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The Troublesome Teenager has Grown Up … Can Bitcoin Make it to the Big Table?

Prof. Bill Buchanan OBE


Quick question … how much is Apple Inc worth? Ans: $713 billion. And Google (/Alphabet)? $578 billion. But, what’s worth $12 billion, and is hardly recognised by any of the nations of the world or on any significant stock market?

How do you become rich? Well, one way is to investing in the stock market. So, over the last two years, an investment in IT companies would have given you different returns:

With Amazon rising 208.43%, Facebook up 88.09%, Google up 75.45%, Microsoft up 43.64%, and Apple rising 31.91%, but on the other end we see Dell and IBM shares have stayed fairly static, while stocks in Twitter, Linkedin and Yahoo have all fallen in value.

So an investment in some of the leading IT companies would have done you well, but there has been an event better investment … Bitcoin. So, while nation states have shunned it, it continues to look to be a major contender on the world-stage and has seen a 530% increase in its value since the start of 2015:

With a current value against the dollar of $1300 per Bitcoin, it has finally climbed back to where it was in 2014, when hype took over from pure business sense:

It just works …

While nation states often control the value of their currency, no-one, apart from perhaps the controller of the Github repository for Bitcoins, has overall control of the supply and demand for Bitcoins. The in-built algorithm to control the supply of the coins has been shown to provide enough of an incentive to create the coins, and in not oversupplying. The unbelievable thing was that the supply coins and the value, and the recalculation of the ledger were just “fudged” values that were not really based on any significant mathematical analysis – but it has worked (up to now, of course).

It just won’t go away …

Many nation states, and crime enforcement agencies, and banks … just hoped it would go away, and that electronic methods which just be the same as before, where countries and large banks had control of the market. But it hasn’t and as fraud continues to rise in banks, and where we have no idea how our money is being used, the safety of holding the coins means that the user has complete control over the money.

Growing up …

So now it looks like the US regulators could approve a trading product related to Bitcoin, and which has seen a 2% increase in value in just the last day. This is because the Securities and Exchange Commission (SEC) rejected a bitcoin exchange-traded fund (ETF), but is now reviewing its decision. A failure to get it through for a second time is likely, though, to lead to a fall in the value of the coins, but speculators obviously see the potential for it to go through (over 66% of all trade in bitcoins has been to buy in the last few days).

Japan and Russia are just two nations in the world who are moving towards recognising the cryptocurrencies exist and are legal. Once accepted by them and on the stock market, it can be seen as a grown-up currency.

Still risks …

But there are many risks … including from software vulnerabilities, such as with a major hack ($60m) of the Etherum currency and which resulted in a fork in the code (and currency):

Along with this, there have been some reports that it has been difficult for some customers to “cash-out” their bitcoins into “fiat currency”, where the bitcoins are converted into trusted currencies (such as for dollars).

Here is my explanation of bitcoins:

Professor Bill Buchanan OBE

Prof. Bill Buchanan OBE

Professor - Edinburgh Napier University

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