Bitcoin’s ongoing evolution draws comparisons to how Napster, while unsuccessful as an organization, upended an entire music industry and propelled it into the digital age.
Bitcoin truly is the Napster of finance says Aite Group in its latest report, Bitcoin: The
Could bitcoin be the Napster of finance?
Napster of Finance. Although many compare bitcoin to the early days of the Internet, it is much more akin to the file sharing technology, which offered a better, faster way to distribute music content over the Internet. Bitcoin is similarly challenging the way money moves on the Internet by proposing a better way.
Aite Group’s research examines the ongoing evolution of the cryptocurrency, discusses other platforms that have learned from bitcoin’s downsides, and assesses the continuation of criminal controversy surrounding bitcoin. Bitcoin will either lay the groundwork for other ideas to come along and run with its innovative concepts, legitimizing cryptofinance for the financial services industry similar to what Napster did for the music industry, or the bitcoin community itself will figure out how to work within the legal framework of finance in order to survive.
While bitcoin’s cryptoleaders have a lot of work to do in order to evolve to a point where these technologies and innovations are ready for primetime, open platform concepts have proven to be effective. Yet, despite this, to avoid potentially being pushed out of the financial services industry, Aite Group believes that bitcoin-based businesses should fully embrace regulatory frameworks in order to succeed in this highly regulated space or meet the same fate as Napster.
Consumers themselves should continue to be wary of the risks involved in using bitcoin and ensure they are fully educated on how to mitigate those risks. While consumer risks abound, there are still some real world benefits for consumers who reside in developing countries or engage in frequent cross-border money transfers, says Aite Group.
Financial institutions should also remain open to companies focusing on cryptorails that are offering a viable value proposition by facilitating less expensive and faster money transfers. While cryptocurrencies may be risky investments for financial institutions, the utility of cryptorails has the potential to improve money transmittance processes, particularly for cross border remittances.
“While cryptoleaders have a lot of work to do in order to evolve to a point where these technologies and innovations are ready for primetime, the open platform concepts have proven to be effective and are here to stay,” says Nathalie Reinelt, analyst in Retail Banking at Aite Group.
“While there are many parallels between bitcoin and the Napster story, the outcome may not be the same, much depending on how regulators and bitcoin businesses work together.”
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