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Bitcoin was originally created by software developer with the pseudonym Satoshi Nakamoto who developed the electronic payment system and based it around mathematical proof. The result was a currency independent from central authorities and almost instantly transferable with very low transaction fees.
Since Bitcoin was introduced, there have been several hundred other cryptocurrencies enter the market. Being sold at a cheaper rate, they are a more accessible alternative to Bitcoin and have been aptly named altcoins. Current popular alternatives include Litecoin (trading at £47.75), Ethereum (trading at £229.24) and Dogecoin (A joke currency which currently has 100 million mined coins).
The main idea behind cryptocurrency was to create a secure and anonymous way to transfer currency from one person to another and since then it’s been heralded as ‘digital gold’. To promote the anonymity, Satoshi Nakamoto had to develop something new, this is when Blockchain, the digital ledger of Bitcoin transactions, was created.
Blockchain is a continuously growing list that records every cryptocurrency transaction and secures each block using cryptography. Each part of the chain contains a timestamp and transaction data which is approved and stored on a peer-to-peer network. The main security benefits of a blockchain is that once a block has been stored, it cannot be altered, ensuring that any cryptocurrency ledgers can’t be tampered with.
If you imagine a blockchain as a medical record and each entry as a block labelled with the date and time it was entered. These entries make up a history which is important for determining future treatments, so no one can alter these past records. However, the doctor will have a key that allows him to make new records, which adds to the block of entries.
While 2017 saw massive spikes in the value of cryptocurrencies, they’re still not entering our day-to-day lives. Most of those who own substantial amounts of bitcoin are doing so as an investment, rather than looking to utilise cryptocurrency as a new way to buy things.
That’s not to say that you can’t buy things with Bitcoin, in December 2013 a Tesla Model S was bought for 91.4 bitcoins and Starbucks are currently letting customers use the cryptocurrency to purchase food and drink
Alongside this US rapper The Game is trying to encourage customers of his cannabis company to purchase his product with cryptocurrencies and to do so he’s partnered with Paragon Coin in an Initial Coin Offering, or ICO. In American states where cannabis has been legalised, Bitcoin has already been utilised by dispensaries to offer a decentralised way to purchase cannabis.
Initial Coin Offerings are a way for Cryptocurrencies to raise money by selling a percentage of the currency to early backers in exchange for either money or other cryptocurrencies, usually Bitcoin.
Despite a few outlets allowing the use of cryptocurrency to purchase goods, they have still not made their way into the banking sector. A surge in popularity, is leading more and more people to invest in Bitcoin and altcoins, but with a new currency on the rise, banks are starting to realise they need to adapt.
Back in 2015, it appeared that banks weren’t willing to accept cryptocurrency deposits. One student found this out after a £50 Bitcoin transaction made its way into his account, Barclay’s froze the account and claimed they were no longer able to continue as his bank. However, with the boom in cryptocurrencies and the popularity surrounding the underlying technologies, the banks are having to start taking the virtual currency seriously.
In Asia, some countries are already embracing and integrating bitcoin into their economy, for example Japan has aimed to have more than 260,000 stores across the country accepting bitcoin by the end of the year. Although China has prohibited conversions of virtual coins to fiat currency and banned their use on the markets, they have also been reported to be working on their own version called Neo.
Fiat currency is legal tender which has a value backed by the government who issues it. For example, the pound, dollar and euro are all fiat currencies.
In the west, it appears that not all banks are willing to accept the success of
Bitcoin as a herald for an evolution in the currencies we use.
While Dimon’s comments did cause a momentary 6% drop in bitcoin value, the past two months have seen its value not only recover, but double in value.
Meanwhile, the European Central Bank has stressed that they are monitoring cryptocurrencies and are evaluating the blockchain technology that comes alongside it. However, the central bank is not considering them a viable threat to the bank or the euro.
Regardless as to whether the banks see cryptocurrency as a new form of payment or not, they can’t continue to ignore the virtual coins as an alternative.
Jamie Dimon, CEO of JP Morgan has claimed that the original
cryptocurrency is a fraud and was quoted at a New York conference saying:
“The currency isn’t going to work. You can’t have a business where people can invent a currency out of thin air and think that people who are buying it are really smart.”
The level of security is one of the biggest allures for people who are considering investing in cryptocurrency. By using blockchain, the virtual currency creates a decentralised economy that protects the identity of the users. If users remain anonymous, then hackers won’t be able to target them based on the transactions they make alone. Alongside this, if a hacker wanted to destroy or corrupt a blockchain, then they would have to affect the data stored on every user’s computer, which could total in the millions, which can be considered nearly impossible.
However, while all this security greatly benefits the user, there have been plenty of horror stories of bitcoin owners losing access to their wallets and therefore losing their coins. Mark Frauenfelder wrote an article for Wired chronicling his 5-month struggle with his bitcoin wallet after the loss of his pin cost him nearly over $30,000 dollars’ worth of bitcoin. This is one of the setback of cryptocurrencies being decentralised, if you forget your login details then there’s often no way to get your account access back.
Oliver Baker, Eurostaff’s Cyber Security Specialist for Belgium, commented on the vulnerabilities that may jeopardise cryptocurrency:
“While the blockchain is secure, hackers may be able to access people’s cryptocurrency wallets. In the past, there have been cases of prolific members of the bitcoin community having their wallets emptied through the theft of their mobile phones numbers. A prime example of this is Bitcoin Entrepreneur Joby Weeks, who found himself losing approximately $1 million worth of bitcoin.”
This is where cryptocurrency can be a lot riskier than your local bank. When something goes wrong with your bank account, you can have malicious transactions reversed. However, with cryptocurrencies, the transactions are designed to be irreversible and with no central figure owning it, there is no way to reverse a hack or exploit.
This could play a huge part as to why banks are cautious in their approach, they need to ensure that their customers who embrace cryptocurrency can do so securely. When working with the code behind cryptocurrency wallets, mistakes can become very costly. More than $300 million worth of altcoin, Ether, was lost recently after a string of bug fixing went wrong.
The adoption of cryptocurrency by the banks has been slow, but with billions of pounds at stake, it’s easy to see why.
Do Cryptocurrencies have the potential to enter the mainstream?
Cryptocurrencies are digital assets designed to secure transactions and to be used as payment processes. In my opinion and perspective, they’re already in the mainstream, it’s just not spoken about as much or it is not as visual as people would see every day on job boards. For example, you have Bitcoin, Steem, ARK, they’re all cryptocurrencies that are being used now as digital payments.
How do you see cryptocurrencies growing in 2018 and the foreseeable future?
I think it’s going to be massive. In the recruitment tech space, I worked on a project with HSBC, going back 4-5 months, called DTC which stood for Digital Transformation Corporate. This was purely based on blockchain and they were looking for digital transformation just around payments and cryptocurrency for HSBC.
Also, Lloyds of London have introduced and are still running a massive blockchain project that is going to implement right the way through the London insurance market, so you’ve got your Aon and Willis Towers Watson and there’s over 64 syndicates that will be taking on the role of upgrading and digitalising their systems within the use of cryptocurrency.
Will the rise of cryptocurrencies lead to an increase in fintech companies?
Because bitcoin is so big and leading the cryptocurrency market, you’ve got all the underdogs looking for better ways to improve and compete. ARK already has SmartBridge, which is being used to bridge blockchains together. All these underdog altcoins are finding better solutions to be as big as bitcoin.
The reason we’re going to see an outburst in fintech companies is because the banks have always been behind on technology and they’ll need help adapting. I think the increase in new fintech businesses will be massive. Some fintech companies will not only focus on the banking side of it, but also any payment applications. Whether, it’s gaming, property or private retailers, in the future any sort of payment process is going to be ran through a fintech company.
What job roles will we see more vacancies for if cryptocurrencies enter the mainstream?
They’re already taking off, that’s speaking from experience. Going back 4 or 5 months, we saw a massive outburst in banks all asking for cyber security experts, .net cyber security experts, C# cyber security experts, designers, the recruitment drive is happening now.
It’s only going to get larger and larger, because when these things are all designed, developed and reshaped, there’s going to be maintenance work that needs doing, there’ll be solutions needed, there’s going to be redesign that needs doing. This can only get bigger and better and I think we’ve only just hit the tip of the iceberg.
How are cryptocurrencies affecting recruitment?
While we may not think that cryptocurrency is widely used, we’re simply just not noticing it in our everyday lives. From purchases on Amazon to Starbucks, these virtual coins are being used and much like contactless cards or Apple Pay, it has the potential to quickly soon become another major payment method.
Cryptocurrencies are only going to grow throughout the foreseeable future and this is creating a recruitment surge for cyber security experts and developers with blockchain experience. This demand is largely from banks or fintech companies looking to take advantage of the need for new, relevant tech.
With Bitcoin showing just how valuable these currencies can be, the investment and usage of altcoins should only increase. Alongside this, cryptocurrencies have brought a unique opportunity to fintech companies both new and existing, who can help cryptocurrency adapters across all industries offer a secure way to embrace them.
Bitcoin has shown the world just how valuable cryptocurrencies can be and as the world begins to adopt them as a viable payment method, the opportunities for those with skills in design, development or cyber security will become increasingly high in demand.