Silicon Valley's smartest investors debate the future potential of the new form of currency.

Is bitcoin the first, or last cryptocurrency?

THE new internet is here, and it’s not about you.

It’s still a novelty in the west, but one expert argues the technology has the potential to elevate the lives of five billion people on the planet.

Bitcoin, the headline-grabbing crypto-currency, is more than just a technological oddity for criminals, libertarians and technology buffs — it’s merely the first ‘app’ in the “internet of Money”.

That’s the view of Andreas Antonopoulos, world-renowned crypto-currency expert and author of Mastering Bitcoin, who is currently visiting Australia to speak at The Bitcoin Address, an open-to-the-public meetup hosted by CoinJar, College Cryptocurrency Network and the Bitcoin Association of Australia.

While it’s still a novelty in countries like Australia, the potential for developing nations is enormous. Australians have a relatively robust banking system.

That’s pretty rare, he argues — only about three quarters of a billion people enjoy that.

Putting the ability to create financial systems outside of the control of “corrupt” institutions and into the hands of individuals will be transformative for the roughly five billion people who have either no access or limited access to banking.

He cites the example of M-Pesa, a mobile phone-based money transfer service which started in several African nations with people transferring phone minutes to one another as a de facto currency.

“There are many places where the nearest bank is hundreds of miles away, but there’s a cell phone tower on the hill,” he says. “You can turn that tower into banking infrastructure and leapfrog the system.”

“This is not just a currency. It’s a decentralised network for transmitting value in a trusted way across the internet,” he says.

“That means currency is just one application — there are literally thousands of applications for something that solves a fundamental problem in distributed computing: how do you establish trust when you can’t trust the internet?”

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Mr Antonopoulos is referring to the “block chain”, a sort of public ledger used to verify that transactions are valid. While most currencies are governed by a central bank that oversees the value and regulates supply, Bitcoin has no such thing.

The digital currency has struggled to gain mainstream acceptance following a series of high-profile security breaches in recent times, most notably the collapse of Mt Gox, a Tokyo-based ‘Bitcoin exchange’ that filed for bankruptcy in February after claiming hackers had stolen 850,000 Bitcoins with a value of around $500 million.

That equated to roughly 6 per cent of all Bitcoins in existence at the time — gone.

But Bitcoin advocates argue money can be stolen from regular banks, credit card details can be skimmed — so what’s the fuss?

Mr Antonopoulos likens the current media commentary around the technology to fears of “crashes and mangled pedestrians” in the first years of the automobile, hysteria around houses burning down with the advent of electricity, or even the early days of the internet when it was considered a “den of fraudsters and thieves”.

“As technology becomes more and more mainstream it starts reflecting the society that uses it. Technology that moves money obviously will have applications in areas where money is difficult to move. Will crime happen on Bitcoin? Of course it will, just like any other currency.”

So why should you care? We might not so much, given our banks are, for the most part, not too corrupt, and the government doesn’t steal our money — for the most part.

“It’s uncanny how similar the questions asking why anyone should care are to the questions asked about the internet back in 1994,” Mr Antonopoulos says.

But in the long run, it could make it easier for individuals to send money to one another for products and services without having to jump through the hoops of merchant service networks.

With Bitcoin you could pay someone 25 cents to use their public Wi-Fi for one minute, for example. Or content providers could charge 10 cents for an article.

“It enables all kinds of behaviours that currently can’t be done because of the limitations of existing payments architecture,” he says.

There are serious concerns with the technology, though. Bitcoin appears to lack the one thing consumers desire most with money: peace of mind.

Ask the average person on the street what a Bitcoin is and chances are they couldn’t tell you. And why would you put money into something you don’t understand?

They won’t have to understand it, argue the advocates.

Just as users don’t need to understand what goes on underneath the hood of Google’s algorithm, consumers won’t have to understand terms like ‘keys’ or ‘block chains’ once user-friendly apps emerge: all they’ll see is value transfer without the fees.

frank.chung@news.com.au