Have Bitcoins Gained Our Trust?

In December, 2013 Yodlee, a software company based here in the United States whose main focus is creating personalized digital financial management tools, commissioned Harris Interactive to conduct a nationwide survey on how Americans feel about Bitcoins.

This survey polled over 2,000 adults, all over the age of 18 and included four major geographic regions of the United States. Almost half (48 percent) had some working knowledgeable of the Bitcoin concept. Though, of those 48 percent, only 13 percent  said they would choose this form of cryptocurrency as an investment over gold, indicating while people are becoming more familiar with Bitcoin, the majority of Americans are still hesitate to consider using them as their currency of choice.

Geographic location also played a major role in survey responses. Fifty-five percent of adults from the Western states were more familiar with Bitcoins as opposed to 46 percent of Southerners and 41 percent of people living in the Midwest. But of those 55 percent surveyed, only 7 percent said they would be willing to invest in virtual Bitcoins over tangible gold.

“The financial industry benefits greatly from disruptive technology, but security is unfortunately a bigger challenge than some new financial innovators expect,” explained Tim O’Brien, Yodlee’s senior vice president of operations and information security. He went on to clarify, “Bitcoin has addressed some major opportunities in the financial system, but the vulnerability of some of Bitcoin exchanges, along with the currency’s overall volatility, are still serious issues.” O’Brien concluded, “Bitcoin will be hard for consumers to understand and trust on a large scale until secure, user-friendly tools and services emerge to make it as convenient and safe as possible to use.”

While the Harris survey polled adults of all ages, it was no surprise young adults were the biggest supporters of virtual currency. In fact, 20 percent of all adults between the ages of 18 to 34 who were familiar with Bitcoin, said they would be willing to use Bitcoin as an investment tool over gold bullion and 39 percent were against any form of government intervention when it came to virtual currency regulations.

As with anything technology driven, the above statistics show the younger generation is more willing to embrace something new. In fact, the Harris survey showed only 8 percent of adults 55 and older would consider Bitcoins over gold.

It was also interesting to note:

• Adults earning $100,000 or more annually who were familiar with Bitcoin were more likely to be willing to risk a part of their savings by investing in digital money.
• More men than women knew about Bitcoin, with the 18-34 age group of males being the largest age and gender group to want to both trade and invest with Bitcoin.
• While one would assume the West Coast, and tech region of Silicon Valley would be the most pro-Bitcoin part of America, actually the Northeast scored high on the Harris survey. Fifty-one percent of all adults polled knew about Bitcoin and 19 percent would be open to Bitcoin investing.

Many in both the financial and tech world have compared the rise of cyber-currency to when the euro was first introduced. All across Europe it was greeted with skepticism and predictions of pecuniary doom, but now 16 years later in spite of stumbles along the way, the euro is still financially vibrant. This is causing many across the pond to ponder if Bitcoin could possibly be seen as the next euro and it looks entirely possible as yet another survey has shown.

The survey firm, On Device Research based out of the United Kingdom reported an astounding 69 percent of those questioned back in May, 2013, had heard of Bitcoin and 32 percent expressed strong confidence in using this form of digital currency. This leads to seeking answers to the number one most baffling question: why are people, specifically financially secure, intelligent, tech-savvy people willing to take a chance on currency which has no tangible identity or backing?

Many people who have researched the cryptocurrency phenomenon have coined it “technology created completely by faith.” Individuals are putting their faith and trust equally in both science and technology and for many trusting the mathematical science behind Bitcoin makes sense. While Bitcoin anonymity for many is a big draw, the algorithm limiting the supply of these virtual coins constantly verifies all buyer/seller transactions, keeping an online, but still anonymous, record of all released coins.

The primary trust factor seems to start with where Bitcoins are purchased. Google Bitcoin exchanges and over 900,000 options are listed. As with all Internet financial transactions, it is important to thoroughly research any platform before transferring funds. So obviously the first test of trust is giving government backed legal currency to an online business in exchange for virtual currency.

Then while more brick and mortar and online retailers and service providers are accepting Bitcoins they are still not that prevalent and many individuals are betting on the speculative aspect of Bitcoin investing in order to make a profit. Venture capitalists are now beginning to see investment value and are touting the praises of private exchanges with big name recognition. For example, the Winkelvoss twins of Facebook fame are the owners of Bitcoin Trust and marketing Gemini, “A Next Generation Bitcoin Exchange.”

Whether interested in Bitcoin for financial gain or because you agree with Bitcoin creator, Satoshi Nakamoto and his disdain with our current banking and financial system, the general consensus is digital money seems to only be as trustworthy as the individuals behind the platforms necessary for the currency to function. Technology futures analyst Jessica Bland in an article for The Guardian sums up the subject of trusting cyber-currency quite eloquently, “Other technologies that bypass the bank are popping up all over the place…but Bitcoin is today’s flag-waver for distributed, accessible finance. It’s an interesting experiment in negotiating how to trust digital technology. And if technology can help us do anything, broadening the financial powerbase is not a bad place to start.”