Blockchain Bitcoin & Crypto Weekly CXO Briefing for week starting 12th June 2017
Originally posted on DailyFintech.com
Decrypted: Mining for cryptocurrency involves using networks of computers to solve complex mathematical problems to verify transactions. The miner that solves math first and successfully verifies a transaction, is rewarded with new generated currency. Cryptocurrency miners use graphics cards from AMD and Nvidia to mine new coins. The rise in value for cryptocurrencies has boosted demand for faster chips from crypto miners. AMD’s shares surged by 9 percent on Tuesday and some of AMD’s processors sold out on Amazon.com and other retail websites.
Our take: This news is a sign how big the mining business is as it impacts the financial results of chipmakers. I am sure all the chip makers are really happy right now. The surge in crypto value is driving strong sales, and Nvidia and AMD are planning to release GPUs specifically designed for crypto mining with reduced specifications and costs. Also because of the supply shortages, the second hand market is thriving. Radeon graphics cards have become collector’s items with prices rising by 2–3x.
A few years back the same thing happened. This was only temporary as everyone was rushing to get into mining. Eventually the price went down and things got back to normal. There is a lot of price speculation going on right now. By the time most miners are set up, prices could easily drop as quickly as they rose.
It will be interesting to see the competition between mainstream chipmakers and Bitcoin mining specialist such a Bitfury and 21co.
Decrypted: The survey results by Cognizant say that a lot of bankers now believe in public blockchain. It also says that they still believe in private blockchains. Translating the results, I think the survey show that financial institutions understand that public blockchain will get even stronger. Up till now, bankers have expressed confidence in private blockchains, or distributed ledger technology that does not even use a blockchain, but have not been confident of public blockchains such as Bitcoin and Ethereum.
Our take: The banker’s thinking has shifted, perhaps driven by fear that they might miss out. The technology for private blockchains has been around since 1978, when the RSA published the algorithm. So why has it been ignored for almost 4 decades? Because they didn’t have to do anything about it. Now they do.
I think Andreas Antonopoulos hit the nail on the head: “Bitcoin is a sewer rat. It’s missing a leg. Its snout was badly mangled in an accident in last year. It’s not allergic to anything. In fact, it’s probably got a couple of strains of bubonic plague on it which it treats like a common cold. You have a system that is antifragile and dynamic and robust.”
There will be public blockchains, there will be private blockchains. Eventually the later will go the way of the dinosaurs. Time and time again, free and open has always beaten closed. The rat will survive.
Public blockchains such as Bitcoin and Ethereum are disruptive to banking as we know it today. There are also opportunities for banks to offer value to customers fpr the mainstream market that will compete with crypto specialst. This survey shows bankers adapting their thinking to this emerging reality.
Decrypted: Almost a year and half ago, New Hampshire passed regulation making it illegal to sell bitcoin without a traditional money transmission license. Now they’ve changed that decision and signed a new law that exempts digital currency traders from the state’s money transmission regulations.
Our take: As New Hampshire lifts regulations on the digital currency sector, other states are still moving in the opposite direction. One of the reasons for New Hampshire’s reversal has been the opposition from “free staters”. The Free State Project was launched in 2003, and today thousands of free staters live in the state and several have been elected to the legislature.
Unless you are deep into payments and regulation, you might see America as one market. It is one currency, one language and 50 markets/states and there is competition between states.
To say the least, the regulatory landscape in the US. for digital currency and blockchain technology is mixed. Some states are taking a stance, good or bad, and most are doing nothing, stuck in some grey area. Change needs to come from above, because managing 50 different regulations is a huge task for any company, especially a startup. Hopefully, initiatives like “Financial Innovation Now”, a joint effort by Amazon, Apple, Google, Intuit and PayPal, can help push Washington make the needed reforms and spur innovation at the federal level.
No question about it, Mark Cuban is a smart guy and his opinion matters. He can post a tweet and drive the price of bitcoin down. He may also know a thing or two about bubbles, having been a part of the dot-com bubble. I mean, one can certainly draw parallels between the rise of cryptocurrency valuations and that of Internet companies in the billions during the late nineties. Whether he’s right or wrong about Bitcoin going mainstream as global digital currency, the jury is still out on that one. Cryptocurrencies are not just assets, they are communication protocols for blockchain applications. You can’t separate bitcoin from blockchain. Demand for blockchain applications, will drive demand for Bitcoin and other tokens and in turn drive their value. As far as bitcoin endorsements go, I’d put more stock on things like what JPMorgan is doing to allow the bank to use a publicly available system for confidential transactions, or IBM’s integration of blockchain into its Bluemix hybrid cloud platform, or Microsoft using blockchain as part of Azure to target big banks. And, let’s not forget several other well-known investors, celebrities and personalities that are betting on bitcoin.
Tell us what you think. Do you agree with Mark Cuban that Bitcoin is not a currency? Go to this thread on the Fintech Genome to tell us what you think.