The Rise of Blockchain & Cryptocurrency - Part 1 - Written For Business Insider Gulf

1. 43november 201642 november 2016
When Money
is No Object
The Rise of Blockchain &
Cryptocurrency: Part 1
By Jose Paul Martin
Could technology provide the solution we’re looking for?
A cheaper, faster and possibly superior way of managing money?
What if you could settle all trade anywhere in the world, in almost
real-time, without any transaction fees and in a fully transparent
manner? Who would need banks as intermediaries? Ouch...
Well, the world is warming up to this idea.

2. 45november 201644 november 2016
Enter Blockchain &
Cryptocurrency.
You see technological innovation has
always enabled a level playing field.
The internet for instance has enabled
ordinary people everywhere to achieve
more freedom, gain more access to
information and in fact even earn a
living. No more gatekeepers, no one
to say you can’t.
Blockchain and Cryptocurrency have
the potential to be the biggest financial
development of this century.
In my humble opinion, one of the
biggest developments of our century
was the Internet (or as some know
it, the world wide web) in particular
the underlying protocol (framework)
called TCP/IP.
This protocol revolutionised the
way we communicated, the way we
do business, the way information is
disseminated. And now, we’re seeing
the birth of another revolutionary
protocol, Blockchain.
Without getting too technical,
Blockchain is a globally distributed
ledger (electronic public book or
database) that is able to record and
verify ownership of the (electronic)
currency which keeps all the records
in tally - without the need for a third
party - it’s distributed like the internet
across a peer-2-peer network, guided
and secured by a mathematical formula
allowing anyone to send funds to
anyone, anywhere in the world and
as quickly as email. What the Internet
(TCP/IP) was to communication,
Blockchain is to currency.
Cryptocurrency refers to virtual
or digital currency because it uses
cryptography that provides security
of transactions and protection from
counterfeiting. There are many
cryptocurrencies around these days, but
Bitcoin is the obvious leader of the pack
since it is the oldest and most popular.
Famed venture capitalist and founder
of PayPal, Peter Thiel thinks it is what
PayPal should have been; “Bitcoin is
the opposite of PayPal, in the sense
that it actually succeeded in creating a
currency...”, which is interesting, given
that PayPal’s original slogan was ‘create
a new world reserve currency’.
Just like various apps are built on the
Internet, one of the earlier versions that
sprung up from the blockchain protocol
was Bitcoin - a cryptocurrency. Some
would consider Blockchain - a record of
ownership, part of the second generation
of the Internet. This is so disruptive, that
banks are taking note.
Why the Big Fuss?
Why are banks worried about this? Well,
there’s no intermediary. And that means
you won’t be charged a wire fee or
merchant fee or any other ‘creaming’ fee
to transfer funds like those used in wire
transfers, credit cards, cheques or online
payments. However, this also means that
there is no recourse if something goes
wrong as it has in the past.
In fact, banks are now trying to get
a foothold in this as they fear this could
change the way their industry works.
Canadian financial services company
- ATB Financial sent €666, the first-ever
institutional cross-border payment
using blockchain to Germany’s
Reisebank in 8 seconds. Not a few days,
or 24 hours… 8 seconds.
Other banks that are also joining
the fray include Santander, UniCredit,
UBS, CIBC, National Bank of Abu Dhabi
(NBAD), Bank of Tokyo-Mitsubishi,
Standard Chartered, Westpac, National
Australia Bank (NAB), Mizuho Financial
Group (MHFG), BMO Financial Group,
Siam Commercial Bank and Shanghai
Huarui Bank and the number that are
signing up are increasing as many plan to
use the protocol. It’s estimated that banks
will pay about 90% less in fees.
Let’s just say the winds of change are
upon us…
There are over 700 cryptocurrencies. Of the cryptocurrencies,
in order of market capitalisation, here are the ones you should
be keeping an eye on:
Rank Cryptocurrency (SYMBOL) Exchange Rate Supply
Bitcoin (BTC)
Ether (ETH)
Ripple (XRP)
Litecoin (LTC)
BTC 0.01 = USD 5.73 (five
dollars, seventy three cents)
ETH 0.01 = USD 0.10
(ten cents)
XRP 0.01 = USD 0.00006
(fraction of a cent)
LTC 0.01 = USD 0.04
(four cents)
15.8 million
coins
84 million
coins
35.4 billion
coins
47.5 million
coins
1
2
3
4
“Cryptocurrency refers to virtual or digital
currency because it uses cryptography
that provides security of transactions and
protection from counterfeiting.”
Another thing to note is that there
is both controlled issuance and limited
supply. As each currency grows, because
the supply is limited - the units simply get
smaller to accommodate greater economic
activity. In short, you can’t inflate the
currency like normal fiat currencies.
So will this go
mainstream?
Bitcoin (the largest cryptocurrency) is more
of a minority sport, it’s estimated that there
are just around 5,000 people who have a
working knowledge of the cryptocurrency.
Today, I hope you’ll be one of those 5,000. In
any case, you don’t need to be an expert.
When financial publications such
as the Economist cover blockchain and
technological publications by reputed IT
research firms like Gartner add this to
their coverage - you know something is
happening already in the ‘fintech’ space.
What’s my personal opinion - no, I don’t
think this will go mainstream in its current
form. Here’s my justification for it: right
now it’s not easy to deposit / withdraw /
trade / exchange cryptocurrencies, not just
in terms of ease of transfer, but also in terms
of geographical and technical restrictions.
to Bitcoin is now saying blockchain
is a bust. Stephan Thomas, founder
of WeUseCoins.com helped simplify
the Bitcoin concept for the masses.
He admits that blockchains are a pain
to work with. The same guy is now
working on new technology called
Ripple, which he is trying to differentiate
it as not Bitcoin and as a competitor to
Ethereum. And banks are taking interest.
I also feel that there are too many
versions of cryptocurrencies and
“forks” that no single currency is
becoming popular. There are over
700 cryptocurrencies out there such
as Bitcoin (BTC), Ether (ETH), Ether
Classic (ETC), Ripple (XRP), Litecoin
(LTC), Dash (DASH), Feathercoin
(FTC), Reddcoin (RDD), Blackcoin
(BLK), Dogecoin (DOGG), Auroracoin
(AUR), Lottacoin (LOT), Megacoin
(MEC), Novacoin (NVC), Potcoin
(POT), Viacoin (VIA), DNote (NOTE),
Namecoin (NMC) and so on.
It would be a fool’s endeavour to
list them all here. But such variety
won’t help if a single currency wants to
become the world’s ‘reserve currency’.
In Part II of this series, we’ll
touch upon how you can buy, sell,
earn or even trade and invest in
cryptocurrencies as well as how secure
they are and how governments are
viewing this new phenomenon.
For example, I can’t trade Bitcoin or
Ether cryptocurrencies on Coinbase.com
because I’m based in Bahrain. And Bahrain
is considered one of the financial hubs in
the Middle East along with Dubai! But I
couldn’t do it in India either, a country with
a population over one billion. So you can
see how this hasn’t really caught on yet.
But I’m not the only one who says this,
even the person who introduced millions
Jose Paul Martin is a
private equity investor &
advisor with over 14 years
of experience in strategic
& financial advisory and
currently focuses on the
Information Technology,
Healthcare & Education. He
is also the Managing Director
of Eqoris Advisors - a
boutique corporate advisory
firm based in Bahrain.