When it comes to the future of bitcoin and its widespread adoption capabilities, one of the common themes that investors, analysts and venture capitalists iterate is the virtual currency’s security. There is another worrisome element to the digital currency that may produce apprehension in the investment community: hoarding.
Prominent venture capitalist Fred Wilson spoke at a recent event held by the NYC Foundation for Computer Science Education, in which he highlighted the two biggest threats holding back bitcoin from entering into the realm of the mainstream: security and hoarding.
The co-founder of Union Square Ventures, who is a considerable proponent of the virtual currency, likened bitcoin to PayPal but without the shackles of a central authority, entity or company and that it is open source and peer-to-peer. However, speculation and price volatility initiates a trend of hoarding where investors sit on their stockpiles waiting for the price to go up, causing supply issues, volume problems and pricing matters.
“I also think we need to see real transaction volume happen. Right now, most people who get bitcoin hold it, they don’t transact with it,” said Wilson. “That’s part of what causes all of the volatility — if there was a very vibrant system where bitcoin was just getting swapped around like crazy, the velocity of the money would cause bitcoin’s price to stabilize and there would be a much more liquid market. I think those are the kinds of things an economist would want to see.”
Another concern that Wilson maintains is the difficulty of acquiring bitcoins. Wilson averred that it can take upwards of a few days to see bitcoins in one’s account, which isn’t a practical amount of time for those who want to witness digital currency become a day-to-day business and consumer function.
Of course, security will always be what plagues the cryptocurrency industry. Wilson posited that a paucity of security is still a major deterrent to the growth of bitcoin, citing the ability to hack into a person’s computer and unscrupulous businesses diminishing public confidence.
“Bitcoin theft is a big issue. Bitcoin fraud is a big issue. And what will have to happen is we will need to see companies like Coinbase and others merge that can invest heavily in security. And that’s both technological security, and also process security, to make you comfortable to keep your bitcoin there. And I think that that’s probably going to be first big commercial opportunity in bitcoin, […] to create secure systems. Because without that, I don’t think we’ll ever get enough confidence and trust in the system for people to really start using it.”
Despite the list of worries, Wilson identified its attractive payment options, the low fees and other unique properties.
