I was recently asked about my thoughts on cryptocurrency.

I was recently asked about my thoughts on cryptocurrency.

To give you some background, over the last two years I’ve been working on a financial product called OlehPay. This spring was our soft launch. During my research in the space I’ve seen many variations of on the particular field I’m working in — the forex remittance space. A number of solutions from various players have risen and fallen in the space. These solutions revolve mostly around two bottleneck pain-points in the space. The first pain-point, which is far more common, arising out of a natural reaction to economic competition, is price point. What is the least expensive way to send and exchange money across the globe?

With all entities in the financial space, regulation is fierce and at its highest. Producing an easy to use solution in a tough regulatory environment makes for a problem as crucial as a product’s price-point. Constructing a solution that smoothly navigates the nit-picky regulations of the remittance space may seem like a trivial problem, but recent innovations in the space have changed the face of the game entirely and changing the way we deal with sending money overseas.

Solutions that creatively reduce the pain of KYC — or “know your customer” — make sending money easier, less expensive, and less constricting. These solutions target areas of the regulatory space differently, and we’ll address them with each of the competitors in the space I will list here.

Companies like TransferWise, the up and coming exchange giant in the space embrace the struggle of its industry’s regulatory environment. Ads about the struggle and unfairness are the crux of their marketing campaigns. By curating an on-boarding process that is thorough and easy to follow for the user, TransferWise works within the regulatory system. Following up KYC requirements, however, requires man power — customer support teams, compliance officers, and more. And these expenses trickle down to the cost of the service to the user.

Other innovators in the space have surmised creative ways to skip the regulatory scene altogether. Goldmoney.com allows one to purchase gold and send it anywhere across the glove. As a commodity, the gold seller has no legal requirement to take KYC from a customer — the company presumably stands in exactly an equal regulatory spot as a coffee house collecting cash for a cappuccino.

Bitcoin, Litecoin, Ether, and other cryptocurrencies piggy-backing after all the talk of blockchain technology, which essentially is a public or decentralized ledger of transactions (and not necessarily exclusive to cryptocurrency as seen in other use cases such as Etherum), are attempting to change the face of global finance and its regulatory counterpart.

These cryptocurrencies don’t have a regulating body governing their production, use or abuse. Anyone can buy and sell cryptocurrencies. They can even sell them overseas to different currencies, all under the KYC radar. This reduces costs to the exchange company tremendously. But it gets trickier.

Not only can anyone buy or sell cryptocurrency but anyone could mine them. This means running your computer to full capacity to solve algorithms that produce Bitcoin (I’ll save the complexities of this for a later date).

More interestingly, anyone could even create their own cryptocurrencies. Seriously, here’s the code right here: https://github.com/bitcoin.

So are cryptocurrencies really safe from governing bodies? I’ve seen links here and here suggesting otherwise.

Ether is on the rise, should I buy into them? I have always been very doubtful about the integrity of these currencies. In 1st century BC, Publilius Syrus wrote: “Something is only worth what someone is willing to pay for it”. How much longer will someone be willing to pay for cryptocurrencies? Anyway, here are a few of my hesitations:

I find something incredibly eerie about the rate by which cryptocurrency can be mined. More so, although they aren’t regulated by governing bodies, they are held heavily by major players. The mysterious creator of Bitcoin in his pseudonym Satoshi Nakamoto owns more than 700 million dollars of his cryptocurrency.

Does non-regulated, decentralization throw more weight in the philosophy of fairness — built so integrally in the design of Bitcoin — despite early adopters like Nakamoto amalgamating masses of wealth, than a centralized currency like the US Dollar whom belongs to no single creator?

Like gold, cryptocurrencies are only worth as much as their holders have faith in them. Also like gold, cryptocurrency is just as susceptible to and experiences steep price fluctuations. In July of 2010, Bitcoin saw rises of more than 1000%. In 2011, Bitcoin witnessed its first bubble — a $31 price of Bitcoin eventually hitting a $2.00 minimum towards the end of the same year. Today Bitcoin continues to jump, skyrocketing, almost to $2700.

Bitcoin, unlike gold, has a limited supply — 21,000,000 pieces. To date, 16,404,925 pieces have been mined. Does limited amounts of Bitcoin comment on the integrity of its value? I think it does.

Here’s why it might: for any healthy economic system, the introduction of new supply both stimulates and qualifies that system. Like a government body that prints money, introduction of new funds both adds more value through the money itself and pressures money stashers to use or invest their money. Stashers are quick to move in order to avoid their money’s susceptibility to inflation as a result of the newly added funds. All this sudden demand to buy and invest stimulates the economy. A company that issues new stock through the raise of investor funds has a similar function. Although these new stocks dilute the total amount of current stock, the new stocks add value to the company as a whole, pushing the value of both old and new stocks.

This is not the case of a cryptocurrency like Bitcoin, where limiting supplies could see no infusion of future value and hold forever a total momentary arbitrary value.

Those in favor of Bitcoins’ stored value point to gold’s inconveniences of its physical limitations. Gold must be stored and secured, moved and shipped to sell. Making simply the handling of gold expensive and impractical on large scales. A physical logistic Bitcoin does not have to encounter.

Those who realize the software implication lacking in the structure of Bitcoin’s design lean towards Ethereum, whose cryptocurrency carries technological applications far nimbler than a simple stored value like Bitcoin. However, likely in the flitter and folly of all the excitement in Ethereum, recent price staggers of the currency may comment on its efficacy and bottom-line practicality.

Would you invest in cryptocurrency?

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