HOW TO CONVERT A SCIENCE INSTITUTE INTO A FINANCE AND MINING ONE?

Mrdul Pandita
Sep 3, 2018 · 5 min read

IMPACT OF BITSCOIN- A BITS PILANI , PILANI CAMPUS EXCLUSIVE CRYPTOCURRENCY

This has got to be one of the hottest topics , I have come across . If thought upon ,the very inception of this idea , has such far reaching consuequences , that the Wall Street Club of BITS Pilani would be exhilarated , considering the substantial paradigm shift the introduction of this thing is going to cause in the campus towards Finance and Investment . Modelling the concept of BITScoin on the revolutionizing BITcoin (BTC) , I analyse this topic through 5 hypotheses –

1) Fees Payment — This may be done only when BITScoin is supplemented by a service called BITSpay , similar to what Bitpay was for BTC . Bitspay would ensure that Bits is protected from fluctuations in the value of BITScoin , by transferring BITScoin payments to BITSpay wallets, and transferring fiat money (here rupees ) to the seller . This way, Bits can reliably charge standard tuition rates and receive payment in Bitscoin without the risk of accepting Bitscoins directly.This model has been pretty successful in the universities who have accepted BTC as a means of fee payment (Universirty of Nicosia , Cyprus is an example) . Also this provides foreign students with the ability to directly transfer funds to the college , without bearing the high costs associated with traditional banking.

2) Mining — The incentives of being a ledger in the block chain system of BTC were humongous , and this may very well lead to cosmic investments by students into the computers designed for the purpose . This mechanism does have a viable side to it , considering the exorbitant fees of BITS Pilani, and absolutely no way to do some sort of a part time job to pay off the student loans .

However considering the stringent requirements of the computers involved in mining , this may very well mean enormous electricity bills for the college . Also understand this — mining is done via certain specialized platforms such as Nice Hash . The thing is these even though BTC as whole is a very secure mechanism , these mining platforms aren’t . Nice Hash has been hacked multiple times and has caused substantial losses to those miners . The introduction of BITScoin might very well lead to prevalence of unethical hacking practices in the campus as well .

3) Hoarding — The mention of the word unethical brings me to hoarding . BTC or any form of cryptocurrency for that matter is a very volatile entity . Keeping this in mind , students might hoard the BITScoins — simply wait till the price rises exorbitantly high and then sell it . Not only does it come under the ambit of bad faith , this may very well cause a shortage of BITScoins when they are actually needed , ie, when the banks over here are out of cash (which they pretty regularly are )

4) Derivatives –Futures –Options : This is the most interesting prognosis . Don’t be surprised if the campus all of a sudden becomes sort of a stock market , with keen investment in Futures and Options . Why? The argument boils to the fundamentals of BTC- volatility . And how can you escape the volatility? Hedging , in the form of a futures derivative which is one of the ways of securing your underlying asset . So if BITScoin was at 1000 rupees today , people might go forward with signing a futures derivative , and say 3 months later , get those 1000 bucks for that one BITScoin , regardless of the whether in reality BITScoin goes as low as 100 rupees .

This would also drastically enhance speculation — again for the above mentioned reasons . And when people speculate , they do look at the concept of Options , which in essence is basically the right(but not the obligation ) to buy or sell a stock . So , say BITScoin is at an all time low of 1 rupees , there would be a boom in buying call option , and say it goes to 1000 rupees , there would be a boom in buying the put option . All in all , BITS Pilani , Pilani campus may very well become a stock market with traders who have Engineering degrees .

But there is another side to it — what sort of people will participate in this? Can everyone do this? Perhaps not .Because essentially , derivatives involve the concept of margining — which is the collateral that the holder of a financial instrument has to deposit with a counterparty to cover some or all of the credit risk the holder poses for the counterparty. Now for example , take the CME (Chicago Mercantile Exchange) , whose BTC futures market has a volume of 5 BTC and a margin requirement of 43 %. At a Bitcoin price of, say, $15000, you would thus need to make a cash deposit of 5*15000*0.43 = $32250. These are mind boggling numbers. Hence unless a plausible margining mechanism is introduced , only the rich kids may enter this field (or the ones willing to take huge risks)

5) Startups — Bits Pilani is known for its astounding startup culture . Most startups today rely on Venture Capitalism for their funding . It has its share of drawbacks one of the most prominent being what is happening under status quo- say an investor invested 5 Crore in your start up , with hope that it would grow to be a company whose valuation is 500 crores . Now after years , your company reaches only a 100 crores. Here the investor will start demanding an increased share in the equity of the company , to compensate for the perceived loss in profits . Most startups have to oblige them . Enter BITScoin , the startups as well as upcoming startups of BITS Pilani can actually do an Initial Coin Offering , in short using a cryptocurrency to fund their idea , services and products . Also the biggest advantage ICO offers over IPO(Initial Public Offering) is that in this case the token holders (BITScoin that is ) don’t own any equity in the company they have contributed to , and thus the company has no real obligations to the contributor to deliver on its promises .

This policy has its perks and snags, but one thing is for sure — Birla Institute of Technology and Science may very well become Birla Institute of Financial Investment and Mining !

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