It’s been a fascinating and rocky year for Bitcoins, with the digital tokens taking three steps forward while experiencing at least two significant setbacks. Lately there have been a lot of financial types on Wall Street poo-pooing Bitcoin and the future of digital currency, but that’s mainly because none of the brokerage houses they work for make money off Bitcoin trades. If they did, those same voices would trumpeting Bitcoin as the second coming of money.
As we look forward to 2014, the future of Bitcoin starts to shimmer into view. Despite the setbacks — and despite government regulators, who clearly do not like the concept of direct digital exchange — the march of digital currency goes on. It is a certainty that Bitcoin will evolve, and that evolution will be shapedby several factors already in play.
You can expect to see digital tokens used to represent real world commodities — like gold & silver.
Here are the possible near future developments for Bitcoin, and for digital currency in general. A couple of these may run beyond 2014, but you can bet some group is already working on the framework.
The First Nation Will Announce the Adoption of Digital Currency
It will be some small country or island nation, but someone is going to adopt a modified version of one of the digital currencies as legal tender. You can count on that happening, because digital currency is efficient and can be conveniently exchanged between devices like smartphones. In many countries, the entire communication structure is built around cellular communications, and cell phones represent the entire digital life of most residents.
Digital Tokens Will Be Used To Represent Actual Commodities
Another development you can expect to see soon will be using digital tokens to represent real world commodities — and the first two are likely to be gold and silver. Imagine being able to walk into your local gold & silver dealer and exchange the digital tokens in your smartphone for actual silver and gold. Now imagine a global network of dealers, any of whom would make a similar transaction. These will be encrypted digital tokens that can be exchanged for real gold. Sounds almost like money, doesn’t it? It’s not; the tokens are more like a digital receipt, that can be signed securely by the owner and transferred just as securely to a new owner directly.
It’s a near certainty government regulators will want to scrutinize the digital commodity exchange, but the model already exists in the futures market. Such a market would require something that Bitcoins do not now have, and that’s a central managing authority. A lot will depend on how careful the central exchange is to monitor security and vet traders.
Branded Digital Tokens Will Appear
Perhaps you are old enough to remember S&H Green Stamps. When you shopped at the local market, the checker would spin off a slab of green stamps. You collected your green stamps in books, and then could trade your books of stamps for real merchandise in the redemption catalog. There was a time when S&H printed more stamps than the Post Office. No one mistook S&H Green Stamps for currency, but you could still trade them for real world goods — and people would trade them amongst themselves without a second thought.
Expect some group or organization to start using a private-issue digital token in the model of Green Stamps, and to start seeing them turn up at shopping centers, gas stations, restaurants, and other businesses that want to take part in rewards programs. There wouldn’t even be any paper tickets or stamps to keep track of; just enter your phone number and the tokens fly straight to your smartphone.
Think of digital reward tokens as frequent flier miles for everything else. Maybe there’s an online store for redemption; or maybe they’re accepted at brick & mortar retail partners. Right now many stores offer discount rebates, and a few even honor competitor discount dollars.
Some of these ideas may not appear in 2014, but we’re definitely headed that way. Whether or not Bitcoins survive as a digital currency no one can say; but now that the digital token genie is out of the bag, you can bet that there will be a million new uses for them in the years ahead.