The price of Bitcoin has taken bit of a dive over the last couple of days, shedding over 20 percent of its value in the last 24 hours. The sell-off, like other sell-offs and rallies before it, draws a lot of attention and questions about what it means for the future of the technology. Here’s why I don’t focus on price much.
Bitcoin is best thought of as a 5- to 10-year project, and we’re at the very early stages. An (admittedly imperfect) analogy is the early Web.
Jerry Brito is executive director of Coin Center, a non-profit research and advocacy organization based in Washington, D.C. focused on the public policy issues facing cryptocurrency technologies such as Bitcoin.
Like the early Web, Bitcoin is an open platform that no one owns, and on top of which anyone can build without having to get anyone else’s permission. And just like the early Web, success requires investors, entrepreneurs, and developers to build out the infrastructure and applications that will make it useful to average users.
The World Wide Web was conceived by Tim Berners-Lee; he published a paper proposing it in March of 1989. The following year he worked to implement the idea in code, making the first website in December of 1990. The first popular Web browser didn’t come until 1993 when Marc Andreessen and the team at the National Center for Supercomputing Applications released Mosaic. The following year Andreessen started Netscape and released the Netscape Navigator browser in 1994.
Those of us old enough to remember using Navigator to browse the Web over a Winsock connection on a 56k baud modem can attest that it was not the amazing experience we take for granted today. In fact, if you couldn’t see that the technology would evolve, you would have concluded that it was practically useless. For one thing, there was no easy way to find things on the Web. Well, we didn’t get Google until 1998.
Google is now the most visited website on the planet. Second to it is Facebook, and for many people the Web is virtually synonymous with social networking. Yet Facebook was not founded until 2004–a full 14 years after the Web was first conceived.
So here’s the parallel: Bitcoin was conceived by Satoshi Nakamoto and proposed in a paper published in 2008. He worked on implementing the idea into code, mining the first block of the blockchain in January of 2009. So, if we take the Web as a parallel, we’re at the stage in Bitcoin were we would hope to see a Mosaic level development, not a Facebook.
In other words, it’s early days. The Googles and Facebooks of Bitcoin–the killer apps that will make the technology indispensable for ordinary users–may not come for another 5 years.
Unlike the early Web, though, Bitcoin has a price ticker people look at daily, and so they wring their hands. Every dip and spike in the price gets a lot of attention and spells either doom or “irrational exuberance.” But as Marc Andreessen has pointed out, “the price of domain names didn’t determine the usefulness of the Internet.”
With a longer time horizon in mind, you can put the short-term drops and rallies in price of Bitcoin in perspective. So don’t worry so much.