Bitcoin Doesn't Need a Dongle

There's a lot of talk about dongles recently. Square has always relied on a dongle and now PayPal is sporting a fancy triangle-shaped dongle, nicknamed the 'Blue Dorito'. Both of these dongles equip your mobile phone to accept and process credit cards securely by inserting the device into the smartphone's 3.5mm audio input jack. Apparently, this passes for financial innovation in mobile payments but I file it under the 'not-disruptive-enough' category. Truly-disruptive financial innovation is already here with decentralized bitcoin. And, bitcoin doesn't need a dongle!

Bitcoin bypasses the need for an external dongle because it bypasses the existing railroad tracks of the entrenched legacy players like VISA and Mastercard. Just as the newly-funded VC favorites of Boku, Jumio, and CardSpring layer on top of the legacy network, Square and PayPal repeat the strategy of keeping the banks and credit card processors in the transaction loop, and the lion's share of the revenue loop as well. This might be a good short-term bridge but the real action is taking place with solutions that route around the legacy networks by replacing the unit of account, or numéraire. The easiest way to circumvent the high-fee transaction networks is to utilize a different currency unit since it does not come with the same handicaps and legacy restrictions of a political currency unit. Erik Voorhees states that we need to advocate "the separation of money and state."

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