Seemingly out of nowhere, a technology appears that changes the way people think about an established industry. Vested interests see it as a threat and become determined to ensure it does not undercut existing profit structures. Sounds like the synopsis of the story about bitcoin up to this point? Well, yes, but digital currency isn’t the first technology to meet the resistance of incumbent parties.
The music industry, for example, faced a signifcant threat from peer-to-peer technology in the late 1990s. In fact, 15 years ago, controversial file-sharing service Napster was one of the biggest stories around. The company’s peer-to-peer technology enabled users to connect to vast music libraries stored on hard drives around the globe, and then download those files with the click of a mouse. More than a decade later, the music industry hasn’t been the same since.
Of course, even at its peak, there was widespread agreement among market observers that Napster had changed the face of music. But, besieged by lawsuits, Napster today survives only as a shadow of its former self. Instead, business interests took advantage of its legal troubles, legitimized the technology and profited from it.
The result could provide an interesting history lesson for bitcoin, illustrating what happens to incumbents when rivals look for ways to innovate a novel idea out of existence.
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While Napster provided a revolutionary way for people to use peer-to-peer connections to download music, the problem was that it essentially freed published works from record label control.
Napster allowed anyone to obtain music – that others previously had to pay for – absolutely free. It’s demise ultimately helped Apple dominate the music downloading industry, and later gave rise to streaming music platforms like Pandora and Spotify in what has become an increasingly important model for the sector.
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Could bitcoin become the Napster of money? The answer depends on how you view the question. Napster has certainly had a impact, but it failed to ever live up to its potential as a business. As such, the company’s history may provide an important warning for the bitcoin industry.
Bitcoin could potentially be replaced by something else, something more favorable to governments and banks worldwide – something Apple Pay, ironically enough, is already trying to accomplish.
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