So I am getting obsessed with Bitcoins now! I met with an Entrepreneur in Iceland, well he is a Computer Science Student and is more obsessed with Bitcoins than I am. I think there is a small community that is developing in Iceland that is building things around Bitcoins. The first step in all of this is to create an exchange for Bitcoins to Icelandic Krona, which is the first thing that he wants to build. I think it makes sense. As I wrote yesterday about how intermediation could really solve the Bitcoin adoption problem and also makes one focus on the value that is created by the Bitcoin or Crypto Currency exchange mechanisms. There are many resources that outlines the benefits of using Bitcoins. Here is a video from Bitcoin.org site
Bringing the context back to Iceland, I would like to fund a startup that does the exchange of Bitcoins to Icelandic Krona. The next obvious question is how does this exchange make money? The business model is similar to that of any payment service say a credit card company or Square or any other mechanism. Iceland is a small enough place that this payment service could solicit many businesses to accept Bitcoins as payment and the exchange can act as the intermediary. I am not the only one to think this works. There are a number of companies that have already set up Bitcoin mining facilities in Iceland. I think Bitcoin mining works in Iceland, as it converts the abundant renewable energy available in Iceland into a transaction currency.
I don’t believe in the doomsday scenarios played out by some of the folks as it relates to currencies and countries and sovereignties. I just think payment or transaction mechanisms that innovate on the two most important value in a transaction will win. What are those 2 things?
- Transaction Cost
Of course there needs to be a mechanism to convert the transaction to the underlying currency of the country in the case of Iceland it is Icelandic Krona or ISK. Iceland already enjoys T+0 transaction speed i.e when I transfer money from my bank account to someone in Iceland it is instantaneous, please tell me any other country that already has that? In addition, there is no transaction cost. This is another reason I believe Icelanders will not see a challenge in adopting something like Bitcoins as this community is already used to it.
The traditional credit card companies in Iceland should jump on this but they are stuck in the Innovator’s Dilemma and they will never innovate faster than a startup can. I think investing enough to get a small percentage of the local commerce into Bitcoins will create enough value in a Startup that it justifies investing in it.
Oh, Chris you still think no one will invest in Bitcoins in Iceland?
I love it when people think they know more than anyone else… yours truly included, no-one knows the future but those who can work on writing the future usually win. I like the tinkering aspect of Entrepreneurship, I will write why I believe in this cohort in another blog post soon.