Bitcoin's backers know they need to win you over

New applications are needed for wider acceptance, investors recently said

By , IDG News Service |  Internet

Bitcoin's popularity is growing, but even its biggest backers say it has a mountain of problems to overcome in gathering wider appeal.

"It's on the fringe," said Marc Andreessen, the Silicon Valley venture capitalist and Netscape co-founder, whose firm, Andreessen Horowitz, is one of the largest investors in ventures involving the Internet-based monetary system.

Bitcoin's current standing in the technology world is analogous to the early days of the Web, he said, when it was feared for its connections to child pornography and illegal drug sales.

The digital currency has found its way into a range of online services over the past year, boosting its popularity, but mainstream acceptance remains elusive.

There are numerous issues at play. People still aren't sure what to make of it, established digital payment systems generally work fine, and there aren't tons of exciting applications yet. Those challenges, and others, were laid out by Bitcoin investors Tuesday at CoinSummit, a San Francisco conference focused on Bitcoin and other digital currencies, which drew hundreds of entrepreneurs and others working in its expanding ecosystem.

One of the biggest challenges is that some people, particularly banks, may not trust Bitcoin yet, some investors said. "The lack of banks willing to take merchant accounts for new Bitcoin companies is a real inhibitor to the growth of the ecosystem," said Jeremy Liew, a partner at Lightspeed Venture Partners, during a panel discussion.

The Web, of course, was eventually embraced by the masses as it became useful for shopping, email, and many other tasks. Investors hope that Bitcoin will someday go mainstream as well, as its platform expands and new applications are developed.

But building trust in Bitcoin takes time, Liew said. "Trust is going to be a very important factor for companies in the Bitcoin space to grow," he said.

Still, investors have high hopes for Bitcoin, despite recent blowups including the fall of Mt. Gox, once the largest Bitcoin exchange, and mounting scrutiny by financial regulators and authorities across the world.

"We think of Bitcoin as being on the scale of the next Internet," said Balaji Srinivasan, a general partner at Andreessen Horowitz, during a panel discussion at the show.

One barrier to use is that people don't trust Bitcoin as they do paper money. When average people think about trusting money, Andreessen said, they think about whether they can trust the bank, or the U.S. Treasury, or the U.S. Mint. Using bitcoins requires trusting the underlying technology, which is a foreign concept to laypeople.

"We have to work hard to explain [the system], articulate it, simplify it, and make it understandable," Andreessen said.

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