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Bitcoin Whisper

Bitcoin Whisper
 

Research Question: Will the emergence of Bitcoin be the downfall of traditional payment services or will existing companies benefit from integrating the new currency?

Companies Covered: PayPal (EBAY), American Express (AXP), Visa (V), Amazon (AMZN), Western Union (WU)

Report Available: January 22, 2013

 

Blueshift’s initial research indicates that Bitcoin, with its low transaction cost, is threatening credit card and money transfer companies, especially if these traditional services do not adopt the new currency. Though convenient, Bitcoin is both complicated to use and vulnerable to theft and government intervention.

 

Observations

  1. Bitcoin provides a way for consumers to engage in commerce at the speed of light with low or no transaction costs, threatening credit card and money transfer companies due to its ability to facilitate seamless eCommerce transactions. Bitcoin reached an all-time trading high this month, topping $900 in the U.S., as current government hearings regarding the increased use and treatment of Bitcoin for legitimate commercial applications. Initial statements from regulators appear promising; with one Federal Reserve official stating that the bank has no plans to regulate Bitcoin.
  2. The rise in Bitcoin interest can be seen in China, a market experienced in digital currencies, with Chinese Bitcoin seeing its daily volume explode from 1,100 during the month of January to 90,000 a day in November. A subsidiary of Baidu started accepting Bitcoin as currency on October 15, indicating the currency has crossed into the mainstream.
  3. Despite the numerous advantages of Bitcoin, the use of cryptocurriences does have significant drawbacks, including being vulnerable to theft and the threat of being heavily regulated due to its black market applications, like the use of Bitcoins on Silk Road, a drug-trafficking site.  Another drawback is Bitcoin’s inability, in contrast to other payment systems, to affect “charge-backs” or halt payments caused by fraudulent activity.
  4. In April, PayPal’s Chief Executive John Donahoe said, “It’s a new disruptive technology, so, yeah, we’re looking at Bitcoin closely. There may be ways to enable it inside PayPal.” MasterCard appears to have a different view, as executive Stephen Ruch believes Bitcoin is a Ponzi scheme, and has no intention of allowing MasterCard to accept the use of Bitcoin. Currency experts are mixed on what impact expanded use of electronic currency like Bitcoin will have on these companies. Some think possible PayPal integration of Bitcoin payments will open it up to more merchants while others believe Bitcoin is a threat to PayPal because its lower costs will deter PayPal use.

 

In order to assess the potential impact of Bitcoin on the eCommerce and global payments ecosystem, Blueshift will gather data and issue a market research report from independent sources in the following silos; Bitcoin exchanges and startup companies, electronic payment executives, eCommerce websites accepting encrypted currencies, cyber security professionals, Bitcoin users, and industry specialists.

 

To see other ideas Blueshift Research is currently working on, please click here.