Bitcoin – boom or bust? That is the billion-euro question!

HELLOMONACO PRESENTS: INVESTORY

Hello Monaco presents a new section, “INVESTORY”, to keep you up to date with the fast changing events that are creating millionaires (and impoverishing those who do not recognise the risks!). We will discuss new types of digital currency investments, the best ICOs, and have experts discuss the pros and cons of investing in this new and important asset category.

Every day we are bombarded with a new vocabulary: Bitcoin… Blockchain technology… Crypto-currency… Digital currency “bubble”… But what does it all mean?

Hold on tight and don’t forget to fasten your seatbelt, “Blockchain” is coming in fast!

Internet of values

Remember the beginning of the Internet? First it snuck up on us, then involved and consumed us, then raced past us. The digital currency revolution is proving to be just like that – an unstoppable wave – full of hype and speculation, but also genuine, fundamental change.

The new digital technology known as “Blockchain” stands at the origins of the currency revolution. In fact, the Blockchain is the system protocol representing a brilliant method of creation of the reliable digital record protected from unauthorized access, which cannot be changed or counterfeited, but transferred quickly and easily. Blockchains are stored simultaneously on the computers of millions of users, which makes it almost impossible to fake data or damage it.

Bitcoin, the original blockchain currency, is a chameleon with the many faces. At the beginning it was a lone wolf, but soon Litecoin, Etherium and a vast number of other digital currencies joined it. These “coins” are known as “crypto-currencies”, created, bought and sold using Blockchain technology, and causing quite a commotion in the finance world. So what, you might ask, is wrong with good old paper money? Isn’t physical tender more secure? Let’s figure it out!

The power of Bitcoin

The financial system began in Florence, Italy, during the Renaissance. The Medici family became intermediaries between creditors who had a lot of money and borrowers who needed them for travel and business development. But, alas, there was no trust between them. In time, bankers filled this gap and took a commission for the management of finances and trust. Today, our present global economic system is still based on mediation, and where there are a lot of intermediaries, there is a lot of bureaucracy.

So how do crypto-currencies like Bitcoin differ? The genius and simplicity of this technology lies in eliminating the intermediary, and at the same time, providing the infrastructure for strangers to do business with each other. Without banks, without governments, without intermediaries! This is the power of Blockchain.

The problem many people see with physical currency is that governments print money and devalue their currency, in turn devaluing people’s savings, and allowing banks to operate as a “big brother”, using their hard-earned money and charging them handsomely for the privilege. Justified or not, there is widespread distrust and a populist wave against this common practice.

And so Blockchain came on the scene with Bitcoin, a digital currency designed to compete with the banks, offering instant transactions, no holding period, no charge-backs (merchandisers will like this), no account freezes, lower or even zero international wire transfer fees, no minimum balances, no maximum balances, and global access. Your “wallet” is always open – no waiting for business hours, no waiting for an account to be approved, accounts are opened easily based on email, and no traditional bank account is necessary. Block chain technology runs a completely egalitarian platform, available to anyone with an Internet connection. It doesn’t require a printing press, a monetary fund, government-backed insurance and therefore, no hyperinflation or bank bailouts.

Bankers are worrying

All this circumventing of the establishment is causing tremors in the financial bedrock of the first world. The heads of the largest investment firms have begun to publically denounce crypto-currency.

At an Investor Conference in New York this past September, Jamie Dimon, CEO of JP Morgan Chase said: “It is a fraud. It’s worse than tulip bulbs… it will be the emperor with no clothes”. He then declared Bitcoin a “bubble”.

Is Bitcoin a bubble? Certainly the price has gone crazy — but Bitcoin has a long track record of crazy prices. Will it crash, or even plateau? As we go to press, Bitcoin has broken another record, with a price above 19,000 USD (17/12/2017) and its Market Cap exceeds 200 billion USD. Nobody really knows what the price will be when you read this. HelloMonaco will be watching – yet another new record, or perhaps a crash!

Nevertheless the number of merchants accepting Bitcoin is growing steadily, but it’s still extremely challenging to use it as a main currency. Bitcoin is still not ready to punch a gap in the international financial markets where such currencies as US dollar and Euro are estimated in the trillions. But, Vyacheslav Taran, founder of the online trading platform www.libertex.org, believes Blockchain is the future of world currency. He said:

“Blockchain technology is the greatest experiment of our times, comparable to the invention of the Internet. It is supported by large American corporations and investors, with full government support. One of its main goals is to create a global alternative payment and settlement system that could naturally replace most payment systems for the third world countries, Africa to start with. And can then go around the world, attacking and replacing national currencies. Very few new world countries can afford to have their national currency and an independent central bank. If Bitcoin was not supported at the highest level in the US, it would have been strangled by regulators back in its embryonic stage.”

New crypto on the block

Though Bitcoin continues to make waves, since 2015 there has been a new challenger already sprinting at a fast pace out of the starting blocks. Etherium (or Ether) was created by 19-year-old Vitalik Buterin from Toronto. Think of Etherium as Bitcoin with attitude – not afraid to do somersaults, not afraid to use the full potential of Block chain technology. Instead of only handling accounts and transactions, Ethereum makes it easy to create smart contracts, telling your digital money what to do and when to do it.

Let’s assume we are running a VIP Sports Tours Business and we think that if Roger Federer wins one more Grand Slam, he might retire at Wimbledon at the height of his career as the best player of all time. So we want to invest in and design VIP tours around that once in a lifetime opportunity (if it happens!). Wimbledon agrees to sell us Centre Court seats for the Final for Bitcoin if we buy 200 or more seats.

A smart contract can be programmed to execute with the following parameters:

— If our VIP Tennis Tours Business has a 15 Bitcoin balance in its “wallet”, and

— if today is February 1, 2018;

— if Roger Federer has won the 2018 Australian Open Tennis Grand Slam;

— if Roger Federer is officially listed as entering the draw for the Wimbledon Tennis Grand Slam;

— then buy 200 tickets for a total of 10 Bitcoin for the “best seats” for the Wimbledon final.

And so we have a smart contract without lawyers or bankers, and is automatically executed. 200 digitised tickets for 10 Bitcoin if Federer wins the Australian Open and enters the draw for Wimbledon.

Ethereum, with its flexibility to operate smart contracts, is a rising star of the crypto currency and block chain world. Closing in on the original digital currency Bitcoin, it has swiftly become the second most valuable of the new payment methods. The value of Ether has increased more than 4000 per cent in the past year, and one Ether is now worth almost 800 USD.

Million-dollar pizzas and the new Nouveau-Riche

That bank notes became money, they shall function as means of payment. The first purchase with crypto-currency happened on May 22, 2010. Laszlo Hanyecz, a programmer from Las Vegas, transferred 10,000 Bitcoins (worth $25 at the time) for two Papa John’s pizzas. At today’s price, each pizza would have cost him more than 80 million dollars! Let’s hope the owner of Papa John’s held on to those Bitcoins. He would be worth over 165 million dollars today (19/12/2017).

Erik Finman, an American school leaver, made a bet with his parents that if he became a millionaire by age 18, they couldn’t force him to go to university. He had the foresight to investment in Bitcoin when it cost $12 a coin. With the current record-breaking valuation, he has won the bet not to attend university.

“I can proudly say I made it, and I’m not going to college,” Finman said. He currently owns 403 Bitcoins, which at the current $16 500 a coin puts his Bitcoin value more that 6 million USD. Finman thinks the best days are still ahead. “Personally, I think Bitcoin is going to be worth a couple hundred thousand to a million dollars a coin,” he said. It should still be approached with caution, as Bitcoin is very volatile, and the value could decline rapidly. But Erik Finman feels very good about it.

The Winklevoss twins discovered Bitcoin in July of 2012, while holidaying in Ibiza. At 32 years old, the enviably athletic twins had both Harvard and Oxford degrees and seemed predestined for success. They had famously won a $65m settlement from Facebook after asserting Mark Zuckerberg had stolen their concept for a Harvard social network.

The Winklevoss twins claim to own close to one per cent of the entire Bitcoin Market, which equates to about 120,000 Bitcoins. They spent about $11 million (less than 100 USD a coin), but the current price (19/12/17), their wallet is worth 1 950 000 000 USD.

You win some, you “lose” some

Buried somewhere under mud and mounds of rubbish, in a landfill site near Newport, Wales, in an area about the size of a football pitch is a computer hard drive worth more than £4m.

It belonged to James Howells, who threw it out when he was clearing up his desk in mid-summer, 2013. Then he remembered that it held a digital wallet with 7,500 Bitcoins created for almost no money in 2009. The 7,500 Bitcoins on the hard drive were worth around £500,000 when it was thrown in the rubbish. Since then, the value has soared to over 123 million dollars. As the saying goes, one man’s trash is another man’s treasure!

To be continued tonight…

Photos: bitcoin.com/Crypto Economy/Le Lourlnal du Geek