From its inception Bitcoin has led the rise of crypto culture worldwide, creating quite a roller-coaster economy in the digital currency sphere. Below Founder and CEO of Chaineum, Laurent Leloup talks Finance Monthly through the yesterday, today and tomorrow of cryptocurrencies.
Founded in 2009, Bitcoin was born from the notion of creating a currency that was independent of any other authority, is transferable electronically instantaneously and has low transaction fees. In its early days, the cryptocurrency was somewhat of an unknown entity to mainstream audiences; attracting a small, but dedicated, following of techies and leading to the creation of similar currencies.
The Bitcoin evolution
Since its inception, Bitcoin has increased in value exponentially throughout the past few years, particularly in 2016 and 2017 as more and more people began accepting cryptocurrency as a credible form of currency and not just a buzzword for tech insiders.
2017 saw a record year for Bitcoin. Starting out at a value of $1,000 in January, the currency hit an all time high of $17,000, a 70% increase, in the first two weeks of December 2017.
Bitcoin’s growth can be down to a number of factors. Firstly, the cryptocurrency model itself enables project developers to bypass banks in order to gather funds. For merchants, there is the benefit of being able to expand to new markets where fraud rates are unacceptably high, or credit cards are simply not available. This creates net results of lower fees, fewer administrative costs and a wider reach across previously inaccessible markets.
The Bitcoin following: from a niche community to the mainstream stage
Bitcoin has always attracted somewhat of a dedicated following. However, this fanbase was often restricted to the crypto community which, although passionate about Bitcoin, was quite an exclusive, niche community largely misunderstood by mainstream audiences.
Social media has played a significant role in the growth of Bitcoin by giving the cryptocurrency community a platform to come together and share their thoughts on the marketplace. For instance, Twitter has a ‘Crypto Group’ where Bitcoin and cryptocurrency enthusiasts can interact and tweet; making it much more accessible for everyday users to become part of the cryptocurrency movement.
Rise of ICOs and cryptocurrencies
As Bitcoin’s presence within the mainstream increased, awareness around blockchain technology and cryptocurrency has grown. With this, the marketplace has seen more and more cryptocurrencies launch through the ICO (Initial Coin Offering) mechanism. Currently the industry is seeing at least three new ICOs launching every week as more investors and developers look to this new fundraising system as a viable way to fund their blockchain projects.
There are many benefits to ICOs which is perhaps why they have become the fastest growing fundraising mechanism in 2017 alone. For organisations who are looking to invest in a project , it is considered a much faster and easier fundraising method, as anyone can start one and is free from geographical restrictions.
Additionally, many people also take interest in the cryptocurrencies because of their liquidity. Rather than investing huge amounts of money in a startup which is locked up in equity of the company, they can offer the opportunity to see gains quicker and take profits out easily.
Nevertheless, whilst cryptocurrencies do offer opportunities to see considerably higher ROI than traditional investments, prices of tokens can be extremely volatile and can be a risky investment. Therefore, investing in these kind of projects should be sought after consulting an expert.
The future of cryptocurrencies
With more and more cryptocurrencies launching, commentators are weighing in on how this will impact the wider industry. Due to the rapid growth of the currency over such a short space of time some are comparing Bitcoin to the ‘dotcom bubble’ in the 90s and early 2000s in that it isn’t sustainable in the long term.
However, in 2017 alone, ICO projects were able to collectively raise over $3billion clearly demonstrating that their significance is only increasing. With more projects expected to launch in 2018 further increasing mainstream awareness around cryptocurrencies, it seems we can expect this trend to remain consistent for the foreseeable future.
What's more, as regulation continues to evolve, ICOs could become very different and we could see them serving many different purposes.
Some commentators have even stated there is a chance they could even replace IPOs and make a fairer and more equally distributed economy, where anyone could become an investor with little risk as a consequence. Tokenisation of capital which provides new levels of liquidity and transparency could become the future as we may end up seeing all kinds of organisations, including larger enterprises, begin to explore the ICO space.
One might assume that Kodak, the American photography company best known for printing your beloved baby pictures from the high street, had faded into obscurity after its redundancy in the wake of the ever-changing digital age.
In the dawn of handheld devices such as cell phones, smart phones and tablets—all of which can take photographs themselves—Kodak underestimated the constant change in our technological society, whereas competitors took advantage of the market to remain up-to-date in a rapidly modernizing world. Its share worth paints a clear picture of this despite its financial peak in 1996, with the brief bankruptcy it filed for in 2012 and the subsequent steady slope downwards in worth from then onwards as solid proof of its growing irrelevance.
That is, until you reach January 2018, and a large spike in value ends its loss-making trend.
The cause? Eastman Kodak Co. announcing Kodakcoin, Kodakone and Kodak KashMiner, another entry in the list of growing cryptocurrencies and miners attempting to bank on Bitcoin’s success. The announcement prompted Kodak’s shares to surge from $3.13 per share to $12.75, slating 31st January 2018 as the date for the Initial Coin Offering (ICO) for Kodakcoin to begin.
ICOs are used to raise funds in the development of a new cryptocurrency, often in exchange for fiat currency or other cryptocurrencies such as Bitcoin. The announcement was made at the CES2018 convention in Las Vegas. Kodakone, created in partnership with London-based WENN Digital, will be the platform for which Kodakcoin can be used, utilizing blockchain technology to help photographers keep track of how their photos are used online. They will allegedly benefit from being able to register their work, sell rights to images and receive payment through the new cryptocurrency.
Among these announcements was the plan to install rows of Bitcoin mining rigs at Kodak’s headquarters in Rochester, New York—a power intensive process run by Spotlite branded as Kodak KashMiner, that will verify cryptocurrency transactions rapidly.
Kodak KashMiner computers can be leased by anyone for a two-year contract for over $3000, with alleged returns reaching over $9000 for the customer at $375 a month. Despite this, the overall worth of these machines is under scrutiny due to the fact that Bitcoins become harder to generate over time, signalling the potential that customers will earn far less than they anticipated. The scheme was also criticised over fears that a cryptocurrency bubble will form because of it.
Kodak’s move is among many others who have recently joined in the trend of creating unique digital currencies or taking advantage of Bitcoin’s success—including Mark Zuckerberg, who recently detailed plans to incorporate Bitcoin into Facebook in order to fix its underlying problem of centralism.
But is this move worth the risk?
Bitcoin itself has become common knowledge at this point, with headlines reporting its changes in worth on a daily basis—however, its worth plummeted by 14% in just 24 hours due to the continued discussion over South Korea’s potential ban of the cryptocurrency. With its future up to debate, it is unknown whether Kodak will reap the benefits that it undeniably needs. It has, at least, dragged itself out of the grave and back into the limelight for now.
Many are fearful of investing, many already did it, others are on the fence as to whether it’s still worth it. Nicholas Gregory, founder and CEO of London-based cryptocurrency enabler CommerceBlock, here provides Finance Monthly with some insight as to whether you’ve missed the boat or not at this point.
The chatter surrounding Bitcoin investments has reached fever pitch in the new year, and the higher its value rises, the louder it gets.
But how do you time an investment in a market like this, and is it worth it?
A massive stumbling block for would-be investors is the fact that nobody inside the industry truly understands how valuable Bitcoin really is. Fair value is difficult to pinpoint, and the market has been gyrating wildly as record high after record high has bowed to the cryptocurrency’s seemingly unstoppable rise.
Meanwhile skeptics continue to question whether Bitcoin has any value at all.
Warren Buffett of Berkshire Hathaway famously called Bitcoin a “mirage” back in 2014, and his criticism still echoes today. This is largely because regulation in many jurisdictions is yet to catch up.
Putting the intrinsic value of Bitcoin aside for a moment, the appeal of cryptocurrency largely depends on whether or not the investor expects other people to want to take it off them at a later date.
If people think Bitcoin has value, then it does. This faith - that it is a store of value and means of exchange - is what has underpinned traditional Fiat currencies ever since stone money was created in Micronesia. Those ‘coins’, which could be so large they weren’t even moved, were also a store of value solely because a community of people agreed they should be.
This same dynamic can lead potential investors to grow nervous over the future value of Bitcoin but, as history shows, it’s nothing new.
I, and my colleagues at CommerceBlock, help companies do business in Bitcoin. So if it’s true that Bitcoin is worthless, then we are in serious trouble.
What makes me more certain than ever that we have a future, is the same excitement that is driving the headlines. Bitcoin promises to be a currency not anchored to the old guard, not beholden to bankers, lawyers, high fees and costly international settlements. It’s a no-brainer for businesses who can accept huge payments from the other side of the world in minutes.
So what impact does this have on the value of Bitcoin? Well, anyone who has observed the astronomical growth in its valuation over the course of 2017 will know that its price has been volatile, to say the least. At the start of the year it was at around $800, before more than doubling to $2,000 in May. Then, in August, it broke the $4,000 mark for the first time. As I write this, Bitcoin is worth over $16,600 just four months later.
However, it’s a leap of faith to chase a market that has risen so dramatically. At the same time, I am one of those who believe bitcoin will be worth $100,000 one day. It’s either that or it will be worth nothing at all.
This is only my opinion. But even if I’m right, I can’t tell you how long that will take or what bumps we will encounter along the way.
In investing, you can be right in the long run, but still lose money. It is best summed up by a retort to famed hedge fund manager Michael Burry, played by Christian Bale, in the film The Big Short, as he defends his decision to short the housing market.
Burry tells a disgruntled colleague: “I may have been early, but I'm not wrong.”
Then comes the reply: “It’s the same thing.”
Many dedicated cryptocurrency and blockchain companies will be ‘R&D by default’, says specialist tax relief firm, Catax. They could therefore be eligible for much more relief than a standard business, meaning US and UK firms could be in line for hundreds of millions in tax relief. Traditional firms investigating blockchain technology and the commercial potential of cryptocurrencies will also be eligible for R&D tax relief.
Catax estimates that as much as 82% of the work carried out by dedicated crypto firms will be eligible for R&D tax relief given its ‘ingrained innovation’. This compares to roughly 35% with a traditional company performing R&D.
In many cases, the enhanced R&D eligibility is because the majority of the workforce will be focused on developing this technology and adapting it to a specific sector or use case.
Rather than channel-specific, the R&D being performed at these companies is company-wide.
But traditional firms investigating the use of these new technologies for their specific sectors will also be eligible.
Firms in countless sectors are currently weighing up the benefits of trading in cryptocurrency amid the recent $12,000 valuation of Bitcoin, and the acknowledged efficiencies of the blockchain. This amounts to time and money ‘developing a new product or business process’ — the basic requirement for an R&D tax claim.
UK firms have already raised a total of £52.8m ($71m)1 in ICOs, while the total raised in the US has reached more than $1.1bn (£820m). In the United States, firms are allowed to claim relief under the R&S Tax Credit system.
TokenData has revealed 90% of funds raised through ICOs has occurred in 2017, which means R&D tax relief for UK firms will fall well within the two year deadline for claiming.
Mark Tighe, CEO, Catax, commented: “Each day we’re seeing more and more dedicated blockchain and crypto companies emerge, while a growing number of traditional firms are also allocating significant resource into how they could integrate this technology into their own operations and sector.
“Within the crypto field, innovation is often company-wide rather than channel-specific and so the eligible expenditure is considerably higher than with traditional firms carrying out Research and Development.
“While you can’t claim R&D on Bitcoin and the blockchain itself, the potential for relief comes when companies evolve them or create new versions altogether. An example might be creating bespoke ‘sidechains’ for your sector that run alongside the blockchain, or a new digital currency altogether.”
(Source: Catax)
One of the biggest trade crazes of 2017, Bitcoin and cryptoculture is a young profit-making hobby turned job for many. Now recognized as a serious business through the regulatory backing of governments and large corporations, it’s future is almost certainly one of continued proliferation, but what does its history look like? Below, Finance Monthly hears from trusted cryptocurrency expert, Fiona Cincotta, Senior Market Analyst at City Index, on the past 10 years of Bitcoin.
So far Bitcoin has only had a short life. However, the few years that it has been in existence have seen the currency go from almost unknown, to hitting the headlines on a daily basis.
Let’s take a look at a brief history of Bitcoin.
2008 – The Legend of Satoshi Nakamoto
Satoshi Nakamoto, or someone working under that alias, allegedly started the bitcoin concept, or so the legend goes. In 2008, Satoshi Nakamoto published a paper, which outlines the concept of the bitcoin. Most notably this paper addresses the problem of double spending, so as to avoid the currency being copied and spent twice. This was an essential foundation brick, that allowed Bitcoin to expand where other attempts at cryptocurrencies had failed.
This same year Bitcoin.org was born. The domain was registered through a site which permits its users to buy and register domain names anonymously.
If we think back to August 2008, it was just weeks before the collapse of Lehman Brothers and at a time when banks were notorious for behaving as they pleased. Bitcoin was intended as a decentralised alternative, controlled and monitored by market forces rather than banks and governments
2009 – Bitcoin becomes public
Bitcoin software is made available to the public for the first time. The first ever block is mined – it was called Genesis. Mining is the process by which new bitcoins can be created. The transactions are recorded and verified on the blockchain. The first ever Bitcoin transaction occurred between Satoshi and Hal Finney, a developer and cryptographic supporter.
By the end of 2009, the first bitcoin exchange rate is established and published. Bitcoin receives a value like a traditional currency. At this point $1 = 1309 Bitcoin
2010 – Bitcoin’s first real world transaction
As global economies continued to recover from the financial crash, the first real world Bitcoin transaction occurred, when a Florida programmer paid 10,000 bitcoins for 2 pizzas worth around $25. Later that year bitcoin was hacked, drawing attention to its principal weaknesses; security. Bitcoin had been trading at around $1, prior to the hack, which then sent the value through the floor. Further bad press this same year, which suggested it could be used to fund terrorist groups did little to increase its popularity.
2011 – Parity with the dollar
Bitcoin reaches parity with the dollar for the first time. By June of the same year each bitcoin was worth $31 each, which meant the total market cap reached $206 million. 25% of the projected total of 21 million bitcoins have now been mined. Encrypted currencies in general were starting to catch on around now and alternatives were appearing, such as Litecoin. Each virtual currency tries to improve on the original Bitcoin. Today there are around 1000 cryptocurrencies in circulation.
2013 – Security Issues; Price Crashes
June of this year saw a major theft of bitcoin take place, from a digital wallet - once again highlighting some of the cryptocurrency’s weaknesses. In the same year, another major security breech saw the value of bitcoin tumble from $17.50 to just $0.01. 2013 also saw the US Financial Crimes Enforcement Network issue the first bitcoin regulation. This would be the start of an ongoing debate as to how best regulate the virtual currency. Bitcoin’s market capitalisation had reached $1 billion.
2014 – Mt.Gox disappears along with 850,000 bitcoins
This year was characterised by growing understanding and desire to regulate bitcoin. Not surprising after the world’s largest bitcoin exchange Mt.Gox suddenly went offline and 850,000 bitcoins were never seen again. Whilst there is still no answer to what happened to those Bitcoins, valued at the time at $450 million, at today’s value those coins would be worth $4.4 billion. The same year US released the Bit License – proposed rules and guidelines for regulating virtual currencies. Microsoft begun accepting payment in Bitcoins.
2016 – Bitcoin boomed
Bitcoin saw an annual gain of 54%, outperforming all fiat currencies. This was the year that the bitcoin really started to establish itself and provided holders of the currency various ways to generate a return or indeed use the currency. It was seen as a safe haven from traditional assets in a year of Brexit, Trump winning Presidency, the continued rise of ISIS and the refugee crisis in Europe.
2017 – Legitimacy and $20,000
The value of bitcoin jumped from $997 to over $19,661 and its popularity has soared exponentially. The currency went mainstream as it became listed on two futures exchanges CBOE and CME. The listing of Bitcoin Future contracts on these exchanges has boosted the legitimacy of bitcoin and made it more widely available. Despite the futures contracts providing ability to short bitcoin, the value of the cryptocurrency hits an all time high.
Finance Monthly also recently heard from Fiona Cincotta, Senior Market Analyst at City Index, on the spread of cryptoculture and the passion for conversion among entrepreneurs globally.
Bitcoin will see-saw in coming weeks but the cryptocurrency mania is set to grow, affirms the CEO of one of the world’s largest independent financial services organisations.
The observations by Nigel Green, founder and chief executive of deVere Group, come after Bitcoin fell by $2,500 last weekend after hitting record highs.
Mr Green comments: “Bitcoin investors have been on a rollercoaster this year. The world’s biggest cryptocurrency soared to a new record of $17,000 on Thursday before nosediving by $2,500 hours later.” Bitcoin has since seen a rise to $18,000 and then $19,000 in the past week, with some dips here and there.
“This correction is an appropriate one after such frenzied trading. We should expect to see Bitcoin see-sawing in coming weeks. Sharp moves are likely, followed by subsequent corrections.
“This is due to the increased interest in this exciting new alternative currency, and especially with the Chicago Board Options Exchange allowing investors to trade Bitcoin futures in the next few days, driving hikes.”
He continues: “Bitcoin’s impressive rally has piqued interest in the phenomenon of cryptocurrencies in recent days and pushed demand further skywards. I believe we will look back on this point as the start of digital currencies becoming mainstream. They can no longer be dismissed as a fad or fraud. Of course, Bitcoin and other cryptocurrencies will rise and fall – but all traditional currencies do the same.
“As they become ever-more established, cryptocurrencies will gain in popularity and the growing cryptocurrency mania will likely result in the launch of more and more digital currencies to meet demand.”
In a statement on a few weeks back, Mr Green also urged caution. He said: “Bitcoin remains a major gamble as it is very much an ‘unchartered waters’ asset – we’ve simply not experienced this before. Also, an asset that goes almost vertically up should typically raise alarm bells for investors. In addition, many would argue that there’s limited underlying economic value.”
The deVere CEO concluded: “Today’s digital world needs cryptocurrencies. One or two of the existing ones will succeed, whether it’s Bitcoin or not remains to be seen. But the dawn of the financial technology era has arrived.”
(Source: deVere Group)
Discussing the latest US tax cuts decision, FTSE updates and bitcoin news, Lee Wild, Head of Equity Strategy at interactive investor, talks to Finance Monthly about the end of year affairs.
With a week to go till Christmas there’s a whiff of Santa rally in the air. Markets should respond well to a ‘yes’ vote on US corporate tax cuts and possible political agreement to avoid a government shutdown on Friday. UK stocks are better value than their US counterparts and, despite the spectre of Brexit horse trading through 2018, there are no obvious banana skins between here and New Year.
In fact, Trump’s tax reform and the failure of progress on Brexit negotiations to revive sterling, will continue to give overseas earners listed here a foreign exchange kick. This, and typically thin trade as investors wind down for Christmas, should allow the FTSE 100 to consolidate gains above 7,500, something it has failed to do thus far. If it does, don’t bet against a new record high by year-end. It’s only one good session away.
An ongoing shutdown of the North Sea Forties pipeline continues to underpin oil prices, with Brent crude looking prepped for a crack at a fresh two-and-a-half-year high.
Whether or not bitcoin traded above $20,000 over the weekend depends on where you get your prices from. According to coinmarketcap.com it peaked Sunday at $20,089.
That bitcoin passed $20,000 for the first time over the weekend is not a surprise. A week ago, with the price at less than $17,000, we said ‘the music may have much longer to play on this one than people think’.
With every new milestone there’s fresh discussion around bitcoin’s legitimacy and potential, both as a trading instrument and revolutionary digital currency. It was the same when it first broke above $10,000 at the end of November. Valuing cryptocurrencies is like sticking your finger in the wind, but traffic is still very much one-way.
Introducing futures contracts in the US was meant to give short-sellers access to the market and improve liquidity, but availability is still fairly restricted. The introduction of bitcoin futures on the Chicago Mercantile Exchange over the weekend may help, but it will take time.
Until it becomes easier to sell short, buying dries up, or there are tech issues or a major hack, bitcoin will keep passing milestones with alarming regularity. Right now, there’s a long queue of investors, both amateur and professional, still waiting for a ride. This bubble is not bursting yet.
Barely a day passes by now on the internet when I am not offered to subscribe to the ICO (initial coin offering) of a new currency. If the statistics are to be believed, there are 11,000 of these new currencies, of which 1,200 or so are capable of being traded on the various cryptocurrency exchanges which have popped up around the world in recent times. But why are there so many of these new currencies popping up and how do they differ from one another? Richard Tall at DWF explains.
Cryptocurrencies - the 'next-gen' currency
The first cryptocurrency was Bitcoin, and this has been with us since 2009. Bitcoin has in reality only been in the public consciousness for the last three or four years and most cryptocurrencies have been created within that time period. As it is now mainstream, Bitcoin can be used as a means of payment either through transfer over the internet, or by use of bank cards which are linked to accounts denominated in Bitcoin. In the modern environment, where so few of us use cash, it has the same sort of functionality as a fiat currency, albeit that the numbers of traders and businesses which are prepared to accept it remain in the significant minority.
Like Bitcoin, most new cryptocurrencies have their genesis in smart contracts. A smart contract is a computer protocol which enables a contract to execute automatically. The basis of a smart contract is that if X happens then Y will flow from that. Most of us would recognise that as a conditional contract, but a smart contract enables this obligation to happen in the decentralized world for those who sign up and agree to its protocol.
The rise of the token
The vast majority of new cryptocurrencies do not create their units in the same way as Bitcoin, though. A Bitcoin is created by solving an algorithm, the reward being generated through proof-of-work. Generally, most new cryptocurrencies being made now are offered as a token which is created by the originator and then traded through the blockchain. This is known as a proof-of-stake. An ICO in these circumstances will simply offer tokens for subscription by investors, usually to raise money for the next stage of development of their project, and in many ways an ICO shares many characteristics with an IPO of a development stage company. Many of us will remember the dot com era, where numerous companies sought funds to take themselves to the next stage of development, with the investors being asked at IPO to invest in the idea rather than a revenue, or indeed profit, generating business.
Coins and tokens - the regulator's perspective
The similarities between ICOs and IPOs have not escaped the attention of regulators. An offer of shares or bonds is clearly within the bailiwick of regulators and so both are subject to a host of legislation. However, the general mantra with an ICO and a cryptocurrency is that they are "unregulated." Bearing in mind money laundering and anti-financial crime legislation, "unregulated" is entirely inapt as a tag. Equally, little thought has been given by ICO originators as to the true nature of what is being offered. The SEC (the US Securities and Exchange Commission) has recently ruled that ether (the tokens behind Ethereum) are securities, on the basis that they are an investment contract (investment of money in a common enterprise with an expectation of profit). Accordingly, the SEC's view is that ether offers should have been conducted in accordance with securities laws. Many other regulators are issuing similar warnings, and making the point that simply because a new technology is being used it does not mean that the resulting token is outside long-established principles of consumer regulation. As a broad rule of thumb:
- If a token offers voting or similar rights it will be treated as a security, as it shares its characteristics with shares;
- If it offers redemption it will be an instrument creating or acknowledging indebtedness, or colloquially a bond;
- If it derives its value from fluctuations in value of another asset it is likely to be some form of derivative.
Whether an ICO is of any merit depends ultimately on the utility of the token offered and what it is capable of doing. Clearly the aim of most ICOs is for the value of the token to increase over time, and any investor needs to look closely at whether that will ever come to pass. Equally, those originating ICOs need to exercise extreme caution in relation to the terms of the tokens offered and the jurisdictions into which they are offered. This is a red-hot topic for regulators who definitely do not share the view that this arena is "unregulated".
Bitcoin reached another new milestone today as it briefly traded above $17,000 (£14,809) before dropping $2,500 down to $14,500, sparking both fear and interest for investors alike.
This comes after the online currency reached $10,000 just over a week ago.
The Cryptocurrency’s meteoric rise in the tail end of 2017 began earlier this year in March 2017 when a single Bitcoin reached the value of $1200. Since then, it has been gaining traction and breaking record after record.
The 70% surge has largely been aided by demand in China, where people use it to channel money out of the country. It has been further aided by Bitcoin’s introduction to the Chicago-based Cboe Futures exchange and its impending launch on the CME futures market, which will allow investors to bet on the future price of the currency, and give it a form of regulation that has not been present thus far, something that has held back a series of big investors.
Despite this climb, critics fear that Bitcoin’s rise is creating an inevitable economic bubble, similar to the Dotcom rise and subsequent crash that saw the end of many companies and stock reductions of up to 86% in others. Others, however, believe that the rise can simply be attributed to Bitcoin reaching the financial mainstream.
Even with its current rise, Bitcoin is still very much an unknown quantity leaving plenty of room for scepticism. Added in to that is the fact that roughly 1000 people own 40% of the Bitcoin market, which has created an environment where traditional investors have been tentative.
As it stands, people can speculate but no one knows which way Bitcoin is going to go. However, given that buying one Bitcoin last night and selling it 5 minutes later would have made you around $3000, makes it understandable that some are likening the continuing climb of Bitcoin to a “charging train with no brakes”.
What is Bitcoin?
Bitcoin was introduced back in 2009 by an unknown individual going by the name of Satoshi Nakamoto in the aftermath of the global banking collapse.
Cryptocurrencies are not a form of physical money, rather they’re a digital currency created by computer code and worldwide the total in existence amounts to £112 billion.
There is no middle man involved in transactions either, eliminating any fees that usually occur. Anyone can go online and purchase Bitcoin, whether that’s a single Bitcoin, a number of Bitcoins or even a percentage of a single Bitcoin.
What do you think about this sudden surge? Do you think now is a good time to invest in the cryptocurrency? Or do you feel this is just a passing craze that will soon die down? Leave your answers in the comments below!
Bitcoin has since its inception, and especially during its 2017 growth spurt, become a bit of a culture, a religion almost. If you’ve heard about bitcoin from somehow, they likely sounded really passionate about it and excited to explain it to you. Below Fiona Cincotta, Senior Market Analyst at City Index, talks Finance Monthly through the bitcoin investment craze.
In 2009 when the bitcoin was invented, very few people thought it was worth a second thought. In June of 2009, a bitcoin was worth $0.0001. Even a year ago no one was really taking about bitcoin. It was a virtual currency that existed for those that were technologically advanced enough to understand it.
As humans, the feeling that we have been left behind or the feeling of missing out, is not one we relish. In many cases this is magnified when money is involved. Conversely, the feeling that we have jumped onboard the right ship is something we love to shout about, something that more and more bitcoin investors are doing. As the price of bitcoin continues to rise, the interest that followers pay to the virtual currency and the hype surrounding it grows exponentially. As the price goes up, so does the hype.
Bitcoin reached a staggering new all-time high on 20th November as the virtual currency broke through $8000 level for the first time, not just the first record high, but the third or fourth record high within so many weeks. Several new developments surrounding bitcoin have aided it’s 48% rally from $5500 just one week earlier.
Whilst the link between the rising price and growing following of bitcoin is indisputable, several recent developments have also increased its legitimacy. Firstly, CME Group plans to offer bitcoin futures from December 10th. Futures are a mechanism of agreeing to buy or sell an asset at a future date and the contracts can be used as a method of speculating on the assets price movement over time. CME’s support for the currency is giving it a legitimacy in the financial world that up until now it appeared to be lacking.
The move by the CME will also put more pressure on the big investment banks to join the party. So far, Goldman Sachs has suggested it could be open to the idea of a bitcoin desk, whilst JPMoragan have also expressed an interest in opening a bitcoin desk to serve clients’ needs. But could more legitimacy just encourage bitcoin followers to continue talking up what is starting to look like this generation’s dotcome bubble. Is the bitcoin a great example of investor enthusiasm driving to fever pitch, before it crashes?
Yet, the bitcoin religion is not just about an apparently phenomenal investment. To some of those involved, bitcoin is the future of money. It is not unheard of for bitcoin enthusiasts to compare where the bitcoin is now, to where the internet was in the 1990’s. One bitcoin investor said “bitcoin is one of the most important inventions of humanity. For the first time ever, anyone can send or receive money, with anyone, anywhere on the planet, conveniently and without restriction. It’s the dawn of a better free world.” Another claims that mankind “has never really owned their own money, it’s always been owned by their rulers. Bitcoin gives the ability for people to actually own their own money.” Here we can see that to some the bitcoin religion goes far beyond the investment itself and is the cusp of a social revolution.
Social revolution, new religion, or not, focusing on the bitcoin rather misses the point. More attention should be switched towards the blockchain, the technology behind the bitcoin. Whilst the technology is complicate the idea is simple, Blockchain technology enables us to sends money directly and safely from me to you, without going through a bank, paypal or credit card company. Blockchain technology has the potential to bring with it widespread change. Whilst JP Morgan CEO Dimon, called bitcoin a fraud, his bank has been using underlying blockchain technology to develop new processes. Blockchain technology is still some way off going mainstream, in fact the bitcoin bubble may have even popped before blockchain goes mainstream. Rather than the internet of information, the blockchain (rather than the bitcoin) could be the internet of value.
Bitcoin’s meteoric rise is attracting a ton of attention. Is it ready for the mainstream?
To learn all about Plutus - a mobile application for making contactless Bitcoin payments, this month Finance Monthly reached out to the company’s CEO - Danial Daychopan.
What is Plutus?
Plutus consists of two interconnected applications:
Plutus Tap & Pay is an Android and iOS app for paying with Bitcoin & Ethereum at any contactless-enabled debit card terminal already in use today. Additionally, every deposit you make rewards you in Pluton, a loyalty rebate token which can then be used to make further purchases without fees.
The PlutusDEX is a one-way peer-to-peer exchange (smart contract) that provides liquidity for the Tap & Pay app. The way this works is that PlutusDEX traders can escrow fiat currency such as GBP or EUR to purchase Bitcoin and Ethereum from the users of Tap & Pay mentioned above.
Our favorite aspect, however, is that the Bitcoin and Ethereum can be bought by other users with zero fees through the PlutusDEX. Our person-to-person system it much easier to add new currencies (both fiat and digital) depending on demand, and a 0% fee trading experience encourages exchanges and blockchain enterprises to use our API as well.
Tell us a bit about yourself. How did the idea about Plutus come about? What were some of the challenges that you faced when setting up the company?
My journey in FinTech began in 2013 when I first started one of the first licensed Bitcoin exchanges, followed by a cryptocurrency merchant payments platform called LazyPay.
Earlier that year, I had seen an invoice get filled within seconds across different timezones, all without the need for a centralised party. After this, I was immediately attracted to Bitcoin and fascinated by the features it had to offer.
At the time, there was already a growing niche of Bitcoin supporters and early adopters who wanted to spend the coins they had earned. However, merchant adoption proved far more challenging than anticipated, stalling due to the logistical and volatility issues. Even the largest Bitcoin companies couldn’t move it forward. Unswayed by rising hype, merchants decided that cash and debit cards worked just fine for them. It was and still is an uphill battle.
We were undeterred and still wanted to be able to spend our digital currencies wherever we wanted. And if possible, without having to get merchants involved altogether. After much deliberation, we finally found a way to do it.
In 2015, Plutus first set out to circumvent the issue of merchant adoption by connecting the blockchain to the Visa and MasterCard networks. This gateway makes digital currencies valid for payment at over 40 million debit-enabled points-of-sale worldwide.
This means that even though you are using digital currencies, the store owner or merchant will receive a bank transfer as usual and will not see any difference when compared to a regular debit card transaction.
What have been the company’s major achievements thus far?
Plutus has come a long way since our inception. When we began, we first wanted to gauge community demand. We knew that we needed the app we were making, but we didn’t know whether other people knew it too. From this idea forth, we decided to crowdfund the project. In a surprising result, we raised over 1 million USD from over 1000 users, and have grown to thousands of subscribers since.
We’ve also built an incredible team of tremendous people, from management to development, and entered into partnerships with leading service providers. Now we are right in the middle of the BETA programme, testing and tweaking our platform with the help of our community, drawing ever nearer to the first production-ready release of Plutus.
What kind of device is required to use Plutus? Do merchants need anything to accept Plutus payments or Plutons?
Pretty much all (relatively) new smartphone have built-in NFC. In fact, finding a smartphone without it
Is actually quite difficult nowadays.
To support Plutus, all merchants need is the regular contactless payment terminal that they most likely already have. This makes Plutus payments valid at over 40 million compatible points of sale in the world by default.
What can you tell us about your in-app cryptocurrency called Pluton?
Our platform Plutus Tap & Pay has an in app token called “Pluton”, which act as loyalty reward points on the platform. However, it is important to note that this is not intended to be a competitor of Bitcoin or Ether.
Rather, Plutons (or PLU for short) are actually a cashback program similar to frequent flier miles. This means that they can be used to make purchases on our platform just like BTC and ETH, with the added advantage of faster deposits and absolutely zero fees. Every time you make a purchase with BTC or ETH, you get 1-3% of your purchase back in Plutons.
Could you tell us more about where you see blockchain technology in the future?
We believe there is huge potential in blockchain technology to positively disrupt our standard methods of payments, trading, and other aspects of our lives. The industry is rapidly growing with a never-ending drive towards more automation, more decentralisation, and less friction. Over the coming years, we believe the use case will reach mainstream products where consumers could have a better user experience without the need to understand or be aware that the blockchain was utilised.
However, that said, private blockchains do not rely on a peer-to-peer network but if an organisation intends to utilise the technology for improved governance, automation and transparency internally then it can work if done right – for now, we remain skeptical.
Do you look at others in the FinTech industry as competitors or do you take a different view?
I have a different view - they help push the industry forward and help us to learn from their mistakes. In many ways, we are doing something completely different.
When you charge your Plutus account with digital currencies, you are actually transferring them directly to a trader on the DEX who has created an order to purchase them in return. This means that our customers can sell and buy digital currencies directly to and from other customers. As a result, Plutus never stores any digital currencies on the platform.
And with recent security concerns on the rise, the benefits of not holding funds are becoming increasingly clear as the blockchain space develops.
What have been the biggest hurdles faced by the company?
Red tape and creating a winning team - both in development and in management. In the blockchain space everyone is competing for talent, while regulators are still very skeptical. This creates a challenging environment.
What is your vision for the future of Plutus? Where do you see the company in 2-3 years?
The aim is to enable users to pay using crypto currency directly with smartphones at any merchants of their choice. And lower the barrier of entry for anyone wanting to buy Pluton, Bitcoin and Ether. This is why we created Plutus Tap and Pay and the PlutusDEX. We also wanted to create decentralise loyalty reward system called Pluton that awards customers for every deposit, which they can then spend anywhere. In the future, we believe the platform will be one of the largest platforms that enables payments via the debit card network in the peer-to-peer market.
We also aim to enable users to make a direct deposit in their Plutus account, using direct bank transfer instead of crypto, who will also receive a reward in Pluton, introducing new users to the blockchain ecosystem.
Initially, we will be releasing physical debit cards, NFC stickers. Our main product will be an iOS and Android app for making contactless purchases, trading and managing your wallets. We plan to add online payments and other nifty features as well.
What are you currently working on?
We are currently working on Plutus Tap & Pay, and the PlutusDEX. Both parts are interconnected and fulfill important roles in our ecosystem. Currently, our live payment systems are already undergoing internal testing. Once the stress-tests have been completed, the PlutusDEX will be released, followed by shipment of the official Plutus Debit Cards.
We are also looking to grow Plutus with new members in key roles - we are currently hiring.
If you could share one piece of advice with young FinTech entrepreneurs, what would it be?
Don't be scared to fail and be prepared to live “the ramen life”.
Website: https://plutus.it
If helping test the platform and coordinating how the future of Plutus Tap & Pay and PlutusDEX will look, why not join the BETA waiting list? http://beta.plutus.it
For more information about Plutus’ long-term ideas, please take a look at “Slingshot from Orbit: The Future Vision of Plutus.it”: https://medium.com/@PlutusIT/slingshot-from-orbit-the-future-vision-of-plutus-it-cf7b69f827ef#.wajh88j3e
Case Study: An Interview with Plutus.it’s CCO - Filip Martinka
Recently, Plutus has been making rounds in London and Berlin, presenting their technology for instant, peer-to-peer, decentralized payment platform. The company’s CCO - Filip Martinka tells us about how the project is coming along.
Why use Bitcoin over Ethereum?
We believe that there are useful aspects to both. The main reason we are using Bitcoin is for its already widespread usage, and Ethereum - for its ability to automate business logic. We want be able to adapt based on demand. Fortunately there are many other projects on the horizon that aim to be natively compatible with the Ethereum virtual machine, so porting the platform may be possible as well.
Why should more merchants accept Bitcoin as payment? What about Ethereum?
We believe that at such an early stage of Bitcoin’s development, convincing merchants is quite challenging. This is why our app is mainly intended for Bitcoin and Ethereum users who are tired of waiting for merchants to accept digital currencies and want to wield the ability to pay regardless of whether the merchant is involved.
Are you planning to integrate with other Decentralized Exchanges?
Initially, our platform will launch with an open API, meaning that 3rd party applications can interface with some features of our system. At the present moment, our development team is focused on finalizing our product. However, once we have a production-ready release, we will look into available options to expand our cooperation with other exchanges, developers and SaaS providers.
What is the reason, in your opinion, that merchant adoption of Bitcoin and cryptocurrencies has been so slow?
It appears that mass adoption is a slow process, and not necessarily a straight line.
Accepting digital currencies still takes a lot of effort, involves friction and regulation, and is often cost intensive. The main problem is that it is not possible for merchants to accurately predict how many Bitcoin purchases they will get in the early stages of adoption. Many get discouraged when they get none, or remove Bitcoin as a payment option for a combination of reasons including training expenses, fees, or technical difficulties.
What can Status do for Plutus?
We appreciate integration into any 3rd party apps, exchanges, or services. All we want is for our users to have optimum interoperability with platforms, and liquidity for our traders. If you have other suggestions please let us know.
How does Plutus benefit from the use of Ethereum?
Our one-way trading gateway integrates an Ethereum smart contract, which makes our platform more transparent and decentralized. Over time, we want to optimize costs, reduce friction, and make the platform more autonomous.
What is the goal you’re hoping to achieve with Plutus?
We want Ethereum, Bitcoin, and other digital currencies to become regular payment options in daily life.
Which other DApps do you think Plutus can benefit the most from?
Exchanges can plug into our platform as well. It will be interesting to see the result.
What do you see as the biggest hurdle(s) in gaining a critical mass for Plutus?
We have to wait for society to get more familiar with digital currencies - until it becomes a topic one can talk about without getting weird looks from strangers. In the beginning, people who earn their income online will be the first to fully adapt to digital currencies. But we believe that this will take less time than most people think.
How do you see Plutus helping people's lives?
Our main goal has always been to provide a convenient payment method, and an easy and affordable way to buy digital currencies.
Is there a level of technical knowledge required by the end-user in order to use Plutus?
Ideally, there will not be more than few clicks required to use any feature. Our team is always thinking of new ways to make Plutus easier to use and navigate.
What is the most exciting feature of Plutus in your opinion?
How it all comes together. The Tap & Pay users deposit Bitcoin and Ethereum, while traders purchase them on the PlutusDEX, and the merchants receive their usual payment from the traders. This makes it possible to add currencies based on demand, and connect other platforms.
What do you think is the most important factor that differentiates Plutus from the non-blockchain(/Ethereum) applications in your field?
The fact that Plutus does not hold any digital currencies, and simply acts as a gateway to connect users with each other and match their trades. This makes the platform more secure and adaptable. And in some ways, the peer-to-peer nature of our exchange makes it more like “localbitcoins” for example, rather than a regular centralized exchange.
What can people in the Ethereum community do to help Plutus?
The main thing would obviously be to use our app, or to purchase digital currencies through our gateway. If you are a developer or entrepreneur, note that our decentralized exchange will have an open API and 0% trading fees for buying any digital currencies, making it ideal for integration in 3rd party software.
