Nov 30, 2017

Stephen Skulley is a banking & finance doyen, who is riding the tsunami of change being driven by technology disruption. This conversation takes a dive into the current state of the banking & financial sector, notably the broad and deep impact of digital technology. And how FinTech, big data, bitcoin and blockchain has the potential to allow greater social equity and inclusion, particularly when it comes to education, health and financial.

“I think the fact that within the bitcoin universe an algorithm replaces the functions of [the government] … is actually pretty cool. I am a big fan of Bitcoin” – Al Gore, 45th Vice President of the United States

Valuable Links and References

Background – 10 bitcoin facts you might not know as the bubbly cryptocurrency gets volatile

by Jemima Kelly

Bitcoin blasted past $US11,000 to hit a record high for the sixth day in a row on Wednesday after gaining more than $US1000 in just 12 hours, stoking concerns that a rapidly swelling bubble could be set to burst in spectacular fashion.

It later dropped by 20 per cent in just hours.

Here are some facts that you might not know about the largest and best-known cryptocurrency.

  1. How many are there?

Bitcoin’s supply is limited to 21 million – a number that is expected to be reached around the year 2140. So far, around 16.7 million bitcoins have been released into the system, with 12.5 new ones released roughly every 10 minutes via a process called “mining”, in which a global network of computers competes to solve complex algorithms in reward for the new bitcoins.

  1. Energy drain

These mining computers require a vast amount of energy to run. A recent estimate by tech news site Motherboard put the energy cost of a single bitcoin transaction at 215 kilowatt-hours, assuming that there are around 300,000 bitcoin transactions a day. That’s almost enough energy as the average American household consumes in a whole week.

  1. Bits of bitcoin

Bitcoin’s smallest unit is a Satoshi, named after the elusive creator of the cryptocurrency, Satoshi Nakamoto. One Satoshi is one hundred-millionth of a bitcoin, making it worth around $US0.0001 at current exchange rates.

  1. Bitcoin billionaires

Bitcoin has performed better than every central-bank-issued currency in every year since 2011 except for 2014, when it performed worse than any traditional currency. So far in 2017, it is up around 1000 per cent. If you had bought $US1000 of bitcoin at the start of 2013 and had never sold any of it, you would now be sitting on $US80 million. Many people consider bitcoin to be more of a speculative instrument than a currency, because of its volatility, increasingly high transaction fees, and the fact that relatively few merchants accept it.

  1. Exchange heists

More than 980,000 bitcoins have been stolen from exchanges, either by hackers or insiders. That’s a total of more than $US10 billion at current exchange rates. Few have been recovered.

  1. Mystery creator

Despite many attempts to find the creator of bitcoin, and a number of claims, we still do not know who Satoshi Nakamoto is, or was. Australian computer scientist and entrepreneur Craig Wright convinced some prominent members of the bitcoin community that he was Nakamoto in May last year, but he then refused to provide the evidence that most of the community said was necessary. It is not clear whether Satoshi Nakamoto, assumed to be a pseudonym, was a name used by a group of developers or by one individual. Nor is it clear that Nakamoto is still alive – the late computer scientist Hal Finney’s name is sometimes put forward. Developer Nick Szabo has denied claims that he is Nakamoto, as has tech entrepreneur Elon Musk more recently.

  1. Inflated Chinese trading

Until this year, it was thought that Chinese exchanges accounted for about 90 per cent of trading volume. But it has become clear that some exchanges inflated their volumes through so-called wash trades, repeatedly trading nominal amounts of bitcoin back and forth between accounts. Since the Chinese authorities imposed transaction fees, Chinese trading volumes have fallen sharply, and now represent less than 20 per cent, according to data from website Bitcoinity.

  1. Market cap 

The total value of all bitcoins released into the system so far has now reached as high as $US190 billion. That makes its total value – sometimes dubbed its “market cap” – greater than that of Disney, and bigger than the market cap of BlackRock and Goldman Sachs combined.

  1. Crypto-rivals

Bitcoin is far from the only cryptocurrency. There are now far more then 1000 rivals, according to trade website Coinmarketcap.

  1. Shorting 

It is already possible to short bitcoin on a number of retail platforms and exchanges, via contracts for difference (CFDs), leveraged-up margin trading or by borrowing bitcoin from exchanges without leverage. But a number of big financial institutions – including CME Group, CBOE and Nasdaq – have recently announced that they will offer bitcoin futures, which will open up the possibility of shorting the cryptocurrency to the mainstream professional investment universe.

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