EDITORIAL - Cryptocurrencies, Bitcoin Mining and Blockchain

What is it all about? Will it change anything? When?

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We hear cryptocurrency, bitcoin mining and blockchain in many conversations these days. The views seem to range from those who think it is hype, to those who are skeptical of the impact they face, to the very few who are convinced the world has changed forever.

At the bottom of this article is a funny video that summarizes three main flavours of sentiment toward cryptocurrency.

In this article I hope to stimulate the thinking of colleagues who may be in government, in senior management, on the advisory boards of nonprofits, directors of profit driven enterprises and those who invest. Some 2,600 are connected by LinkedIn and the rest (458K) read this blog.

Recently, the feed from CNBC ran the headline 'Secretive Chinese bitcoin mining company may have made as much money as Nvidia last year'.  The article went on to say:

• "Based on conservative estimates of gross margin of 75 percent and operating margin of 65 percent, Bernstein analysts calculate that Beijing-based Bitmain made $3 billion to $4 billion in operating profits in 2017". 

• "By contrast, Nvidia's operating profit was $3 billion during the same period, according to Bernstein's U.S. semiconductor team estimates".

So how can this be?  
Mostly because changes are occurring so rapidly. Of course even the casual observer will understand the implications of Nvidia Corporation profits after 24 years of capital intensive development being overshadowed by a bitcoin mining operation in its infancy. Bitmain was founded five years ago (2013) and is likely a less capital intensive operation. An interesting sidelight to this story is that Nvidia may, in fact, hold an important key to higher computing densities and lower power consumption in bitcoin mining with the SoCs and parallel processing capabilities it owns.

Okay, so what? 
Here's what. The lack of stability and massive speculation evident in cryptocurrency have blinded those who should be paying close attention to blockchain technology in the rest of the economy. 

Defining the blockchain in detail is beyond the scope of this article, however, several articles have appeared in InfoStream (Use the search feature). A recent InfoStream article featured Ginni Rometty CEO of IBM, was simple and explained blockchain to the US National Governors Association.

What is it all about? Will it change anything? When?
The main blockchain takeaways for your consideration are these:

1. Blockchain will convert every existing value chain into an ecosystem of collaborators working to deliver products and services to the customer with full transparency, financial security, lower cost and high levels of trust.
2. If you aren't in the ecosystem that evolves to serve your customers, you will lose your customer base and likely your business.
3. Blockchains already exist for food safety, country of origin, manufacturing processes, funds transfer, smart contracts and financial services, to name just a few.
4. If you move very quickly, there may still be an opportunity to be a driver of the blockchain and ecosystem that is rapidly developing to serve your customers.
5. According to Gartner, IBM, McKinsey and other analysts blockchain will have a more powerful disruptive effect than did the Internet.
6. In my lifetime, I have been associated with four major disruptions: Electrical to Electronic; Wired to Wireless; Analogue to Digital; and, the Bandwidth/Capacity of Optical Fibre. The speed at which blockchain is being embraced is beyond anything I have witnessed, possibly because there are so few barriers and such a high degree of benefit for all.

In my advisory activities, I use the term 'digital velocity' to define the acceleration (velocity) an organization must achieve to overcome the cultural and process inertia (gravity) preventing change and therefore future sustainability.

This is going to sound harsh, but I observe that many are ambivalent or ignorant of the consequences they face, while others sit on the deck of their  modern 'Titanic' discussing competitive improvements as the ship silently slips below the waves. My intent here is to sound an alarm and to provide a call to action.

Blessed are those who find wisdom, those who gain understanding, for she is more profitable than silver and yields better returns than gold. Wisdom, she is only a friend to those who act. It's time to get the help you need and act!

A COMMON RESPONSE TO CRYPTOCURRENCY:

INNOVATE - Heat From Bitcoin Mining Operation Tapped for Agrifood Production

The Bitcoin Energy 'Deficit' May Have a Solution.

Lyzaville Sale/CBC News

According to a story by Samantha Samson, at CBC News, a Manitoba company has found a solution for the waste heat developed in Bitcoin Mining. They transfer the heat to a greenhouse and fish farming operation operation to grow various plants and Artic Char.

Bruce Hardy, the CEO of Myera Group has been mining Bitcoin for two years but realized they needed to find a use for the heat produced by the computers. About a year ago, Myera  opened this operation in the old Tin Lizzie Auto Museum on the grounds of the former Grey Nuns' Convent located on Highway 26 just west of Winnipeg​.

Lyzaville Sale/CBC News

Dwayne Clark is the Reeve of the Rural Municipality of St. Francois Xavier. According to the story, he was happy to see a developing eyesore in the community being restored and repurposed.

The Myera project is a Proof of Concept (POC) project that may be a solution for the Bitcoin energy 'deficit' as it scales.

In a brief conversation with Myera Group yesterday, it was evident the Innovation Campus being developed in St. Francois Xavier in Manitoba and the Myera Group have much broader aspirations. A future story may feature some of these elements as the POC project develops.

In the meantime, a Mashable story by by Stan Schroeder last month, gives more detail to the Bitcoin energy issue and suggests the problem may not be as large or as unsolvable as reported. The Mashable story is worth reading. 

The Myera Group project is also worth following.

EDITORIAL- Is Bitcoin Stable Enough to be a Currency

Would You Like to be Paid in US Dollars, Gold or Bitcoins?

Three stories that I read yesterday, gave me pause to think about cryptocurrency and in particular, to ask if Bitcoin is a currency:

• Putin Thinks the Cryptoruble will Avoid Western Sanctions
• South Korea Ends Anonymous Crypto Trading
• Japanese GDP Grows From Bitcoin Effect

We need to accept a definition of 'currency'.  

Merriam Webster defines currency as: Something (such as coins, treasury notes, and banknotes) that is in circulation as a medium of exchange; Paper money in circulation; or, A common article for bartering (Furs were once used as currency). 

Other references suggest a system of money in general use; For example the US dollar is a strong currency that may be used to settle accounts in other countries. Synonyms for currency include: Money, legal tender, cash, banknotes, bills, notes, coins and coinage.

According to Wikipedia currencies can be classified into two monetary systems: fiat money and commodity money, depending on what guarantees the value (the economy at large vs. the government's physical metal reserves). Some currencies are legal tender in certain political jurisdictions, which means they cannot be refused as payment for debt. Others are simply traded for their economic value. 

For the most part, the concept, understanding and regulation of digital cryptocurrency is still developing. However, the idea of 'common acceptance' with slow intentional movements of value or 'limited volatility' is important for a monetary system to gain and hold the trust of those who intend to use it as a medium of exchange.

On Tuesday the Wall Street Journal reported that Founders Fund, run by Peter Thiel, a PayPal co-founder and early Facebook investor, has bought millions of dollars in Bitcoin. According to some reports, the venture capital firm bought about $15 million to $20 million of Bitcoin. This news drove Bitcoin to a new high, at one point surpassing US$15,040 – a 14% daily gain. Based on the idea of 'limited volatility' this movement suggested Bitcoin is not a currency. 

However, we observed that as Bitcoin's price climbed, trading in the Chicago Board Options Exchange (CBOE) Bitcoin futures was briefly halted in accordance with pre-set rules. The Chicago Mercantile Exchange (CME) and CBOE have both launched futures contracts tied to Bitcoin's price. These new futures markets allow institutional investors to hold something that looks like Bitcoin, without having to hold the actual cryptocurrency. Some of these investors have very deep pockets and previously faced regulatory roadblocks to accessing the Bitcoin asset class. Trading in futures contracts that are settled in cash and trusting the 'halt trade' mechanism to work will add confidence to Bitcoin investors and may in the long term solve the volatility issue.

However, there are still pot holes to be avoided with Bitcoin. Jason D. Rowley, is a venture capital and technology reporter based in Chicago. On December 12th he published an article on Crunchbase suggesting Bitcoin had lost its way as a means of exchanging value. He reviewed transaction cost and other elements that were once attractive to those who used Bitcoin.

So back to the question, Is Bitcoin stable enough to be a currency? 
For most mainstream transactions the answer is likely 'no' because of the volatility and risk of value changes involved. However, Proof of Concept (POC) work to understand the cryptocurrency system and how it will have a bearing on your business in the areas of exchange, taxation, smart contracts and settlement seems advisable.

The InfoStream article on Bitcoin last year, hardly anticipated the year this cryptocurrency experienced. However, the three stories at the beginning of this article are an indication of the type of disruption that is coming toward our global monetary system.

As to the other question: Paradigm accepts settlement in US dollars, doesn't accept Gold and is experimenting (fooling around might be a better term) with cryptocurrency. Here are two other links to the Bitcoin story for your convenience:

• bitcoin.org
• bitcoin.com

About Executive Producer, Larry R. Evans:
Larry Evans is an experienced innovator and strategist. He is Principal of The Paradigm Corporation, which is headquartered at Thunder Ridge just outside Crossfield, Alberta, Canada. He is known for bringing a unique and predictive lens to paradigm shifts during a career that spans 45 years. Now often from his wheel chair, he brings a grounded, tenacious view of brand, ecosystems and trusted relationships for the digital age. His perspective and values influence his life, business and ministry.

https://www.linkedin.com/in/larryrevans

MARKET - Bitcoin Continues Upward Trend

Bitcoin surge continues to frustrate, impress or surprise skeptical market analysts

At 17:20 hrs Mountain Time today, Bitcoin was valued at US$16,892.01  (C$21,972.12)

Kevin O'Leary on CNBC explains one big thing people don't understand about bitcoin (but need to)

Futures Industry Association Blasts New Bitcoin Derivatives

MARKET - Bitcoin Surges Higher

The speculation about factors driving Bitcoin value continues

Whether it is possible to know with confidence, the factors that are driving the value of Bitcoin at this point, seems unlikely. However, as a matter of support for conjecture that Bitcoin is not just a bubble are the announcements that derivatives and other financial products are being placed on the market by some of the largest trading organizations.

This morning Bitcoin value exceeded US$11,000. 

In Canadian dollars a Bitcoin was valued at C$13,770.48 earlier this morning.

CNBC asked panelists to explain this meteoric rise in value

Cryptocurreny Market Cap Surpasses US$160 Billion

According to CoinMarketCap, the combined value of all publicly traded cryptocurrencies has set a new record, surpassing US$160 billion for the first time.

On August 28th, the value of ether, bitcoin and more than 800 other blockchain-based assets had surpassed $164 billion.

Visit CoinDesk

FUTURE TRENDS - More and Diverse Industries Adopting Blockchain

The blockchain was introduced in the original source code for bitcoin and other cryptocurrencies, and it has been primarily associated with the transparent and real-time tracking of cryptocurrency.

The blockchain is, at its core, an unalterable, distributed, transparent ledger of all the transactions made within the chain.

Various industries are adopting the blockchain, or at least exploring the option of using blockchain technology.

Some of the most unexpected blockchain introductions are in education, where blockchain is being used to create “learn to earn” initiatives that tie learning (of any type) to displayable “Edublocks” that employers can view.

Some schools, notably the Media Lab at MIT and the University of Nicosia in Cyprus, have already started incorporating blockchain technology by generating cryptographically signed and verifiable certificates for graduates.

Another industry where blockchain technology is being tested is energy utilities.

There are test projects currently underway in both Australia and France, with promising results.

Jemma Green, co-founder of Power Ledger in Australia, told Brave New Coin, “Just as Airbnb and Uber have up-ended the hospitality and transport markets, Power Ledger has the potential to change forever the way we buy and sell energy to power our homes.”

The Power Ledger program allows users to sell excess solar energy to utilities companies or other consumers.

They use a hybrid blockchain in order to manage the many moving parts involved, such as the conversions from digital electricity meters to blockchain tokens.

The original trial is now expanding, and Power Ledger hopes to overcome regulatory hurdles and start licensing their business model in order to generate revenue.  

France is also exploring various blockchain applications for renewable energy, including not just prosumer home owners (home owners who both produce and consume solar energy), but also electric car charging.

Microgrids are another application of the blockchain in renewable energy, and microgrids are popping up in various places, including Brooklyn.

These micro projects are more in line with the cryptocurrency and blockchain ideal of moving away from large institutions and centralized control.

Other examples of this “outside the system” integration of blockchain and energy include SolarCoin and the IDEOLabs prototype SmartSolar technology.

These small, outside-the-box projects are exciting and will undoubtedly continue to grow.

But it is the adoption of blockchain by the very large institutions that were previously threatened by the technology that is currently most interesting.

Integrating solar energy into existing power grids through blockchain, for example, or bringing the blockchain into respected educational institutions like MIT.

The most notable example of the blockchain being adopted by the very institutions that it was designed to challenge is among the large banks.

Denmark is considering minting an e-kroner, which would mean that the blockchain is adopted within the present model of currency rather than disrupting and replacing it with cryptocurrency.

Even Visa is looking at adopting blockchain technology.

Blockchain technology is popping up in a number of unexpected places, and that’s a trend that is not slowing down – as Ars Technica put it, blockchains are the perfect technology for when everybody distrusts each other, and current global unrest means the world has never been more ready for a technology like this.

Prepare to see the blockchain in an industry near you!

About Tiffany Sostar

Tiffany is a writer, editor, academic, and animal lover who came late to her appreciation of pets. At 18, a rescue pup named Tasha saved her from a depression and she hasn't looked back. She has worked as the canine behaviour program coordinator for the Calgary Humane Society, and was a dog trainer specializing in working with fearful and reactive dogs for many years. She doesn't have any pets right now, but makes up for it by giving her petsitting clients (and any dogs she comes across on her frequent coffee shop adventures) extra snuggles.

FUTURE TRENDS - Decrypting the Pros and Cons of Cryptocurrency

Although one of the greatest values of cryptocurrency is its transparency, it is notoriously difficult to get a good theoretical grasp on.

You might even call it cryptic, if you were inclined to puns.

In fact, the name points to the fact that the currency is generated using cryptography and sophisticated encryption algorithms.

The transparency that makes cryptocurrency so attractive to some financiers has to do with the blockchain, which is how cryptocurrency is tracked.

Each transaction is logged automatically, anonymously, and in an open-source and freely available ledger. This removes the need for a third party, such as a bank.

But what is cryptocurrency?

At its core, it’s money. But it’s not money like most people are used to.

Instead, cryptocurrency is generated, tracked, and stored entirely digitally. It is BitCoins, LitCoins, and Ether.

It has the potential to be the next evolution in global finance.

The move from gold to paper money was largely driven by portability, and led to the creation of fiat currency managed by banks.

The move from fiat currency to cryptocurrency, if and when it happens, will be a similar evolution.

Digital currency has some significant benefits.

It is less susceptible to fraud because it can’t be counterfeited, offers lower fees to users, is available to everyone with access to connected devices, and allows you to fully own your currency.

Apart from cash under a mattress, no current systems allow that same level of ownership.

But cryptocurrency has drawbacks, as well.

Not least of which is the fact that it’s a challenging concept to understand, and therefore it’s difficult to get widespread public backing.

When even cryptocurrency experts say that “Bitcoin’s value cannot be reduced to one single element or feature,” and require lengthy articles to define its value in various forms, it’s going to be a challenge for non-experts to grasp.

Beyond that initial difficulty, cryptocurrencies may be safer when it comes to certain kinds of fraud or theft, but they are at significant risk of loss due to technical glitches, human error in choosing weak passwords, and exchange businesses failing without reimbursing customers.

Cryptocurrency represents another technology that has the potential to radically disrupt current business practices.

It is a currency for a digital age – created online, tracked online, stored online.

But even in Kenya, the world’s leading adopter and innovator in mobile commerce, cryptocurrency is struggling to gain traction because of a lack of business adoption and available apps.

However, despite these early struggles, cryptocurrency is likely to continue making market gains.

In a destabilized global economy, cryptocurrency offers the potential for greater transparency and security than banks can currently offer, and as cryptocurrency is adopted, governments will increase regulation.

Increased regulation, although in many ways antithetical to some of the core values of cryptocurrency (with its roots in libertarianism) will offer stability and public trust.

And, once established, some writers believe cryptocurrency could offer a viable delivery system for a Universal Basic Income (UBI).

As technological disruption in the form of automation continues to threaten the current concept of work, the idea of a UBI has surfaced repeatedly as one possible solution.

About Tiffany Sostar

Tiffany is a writer, editor, academic, and animal lover who came late to her appreciation of pets. At 18, a rescue pup named Tasha saved her from a depression and she hasn't looked back. She has worked as the canine behaviour program coordinator for the Calgary Humane Society, and was a dog trainer specializing in working with fearful and reactive dogs for many years. She doesn't have any pets right now, but makes up for it by giving her petsitting clients (and any dogs she comes across on her frequent coffee shop adventures) extra snuggles.

FUTURE TRENDS - The Slow Death of Cash

Cash is probably dying.

Slowly, perhaps very slowly, but it is almost certainly headed the way of the payphone and electronic currency is taking its place.

Although responses to this idea vary, and some are concerned about the risks associated with a cashless society, there are some good arguments that the death of cash is a good thing for both global and national economies.

Cash is slow and cumbersome, and notoriously difficult to keep safe.

It can be stolen, counterfeited, lost. It is both the object of crime – in the US there were 4,000 bank robberies in 2015 – and the enabler of crime. 

Electronic currency is safer, faster, and less expensive to maintain.

Although many people are concerned about hackers, cryptocurrency such as bitcoin offers the blockchain, a system that ensures every transaction is legitimate and is tracked in an open, transparent, online ledger system.

Blockchain’s educational website makes the argument that blockchains “provide an opportunity to build a global infrastructure untethered from the stability or permission of governments and institutions.”

Although that might sound like a utopia to some, it raises serious concerns about issues like taxation, and the social services and infrastructure maintenance that depends on tax revenue.

Although Blockchain Revolution, by Dan and Alex Tapscott does not address tax specifically, the book does include a chapter on how bitcoin and blockchains have the potential to revolutionize government by introducing true transparency and agency over how money, votes, and even property move between individuals and organizations.

They see the potential in bitcoin and blockchains to change everything from banking to government to the very foundations of capitalism and the corporate entity.

Does it sound confusing?

That’s because it is. The shift to electronic currency is one that has been happening globally for years.

This is a change in how money is accessed, but not a fundamental shift in how money is conceptualized.

There’s a debit card in every wallet, and most banks now accept cheques via smartphone photo, but money is still money. The value of e-money is still tied directly to the amount of fiat currency (any legal tender issued by a central authority and backed by regulation) that it represents.

Cryptocurrency, such as bitcoin, is fundamentally different.

It is disconnected from governmental and banking authorities, and is only beginning to edge up to the legislative and regulatory realities that will make it viable for the average person.

It will take time for cryptocurrency to reach a broad audience, and even longer for it to replace either cash or electronic currency.

One element at play is humans’ psychological attachment to physical money.

It’s been around for thousands of years, and the very untraceability that makes cash the focus of criminal activity also makes it valuable to anyone who wants to make a purchase that is not digitally linked to their identity.

However, despite the challenges facing digital currency in either crypto- or e-money forms, digital transactions are here to stay.

Kenya has the world’s leading mobile-money system, M-Pesa, which is used by more than 17 million Kenyans. The system relies entirely on mobile phones, and has made transferring money easier, faster, and safer, and bypasses banks entirely. 

However it happens, and at whatever pace, it’s clear that money is going digital and even if cash doesn’t disappear in the next decade, its place in people’s lives will be shifting.

By Tiffany Sostar

Tiffany is a writer, editor, academic, and animal lover who came late to her appreciation of pets. At 18, a rescue pup named Tasha saved her from a depression and she hasn't looked back. She has worked as the canine behaviour program coordinator for the Calgary Humane Society, and was a dog trainer specializing in working with fearful and reactive dogs for many years. She doesn't have any pets right now, but makes up for it by giving her petsitting clients (and any dogs she comes across on her frequent coffee shop adventures) extra snuggles.