Forever blowing bubbles...

Jamie Simmonds MD @ TheTin

Forever blowing bubbles...

Forever blowing bubbles... 

So Bitcoin eh? Bubbles eh? Unless you’ve been living in a Wi-Fi-less bunker you’ll have seen plenty of coverage on the Bitcoin phenomenon over the last few months. And as it goes I’m pretty exasperated at the generally uninformed, scare-mongering ‘fake news’ they’ve been serving up. Let’s redress the balance a little…

Rarely have I witnessed a topic so misunderstood by the mainstream media who gleefully cast their negative opinions at the drop of a hat. This culminated on a BBC news segment ‘The Papers’ where two smug journalists proceeded to have a good old laugh about how they’d had blockchain explained to them 5 times and still didn’t remotely understand it, but yet felt comfortable to prophesize Bitcoin’s doom and let everyone know “It’s about knowing when to jump ship.” Is it? Thanks for that.

In fairness, this misunderstanding isn’t exactly helped when key reports have investment predictor extraordinaire Warren Buffet saying he wouldn’t be buying Bitcoin or any other cryptocurrency anytime soon. In fact, he then went on to say he wouldn’t be ‘shorting’ it either because he ‘knew nothing about it’, but of course that wasn’t widely reported.

Bitcoin does have its issues as the recent volatility has shown, but the current price (around $10,000) was only broken for the first time at the end of November last year. It still may even be proved that we are in a financial bubble (don’t mention tulips or I’ll explode), but the consistent negative press of its ‘imminent demise’ (damages the reputation one of the most important technological advancements of recent years: Blockchain. Cryptocurrencies are one of the most interesting and disruptive uses of Blockchain; they are the AirBnBs of the financial services world.

So what is Blockchain? Put simply, rather than one bank holding all the records of your transactions, imagine that those transactions are stored by millions of computers around the world with the information being continually cross checked. This makes fraud impossible because the data can’t be falsified.

“The blockchain is an incorruptible digital ledger of transactions that can be programmed to record not just financial records but virtually everything with a value.”
Don and Alex Tapscott “ Blockchain Revolution”

Blockchain is being used to innovate and disrupt in other industries too:

In Medicine… it is being used to decentralise patient healthcare records, manage and control the pharmaceutical supply chain, and - in conjunction with financial and clinical AI-powered algorithms - provide improvements in treatments and patient care.  

In Insurance… it is being used to build trust with consumers by improving transparency, using open ledgers that customers can see. It can also enhance efficiencies for the customer by allowing them to hold their own data and seamlessly switch between providers. And it can help insurers with fraud detection and prevention by independently verifying and authenticating customers, policies and transactions.

In Energy… start-ups like Powerledger are building suites of decentralised applications allowing renewable energy to be traded by public or private business and established businesses  like Shell are acquiring stakes in blockchain businesses:

“Blockchain applications have huge potential to shake up how we do things in the energy industry from streamlining process, to simplifying how we work with our suppliers and serve our customers. “
Shell chief technology officer - Johan Krebbers

Even in Commercial fishing where a WWF funded system will allow fishing operations to record details of a tuna catch on the blockchain. This will enable consumers to scan a QR code to check details of the fish they are buying on the same blockchain.

More often than not these technological innovations have a core currency at their heart. Most of the new cryptocurrencies are based around a specific idea defined in a white paper and are raising money using ICOs (initial Coin Offerings) in the same way that traditional businesses have been raising capital with IPOs for many years.

Some of these ICOs make for interesting propositions. If you have spare cash lying about you could do far worse than to research and get involved – they not only have potential but are things you might get emotionally excited about too. Some have an interesting technological slant, good team behind them and valid target markets, and from saving the world or changing gambling, the next big things are out there.

Some that have caught my eye include:

Lalaworld – Providing bank accounts and financial services for the displaced populations of the world. 

BeeToken – aim to disrupt the disrupters by creating a decentralised home renting platform like AirBnB. 

Kodakcoin – a coin from Kodak that will create an encrypted, digital ledger of rights ownership for photographers to register both new and archive work that they can then license.

TheTin & Crypto
At TheTin we took a proper interest in crypto-currencies about 5 years ago and were one signature away from working with a hedge fund to build a charity alt-coin where half the profits mined would have gone to good causes. We had the code ready and had worked out the technology. We even invested in our own mining machine. Using 4 of the best graphics cards available it churned away sounding like a small jet in the corner of our office for several months and was affectionately named ‘the magic money machine’ by my son. And it did just that, create money out of thin air.

Mining you say? Well, although no physical action is actually undertaken, ‘mining’ is a good analogy. Cryptocurrencies themselves are based around a puzzle with a finite number of answers (Coins or tokens) when these puzzles are solved all of the other miners around the world verify the solution and the miner gets a token – and just like mining, as the resource has become more difficult to find more and bigger machines are needed to find the commodity. Of course, this means there is only ever a finite amount of this coin available and so it has an intrinsic value – unlike any currency when your central bank can just start printing more cash i.e. quantitative easing.

After a few months of excitement, the Bitcoin price had fallen. We didn’t get the crypto-build project and interest waned (which is a shame because I might be retired by now). It wasn’t until the start of last year when it got my full focus again.

There were lots of alt-coins five years ago, but Bitcoin dominated the scene. Since then the industry has changed massively. Not only is there exponentially more money, people & infrastructure involved, but there are now some major players amongst the alt-coins that could take over the cryptocurrency mantle from Bitcoin.

So who’s in the running?

Etherium (approx.. $85 billion in circulation)
Now the second largest coin by market cap, it is being used by the majority of new coins or tokens launched with the ICOs . This gives it a major advantage over Bitcoin because it is not just a digital currency, it is a blockchain-based platform with massive flexibility.

Cardano (approx.. $9 billion in circulation)
Similar to Etherium but with a focus on just a few fundamental elements, it’s the first blockchain to be developed from a scientific philosophy with both a regulatory and compliance focus. It also aims to integrate with all other major cryptocurrencies without the use of a third party, which reduces fees, allows quicker and easier transactions and removes the risk of a third party losing your cryptocurrencies.

NEO (approx.. $8 billion in circulation) 

Dubbed “the Etherium of China”, Neo is their largest cryptocurrency and has a greater scaling potential than that of Etherium. It also an Open Source technology behind it, meaning it has an easier point of entry. It also seems to be gaining momentum with several ICOs using it as their base platform.

Who’s saying what…
It is not just the emergence of these new powerful cryptocurrencies (there are hundreds worth looking at) that is worth note. A number of heavy hitters are stating much more positive views and intentions. For example:

Mark Zuckerburg (CEO Facebook)
“A lot of us got into technology because we believe it can be a decentralizing force that puts more power in people’s hands...” revealing he is studying cryptocurrency “and how best to use them in our services.”

Christine Legard (MD of the International Monetary Fund)
“In many ways, virtual currencies might just give existing currencies and monetary policy a run for their money,” she said. “It may not be wise to dismiss virtual currencies, instead, citizens may one day prefer virtual currencies.”

Even rapper Fifty Cent who allowed people to pay for his 2014 album in Bitcoin has now ended up with over $8 million in the cryptocurrency. “Not bad for a kid from South Side, I’m so proud of me.” He later commented on his post: “Ima keep it real, I forgot I did that shit lol.

To conclude...
At TheTin we are investigating various ways blockchain could be used to improve services, including how it can be used in conjunction with AI to provide more relevant data and insights. We know blockchain is something game changing and are looking for practical opportunities to use it for our clients.

So next time you see a negative piece proclaiming the imminent demise of Bitcoin remember there’s a bit more to it than that. Cryptocurrencies and Blockchain are here to stay and are already changing the world.

NB You’d obviously be mad to take anything said in this article as investment advice

If you interested in having a chat about the ways your business may be able to embrace blockchain give us a call or catch us at SXSW next week.



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