The days of considering cryptocurrencies a niche interest – reserved for a few brilliant but isolated programmers – are over. Whether you’re an early adopter, a recent convert or remain a steadfast skeptic, blockchain’s capacity to overhaul fintech can no longer be ignored.
For the unaware, digital currencies or cryptocurrencies are intangible, decentralized forms of money. Cryptocurrencies such as bitcoin, the most common example of digital cash, are built on the back of blockchain networks or, a series of ledgers maintained across the internet.
One of the selling points of cryptocurrencies is that they’re not bound by the same restrictions as traditional currencies. Transactions are borderless, for example, making it easier to pay bills or send money internationally with a bitcoin instead of a Canadian dollar.
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But it’s not just bitcoin anymore. Digital platforms such as Ethereum, with more complex capabilities than acting solely as digital currencies, are already disrupting the still-fresh sector. Ethereum, for example, allows companies to crowdfund their own cryptocurrencies through an initial coin offering, or ICO, as an alternative to raising money on a traditional exchange.
There are thousands of opportunities for startups to enter this market and take blockchain in a new, previously unimagined direction. In fact, that’s exactly what Bitaccess did, an Ottawa-based firm that now has hundreds of bitcoin ATMs operating around the world.
“I am absolutely convinced that digital currencies are here to stay. They’re not going anywhere. They are going to be a deeper and deeper part of our lives,” says co-founder and CEO Moe Adham.
The gateway to digital currency
Bitcoin ATMs look nearly indistinguishable from traditional models, but are connected to the Bitcoin network instead of a personal bank account. Users can walk up to the machine, put a few dollars into their digital wallet or take some out, and receive an electronic receipt sent by text message to their smartphone. It’s a simple, familiar transaction that Adham says is meant to onboard new users to the idea of using a digital currency.
The first ATM was launched in Toronto’s financial district on New Year’s Day in 2014. The initial site was a hub for blockchain enthusiasts then called Bitcoin Decentral, now just Decentral. It has become an auspicious starting point for digital currencies: Adham says the origins of Ethereum actually spawned from here, too.
“The founder of Ethereum (Vitalik Buterin) was the IT guy there that day. He was the one helping us setup the internet for the ATM,” he recalls.
“We knew we were on to something because we immediately got
While Adham looks back on their first ATM, the efforts of three weeks’ work on the project, as a rudimentary product, the global response to their innovation was immediate.
“We knew we were on to something because we immediately got interest from all around the world for more of these things,” Adham says. He and his team maxed out their credit cards and got to work mass producing their bitcoin ATMs.
Though they’re now manufactured through a partner in China, they were first produced out near the Ottawa International Airport. The ATMs quickly spread to Belgium, Switzerland and across the United States. Today, there are more than 1,000 across the world, including a couple in Ottawa.
The rise of competing cryptocurrencies provides new opportunities and challenges for Bitaccess. Counterintuitively, the surging popularity of bitcoin ATMs has dwindled, Adham says, as bitcoin itself becomes more mainstream.
When they were just starting out, transaction fees for bitcoin were just a few cents, making it affordable to walk up to an ATM, put five dollars in and get five bitcoin back.
“A very easy pitch point for digital currency was, ‘Oh, you should just pay me bitcoin, it’s free,’” Adham says.
“It was a great way to just onboard somebody and show them the magic of this new type of currency.”
Now, as the frequency of transactions per block (the foundation of the Bitcoin payment network with a set activity capacity) increases, so do the transaction fees. When the exchange rate reaches five dollars to four bitcoin, selling a skeptic on the idea of digital currency is a bit more complicated.
The next step for the ATMs is likely to add ether, the digital currency born from the Ethereum network, which is being touted as a strong alternative to the popular incumbent. This presents its own problems, though. The transactions become more complex when the machine has to explain, over the course of a one-minute interaction, what the differences between cryptocurrencies are to a user who has never dabbled in digital currencies before.
Blockchain isn’t limited to digital currency, though, and Bitaccess is pivoting accordingly.
“Ethereum, when it was conceived, was not necessarily designed as a payment network… It was designed for what they call smart contracts,” Adham says.
The foundation of blockchain is that its ledgers are maintained by a series of concurrent records on nodes (any personal computer linked to the blockchain) around the world. Instead of a centralized body such as a bank or government verifying the validity and value of a currency, these hundreds of thousands of nodes ensure that if a single record is changed on one computer, the others are there to correct it.
This same concept can be applied to contracts, and Ethereum’s programming specifically allows for this functionality.
Bitaccess builds smart contracts for specific use cases such as options trading and public auditing. Adham says the company is also building a product to help users secure their increasingly-digital asset portfolios.
One of the firm’s goals is to add property rights to blockchain, but that may require a concession in terms of decentralization. An authoritative body would have to verify who owns a property on the blockchain in the first place.
“Unless we start by putting authoritative data on a blockchain, we might lose the momentum we have now to see smart contracts become what they can truly be,” Adham says.
If Bitaccess is successful, and the momentum of blockchain and digital currencies continues, these applications will pervade our lives in as-of-yet unimaginable ways. Beyond holding bitcoin or ether in your wallet, decentralized, digital records may become the norm for all aspects of ownership and public holdings.
“I believe that there’s an immense opportunity in that space, and Bitaccess is really well positioned to capture a lot of that value,” Adham says.
This article originally appeared in the latest print edition of Techopia.