Blockchain Bitcoin & Crypto Weekly CXO Briefing for week starting 15th January 2018
The Blockchain Bitcoin & Crypto Weekly CXO Briefing is all you need to know, each week, jargon free for CXO level business leaders and investors who will use this technology to change the world. Each week we select the 3 news items that matter and explain why and link to one expert opinion.
For the intro to this weekly series, please go here.
I’ve been on vacation for last three weeks, so its good to be back with everyone! Last year, was full of speculation and volatility for Bitcoin and other cryptocurrencies, but I think this year will see Bitcoin emerge as a payment network. I’d like to wish you a healthy and prosperous New Year, with lots of cryptos in your wallets!
News Item 1: Why one small Washington town has seen so many bitcoin miners move in
Decrypted: A Bitcoin mining boom is taking place the middle of nowhere in the US, specifically in Wenatchee, a rural town in Washington state. It has become the Bitcoin mining center in the United States.
Right now, there are over 12 crypto mining companies in Wenatchee and the reason why this is happening, is because electricity in Washington state is so cheap. The average electricity price per kilowatt in Washington State is about 4 cents, when the national average is 7 cents and some states are even higher.
The Columbia River, which it’s located near Wenatchee, generates cheap and affordable hydroelectric power. The crypto mining guys are flocking there, because it’s cheap and so they can make more money.
Our take: One of the 12 Bitcoin mining companies, is called Salcido Group and it’s currently mining five to seven Bitcoins per day. They’re looking to mine 50 bitcoins per day by this coming July.
This is an important development, because China is now thinking about shutting down Bitcoin miners. The reason the Chinese government is considering to shutdown miners, is because of the excessive electricity consumption and the financial risk.
China has the largest Bitcoin mining community. That’s where most of Bitcoins are mined today. Two of China’s largest Bitcoin mining operations are looking to set up shop elsewhere in the world, as the China expands its ban on cryptocurrencies to mining operations. Bitmain, that runs two exchanges, has set up a regional office in Singapore, as well as mining operations in the US and Canada.
China has banned Initial Coin Offerings (ICOs), last September, as well as trading of the digital assets on local exchanges. Initially the country was very popular for cryptocurrency mining ops, because of cheap energy costs. But this shift in policy could have huge effect on the Bitcoin mining landscape, which is already struggling with high transaction times, which sometimes can even take more than 10 minutes.
When Bitcoin mining began, regular off-the-shelf PCs were fast enough to generate Bitcoins. That’s the way the system was set up, as it was easier to mine in the beginning, and harder to mine as more Bitcoins are generated. Over the last few years, miners had to move on to faster hardware in order to keep generating new Bitcoins. Today, application-specific integrated circuits (ASIC) are being used. New faster hardware is being created by various mining start-ups and the price tag for a full mining rig and cost around $ 12,000.
For those of you that are thinking about mining and don’t want to make investments in hardware, you might want to consider Bitcoin cloud mining. Services like Genesis or HashFlare, that let you mine Bitcoin, Ethereum, ZCash, Dash and Monero really cheap.
Bitcoin mining is kind of the modern-day gold rush with, just like a century ago, when people were moving out to California. It’s great to hear that this is happening in the US. Mining operations like this can boost the local economy of small towns and it can help government warm up to Bitcoin and crypto.
If China goes ahead and bans crypto mining, this could really be a big opportunity for the US. Companies like the Salcido Group could find spots within the US with cheap electricity and build an environment that helps economies of small communities.
News Item 2: Bitcoin rival Ripple COULD take over – CEO says new cryptocurrency is the FUTURE
Decrypted: The rapid rise of Ripple has attracted attention in recent weeks. At the beginning of year, its market capitalization was more than $ 100 billion. This value represents growth of almost 8000% during the course of 2017.
But Bitcoin’s popularity has caused demand for all cryptocurrencies to skyrocket in 2017, pushing crypto like Ripple and Ethereum, to also benefit by the cryptocurrency craze.
Our take: Ripple started 2017 at $ 0.006 and it’s now traded at $ 1.84. Can you imagine? This is a tremendous return! Far beyond anything Bitcoin did in 2017, which grew about 1400% last year.
The key difference between Ripple and Bitcoin is that it is not mined. The process that requires Bitcoin users to use algorithms to verify transactions. In contrast, Ripple is controlled by a San Francisco-based company. It creates the currency and releases new batches periodically. This frees Ripple from some of the Bitcoin’s recent criticism, which pointed to the enormous amount of energy used during the mining process.
So why is Ripple’s price rising?
Firstly, rather than naively view centralization/decentralization as binary, Ripple recognizes that decentralization can take many forms and likely resembles more of a spectrum than a dichotomy. “The view that something is either decentralized or centralized is harmful and draws attention away from what we should actually care about — to what extent particular systems have particular beneficial characteristics,” said David Schwartz, Chief Cryptographer at Ripple.
Another reason is there was a change in how prices are calculated. The crypto exchange CoinMarketCap made a change recently, excluding many Korean exchanges from its price calculations. Previously, CMC did not reflect what U.S. holders could actually sell for, and that caused a lot of confusion. The new price is more accurate and meaningful.
Lastly, XRP’s appeal to businesses is strengthening. Ripple announced that three of the top five money transfer companies worldwide will be implementing Ripple’s XRP token in their payment flow systems this year. The company’s emphasis on facilitating global financial transactions means it has been adopted by banks and other financial institutions, including Santander, the Bank of America and UBS. Ripple says it has licensed its blockchain technology to more than 100 banks to date.
Can Ripple replace Bitcoin?
The use of Bitcoin and Ripple is completely different. Ripple is faster and cheaper than Bitcoin, You can move stuff around faster and it’ll cost you less than Bitcoin, a least for the time being.
But I don’t think its going to replace Bitcoin. Ripple is trying to replace Swift and inter-bank transfers, that process more than 5 trillion dollars per day.
Bitcoin on the other hand is intended as a currency, which is developed to be used as mode of payment. Ripple is not a cryptocurrency.
Ripple has a bright future. It transfers money internationally at minimal fee avoiding currency conversion charges. It provides blockchain software to banks and has its own native currency (XRP), for working with regulators.
Ripple can succeed with or without Bitcoin. It can succeed without mining technology and it has a slew of big names behind it already. Ripple could be the first cryptocurrency used by big business, since it seeks to disrupt a current financial service.
News Item 3: Bitcoin drops $ 2,000 in value as South Korea announces planned trading ban
Decrypted: Lots of news out of South Korea this week which rattled the crypto world. Bitcoin tumbled on Thursday, after the South Korean govenrment announced it was evaluating options, that included the possible shutdown cryptocurrency exchanges to stop speculation.
Last month, South Korea’s Financial Services Commission said it was prohibiting cryptocurrency exchanges from issuing new trading accounts. Exchanges that allowed new accounts, could be forced to stop trading or even be shutdown. The government is taking action because it fears it could lead to pyramid schemes.
As South Korea is one of the biggest markets for cryptocurrencies, this could have a massive impact to the entire market.
Our take: The clampdown in South Korea, a crucial source of global demand for cryptocurrency, came as policymakers around the world are trying to figure out how to regulate an asset whose value has skyrocketed over the last year.
Cryptocurrency is a big deal in South Korea. Traders that pay in won for Bitcoin, can pay nearly 20 percent more than international market rates, due to high demand. But not many people took kindly to government’s possible ban. Over 100,000 South Koreans have voted in a petition to voice their opposition to the possible ban.
After the market’s sharp reaction to the announcement, the nation’s Presidential office hours later said a ban on the country’s cryptocurrency exchanges had not yet been finalized, while it was one of the measures being considered.
South Korea has been very quick to adopt cryptocurrencies, as a usable form of currency, especially when it comes to Bitcoin. The country rapidly adopted Bitcoin, and has since, rapidly pumped out legislation and regulation trying to control it. South Korea has become the experiment for the rest of the world for cryptocurrencies, as it is a battleground between a younger population that desperately wants cryptocurrency to provide a better future, and government officials who see the entire market as nothing more than a scheme built on false value.
The growth of cryptocurrencies and the trading frenzy, have raised eyebrows among regulators globally, though many central banks have refrained from supervising cryptocurrencies themselves.
Governments attempting to stop cryptocurrency trading, would cut off a major source of income for many people, as well as remove a large amount of money from the daily trade volume of many cryptocurrencies, lowering the market valuation as a whole. This is exactly what happened over the last few days.
The South Korean story is very important in the global market, and one you should pay attention to. I’m supporting the South Korean people and their right to trade cryptocurrency. If you believe in a cryptocurrency decentralized future, you should too.
Opinion: Ethereum Founder Vitalik Buterin Tells Crypto Community To Grow Up, Stop Flaunting Wealth
Ethereum founder Vitalik Buterin says cryptocurrency investors who are flaunting their crypto wealth online, are missing the point of how the technology can change the society.
*All* crypto communities, ethereum included, should heed these words of warning. Need to differentiate between getting hundreds of billions of dollars of digital paper wealth sloshing around and actually achieving something meaningful for society. https://t.co/aNpEnBNGsA
— Vitalik Buterin (@VitalikButerin) December 27, 2017
Initial Coin Offerings (ICOs), exploded in 2017, going from a relatively unknown fundraising method used in the blockchain community, to raising over $ 4 billion. Cryptocurrency influencers have a complicated relationship with the market as they’ve recently been accused of pumping and dumping cryptocoins they’ve been paid to promote.
Traditionally, many have argued that the sole purpose of business is to make money, the more the better. This image, deeply embedded in the capitalist system, molds the actions of most people and companies. They only to focus on maximizing short-term profits and delivering quick returns. Their decisions are expressed only in financial terms.
But money does not make you a better person or a better company. Its important to create of value. Only if leaders think of themselves as builders of value can they master today’s changes and challenges and create great companies. By creating value we generate great returns, not just financial ones. And all this can be accomplished without ever obsessing, dreaming or scheming about how much money you can make today. Creating value and building innovative technologies and extraordinary products, is the only way to create sustainable wealth, and eliminate all the talk about a crypto bubble out there.
Ilias Louis Hatzis is a Blockchain entrepreneur who writes the Blockchain Bitcoin & Crypto (BBC) Weekly CXO Briefing each Monday.
Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email.