Final Thoughts
The ability for payments to be processed via Bitcoin offers a
potentially significant opportunity for the digital currency to
fulfill a market niche with applicability in the areas of general
merchant payments, international payments, and
micropayments. Balanced against this potential opportunity
for Bitcoin are several issues or risks. Some of these are likely
to be permanent, such as what we perceive as the inherent
instability of the digital currency. While other issues may
eventually be addressed (for example, security concerns of
Bitcoin exchanges, regulatory and legal issues, and the
development of payments system infrastructure), the expense
of doing so could clearly diminish the cost advantage Bitcoin
currently enjoys relative to traditional payments systems. It is
not clear at that point whether the remaining cost advantage
would necessarily outweigh the remaining issues. Thus, while
we think Bitcoin clearly has some potential as an alternative
payments system, it is probably too early to assess its longterm
potential and sustainability. The extent of public demand
for an alternative currency is unclear (and there are other
choices for hard assets, such as gold). Also, we expect the
inherent volatility of Bitcoin to restrain wider public
acceptance.