There are many reasons why someone may become interested in Bitcoin. Some are mesmerized by the technology’s pseudonymous creator, while others simply like the idea of having a completely open payment network for the entire globe. Although it’s easy to become captivated by what Bitcoin has to offer, it is difficult for many individuals to fully understand the specific areas of daily life where Bitcoin may be useful.
Coinbase has been one of the main drivers behind the adoption of Bitcoin in the mainstream, and CEO Brian Armstrong sees three areas where Bitcoin can be most useful right now. For Armstrong, disrupting traditional financial services, bringing digital financial services to people who don’t already have them, and enabling completely new Internet applications are the three areas where the cryptocurrency can be the most useful right now. The Coinbase CEO expanded on these thoughts in a recent episode of the a16z Podcast with Wall Street Journal ColumnistChristopher Mims.
Disrupting Traditional Financial Services
Armstrong’s first area of focus when discussing Bitcoin’s usefulness had to do with traditional financial services. Although many Bitcoin businesses have decided to focus on the developing world or industries that operate in a legal gray area, Armstrong also sees value in using Bitcoin to disrupt the financial services that people already use in the developed world:
“One of them is . . . distributing traditional financial services and products. In [one] case, remittance. It might allow it to be faster or cheaper, right? Other examples of traditional financial products it might disrupt would be things like credit card payments where now those fees are less, or instead of going to get a loan at a bank, you might be able to get a peer-to-peer loan through something like BTCJam, which is a startup out there.”
Bringing Financial Services to the Developing World
Armstrong’s second area of focus was the developing world where there is more than a bit of cell phone penetration but a lack of access to traditional bank accounts. The Coinbase CEO believes that Bitcoin can bring financial services to people in the developing world who otherwise would have no access to digital commerce:
“The second major category in my mind would be developing world use cases where people don’t actually have financial services today. These are the unbanked of the world, and there’s something like two to three billion people in the world who have a cell phone but do not have a bank account or credit card. So, they’re living, essentially, with cash or they’re using some kind of primitive digital currency — like a lot of people actually send cell phone minutes or cell phone credit. They can SMS it to each other in the developing world.”
Armstrong expanded on how something like cell phone minutes could be seen as a precursor to a digital currency such as Bitcoin:
“There’s actually some places where you can go in the Philippines and buy dinner with cell phone minutes and things like that. You text it to the person across the counter, and so those are all early precursors of digital currency – types of digital currency that people are using there. We think that a whole generation of kids and people in the developing world will actually grow up, and their first ‘bank account’ will actually be a digital currency wallet on their cell phone.”
Enabling New Internet Applications
Armstrong’s third area of usefulness is perhaps the most interesting. With Bitcoin, certain Internet applications that did not make sense in the past are now possible:
“The third one would be what I call brand new Internet applications that are uniquely enabled by Bitcoin. By that I mean it’s not disrupting the traditional financial services industry or something like that. It’s actually creating something [where] the only way it works is with Bitcoin. These are very small today, but I think in the future some of these will end up being multi-billion dollar companies and systems. Some of these are things like distributed crowdfunding, like the Lighthouse project is an example of that. There are prediction markets where you can use the wisdom of crowds to predict the outcome of certain events.”
Armstrong also explained that many of these new applications made possible through Bitcoin usually have something to do with microtransactions:
“A lot of them have to do with microtransactions, actually, which is something Bitcoin uniquely enables. So, there are things like tipping on the Internet with things like ChangeTip. These are examples of, kind of, very new use cases that are uniquely enabled by Bitcoin, which are not big yet but could actually grow — more of like a greenfields idea.”
When you combine these three areas of usefulness for Bitcoin, it’s easy to see why so many people are bullish on the technology’s potential rate of adoption. As Armstrong alluded to later in the conversation, it is these sorts of use cases that attack pain points in people’s financial lives that will drive more adoption over the long term.