This article in our series on digital currencies is by Peter H Le, founder of Qollage, a Singapore-based company specialising in consulting and concierge services for Ripple & Bitcoin technology.
As adoption of the ‘cloud’ increases, another technology trend rides along. A move towards decentralization of technology & information is paradoxically restoring ownership to the very people moving their data and applications up into that same nebulous cloud.
Bitcoin (BTC) is, in essence, a digital currency; a computerized and decentralized form of currency. No one entity has complete control over its use, supply, or production. Based on Wikipedia, there is a total limit of how many Bitcoins will be produced which is 21 million.
Recent information suggests there are already 11 million “bitcoins” in circulation. These bitcoins can be produced by anyone with a computer. Much like mining physical gold in the gold rush of 1849, bitcoins are mined digitally since 2009. Instead of using picks and shovels to dig gold from a mine, people use computers to mine Bitcoins virtually.
Bitcoin works through a distributed and decentralized peer to peer network. Using computer algorithms, this distributed network governs how long it would take for a computer to mine and produce a Bitcoin. As more Bitcoins are mined and come into circulation, the longer and harder it is to mine and produce another Bitcoin. The decentralized network makes it harder and harder as more and more come into the Bitcoin supply.
This prevents any one person from monopolizing the artificially limited supply of bitcoins. Bitcoin is a decentralized, community driven system of monetary exchange, where the prevention in the increase in money supply is key to its existence and attractiveness.
This can seem like a virtual video game and public adoption has taken time. In the past few years, there have also been well-publicized cases of hackers breaking into the system and stealing bitcoins. Like all systems, it takes time to work the kinks out. The constant improvement and innovation will make adoption easier, and more importantly, boost trust and confidence in the system.
New businesses have been built around the Bitcoin economy, from ATM machines, to pre-paid Visa/Mastercards, to merchant services. Bitcoins can be exchanged for both currency and precious metals. Near the end of 2012, WordPress, an extremely well-known company which provides tools for easy website production and maintenance, announced it would begin accepting payment in bitcoins.
A payment gateway company called Ripple (ripple.com) intends to make bitcoin payments easier than PayPal transactions. Ripple is new and still in the testing phase but the Bitcoin community is keeping an eye on this promising company. A generally accepted payment processing system for bitcoin will add tremendous value. Ripple also offers it’s own currency called Ripples (XRP) and has set a hard limit of 100 Billion units. In that regard, perhaps Ripple will be to silver as Bitcoin is to gold in the digital frontier.
Decentralization has affected other companies in payment processing. Companies like Transferwise (transferwise.com), operating in Estonia and the UK, and Paymium (paymium.com) in France, are challenging the traditional banking system by offering extremely low cost money transfer fees, directly competing with the traditional international bank transfers. These companies are also directly competing with PayPal as a payment method.
As mentioned earlier, new technology comes with security risks. Companies like BitInstant (bitinstant.com), which help facilitate exchange between Bitcoin and currencies, have been hacked into causing loss of clients’ Bitcoin accounts. To combat the ongoing online attacks companies in the business of Bitcoin apply 2nd password layer protection for payment transfers, using Google Authenticator (which is like having a Token), SMS text or other methods. Time will tell which systems prove trustworthy and earn confidence.
Peter Le is director of Qollage, a Singapore-based company specialising in consulting and concierge services for Ripple & Bitcoin technology. Born in Vietnam and raised in California, he consulted over 15 years in Business Development & Technology Services, working internationally from Hong Kong to Silicon Valley to Central America.
His core expertise is being the liaison between the worlds of Finance, Marketing, and Technology, creating real-world solutions for institutions. His past clients include industries in Banking, Health Care, Tourism, Gaming, Retail, and Telecommunications. He holds bachelors degrees in Marketing, Finance, and Management Information Systems at the University of Arizona, and is a member of the Platinum Group for international planning and structuring.
Peter’s e-book “Bitcoin in English” is available free to all Premium Level Members of Q Wealth.
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You can Find Part 1 of the Series HERE