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Forget Everything You Didn't

Understand About Bitcoin

By Carter Dougherty January 15, 2015

Photographer: Scott Griesel/Getty Images

Jeremy Allaire doesn’t talk about Bitcoin like he used to. Allaire’s startup, Circle

Internet Financial, has pulled in $26 million in venture capital over the past two

years with the promise that it would help “make Bitcoin mainstream” by

developing simple tools for using it.

Visit Circle’s website today, and references to Bitcoin aren’t prominent. Allaire’s

current sales pitch is that his company can move your money—be it in dollars,

euros, or yen—quickly, securely, and for free. “We’ve never said we’ve attached

ourselves for eternity to Bitcoin,” Allaire says. “Users around the world

understand monetary value in their local currency.”

As interest in Bitcoin as a new currency wanes, Allaire’s shift points the way to a

potentially different legacy. Conceived as a substitute for conventional currency,

without the involvement of established institutions, Bitcoin is poised to evolve

into a money transfer system that would do what Western Union or Citigroup

does, only more cheaply and efficiently.

In the early days of 2014, partisans of the digital currency looked forward to what

they hoped would be the year of Bitcoin. They spoke of it going mainstream as a

replacement for “government-issued” currencies or as an inflation-proof store of

value. Coinbase in San Francisco—“We make it easy to get started with Bitcoin”—

joined with Budweiser to distribute small amounts of Bitcoin at summer concerts

(people got drunk). BitPay, an Atlanta-based startup that processes Bitcoin

payments, sponsored the Bitcoin St. Petersburg Bowl on Dec. 26 (North Carolina

State beat the University of Central Florida, 34 to 27).

Anyone who saw holding the currency as a path to riches has been disappointed.

The value of Bitcoin—measured in dollars—fell almost 70 percent last year and

has continued to plunge in 2015. The price drop,...