21 Jun3 lessons on Bitcoin for everyman in Financial Services.
Eureka. Up until last week, I had not really understood Bitcoin and had only just begun to understand how the Blockchain aka distributed ledger part of Bitcoin was going to affect financial services. More on the latter in coming weeks. This week, I hope my view of my “Bitcoin epiphany” will enlighten others.
Slow Train Coming
My enlightenment in matters Bitcoin is the outcome of a trinity of events. First, sometime last year, I was given a Bitcoin. This was a gift over dinner from a good friend who is a senior Google engineer. Easy as can be, he set up an app for me on my iPhone and told me I could pay for stuff with it. I was curious, thinking I must look into it. But, in over six months, there was not one trigger to do so. That Bitcoin attracted my interest, but languishes, virtually and unused on my iPhone.
More recently, I have had clients and potential ones ask me about Ripple. In the process of learning about that platform, I had the tremendous good fortune to be introduced to the wonderful Richard Brown at IBM, who has been thinking long and hard about distributed ledger technology and writes a really informative Blog on these matters. Exchanging thoughts with Richard, I began to understand how that technology might be cleverly used in my business back yard. Only began though.
Good things come from threes
It took a third event, for it is always three, for the penny to drop. By chance, I picked up a copy of Wired Magazine on the way through Johannesburg airport. I rarely read Wired, but a cover headline caught my eye: “Reid Hoffman: Why the block chain matters.” Hoffman is a serial entrepreneur and über successful investor; among loads of things, he runs Netflix, chairs LinkedIn and is ex PayPal. Very smart, very successful and a genuine influencer. Wired magazine had my attention.
The article is a must read; a seminal article for helping the understanding of this bit of technology, why it matters and why it will matter a whole lot more than might at first be apparent. If the following interpretation sparks your interest, I cannot recommend highly enough that you spend 30 minutes reading the article as soon as possible.
Hoffman puts forward the notion that we must think of Bitcoin as a function of its three components; it is a cryptoCAP. A currency, an asset and a platform. It is a currency in so far as it is a store of money and a medium of exchange. It has a value and people are willing to accept it as a form of payment. The asset part needs a simple comparison. it is like gold; a commodity that has a limited supply that only expands very slowly. Like a commodity, its value can fluctuate wildly. The platform part is what connects it to other things in Financial Services. It is a means of accounting and record-keeping that allows a dispersed or distributed community to keep track of who owes what to whom and whether a transaction on that platform is a legitimate one that should be authorised by the community and recored in the accounts.
Lessons to be Learned: Comfort. Many folks do not have a high comfort level when it comes to Bitcoin; perhaps they are worried about untraceable payments, perhaps they wonder whether their Bitcoin balance is as safe as their bank balance at Citibank or HSBC.
Hoffman wisely points out that many things that have gone on to be wildly successful did not achieve what he calls “broad consensus” early on. QED. He is spot on and my own epiphany, that journey to my own Eureka moment, proves the point exactly.
The penny did not so much as break out into a spontaneous explosive of thoughts on how Bitcoin and what it brings will matter. In the next post, a few thoughts on how Bitcoin is better than gold.
I am indebted to Emmanuel Mogenet for his inspiring gift and to Richard Brown for so readily sharing views and educating the latecomer.
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