This is the mobile era and Bitcoin is far from mobile friendly. This has to change for Bitcoin to become mainstream.
Bitcoin is based on a revolutionary idea, that all of us can be our own bank. That idea seems crazy – as crazy as the things we do every day thanks to the Internet that were inconceivable before the Internet made them possible.
However the way that Bitcoin achieves this revolutionary objective (the decentralized Blockchain) means that you need big computing power to store and process Bitcoin. Even worse, because Bitcoin (like any digital data) can be hacked, you need physical vaults like old-fashioned Wild West banks to store your assets. This hardly feels like progress. It is certainly not aligned to the mobile revolution.
So will digital wallets trigger mainstream adoption of Bitcoin?
I see two forms of digital wallet – on phone and in browser. The browser version will be used for micro payments online and the mobile version will be used in physical stores or for person to person payments.
Coinbase, a well-funded Bitcoin startup, is tackling this problem with the concept of wallets and vault. You can lose the cash in your wallet but your remaining assets remain secure in your vault (aka your bank).
This concept of wallets and vaults makes sense and is now the accepted way to do this. However this alone does not solve the problem. The physical wallet analogy blinds us to the problem. A physical pickpocket can only steal one wallet at a time. A digital pickpocket can steal millions at a time, so the incentive for criminals is much bigger, we could have our digital wallets picked regularly.
I don’t know what technology will solve this. I can see many candidates. However, I am confident that it will be solved because it is not a Bitcoin specific problem and the opportunity is huge. Any cash in a digital wallet can be stolen – Fiat currency in a stored value form in a phone can be stolen as easily as Bitcoin. So all the players going after this – Apple, Google, Credit Card companies, PayPal etc – will be looking for solutions.
The long awaited Apple move into NFC maybe the trigger this market has been waiting for.