Fred Wilson calls applications built using Bitcoin that couldn’t have existed prior to Bitcoin “native Bitcoin apps“. Most of the applications built so far on Bitcoin are not native by this definition. You can buy something at an e-commerce site using Bitcoin and it is cheaper than using a credit card but buying things online isn’t a new activity.
What will these native Bitcoin apps do? That is very hard to predict, just as it was hard to predict back in 1993 what the successful native Internet apps would be (try to find someone in 1993 who predicted Wikipedia, Twitter, blogging, etc). But we can make some guesses. Here are some of mine:
- International microfinance – Soon 5 billion people will have internet-connected smartphones but most still won’t have bank accounts, access to credit, etc. Bitcoin removes most of the cost and friction of cross-border transactions and allows anyone with internet access to participate in the global economy. Early examples of international microfinance services include P2P lending sites like BTCJam and Bitbond.
- Allocating bandwidth, storage, compute. Bitcoin could enable new ways to share and trade networked resources. For example, people have been trying for years to create mesh networks with only occasional success. It is possible that these systems mostly failed because they didn’t offer the right incentives to share resources. Bitcoin provides a mechanism for network nodes to pay for resources at the protocol level.
- Marketplaces – Ask anyone who runs a marketplace and they’ll tell you that paying out to people with bank accounts is a huge headache, and paying out to people without bank accounts is altogether impossible. Using Bitcoin, we could take ideas like crowdfunding and crowd labor services (oDesk, 99 Designs, Beacon Reader, Mechanical Turk) and open them up to anyone with a smartphone.
- Micropayments – The world just ran the first large-scale micropayments experiment – in-app payments on iOS and Android – and it was a huge success. In-app payments quickly became the dominant business model for mobile games, with some games generating billions a dollars a year using them. What would happen if we enabled micropayments on the web and not just for native mobile apps?
- Incentivized social software. Up until now, social sites have had to rely on non-monetary currencies such as likes, followers, karma, upvotes, etc. With Bitcoin we can add actual monetary incentives to the mix. This is happening organically on Reddit where users are tipping each other using Bitcoin and Dogecoin. A good exercise would be to go back and look at the history of failed social sites and try to rethink them using financial incentives.
The first phase of Bitcoin was about laying the foundational infrastructure – gateways, consumer wallets, developer platforms, merchant services etc. The next phase will be about native Bitcoin apps – building new things that could never have been built before. These will likely be the applications that drive Bitcoin adoption into the mainstream.