5 Bitcoin Trends That Have Emerged in 2014 (So Far)

Tom Sharkey (@tom_sharkey) | Published on July 13, 2014 at 11:11

The bitcoin landscape is evolving so rapidly that it’s hard to believe we’re already halfway through the year.
Like any new industry, there are so many areas to explore in the bitcoin space that a week’s worth of developments can sometimes feel like a month or two have gone by.
Bitcoin has certainly seen a lot of action in 2014. The collapse of Mt. Gox, hefty venture capital investments in bitcoin startups and the US government auction of 30,000 bitcoins seized from the Silk Road all generated buzz in the mainstream media.

CoinDesk’s recent State of Bitcoin Q2 2014 report highlights some of the key developments that have influenced bitcoin’s journey over the past few months, providing context for the digital currency’s ever-changing position in society.
While only time will tell what’s in store for bitcoin’s future, a number of trends have emerged in the industry this year that could shape the direction and velocity of bitcoin’s growth.
Here are five bitcoin trends that have emerged in the first half of 2014:

1. Big-name retailers jumping on board

The year started with a bang when Overstock became the first major retailer to accept bitcoin. News of Overstock’s success with the digital currency served as a signal for other large companies to follow suit.
Electronics retailer TigerDirect integrated bitcoin as a payment option by the end of January, and other household names like the Sacramento Kings, Lord & Taylor and REEDS Jewelers got on board soon after.
By the end of June, three companies with at least $2bn in annual revenue had begun accepting bitcoin: DISH, Expedia and Newegg.
With smaller businesses also continuing to accept bitcoin at a fervent pace, we estimate that around 100,000 merchants will accept bitcoin by the end of 2014:

State of Bitcoin Q2 2014

2. A warming regulatory climate

While it certainly hasn’t been all smooth sailing between governments and bitcoin this year, it seems like tides are changing and regulators around the world are starting to take a more open-minded approach to the digital currency.
In the beginning of 2014, China’s stance on bitcoin was ambiguous at best. By April, China’s Central Bank Governor said that banning bitcoin was “out of the question,” referring to it as more of an asset than a currency.
Russia, after releasing stern warnings about bitcoin early this year, recently reconsidered its stance on the digital currency.
Gerogy Luntovsky, the deputy chairman of Bank of Russia, explained that his agency is going to take time to examine bitcoin as the industry continues to evolve:

“At this stage, we need to watch how the situation develops with these kinds of currencies. These instruments should not be rejected.”

Progress has also been made in places like California, where Governor Jerry Brown has granted bitcoin ‘legal money’ status, and Switzerland, where similar ‘legal money’ regulations are being considered.
Regulators seem increasingly willing to hold off on impulsive legislation in favor of working with the bitcoin community to find the best resolutions to prevent money laundering and fraud without stifling innovation.

3. VC firms keep betting big

Not everybody is as slow as governments to embrace bitcoin.
Serious venture capital investments in bitcoin companies were already taking place in 2013, but VCs have certainly kicked it up this year, with a total of $150m having already been invested in 2014.
With 2014′s Q2 VC investments reaching $73m (up from $57m in Q1), CoinDesk estimates that by the year’s end, 2014 VC investments in bitcoin companies will have surpassed 1995 VC investments in Internet companies:

State of Bitcoin Q2 2014

The venture capital flowing into the bitcoin space supports the industry’s infrastructure both explicitly and implicitly: startups gain access to resources that allow them to build much-needed products and services around the Bitcoin protocol, and the investors’ confidence in the digital currency brings legitimacy to bitcoin’s reputation.

4. Building on the block chain

Most people who take the time to really learn about bitcoin realize that the true genius in Satoshi Nakamoto’s invention is not the coins themselves, but rather the block chain.
The term ‘Bitcoin 2.0′ is often used to describe applications that use the technology of the block chain to address issues like smart contracts and identity verification that were once impossible to solve in a decentralized way on the Internet.
Jeff Garzik, one of the bitcoin protocol’s core developers, described the significance of the block chain beyond the scope of digital currencies:

“As a computer scientist, and in computer science in general, when you talked about building distributed systems, there tended to be a purely theoretical view about how computers would talk to each other, how to keep them coordinated. Satoshi and the blockchain really solved that problem in an elegant and unexpected way.”

Block chain-focused startups like BlockScore and BlockCypher have already secured funding this year from investors. As 2014 rolls on, expect to see new uses of the block chain technology solving problems in a uniquely decentralized manner.

5. New emphasis on transparency

The collapse of Mt. Gox, once the biggest bitcoin exchange in the market, was a wake-up call to many in the community.
The former exchange’s CEO Mark Karpeles was notoriously opaque in the months leading to its bankruptcy, causing confusion among users who held bitcoins on Gox.
Ultimately many people lost BTC through the course of Mt. Gox’s downfall. Outcries from the community started pouring in, demanding other big exchanges prove their solvency with professional audits.
Exchanges like Bitstamp, Kraken and Coinbase all agreed to be audited in the aftermath of Mt. Gox’s liquidation.
The demand for more transparency in the industry doesn’t stop at exchange audits, though. Revered bitcoin evangelist Andreas Antonopoulos recently took to Twitter to announce his departure from the Bitcoin Foundation, citing a lack of transparency as a primary concern:
If the first half of 2014 proves anything, it’s that the technology underlying bitcoin is resilient even under catastrophic circumstances (Mt. Gox), and that the community is willing to rally together in bringing bitcoin to mass adoption.
There’s a reason people call it the “honey badger of money.”

New Banking Task Force to Study Digital Currencies

Jon Southurst (@southtopia) | Published on February 22, 2014 at 10:40 GMT | News, Regulation, US & Canada

The Chairman of the US Senate’s Homeland Security & Governmental Affairs Committee (HSGAC) which investigated digital currencies in November has responded positively to the creation of a new state bankers’ task force to perform its own study into what sort of regulation is necessary.
The new “Emerging Payments Task Force” comes from the Conference of State Bank Supervisors (CSBS), a national meeting group of regulators from all states “dedicated to advancing the state banking system” in the US at a federal level. It aims to study the impacts and potential consumer protection issues arising from new payment method technologies, including bitcoin, among several others.
HSGAC Chairman Senator Tom Carper (D-Del) issued a press statement earlier approving the move, saying he wanted to ensure governments “are adequately protecting consumers and addressing lawbreakers without hindering innovation”.

“That’s why I am encouraged that the Conference of State Bank Supervisors is paying attention to this evolving technology and looking for ways to better coordinate oversight to protect consumers and local communities.
While there is still more work to be done, this is an important step. I encourage federal and state agencies and local entities, including banks, to further their collaboration so consumers and businesses can understand the rules of the road and be well served by them.”

Digital currency stakeholders

The Task Force will speak to a “broad range of stakeholders” in the virtual currency and payments sphere, including state and federal regulators, people in the industry, and other experts. It too believes there must be enough regulation to protect participants but not at the expense of progress.
“State regulators welcome a robust and focused dialogue about the benefits and risks of innovations to payment systems,” said CSBS Chairman and Kentucky Department of Financial Institutions Commissioner Charles A. Vice. “We seek an environment where technological innovation can be developed, but also regulated in a clear manner.”
The Task Force will include state regulators from nine states, including Superintendent of New York State Department of Financial Services Benjamin Lawsky, who oversaw that Department’s recent hearings into digital currencies and who also promotes special ‘BitLicence’ money transmitter regulations specific to such systems.
On its website, the Conference of State Bank Supervisors introduces itself thus:

“Our regulator membership sets us apart from other Washington organizations. Our strength lies in bringing all state banking departments together to present a unified voice in Washington. Through CSBS, state bank regulatory agencies continue to champion a system that offers competitive chartering options and efficient and effective – and local – supervision.”

US Law image via Shutterstock