Here’s one of the most interesting predictions for the future of bitcoin

A Bitcoin sign is seen in a window in Toronto, May 8, 2014.

What’s next for bitcoin?

2015 has seen the digital currency’s volatility stabilise and price jump, but it has also seen much of the hype dissipate. And there’s been a divergence between bitcoin and the technology that underpins it – blockchain.

Blockchain, which uses complex cryptography to regulate and record transactions, is in the ascendancy, with millions of dollars flowing into the technology and banks lining up to experiment with it.

Meanwhile, many of the leading consumer bitcoin companies – digital wallets, payment processors, and exchanges – are being forced to adjust or rethink their business models in the face of slower than expected consumer uptake.

“It’s naive to think there will only be one blockchain”

According to Jeremy Millar – the co-author of one of the most extensive reports to date on the corporate ecosystem emerging around the digital currency – the issue is that the markets for bitcoin and blockchain have already fundamentally divided.

“I’m looking at this in terms of market development and what I’m saying is the market of people who buy blockchain to implement financial services is fundamentally different as a market to bitcoin,” Millar told Business Insider.

Millar, a partner at boutique technology investment bank Magister Advisors, recently co-wrote an extensive, 75-page report on the two sectors.

“A cryptocurrency market will have exchanges, it will have brokers, it will have speculators, it will have payment networks,” he says. “The features of blockchain as a market are institutional adoption, integration with existing business processes, IT planning and budgeting, evaluating technology replacement.”

In other words, the two products are pitching at different audiences – one to consumers and currency speculators, the other to corporate IT departments.

The crucial element in understanding all this is that while bitcoin’s blockchain is the best known, it’s not the only one. Blockchain is shorthand for the complex cryptography-based software underpinning the network. It regulates transactions and records who owns which bitcoins. It’s faster, cheaper, and quicker than traditional payment methods.

But the technology can be duplicated with private blockchains, and Millar says: “I think it’s a bit naive to think there will only be one flavour of blockchain.”

So even if blockchain becomes the norm in banking, it doesn’t necessarily mean bitcoin will rise with it.

“Emerging markets are much more bitcoin native”

But Millar thinks bitcoin will find a home in emerging markets. He says: “Emerging markets are much more bitcoin native. Look at an area like Argentina, where there are capital controls, challenges in the local financial institutions, and there’s a need to do cross border payments.

“If I am running a commerce warehouse in the Philippines or Argentina, my supply chain even at a small scale is going to have many currencies and many areas where there could well be capital controls, fluctuating exchange rates, volatility, what have you.

Jeremy Millar

Jeremy Millar, Magister Advisors.

“In those environments, the ability to get into bitcoin – the ability to get out of the local currency into something that’s portable – has value in and of itself. For me and you here in London, getting into bitcoin doesn’t offer us much value.”In this case, bitcoin’s global scale is a unique advantage over any rival digital currency using blockchain technology. Millar says that while he expects there to be multiple blockchains, he thinks there will be only one dominant digital currency. And, barring any big upset, that will be bitcoin.

He continues: “I’ve talked to people who are building bitcoin services in places like Argentina. They’re not appealing to hipsters. They’re trying to help people manage their pay roll or supply chain.

“When you go and talk to the exchanges and the wallets they say the same thing – 90% of bitcoin is held by wealthy individuals for speculation. But 90% of the transactions are commercial transactions.” And most of those transactions are coming from emerging markets.

“If you were to start TransferWise today, you would look at bitcoin”

That’s not to say there isn’t going to be a bitcoin market in the UK, but Millar believes it will look pretty different.

“What you’re going to see in Europe and North America is the development of bitcoin inside, and that is people who are building next generation financial services will be incorporating bitcoin at least in their strategic thinking in terms of payment rails and how they store value.”

“You may or may not choose to use it, but if you were starting a consumer finance business today, particularly one around payments or exchanges of value, I believe you would have to look at bitcoin,” Millar says.

The advantages offered by bitcoin from a business perspective – it’s faster, cheaper, and gives you more control – will make it attractive to new consumer fintech businesses starting up. Once again, its the scale of bitcoin that gives it an advantage over rivals.

The founder of international payments startup TransferWise was recently dismissive of bitcoin, but Millar says: “I believe if you were to start TransferWise today, you would look at bitcoin.”


TransferWise co-founder Taavet Hinrikus is skeptical of bitcoin.

“The existence proof of someone doing this is Circle in the US. Circle [a bitcoin-based payments app] is revolutionising the way people pay by creating the features of how people actually pay for things as a group. It’s actually much more like WhatsApp than traditional internet banking.”

“You can [build that on traditional payment networks] but the reason why you integrate bitcoin is because you control the ledger, you control the exchange of value, and you cut out traditional payment rails to reduce costs and increase flexibility.”

With this “bitcoin inside” set-up Millar envisages, bitcoin becomes almost invisible. It’s effectively relegated from a currency to simply the mechanics of payment – under the hood rather than a logo on the dashboard.

Payments app Circle is right now trying to appeal to a wider audience bypitching the appeal of bitcoin to people who want to use dollars. Circle is effectively offering the benefits of the blockchain to people who don’t want to use bitcoin.

If more businesses move this way it could anger bitcoin purists who see it as a revolutionary technology that deserves to be front and centre. It’s also seen by many as an ideological tool. Still, it could also give bitcoin a much needed second wind in the west that could transform it into more than just an asset for speculators.