NEW YORK (InsideBitcoins) — Reid Hoffman can spot a technology trend. The founder of LinkedIn worked at Apple, was on the board during the funding of PayPal — and his first company, SocialNet.com, was a social network before social networks were cool. He’s invested in Facebook, Airbnb, Flickr and many others. Needless to say, his appearance at the Bitcoin & the Blockchain summit in San Francisco last week was the highlight of the event for many attendees.
Appearing with Wences Casares, the co-founder and CEO of bitcoin wallet and vault Xapo, the two engaged in a wide-ranging and casual conversation that included cryptocurrencies, network effects and the price of bitcoin. Casares has an impressive resume as well, launching the first ISP in his home country of Argentina, and an online financial services portal which he sold to Banco Santander for $750 million in 2000.
The discussion began with a discussion of where bitcoin fits in the cryptocurrency scheme of things.
“You have about 90 cryptocurrencies that have some form of traction, buyers and sellers — all of those cryptocurrencies combined have about 50,000 users. Where bitcoin is at about twice that in new users a week,” Casares said. “All of the cryptocurrencies were about 50% of the volume a year ago. And today, bitcoin is more than 90% of the volume.”
That’s the network effect propelling bitcoin to dominance, both agreed. And with momentum, the price will follow. But first things first.
“It’s simple math. (The price is going up.) And going up a lot. A half million dollars, a million dollars a coin — something ridiculous like that.”
“I think it is remarkable that bitcoin is working as designed,” Casares added. “It was designed to be spread as an asset and only when it has some significant pervasiveness as an asset; it may become a payment mechanism. There are roughly 10 million people in the world who hold bitcoin; there’s less than a million people who are actively using it for payment. If you believe that we’re going to get a billion people in bitcoin — in 21 million coins — the only way, is by the price going up. It’s simple math. And going up a lot. A half million dollars, a million dollars a coin — something ridiculous like that.”
But for Hoffman the price of bitcoin is of little concern.
“The least interesting question about bitcoin is the current price,” Hoffman said flatly. “Bitcoin is designed … as an asset versus a transaction. So you actually need to get a number of wallets and you have a number of assets in those wallets — and it’s only once that becomes more universal does a transaction currency become possible. And so, actually in fact, fluctuations in price, even as dramatic as we’ve seen, actually reflects a robust ecosystem. You want to actually be stressing systems in order to have them be robust.”
But for bitcoin enthusiasts who are less patient, when will the tipping point be reached? Or, will it? Casares is willing to make a prediction – and it’s an explosion with a surprisingly short fuse.
Bitcoin is the “best form of money we’ve ever seen,” he said, calling it “gold 2.0.” The users that will fuel bitcoin’s breakout will total a number around 150 million users, Casares believes. “At this rate of growth we could hope to be there by sometime in 2016 or 2017.”
But Hoffman discounts the zealous devotees that believe bitcoin will outmode all currencies.
“I don’t think it will replace all of them. To me, it is 100% clear that there will be at least one global cryptocurrency. I think the likelihood is that bitcoin is that one, versus other ones, given the network effects that it’s growing. And that’s part of the reason why, in terms of investment and also in terms of developers and all kinds of things, it’s how you make that system really robust.”
And Casares thinks that waiting for a breakout moment – some triggering event that proves to be the catalyst for bitcoin’s global domination – may be misguided.
“I get questions that seem to imply that we should see some breakthrough, next month – next year. What’s going to be the killer app that we haven’t seen yet? What’s going to make bitcoin explode into the mainstream in a year? But we don’t know if these things are going to happen or not — and when. I think that what we can rely on is the same thing that we saw happen in the last five years. If we see the same thing that we saw happen — in terms of bitcoin growth and adoption — in the last five years for the next five years, that gets bitcoin mainstream and gives you many hundreds of millions people on bitcoin; even possibly close to a billion people on bitcoin.”