One issue with BitCoin is that it relies on a centralized exchange, leaving it open to potential government intervention. These exchanges have been hacked into and robbed on multiple occasions, destroying consumer confidence in the currency. This has contributed to BitCoin’s primary use in the dark areas of the Internet, gaining a reputation for being a currency focused on drugs, gambling, and adult entertainment.
A new concept for digital currency called Ripple is attempting to fix the problems of BitCoin. Ripple allows users to extend credit to strangers using social networking; the common friends of the two users serve as the guarantor. This network holds a large amount of potential for BitCoin.
From a Motherboard article:
What Bitcoin enthusiasts realized recently was that this decentralized network was the perfect platform to buy and sell bitcoins. It would not only make bitcoins easier to trade, it would make the alternative currency that much harder to shut down.
The latest version of Ripple will include a built-in BitCoin exchange platform. But will this be what ultimately brings BitCoin to the mainstream?
In reality, trying to popularize BitCoin by solving the problems of the exchanges is like trying to put out a house fire with a teaspoon of water. Yes, the instability of BitCoin value is a serious problem for the digital currency, and Ripple can help mitigate that instability. But the real problem for BitCoin is the lack of demand for it. BitCoin’s two major advantages are privacy and a lack of discount fees for merchants. The vast majority of consumers willing to abandon the dollar in order keep their transactions private are those engaging in illicit or embarrassing actions. This is the central problem. To have a chance at becoming a mainstream currency, BitCoin needs to lose its reputation as money for drug dealers, gamblers and pornographers. But most people with a motivation to use BitCoin are the ones patronizing those industries. Now that’s what’s known as a fundamental problem.
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