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Blockchain & Cryptocurrency - Part I (Jose Paul Martin)

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Jose Paul Martin
Jose Paul Martin

Blockchain and cryptocurrencies have the potential to disrupt the global financial system by allowing fast, cheap, and transparent transactions without intermediaries like banks. Blockchain acts as a distributed public ledger that records all transactions in a way that cannot be altered. The first major cryptocurrency, Bitcoin, works on the blockchain protocol to enable fast digital payments anywhere in the world. However, cryptocurrencies have not yet gone mainstream due to technical restrictions and the large number of competing currencies, though banks are beginning to take an interest in blockchain technology.

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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.
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.

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Blockchain & Cryptocurrency - Part I (Jose Paul Martin)

  • 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.