Bitcoin 101: How does the alternative currency stack up?

Bitcoin 101: How does the alternative currency stack up?

This Q&A was originally published in DK’s weekly eZine, S. P. A. C. E.

RECENTLY ON TWITTER I ASKED about options for transferring funds online. That’s how I got introduced to cryptofinance expert Raffaele Mauro.

In an email Q&A, he helped me understand how Bitcoin stacks up.

Here is how our conversation went:

Easy Bitcoin
Easy Bitcoin

‘SMALL AND GEEKY.’ Learning about Bitcoin from cryptofinance expert Raffaele Mauro (@Rafr). Here is a Q&A, in which he helped us understand in simple terms why Bitcoin is misunderstood, and the vastness of its potential.

AS: What is the ONE thing you wish everyone could grok about Bitcoin, something that most people simply don’t see/know right now?

RM: The most important thing that most people don’t see is that Bitcoin is not just another form of money or digital currency. Potentially, it is the ‘economic layer of the internet,’ a new protocol with huge potential impact like SMTP was for email/messaging. Beyond that, the blockchain, the technology behind Bitcoin, opened a gigantic space of exploration for a new wave of decentralized applications.

AS: What hurdle is keeping us laymen from grasping the potential of Bitcoin?

RM: Four reasons: 1) Bitcoin is not the most convenient solution for most day to day, traditional transactions in developed countries; 2) The design of most Bitcoin applications is poor and not user friendly, complex operations are accessible only to techies; 3) Cool applications and platforms are still in their embryonic form and there are no standards; 4) The Bitcoin community is still small and geeky.

AS: I’ve been reading about blocks. What would you say is the drive for Bitcoin miners to do the work they’re doing? Will they stand to make a ton of Bitcoin? Curious what’s the incentive for people who are doing the work to lay the infrastructure for this. And is it big enough, I wonder, to build something truly interesting?

RM: Yes, today miners and mining farms are mostly motivated by the economic incentive. There is still a small number of miners who are motivated by the intellectual excitement (understanding software & hardware challenges) but generally speaking, small scale mining is not sustainable. On the other hand, there is an entire space of developers and contributors to the community where the intellectual challenge could be the main motivator with potential economic gains as a side effect (generating skills useful for Bitcoin companies).

AS: This next one is really open-ended. If you could change anything at all (sky’s the limit here) about the way people buy and sell and trade in any currency, what would that one thing be? Why?

RM: Currency operations should be like email: fast, easy and accessible to anyone.

AS: Sounds idyllic. Any drawbacks?

RM: Bitcoin has several drawbacks

  • Rigid monetary supply (on the same time a benefit and a drawback) and therefore high volatility
  • Technical vulnerabilities (examples: 51% attack, block size problems)
  • Transaction speed
  • Despite its decentralizations, there are strong network effects and “third parties” are still re-created
  • Inequality
  • More recently: flame wars among developers

AS: What can we expect to see next?

RM: I see 4 potential scenarios:

  • BASIC. Cryptofinance as sub-industry of Fintech innovation
  • OPTIMISTIC. Blockchain as the new payment layer of the Internet, like SMTP for email Internet of Things powered by blockchain technologies
  • PESSIMISTIC. Bubble & crash in cryptoasset (second mega-bubble) Bubble & crash in VC in vestments in Bitcoin startups
  • UTOPIAN/DYSTOPIAN. Decentralized technology radically disrupts governments, organizations and financial institutions


To learn more, check out at Raffaele Mauro’s Slideshare presentations >

Other thoughts?

What do YOU think? What else is out there, what’s on the horizon?

And if you are using Bitcoin, how is it working? Lessons learned? —AS

This Q&A was originally published in DK’s weekly eZine, S. P. A. C. E.