Time to join the chain gang?

Pissed

I was pissed. I normally am at the vendors’ get-togethers. Masquerading as networking events, they are more an excuse for a bunch of blokes (it is exclusively blokes, sadly) in the horsey/betting online business space to exchange ideas and rounds of grog. Mostly rounds of grog.

But not all chat is horse and football, nor is it product launches or how’s the little one(s)…

A couple in the group, who you may know, are into broader ‘make money’ concepts. Forex trading and the like. John and Graham, mainly.

Graham is always getting his mobile out and showing me the latest trading gizmo he’s using to plunder a few extra quids – you can never have too many quids, apparently; while John is the sort to be less interested in little tactical projects, more inclined towards the macro: the game changer.

So there we were boozing and blustering the night away when the subject of bitcoin came up. Bitcoin, in case you’ve had your head under the pillow for the last five years, is a new sort of money.

You can buy stuff with it, and exchange it for other currencies, but you can’t get it in the bank. That was the bit I struggled with. Especially after a few of those Lagunitas IPA’s (fierce tasty, even fiercer alcoholic).

You see, I’m a bit old skool. In spite of running a tinterwebs business and betting on horses most days, I’m actually risk averse. Calculated risks around things which I broadly understand are what check my boxes.

I’d heard of bitcoin but I didn’t understand it. Still don’t fully understand it.

**

Join the Club?

Anyway, Graham and John were evangelising about something called Bit Club Network (BCN hereafter), and so too, separately but as a result of convo’s with this pair, was another mate in the trade – absent this night – Steve.

BCN is a ‘mining club’. Mining is important because it is how bitcoin – and other so-called crypto-currencies – manifest themselves. Instead of sooty blokes with lamps on hard hats and pick axes, though, bitcoin and its ilk are unearthed by computer algorithm.

The human resource of sweat and toil is supplanted by electricity and processing power which, as it turns out, is almost as expensive.

In a nutshell, bitcoins are liberated when computers solve complex mathematical conundrums. The solution is verified by the community (i.e. other bods in the same game) on something called the blockchain.

**

Welcome to the chain gang

The blockchain could be the single most important piece of computer technology ever devised: even more so than the internet itself. Why? Because it can be used as a settlement engine or market place for just about anything. And there are already prototypical replications of established business systems springing up, ready to challenge the old world order.

Betting exchange? Try augur. Bank settlement? Ripple. Ecommerce? Loads of ’em. What about intellectual property rights and/or business contracts? Ethereum has this cornered currently with something called smart contracts.

In each of those marketplaces, you trade tokens (coins, units of monetary value) with other users.

With. Other. Users.

Not with banks. Not with lawyers. Not with Amazon or Betfair or any other middleman creaming off a hefty percentage.

With other users.

There are three key benefits to this: price, trust and availability/accessibility.

Without going into detail, transaction costs are lower (think 0.25% to exchange currency instead of the 8% or whatever for Western Union to wire funds back home).

The ‘distributed ledger’ nature of the blockchain means that trust is engineered into the system and verified by individuals, not institutions.

And you don’t need a bank account to do this. A mobile phone will do. Many millions of people in the world don’t have a bank account, but they will be able to pay for stuff – even small stuff – using bitcoin and their phone, in the very near future.

This is not science fiction. This is happening right now. You can already buy stuff with bitcoin. Graham has a Mastercard loaded with bitcoin. (I’m guessing it’s not cost effective yet, because of the fact Mastercard are associated with it; but as soon as the payment system is locked into the blockchain, there will be no need for Mastercard, Visa, or banks… and it will be the sensible way to buy stuff).

Get in the game…

So how do you get in the game?

Unless you want to mine the coin from your computer (good luck with that if you’re using a standard bit of kit!), you need to convert a ‘fiat currency’, i.e. pounds, euros, dollars, etc, into a crypto-currency in the first instance.

This article in the Telegraph a couple of months ago shows how to do it; and, implicitly, tips the wink to how mainstream this is becoming.

Getting in the game can seem complicated. It certainly did when I awoke, hungover to hell, the morning after the vendors’ lash up.

But when I sat down to do it, it was a breeze.

1. Get a wallet. That’s where you store your online cash. Just like any other online account you might have: bookmaker, bank, email, etc.

2. Buy some bitcoin. Trickier, and you’ll probably have to demonstrate you are who you say you are first time around (sensible, eh?), but I was able to get this done in 15 minutes or so.

The bod from whom you buy the bitcoin will send it to your unique wallet address that you’ll get in step 1.

3. Transfer the bitcoin from your wallet to wherever you want it. Or don’t. I moved all mine into BCN initially and, as that has generated more bitcoin, I’ve re-invested it on an exchange. But you can just have it sit there building value.

Why am I telling you this?

So why am I telling you this? Well, I haven’t got anything to sell, so that’s the first thing.

I could promote Bit Club Network – in fact here’s my introducer’s link – but, to be honest, I’m not sure I wouldn’t have done better just investing the coins I bought to join the BCN mine myself.

Still, BCN are worth a look if you want to understand more about how bitcoin mining works. And there are some good elements to it, such as the chance ot invest in other altcoin mining (like ethereum, zcash, and others), and some interesting opportunities in the space (including CoinPay, a kind of Bitcoin visa card, which sounds really interesting).

But the main reason I’m mentioning this is that, if you’re an investor at any level, then you should be thinking about diversifying your portfolio into cryptocurrency/altcoin.

I’m not saying they’re the way, the truth, and the light; but, with a global market capitalization (i.e. if everyone sold right now) of $163 Billion they’re not going away.

Regardless of whether there may be a bubble forming in the short term (there may well be), it’s an exciting – and fast moving – space to be in.

My Portfolio

I really hope it’s obvious from what I’ve said already, but let me be clear.

NOTHING IN THIS BLOG POST CONSTITUTES FINANCIAL ADVICE.

Caveat emptor.

I’ve written it because I want to write about something other than racing from time to time, even though I still love writing about racing.

And, more than that, because it’s something Graham and John and Steve, have got me in to. (I really should go boozing more often! 😉 )

My current portfolio consists almost solely of Bitcoin and Bitcoin Cash, mostly the latter. Why? Because it has scalability to process larger numbers of small transactions which is an important function currently missing from the legacy Bitcoin. (SEGWIT and the Bitcoin scalability problem are discussed in more detail here, if you’re interested).

Is this the right move? Who knows. I’m not an expert by any manner of means. Far from it. And I’ve invested in a manner commensurate with my level of awareness, i.e. not much.

But enough to benefit from the rising tide currently lifting all altcoin boats, and to be able to trade into and out of a few of the less fashionable, more speculative, currencies.

I also had ripple, which I sold at a loss; and espers and siacoin, in which I’ve probably done most of my money. They were penny share punts and look to be going the way of such things.

And I made a few quid trading in and out of the volatility of viacoin.

Bitcoin was £300 a coin in April last year, when I got involved. I felt at the time that it was too high (based on nothing, I might add).

Bitcoin is now £3,500 – having been £3,750 a couple of days ago. Demand, from China as much as anywhere, outstrips supply in this most global of currencies.

Where will Bitcoin, Bitcoin Cash and the rest be in six months or a year’s time? Your guess is as good as mine, but the consensus seems to think Bitcoin – a safer bet, relatively – may go up another 30% before correcting back by year end.

Bitcoin Cash is seen as having more explosive short-term growth potential. Some predictions have suggested as much as 4x its current value. Whilst that is probably ambitious, there’s no doubt it has more upside than its older brother. It also has considerably more downside!

Closing Thoughts

My awareness of cryptocurrency has come a fair way since that drunken discourse eighteen months or so ago. And so has the value, maturity and demand for the sector.

It is still an emerging market, and will face challenges from the ‘old world’, including from financial institutions and, almost certainly, governments. (China recently banned initial coin offerings – the crypto equivalent of IPO’s – in their country; others, including perhaps USA, may follow).

But, five years from now, it is likely that most large offline businesses and just about all online businesses will have the facility to process Bitcoin transactions. As soon as it is financially viable – i.e. when I don’t need to pay PayPal, or Mastercard, or a bank, for the privilege – I will accept Bitcoin on geegeez.

Until then, I’d encourage you to get drunk and talk rubbish about the world with your friends. Oh, and maybe bag a bit of Bitcoin. You don’t have to buy a whole one!

– Matt