Analysis, Event

Bitcoin, Value and the Future of Cryptocurrencies

On Wednesday, November 26th, Coins.PH sponsored Bitcoin 102, a small event keynoted by speakers from the cryptocurrency community, in Makati City. Attended by a mix that included startup founders, developers, finance professionals, Bitcoin users and folks curious with the technology, the talk was kenoyted by Coinspeaker editor Daniel Harrison and 37Coins co-founder Johann Barbie.

The discussions revolved around the ever-changing value of Bitcoin, and how stakeholders can address the volatility — particularly whether this can be considered a sound financial instrument. Barbie, likewise, in his capacity as co-founder and developer at crypto wallet service 37Coins, highlights how his team has explored partnerships with stakeholders in various countries and jurisdictions, in order to come at a cost-effective and multi-platform approach to wallets: by using SMS.

It’s a Cartel

One interesting thing pointed out during the discussions was that Bitcoin is rooted in a lot of ideal scenarios, but the reality is far different from how the designer originally intended it. The Blockchain supposedly democratized transactions as these are now more transparent, secure and accessible. However, the stark reality is that there the vast majority of Bitcoin and related resources are controlled by only a few. Barbie even characterizes it as effectively a cartel behavior, especially amongst those who have the resources to mine Bitcoin, and those who already have significant holdings.

According to Barbie, the people who benefit most from the upsurge in Bitcoin value are the ones who already have a lot of it in the first place.

The discussion led to startups that offered wallet services, and 37Coins actually being part of the group. Whilst it’s easy to dismiss these companies as part of the yet-another-bitcoin-wallet startup crowd, the fact is that these are bringing Bitcoin to the masses by offering localized services like bank transfers. 37Coins is bringing it one step further by addressing the needs of the unbanked, by enabling transfers to those who may not necessarily have savings accounts, credit/debit cards or even ordinary cash cards.

Meanwhile, in this author’s discussion with Harrison, we delved deeper into the value of Bitcoin. Harrison says that Bitcoin does not have intrinsic value as a currency. Unlike fiat currency, the value of which is usually determined by monetary authorities, “ownership” of Bitcoin means having partaken of the Blockchain and the value is determined by whatever the market dictates it. You essentially own a piece of it, but that doesn’t mean the particular piece should have a value in itself, except perhaps for the speculative value and the value determined by demand.

In the end, Harrison says Bitcoin can still be an effective instrument for investment, as part of fund managers’ portfolio, perhaps in hedging their investments. He highlights that the most loss one could get from acquiring Bitcoins is losing 100% of the acquisition cost. But the potential return can be hundredfold. And what is the best driver of upsurges in Bitcoin’s value? It’s when there is good news that precedes it, such as governments warming up to crpytocurrencies in general.

Beyond finance

The beauty of Bitcoin, from the discussions presented by the two speakers, is in how it has brought logic to finance. While Bitcoin is more popularly known as a means of virtual monetary exchange, the bigger value is in what can be done with the exchange of data and not just money. For example, money intended to finance a certain project can be earmarked for such, and other parties (such as government government or corrupt individuals) will be unable to touch it.

Bitcoin is definitely here to stay. But Harrison gives a hypothetical situation in which someone develops an altogether new version of  the Blockchain — and not just building upon the Blockchain or other existing iterations — as something that could be the end of Bitcoin. This, however, is highly unlikely, at least in the short term.