With so much said about Craig Wright's supposed identity as bitcoin founder Satoshi Nakomoto, one could be forgiven for thinking that all of the cryptocurrency's challenges have now been resolved.
Yet Satoshi Nakomoto -- whoever he or she is -- can't put the genie back in the bottle amid bitcoin's struggles to maintain long-term acceptance.
And that's the key to the future of this or any other virtual currency: acceptance.
In essence, bitcoin can be one of two things: an investment vehicle for speculators to bet on, hoping that increased acceptance will drive up its value because of limited supply. Or a widely accepted global currency to which all manner of users, from money managers to online shoppers, can turn.
It can't be both. An investment commodity, which fluctuates according to supply and demand, makes a terrible transaction currency because merchants and consumers are caught dealing with the instability.
Trading in dollars is straightforward. There were only three days in the past three years when the trade-weighted dollar moved by more than 1 percent. There have been 491 more-than-1-percent days for bitcoin over the same period, including 45 when it moved more than 10 percent.
Bitcoin's volatility makes it look more like a banana-republic currency than a sensible medium of exchange. Once the initial shock passed, even the Kazakhstan tenge and the Azerbaijan manat -- oil-linked currencies that endured brutal surprise devalutions over the past year -- settled down to trend more stable than bitcoin. Japan is carrying out some of the most dramatic monetary experiments of any rich-country government in modern history, but its volatility barely registers relative to that of bitcoin.
Proponents will point out that bitcoin has gained wide acceptance, with many online merchants accepting it as payment. Even bitcoin ATMs have appeared. But none of that is an assurance of long-term viability. Adding a bitcoin button to a website isn't a herculean feat, given the very low transaction costs, while those ATMs are little more than gimmicks.
That the currency lacks a central bank, or a central banker, is extremely attractive to libertarians. They like the idea that it's immune to the policy or political manipulations of one person or institution.
Yet bitcoin's 3 percent drop within hours of Wright's ``outing" on Monday undermines the thesis that it exists beyond the influence of one person. Wright said little of substance related to the cryptocurrency itself. There's speculation that he'll be spurred to sell some bitcoin just to verify his identity as its founder. This makes sense, but it's still just speculation.
Already there are almost two dozen rival cryptocurrencies out there, including ones designed for the porn and cannabis industries and one based on a dog-related Internet meme. On top of that, institutions from Goldman Sachs to Nasdaq are exploring blockchain-based systems of their own. In an ironic twist to blockchain's anarchic genesis, even governments including those of China and the U.K., and the state of Delaware, are considering adopting the technology for digital currency or record-keeping.
A more important question for bitcoin is whether it can maintain its first-mover advantage in blockchain technology in the face of the newcomers. That's a problem even Satoshi can't solve.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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