ONE of big stories in technology of late has been crypto-currency – that is, digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds. Bitcoin, the best-known crypto-currency, and some of its peers, have seen their values absolutely soar in recent times.
The value of bitcoin is about an all-time high; up tenfold on the mark it was languishing at around the beginning of last year. Ethereum, an alternative digital currency, has also rocketed in value.
So, are crypto-currencies like Bitcoin finally, truly coming into the mainstream? It seems that the answer is yes as an asset but not yet as a transaction method.
According to a recent report by JPMorgan, merchant acceptance of bitcoin is at an all-time low. Out of the leading 500 internet sellers, just three accept bitcoin, down from five last year, the report found.
A Google search shows that Northern Ireland has its own bitcoin association, but it’s not hard to work out that there aren’t many places to spend the crypto-currency in this part of the world either.
It seems that as bitcoin’s price has sky-rocketed, customers holding the currency are more interested in holding it to make money than spending it on goods that could be purchased in other fiat currencies.
And when consumers do try to spend it, it often comes with high fees, which means that it isn’t viable for small purchases, or it takes a long time to complete the transaction.
And the lack of demand at the consumer end means merchants aren’t inclined to invest in the infrastructure required to accept bitcoin. So, the likelihood is that people will continue to be more interested in trading or investing in it rather than using it as a fiat currency.
But, blockchain, the distributed ledger technology underpinning the crypto-currency, is taking hold in a number of finance and commerce-related areas.
ICOs, or Initial Coin Offerings, are an alternative, unregulated way of fundraising enabled by blockchain technology. Investors are sold digital ‘tokens’ in exchange for their financial contributions, which can then be used to allow access to the finished product, act as a kind of voting power, or for other purposes.
ICOs, it seems, are booming – repeatedly raising hundreds of millions of dollars and overtaking mainstream funding sources. According to one estimate, in the tech world, initial coin offerings have raised more money than established venture capital, early-stage funding in 2017 to date.
Boxer Floyd Mayweather – the one who recently fought Conor McGregor – has even got in on the act, publicly throwing his weight behind two ICOs. In July, he posted a photo of himself on a private jet next to piles of money, promising “I’m gonna make a $hit t$n of money on August 2nd on the Stox.com ICO.”
Mayweather then signalled his support for the ICO of Hubii Network, a decentralised media marketplace, in August.
It is clear that crypto-currencies aren’t going away, much to the chagrin of some very famous investors who have been calling it a bubble or fake for years. Just don’t expect to spend them in all of your local shops any time soon.
:: Patrick McAliskey is managing director Novosco, an indigenous managed cloud company with offices in Belfast, Dublin, Cheshire and Cork. It employs over 150 people and works for leading organisations across the UK and Ireland, including many of Northern Ireland’s top companies, UK health trusts, councils and other organisations