Date: October 31, 2008
Protocol: SHA256 / Bitcoin Core
Score: 78 / 100
Sector: Payment Processing
Bitcoin is a decentralized digital currency created by an unknown person or group of people under the name Satoshi Nakamoto and released as open-source software in 2009.
Adoption Vectors – In order for Bitcoin to reach a wider audiences, it will first need to become accepted as a means of payment. As exchange rates continue to decline, Bitcoin has the potential to be easily accepted and converted to local fiat currency.
Project Innovation – The Bitcoin Core team is actively working on developing higher transaction volume solutions such as the lightning network, as well as implementing exchange systems to allow the currency to act as a more reliable means of payment.
Valuation Metric – As a scarce token of payment, Bitcoin’s fiat dollar value is related inversely to the volume of transactions on the network and the size of those transactions. As more transactions occur, and the price becomes less volatile, users will be more willing to purchase smaller amounts of bitcoin to fulfill their payment needs.
Risk Assessment – While Bitcoin is assuredly the most well-known cryptocurrency at the moment, there is substantial risk that a newcomer could produce a more effective protocol that is able to capture it’s market share. Bitcoin also has the largest pool of mining operations, many of whom are using
Team – Despite the founder, Satoshi Nakomoto, being notably absent, there is a substantial team working on this project under the mantle of Bitcoin Core. They are excellently funded by their initial investment in the technology, which means it’s unlikely they will leave the project any time soon.
Bitcoin has established itself as the first major cryptocurrency. It is already in use worldwide, and sees daily transaction volumes in the hundreds of millions of dollars. As a digital currency, this project has yet to meet it’s match, but there are still issues with scaling which may prevent more widespread adoption unless the protocol is developed further.
Bitcoin’s market cap in 2018 reached over 300 billion USD, and there are over 20 million active wallets in the network, signifying a substantial user base. If the technology meets expectations in the coming years, there is no doubt that a high percentage of online commerce may adopt this system.
Bitcoin has already proven that it can support a small volume of transactions, but further technological improvements will need to be made in order for this protocol to reach mass adoption.
The initial investors in the Bitcoin community truly believe in this protocol as the one true digital currency, and have stood by it by funding bounties on technology improvements. In addition, the Bitcoin Core team is made up of a diverse group of highly skilled technologists, and have effectively launched a full scale technology firm to back this project.
While the initial innovation of Bitcoin as a decentralized currency was quite impressive, the team has not implemented substantial improvements on this design to date. Projects like the Lightning Network and Layer 3 are still in their infancy, so it’s difficult to judge whether further innovation is on the horizon.
At this point, most of Bitcoin’s success has been the result of widespread speculation on future price increases, so it is difficult to judge whether this product has the potential to grow beyond it’s current use in illicit activities and international remittances.
Dan is an analyst and contributor for the TD Ameritrade Network where he covers financial markets and the economy. He has held series 7 and 63 securities license and started off as a equity and equity derivatives rep for the trading platform thinkorswim. He holds an MBA from St. Bonaventure University and a B.S. in Finance.