Bitcoin is an untraceable, all-digital form of money with no government regulation, probably best known as the crypto-currency used to buy illegal drugs on the underground website Silk Road. But it’s inching its way toward legitimacy, with major retailers and services like Overstock and Dish Networks now accepting bitcoin payments.
In the latest incremental win, Apple recently updated its App Store guidelines to clarify its position on bitcoin apps. Apple will now allow the sale of apps enabling transmission of “approved virtual currencies,” as long as they are legal under state or federal law in the areas the app functions.
Silicon Valley has made significant bets that bitcoin will transform digital trade. Not many people are good at explaining why. But I recently sat down with Ben Horowitz, a partner in venture capital firm Andreessen Horowitz and the author of the new book The Hard Thing About Hard Things, who offered the clearest description I’ve heard to date of why he and others are investing deeply in companies connected to bitcoin.
The key innovation is that it solves what’s known as the “double spending problem,” says Horowitz, whose firm has invested $25 million in Coinbase, a digital wallet that enables buying, storing, and spending bitcoin.
“If you give me the coin, I know that you gave it to me and nobody else,” says Horowitz. “Traditionally, we have someone like Visa who keeps a ledger, and you have to pay a big fee….in bitcoin there is no central thing or fee.”
Watch the video above for more details from Horowitz on why bitcoin isn’t a “fake currency” or a fad–and why Pawn Star personalities should probably take a pass on any more financial commentary.