Would you want to get paid in bitcoin?

A copper bitcoin standing up while others are piled around it.

The virtual crypto-currency, Bitcoin, is never long off the media’s radar. In 2013, when it became more readily understand and quasi-mainstream, it garnered attention due to its wild, erratic price surges and subsequent dizzying falls. At one point it hit $1,150 in 2013. It is now at around $290.

As far as currencies go it still lacks the stability most require to be a viable alternative to Pounds, Euros or Dollars. Most governments who do recognise it treat it as a form of barter, for tax purposes.

A question of control?

Bitcoin has no central bank or another mechanism for controlling inflation. Again something which most forms of legal tender have found necessary since King Charles II of England put a stop on the Exchequer in 1672, effectively wiping out the first generation of English financiers (the Crown couldn’t afford to service its debt). As a direct result of this action, the Bank of England was founded in 1694, which was when governments started to have a more direct influence on controlling and managing currency.

One of the main reasons for the enthusiasm around Bitcoin is this lack of control from governments. However, it’s this same freewheeling Wild West attitude which makes many cautious to accept it as anything more than a geeky novelty. Ben Bernanke, the former Federal Reserve Chairman, feels that Bitcoin, “may hold long-term promise, particularly if the innovations promote a faster, more secure and more efficient payment system.”

Bernanke may be right. One Canadian payroll startup, Wagepoint, has even started offering Bitcoin as a payment option for employees who want to get paid in the virtual currency.

Ponzi scheme or revolutionary?

Despite the recent price fall Bitcoin fans are still firm believers. The fact that Paul Krugman in The New York Times once again called it a con, and the paper of record for all things financial and business related, The Financial Times says, it’s still a solution in search of a problem doesn’t faze them.

Now, granted, neither paper is close to the action. Nuances of the debate amongst enthusiasts have got lost in the media narrative surrounding Bitcoin, and even the FT said its best to “ignore this virulent debate, accept that crypto-currencies will not displace banks.”

Meir Statman, a professor at Santa Clara University, who specialises in behavioural finance sees the 144,000 strong reddit groups and other online forums for Bitcoin to be echo chambers of optimism. Speaking to TIME Magazine, he said, “when you have people who reinforce [your beliefs], people are not looking for the truth, they are looking for views that are going to support their prior beliefs driven by ideology and self-interest and so on.”

Searching for product – market fit

Despite the ongoing scepticism, $317 million of VC dollars have been invested in Bitcoin startups since 2012. Jeremy Allaire, the founder of Circle, a startup which facilitates peer-to-peer Bitcoin payments over smartphones, feels this is like being active in “the internet before Netscape.”

VCs are closer to the action than columnists in London and New York. But does this mean they have an enhanced level of insight? They have some proprietary knowledge, sure, but to them, Bitcoin is just one of many long-term shots. Especially when you consider the fact that over $80 billion of VC money has gone into startups in the US alone since 2012. On that scale, what’s a mere $317 million?

As to whether Bitcoin can become a stable currency alternative, to get paid in or use as an investment vehicle, entrepreneurs need to answer these questions the FT poses which reflect the same Lean values Eric Reis advocates: “Can it save money? And what problem is it aiming to solve?”