09 Jul Bitcoin – Is it time for you to take a look – by Zann Kwan
I attended the above titled talk by Zann Kwan, who is the founder of Numistic Pte Ltd and Bitcoin Exchange (operating the Bitcoin ATMs in Singapore).
I will recount some pointers which I have found useful to better understand Bitcoin.
Open Source – No one owns or control Bitcoin
Unlike currencies which are controlled by governments, Bitcoin is not owned by anyone. It is decentralised and transactions are verified by users on the Bitcoin network. Importantly, no government has the power to shut down Bitcoin unless they are able to shut down the internet.
Transparency – a dream come true for law enforcement
Bitcoin was pictured as the dream for crooks and drug lords. But she begged to differ. Bitcoin is pseudonymous, not anonymous. All bitcoin transactions are logged in a public ledger which anyone can access. For example, blockchain.info broadcasts every transaction. This is transparent and law enforcers can trace the transactions right back to the day the bitcoin was mined, which greatly helped them in finding the crooks.
Low Transaction Cost – Disrupts banking and payment industry
Bitcoin has a trump card and that is low transaction cost. Do not underestimate this as many big banks and payment companies like Visa and MasterCard make loads of money off transactions every second. With Bitcoin, you can overcome credit card purchases of 2-3% transaction costs, telegraphic transfer fees and even remittance taxes. Businesses can share the cost savings with consumers and take out the middle men.
And because of low transaction costs, micro-payments are made possible, which further enhances the possibilities for micro-lending and crowd-funding activities. Without Bitcoin, you would probably incur a transaction cost larger than the amount you wanted to pay. For example, a telegraphic transfer will cost you $35, even if you are transferring $10 to another person stationed overseas. Bitcoin can denominate into 1 satoshi = 0.000 000 01 BTC and hence, mirco-payments are a reality.
She also added that newspapers can charge by article in the future, say $0.10, since micro-payments are worthwhile without the middlemen. Readers no longer need to pay full subscription to the entire set of newspaper ladened with advertisements.
No Personal Data Revealed – No security costs
A Bitcoin transaction requires at least two unique addresses (think of these as bank account numbers) – a payee and a receiver. There are no personal details being disclosed like your credit card details other than the digital addresses. There is no requirement to store personal data and subsequently install expensive security systems to protect them.
Digital Property – Not a currency, yet
The only issue with Bitcoin is that it is recognised as a commodity or digital property. It is not viewed as a currency even though it has been labelled as such. It attracts capital gain tax in some countries and GST in Singapore.
Bitcoin is like Gold
Bitcoin is limited in circulation, 21 million bitcoins to be exact. As of today, we are at 13 million. Bitcoin gets harder to mine as the supply increases. The current block of bitcoins is 25. Every 4 years, the block of bitcoins reduces by half. Gold is limited by the Earth’s supply too. Bitcoin and gold have value because people perceived so. The more people believe in their value, the more legitimacy they will have. And this is what made most people uncomfortable about.
Many other digital currencies are created to overcome the limit in Bitcoin supply. There are 300 digital currencies now but Bitcoin made up 96% of all crypto currencies. Bitcoin will continue to reign over the other digital currencies as long as the level of adoption maintains dominance.
Proliferation of Bitcoin adoption?
Half the world doesn’t have bank accounts. 80% Indonesians, 65% Indians, 12% Americans and 70% Africans have no bank accounts. She said that Africa was a special continent immediately went onto mobile communication network without transiting through landlines. As such, she foresees Africans will bypass the bank accounts to Bitcoin. In fact, one third of Kenyans have bitcoins. Many countries are permissive or investigative towards the adoption of Bitcoin and the number is increasing.
As the adoption of Bitcoin expands, related services would be provisioned. We have Bitcoin mining companies that are listed such as Digital BTC. There would be Bitcoin insurance, Bitcoin debit cards and Bitcoin derivatives products in the future.
Is Bitcoin a hype? Or is it a real force to be reckoned with? Will you buy Bitcoins? Share with us your thoughts.