golden bitcoin
A growing number of Kentuckians have seized on electronic money, specifically digital “cryptocurrencies” like Bitcoin that are traded outside regular financial systems, and are finding ways to make it pay for them.
The digital currencies market is still a bit like the Wild West: spotty oversight, a hasty rush toward every new opportunity, the occasional schemers, volatility and the ever-present promise of a quick buck. How big is it? The top six digital currencies, out of 104, have a market cap of around $183 billion, and it’s still growing.
In addition to the Lexington merchants who take Bitcoin for payment — which include a lawyer, a jeweler and others — some Kentuckians are creating their own digital currencies, trading on exchanges, writing commercial and consumer applications for the use and trade of electronic money and even installing local Bitcoin ATMs.
Understanding the law of the land
Digital currencies (DC), of which there are many, have their own brokerages and trade exchanges. Unlike national fiat currencies, they are traded outside the usual regulated venues (e.g., banks). Individuals or investor groups can create their own currencies, like Litecoin and Ethereum, but Bitcoin is still the standard by which markets are measured and considered the most stable.
DC transactions are conducted on a secure system called “blockchain,” which uses a worldwide network of interconnected “miner” ledger systems. These provide transaction verification and give proof of ownership.
Bitcoin is the world’s first global currency as it belongs to no single government, yet is recognized worldwide, although different countries have different rules for it and a few have banned it outright. Still, many banks and governments are working to create their own DC. For instance, Canada is working on one called CAD-Coin. Some even suggest we will all use cryptocurrencies by 2030 (or sooner), and national fiat currencies will fade away.
The local gunslingers
The Kentuckians cashing in on blockchain and DC — and creating the tools to use it — are largely computer-savvy millennials who understand its complex encryption and ledger system. (You don’t have to be a computer whiz to invest, though.) To wit, a nationwide, 2,000-person Harris Poll in October showed that, of the 18- to 24-year-olds surveyed, more than 50 percent view Bitcoin favorably, and are twice as likely to own it as other age groups. People 18-34 make up half of the cryptocurrency community, and they’re largely the ones creating new opportunities, too.
Brian Carlson, a 20-year-old University of Kentucky computer science major from Moreland,
Brian Carlson
Kentucky, has written an arbitrage program that looks at the various DC exchanges, determines whether a currency is trading low or high and executes a series of trades that yield a profit. This is similar to online trading programs that brokerages use for normal stock and bond trades.
“My system is based on machine learning and intelligent decision making — I guess you could say it’s a form of artificial intelligence,” Carlson said.
He’s considering calling the program Arbbot, since it’s an arbitrage-style, online, trading robot (or “bot”). It can trade just one currency, or trade in and out of several, and then convert it all back to dollars at the end of the day.
“I’m writing the program to have the same look and feel as any other online trading program, like the big, national brokerages, so that people new to digital currencies can get started quickly,” he said.
He’s not released it to anyone yet as he’s still developing and testing it, but investors are already sniffing around.
Staking a claim
Those interested in investing in digital currencies right now can do it at a Bitcoin ATM in Lexington or Louisville. Patrick Ulrich, president of Bluegrass Bitcoin, owns the machines and
Siso
Patrick Ulrich
says they garner about $15,000 per month in new investments. The machines do not dispense cash yet and only take cash for new investments due to state and federal finance regulations. He’s planning to install machines in the Florence and Bowling Green, Kentucky, areas by year’s end.
There are ATM and brokerage fees for investing that are comparable to conventional brokerages. The immediacy and confidentiality of a DC is worth it to some people — no banks or government oversight of their transaction — along with the promise of profit.
“Signing up to start investing at the machines is easy,” Ulrich said. “It only takes a few minutes to enter your information. During registration, the machine scans the front and back of your driver’s license for security. Within about 24 hours, you are notified by text or email with all your account and security information, and you can then make your first investment.”
The new digital dinero
Another side of the DC spectrum is creating a new currency. Shane Hadden, founder and CEO of Provide Community PBC, is a digital currency design consultant and a finance lecturer at
Shane Hadden
UK. In the spring, he will teach a class on financial innovations, with an emphasis on creating a currency and what it takes to give it global acceptance. (As a note, his company was the first to gain the newly recognized Public Benefit Corporation status in Kentucky.) He is also creating his own digital currency called Provide.
“A currency can be created from nothing just by creating and offering it to the public,” Hadden said. “It gets its value through public acceptance and use. Most currencies have an underlying financial platform, though, and that gives them stability in a volatile landscape. To show how far (DC) has come, the CME Group, a leading derivatives marketplace, is offering a Bitcoin futures vehicle this year.”
Hadden is also developing a global DC score for individual currencies and their growth potential.
One local pair, Lamar Wilson and Lafe Taylor, launched a “Bitcoin wallet” mobile application in 2014 called Pheeva, which allows users to pay for goods and services at stores accepting
Lamar Wilson
Bitcoin.
For some time, it was the only Bitcoin wallet Apple allowed to be distributed, and was selected by Georgia Tech as its campus standard for DC transactions.
These days, they’ve developed Hijro, a blockchain-based, distributed ledger program that allows vendors and customers to handle the facets of supply chain finance. It offers security, real-time tracking, delivery and product verification, and immediate payment. They have raised $2.6 million in startup funds and have received a lot of attention from the trade press. They also have a substantial group of big name investors that include big names like Draper Associates and Thomson Reuters.
The Hijro Network’s centerpiece is the Trade Asset Marketplace, a multibank, multilender platform. It allows vendors and customers to securely finance orders, verify that only one payment is being made for the assets, and focus on both payables and receivables. It also permits a new level of transparency and efficiency in trade asset settlement and reconciliation.
To help reduce fraud and multi-financing, they developed the Hijro Global Trade Asset Registry (GTAR). Their website promises it can “improve visibility of transactions, documents, and asset ownership across the GTAR for both bank and non-bank lenders.” It’s a comprehensive suite of secure, highly visible supply chain tools that improve financing and greatly increase security and efficiency. While this technology is not completely mature, it may well revolutionize how supply chain finance and tracking is handled.
Like all of the Bluegrass region’s blockchain and digital currency pioneers, Wilson and Taylor are working to establish their early positions in the still developing field and banking on the opportunity to help Lexington maintain its growing reputation as a tech hub in this new digital frontier.