Four Fundamental Problems Bitcoin Startups are Attempting to Address

Cryptocurrency sounds suspicious just by moniker. Cryptography is like a more imposing form of the word “security”, and cryptocurrency can be difficult to wrap one’s mind around. It’s an exciting and volatile new form of currency that has millennials asking themselves whether it’s time to invest.

Banks and venture capitalists don’t like uncertainty, so why is Goldman Sachs rapidly investing in Bitcoin related startups and business ventures? The answer is to stay ahead of the emerging trend (even the IRS is saying Bitcoins are taxable). Cryptocurrency is a very real phenomenon that is starting to show itself in our everyday lives. There are strong odds that you’ve shopped somewhere this week that will accept Bitcoin as a source of payment. That snowball effect has given away to some interesting startups trying to solve fundamental problems related to currency.

Investing in Digital Currency

If you want to invest in Bitcoins, you have two options. The first is to visit an exchange like Genesis Mining, and convert your cash into what is essentially Bitcoins. This is the most popular and user-friendly method currently in existence because the second method is almost prohibitively expensive. As Genesis notes, it would be difficult to mine in the Bitcoin space because there are so many miners working. The cost of power (both computing and electricity), would very quickly outpace any gains on the volatile Bitcoin market. Groups investing in Bitcoin mining outfits end up working a lot like investment firms, offering some guidance and analytics on potential investments.

For newbies, mining is a very daunting operation requiring quite a bit of setup. Even a hobbyist programmer or engineer needs significant computing power and effort to do the job properly.

Remittance Payments

One of the more controversial aspects of this current presidential administration is the potential targeting of remittance payments over the border. Companies such as BitPesa are working on trying to use Bitcoin as a method to anonymously send money across the border, either for charity or as remittance. Essentially, BitPesa accepts Bitcoins from a user, then converts those coins into cash that another user will receive after a 3% commission.

Bitcoin may be seen as a solution to this issue, and an alternative method for immigrant families or charity donations to go through fewer hurdles to do some good. It’s not hard to imagine a future where charities will directly accept Bitcoin payments, which can easily be converted into cash anywhere around the world.

Holding a Physical Wallet

Cash is used to fund terrorism, drug and human trafficking trades, evade taxes, and a host of other illegal activities. It’s hard to eliminate partially because people still want something tangible that can represent their money. Digital currency involves transferring numbers around, it’s not as easy to make a connection to the real world.

Ledger Wallet is going to change the way we look at digital currency with a special unit, they call a “ledger”, that can accept and transmit data to pay for things. Ledger Wallet is USB-based, so it can interact with a variety of devices as well. The company also claims the device is malware proof, which would be a huge boon for users worried about security if that claim holds true over time.

Smarter Loans

One of the major problems facing our global economy is the number of underbanked. According to the FDIC, 19% of American households needed some financial product outside of the mainstream banking system. That’s where peer-to-peer loans come into play. This space is beginning to get more crowded, but BTCJam sees it as a potential win in developing nations who have a hard time giving and receiving money overseas.

If you needed to pay a contractor who works in Brazil or India, that contractor eats a ton of fees converting currency and just receiving payment for the job. Bitcoin would cut some of that overhead out, allowing for a fairer exchange rate, with the option to use Bitcoin at local businesses where accepted.