What Is A Ponzi Scheme & Why Bitcoin Is Not One

What Is A Ponzi Scheme & Why Bitcoin Is Not One

” The arrest of principals of Bitclub Network, accused of operating a Ponzi scheme, underlines again the wild west nature of the digital space. Here’s an article from our e-book – Blockchain, Bitcoin and what the difference means to you – which neatly points out the differences between a Ponzi scheme and genuine blockchain based cryptocurrencies.”| Temple Melville CEO of The Scotcoin Project


What Is A Ponzi Scheme & Why Bitcoin Is Not One

By:Sudhir Khatwani In:Bitcoin Last Updated:13/10/2018

One of the biggest myths regarding Bitcoin is that many consider it as a fraudulent, Ponzi scheme. But very few actually understand what a Ponzi scheme is.

It is not wise for people to draw conclusions without a proper understanding of any topic whatsoever. And that is what people are doing when it comes to Bitcoins. They just term Bitcoins and other cryptos as scams.

Therefore, being a reputed blog in this space, we at CoinSutra think it is very important for us to clarify this point and spread more awareness, which is also our motivation to write today. I will explain in detail why Bitcoin is not a Ponzi scheme, but before that let’s understood and examine what a Ponzi scheme actually means.

What Is A Ponzi Scheme?

A Ponzi scheme is a fraudulent investment operation where the operator generates returns for older investors through revenue paid by new investors, rather than from legitimate business activities or profit of financial trading.

Operators of Ponzi schemes can be either individuals or corporations and grab the attention of new investors by offering short-term returns that are either abnormally high or unusually consistent.

Companies/schemes that engage in Ponzi schemes focus all of their energy into attracting new clients to make investments. Ponzi schemes rely on a constant flow of new investments to continue to provide returns to older investors. When this flow runs out, the scheme falls apart. [Source Wiki]

Ponzi schemes are sometimes also referred as pyramid schemes and the characteristics of both the schemes are higher returns than the average market by recruiting new members under the scheme and taking money from them in some form or other.

Characteristics of Ponzi or Pyramid Schemes:-

  • They promise high and unusual returns.
  • They promise regular or monthly returns usually.
  • They require you to add new investors/members into the scheme to increase your return rate.
  • Founders usually run away with a big chunk of money.

These are the main characteristics of a typical fraudulent scheme whether it is in the crypto space or otherwise.

Now that you know these characteristics you can easily do away with such schemes by doing a quick litmus test.

What You Can Do To Not Fall For Such Schemes: Litmus Test

You can quickly do a litmus test to avoid such schemes or projects by following two simple bits of advice given by Andreas M. Antonopoulos, a renowned Bitcoin speaker, and proponent.

Andreas M. Antonopoulos

✔@aantonop

Does it promise regular returns that exceed average market returns?

It’s a Ponzi

Does it focus more on recruiting new people than any product?

It’s a pyramid scheme#litmustests

2,228

5:18 PM – Dec 1, 2017

This litmus test is so powerful and apt that you can apply it within the crypto space. You can also use it to judge other schemes outside of this market.

Bitcoin Is Not A Ponzi Scheme

In the light of the above explanations, I can say that people who say Bitcoin is a Ponzi scheme don’t really understand what a Ponzi scheme is.

ParabolicTrav@parabolictrav

If you call Bitcoin a ponzi scheme, you know nothing about Bitcoin, and you know nothing about ponzi schemes. $BTC #Bitcoin

  • Bitcoin never asked anyone to put money

Bitcoin whitepaper, if you have read it, doesn’t speak a thing about buying/selling bitcoins and neither lure investors to put their money. It is an 8-page document explaining a solution for making a censorship-resistant digital money.

  • Bitcoin founder never ran away with a big chunk of money

Bitcoin founder, Satoshi Nakamoto never ran away with a chunk of Bitcoins. One might now argue that he held millions of bitcoins but that he never stole from anybody or just created out of thin air despite being Bitcoin’s founder.

Instead, he also had to run a full node and mine Bitcoin blocks to receive the block rewards to get new bitcoins, which is a legal way that anyone can follow even today.

Also, note that the Bitcoins he mined at that time and kept to himself were worthless then. It was his sheer will to believe in the potential of the project that motivated him to keep those funds with him.

  • Bitcoin never asked you to recruit new people/investors under it

Neither Satoshi or his whitepaper or even early Bitcoin holders went to recruit new people/investors for Bitcoin.

In initial days, mostly geeks used to mine and play with Bitcoin and most of them used to spend it on gambling or pizzas or just used to giveaway in meetups. I have not seen such Ponzi scheme yet that give away their products in such a manner.

  • Bitcoin doesn’t promise or gives monthly/regular returns

Bitcoin whitepaper or it’s working model till date doesn’t promise any returns or regular returns either. Yeah, of course, that’s another thing that people have made money due to insane rise in the price of Bitcoin over the years but that’s simply the law of demand and supply acting in a free market.

On the flip side, Bitcoin prices also fall rapidly and many people get burned due to their such speculative investment!

  • Bitcoin has no head/person controlling it

Bitcoin is based on the decentralized and censorship-resistant tech of blockchain and proof of work which makes sure that no one, in particular, is ‘in-charge’.

Clearly, with no one at the helm of Bitcoin, no one can run away or take over other people’s money or Bitcoin.

Conclusion: Crypto-Scams

Everything said and done, I understand that there are a lot of cryptocurrency Ponzi schemes and pyramid schemes going on but that doesn’t mean Bitcoin or the other currencies are fraudulent.

On the flip side, cryptocurrency market has been, is, and will be prone to such schemes because it is based on the decentralized technology of blockchain. Something which is based on decentralized tech and is hard to stop or regulate will give birth to Ponzi schemes but that doesn’t mean that Bitcoin is a Ponzi scheme.

Instead, use the parameters that I have discussed at the start of this article to educate and examine yourself whenever you encounter such Ponzi schemes and simply opt out of it.

Lastly, I would say, I am yet to see a Ponzi scheme like Bitcoin which does this:

Miguel Cuneta@MiguelCuneta

Show me a ponzi scheme where the early investors donated $86 Million to charity and I’ll give you all my #bitcoins. https://www.reddit.com/r/Bitcoin/comments/7jj0oa/im_donating_5057_btc_to_charitable_causes/?utm_content=title&utm_medium=hot&utm_source=reddit&utm_name=Bitcoin …

I’m donating 5057 BTC to charitable causes! Introducing The…

Hello! I remember staring at bitcoin a few years ago. When bitcoin broke single digits for the first time, I thought that was a triumphant…

reddit.com

Authored By SUDHIR KHATWANI

Hey there! I am Sudhir Khatwani, an IT bank professional turned into a cryptocurrency and blockchain proponent from Pune, India. Cryptocurrencies and blockchain will change human life in inconceivable ways and I am here to empower people to understand this new ecosystem so that they can use it for their benefit. You will find me reading about cryptonomics and eating if I am not doing anything else.

Video interview: Nostalgia advertising campaign with Temple Melville

Want to find out more about our fantastic nostalgia advertising campaign? Here’s an interview with the film’s producer and director, Frank McGowan and our CEO, Temple Melville. Watch Here >
https://www.facebook.com/badponymedia/videos/1020570278276008/

Video interview: Nostalgia advertising campaign with Temple Melville
Bad Pony Media

GLASGOW FILM COMPANY LEADS CASTING FOR NEW SCOTS NOSTALGIA AD CAMPAIGN

BAFTA celebrated GLASGOW production company BAD PONY MEDIA have announced a nationwide casting call for a nostalgia led ad campaign looking to promote SCOTTISH crypto-currency brand SCOTCOIN.

The multiplatform ads, which will be filmed at the Bad Pony Media studios in the heart of MERCHANT CITY in Glasgow, will feature people from across Scotland talk about their most memorable “firsts” – including first kiss, first concert and first time driving a car.

CEO of THE SCOTCOIN PROJECT CIC, TEMPLE MELVILLE, said: “We’re absolutely thrilled to be collaborating with the team from Bad Pony Media. We are looking for people of all ages and from all across Scotland to be part of the campaign and tell their stories.”

SCOTCOIN, which launched in 2013, is the world’s only dedicated Scottish digital currency. Initially conceived as a way for forward-thinking Scottish SME’s to challenge traditional business banking methods and charges, SCOTCOIN has grown to become a globally traded crypto-currency – similar to BITCOIN, and the soon to be announced new coin will have full smart-contract capability and a proud heritage in Glasgow culture.  Scotcoin Project CIC is the educational arm of the SCOTCOIN brand, which is set to promote knowledge of crypto-currency, Blockchain and digital money matters.

The ads themselves will be directed by multi-award-winning director/producer FRANK MCGOWAN. McGowan recently returned from the US, where he worked alongside WHOOPI GOLDBERG and BILL MURRAY for Bad Pony Media’s new HOLLYWOOD MEETS GLASGOW and SCOTLAND GOES GLOBAL projects.

He said: “These ads will be something really special as we’re looking for real people and real stories. They will be used across all platforms to promote how easy using digital currency for the first time can be. It’s going to be a lot of fun!”

SIGN UP HERE

Danette Wallace - Blockchain Will Force Us To Put Our Big Boy Big Girl Pants On

Blockchain Will Force Us To Put Our Big Boy / Big Girl Pants On

Author: Danette Wallace

When we transition to digital currencies and blockchain applications we will need to collectively grow up.

In western culture, we are accustomed to depending on external organizations to take care of our assets. Banks take care of our money, trusts take care of our properties, stock brokers take care of our investments. If we have an issue with any of these areas, there is a backup system in place. These external organizations are responsible for backing up our information because essentially we don’t own the data, they do.

The irony is that there is a sense of freedom that comes when your information is captured (much like there is a sense of freedom for children who don’t have to worry about paying for rent or food because their parents take care of it). As a society, we’re like children. We’re free of the worry of being 100% responsible for our information because centralized organizations take care of it, problem is, they also own it. With blockchain, all of that will change.

A SHIFT OF RESPONSIBILITY

With the move to digital currencies and blockchain applications, the safety of our assets and our sensitive information will become our individual responsibility. Currently, this is not the case. If we lose a valuable document, we can recover it from the organization that is responsible for keeping a record of it. There is often a record of what we own somewhere in the bureaucratic universe.

Because of this backup system, our minds tend to think of digital assets as “copies” of something that exists in the cloud somewhere. With decentralized blockchains, however, the original data exists on individual nodes only. In other words, the original data will often exist only in our phones. That’s what makes blockchain so different from other technologies. It allows for the digital asset to be the “original,” just like cash. But also like cash, if you lose it, you lose it.

TIME TO GROW UP

This may be a difficult transition for some. We all have that friend who seems to misplace their keys every other week or the family member who can’t find their eyeglasses even when the glasses are sitting on top of their head. These are the individuals who may have the hardest time with this new responsibility.

A number of people have lost millions of dollars worth of Bitcoin from being careless with their personal passwords to their Bitcoin accounts. Since the password doesn’t exist on a central database, if the person loses their password, there’s no way to recover it and the Bitcoin sits on the blockchain with no way to access it. As of July, 2018, a total of $44 billion worth of Bitcoin (6M Bitcoin) are left inaccessible and permanently lost on the Bitcoin blockchain. If you don’t want to lose access to your cryptocurrency, do whatever you can to keep your passwords safe.

Andreas Antonopoulos, one of the foremost Bitcoin experts, prints out his passwords and key phrases and puts the paper copies in bank safety deposit boxes. This is ironic given that Antonopoulos thinks banks will go by the wayside when cryptocurrency enters mainstream. I tend to agree with him. I have always said that banks should consider transitioning from monetary banks to information banks. That way they will continue to remain relevant.

DO YOUR HOMEWORK, KNOW WHO/WHAT TO TRUST

With the transition to blockchain, we will need to shift our trust from the banking system and government organizations to trusting the blockchain protocol. Blockchain is a unique technology because it’s able to hold records of people’s assets in a decentralized framework. Blockchain is often referred to as a trust-less system which means, with blockchain, we don’t need to trust people or institutions. The trust resides in the technology itself.

For some, trusting blockchain protocols may be difficult at first. This is often due to their misunderstanding of where to appropriately place their trust. The trust-less aspect of blockchain comes into play when the technology is used as it was intended…as a decentralized consensus platform. Trust should not be placed in centralized databases, even if they say they are using a blockchain. If they are using a centralized blockchain, then they are not using blockchain as it was intended. The user should be mature in their pursuit of knowledge and in their decision making and they should know who to trust.

For example, those that have done their homework know that the Bitcoin protocol has proven its trustworthiness. In the nine years that Bitcoin has been around, there has not been a successful theft from the protocol yet. This does not mean that people don’t try. Hackers are constantly trying to hack into Bitcoin. The reason they’re unsuccessful is because of the decentralized nature of the protocol. To successfully compromise the system, a hacker would need to gain consensus from the community to implement their changes but hackers are never able to gain that consensus. This is why a decentralized blockchain is safer than a centralized one. Regulations and laws do not prevent hackers from hacking into Bitcoin, the decentralized community does.

When data is kept in a centralized exchange, it’s more susceptible to theft and corruption. This is why it’s important to 1) know the difference between a centralized blockchain and a decentralized blockchain and 2) put our trust in the appropriate decentralized blockchains.

For proof of the safety of decentralized frameworks, all you have to do is look at the evidence.

  • Amount of Bitcoin stolen from the decentralized Bitcoin protocol — $0
  • Amount of Bitcoin stolen from centralized exchanges — $15 Billion

When there is a shift in trust from centralized organizations to decentralized blockchains and we gain an aptitude to know the difference, we will take on a new responsibility for the safety of our assets. That’s when we will collectively grow from blockchain infants to blockchain adolescents and have our big boy / big girl pants on.

“Blockchain Will Force Us To Put Our Big Boy / Big Girl Pants On” 

Author: Danette Wallace

Meetup 15th October 2019

I’m going to start by telling you all a story which has huge significance for digital currencies.

I was in a pub down south with a friend. A little while later, another gentleman came in who my friend knew. After introductions the new arrival asked me “ What do you do then?” I replied that I was involved with cryptocurrency.

“What’s that then?” he asked.

“ It’s like Bitcoin.”

“Never heard of it” he replied

I thought for a moment.

“Do you use Facebook?”

“Oh course” he said.

“ Have you heard of Libra?”

“Oh yes, I know all about Libra,” and he really did. He had read all about it.

So my point is back in say March this year there might have been 40-50 million people who knew something about crypto or digital currencies.

But NOW, a potential 2.7 BILLION do.

And that is a game changer. There’s lots of issues about Libra, not least their problems with SEC and the Senate and people dropping out, but it remains the case that it has opened up the debate that was needed

We will be having the second Advisory Board meeting next week. We have high hopes that this will prove a useful and helpful fixture as we move forward.

We are due to have a meeting with our preferred blockchain suppliers in the next couple of days, but we already have some important information in this respect.

The decision has been taken to have Scotcoin become an ERC compliant token. Our coin will have smart contract capability. We in fact have a coin running on the Ropsten testnet and expect to be able to deploy it in Alpha mode fairly shortly. There are other considerations to be taken into account, but at the very least we now have an actual beta test coin that covers what we require in terms of security, longevity and tradeability. As you probably know, Ethereum is the largest blockchain in terms of tokens sitting on it. There are other very good reasons for going down this route, quite apart from speed of transaction, the scalability and the minimal power use.

Firstly, the SEC has ruled that Ethereum (and its tokens) are NOT securities. The reasoning behind this is that the very nature of the blockchain per se – as a decentralised platform – means that no one is actually managing the token for profit. ICO considerations are somewhat different, but the baseline is that Ethereum (and Bitcoin eg) are exchange tokens with the same characteristics. Sales and purchases are NOT security transactions and therefore the SEC has no oversight. Scotcoin is and will be exactly the same.

Secondly, the basis of any blockchain covers 5 main points.

Number 1 is that it is ( or should be) decentralised. That means that no one person or small group of people can influence the profitability of the token. In essence a token has no inherent profitability – the pound in your pocket is worth a pound with no DNA to make it profitable and in excess of that £1. Number two is that the decentralised consensus means that everyone on the network has an identical copy at the same time. No one can “steal a march” on anyone else. Number 3 is that it is “add only”. You can’t alter or add to a block once it is complete. That means that number 4 new information CANNOT conflict with existing information. And finally number 5, everyone can access all the information on the blockchain simultaneously and instantly.

As a reminder, each “block” consists of three parts . The first is the hash that seeds the block, in other words the incoming hash or information. The second part is the data that gets entered into the block in other words the transactions that have taken place and are being entered to be recorded. And finally, the third part is a second hash, which is the outgoing hash covering not only what has happened in that particular block but all that has happened since block one. Just so you know we are very close to block 600,000 on the Bitcoin blockchain.

Another reason for going down the ERC route is that one of our 5 pillars for Scotcoin’s new blockchain is that it must have longevity and stability as well as security. The Ethereum chain ticks these boxes. There are already something like 250,000 tokens on it and it is the second largest crypto currency both by total market capitalisation and by daily volume.

It is frequently said that crypto currencies are a store of and do a very good job of transferring value. Why do we say that? What are the characteristics that cryptocurrencies share:

1. The supply of all the coins or tokens are clearly defined and publicly available.

2. They are permissionless: You can just download the software for free and start sending money across the internet.

3. They are self-sovereign: You don’t have to rely on a bank, payment service or other centralised organization to process the transactions. It’s all performed on the blockchain network.

4. They are highly divisible: You can divide every cryptocurrency into extremely small amounts, enabling easy day-to-day (micro) payments iup to 18 zeros after the decimal point.

5. They are extremely portable: Everyone can fly across the world carrying billions worth of cryptocurrency. Try doing that with real gold.

Other primary characteristics of cryptocurrencies are that they are interchangeable and censorship resistant — no governing authority can prevent any cryptocurrency user from spending their crypto.

Some of you may have heard of Luca Pacioli. He wrote the base treatise on what one would term modern accountancy in 1493 – yes over 520 years ago.

Quite apart from setting down the basis of double entry bookkeeping, which arguably brought about the modern financial world, what it did do was bring Trust to an area where skulduggery had been the norm. In essence, the blockchain and crypto currencies do the same thing in respect of modern finance – you can be sure that a transaction can be trusted if it is recorded on the blockchain. There does not need to be a third party noting the transaction for it to be trustable.

We at Scotcoin are particularly keen on the circular economy and heading towards Zero Waste. I am proud to announce a joint initiative to reward people using Zero Waste in Scotland. There are quite a few shops you can visit and we are putting in place a scheme to reward people who use Toogoodtogo, who recycle food. Quite recently an entire wedding for over 200 people was catered using their food. This is food that would otherwise go to landfill, but an enormous waste and cost to the shops that need to get rid of it . We will be putting up a list of those shops where you can earn SCOT for buying from them and where you can trade in your SCOT for products. Now that we very nearly have our new coin, we will also be offering other online products and services via the website tokenmarkets.com. Scotcoin will have it’s own dedicated sales site. In essence, by paying in Scotcoin you will receive up to a 30% discount on items.

One of the most important things that people need to realise is that Blockchain and its technology will put responsibility fair and square on the individual again. Lost your bank card? No problem, the bank will send you a new one. Forgotten your password? You can reset it. With crypto, NEITHER of those options are available. Where we have been used to other people and third parties backstopping us, none of that will exist. As a result we will have to be much less cavalier about what we do in relation to our wallets and Identity – because yes, Blockchain impinges on Identity as well.

Just in the last few weeks I’ve been reminded of this. We will shortly be putting up an article entitled “Time to pull on you big boy or girl pants” and it deals precisely with this problem.

So if you have a crypto wallet, make sure you have taken a photograph of the pass phrase AND written it down in not one but TWO different places. Lose that and you lose the wallet, the coins, everything. So make sure it’s safe. We will be offering a way, with the new coin, of securing your passphrase.

One of the questions I am frequently asked is why should I buy Crypto and/or Scotcoin? There are many good reasons, but there is one which does not get enough airing. That is that Crypto are a digital asset and as such have created a whole new asset class to have in the mix of your investments. This may not be of significance to lots of people, but it is a consideration which should not be ignored. The traditional classes (shares, bonds, properties, cash etc) now have another leg – digital.

Finally, in celebration of the fast approaching anniversary of the creation of Scotcoin on the Counterparty Protocol, we are running a promotion on our exchange which will give purchasers 50% off the cost. So whatever the number of SCOT you wish to buy, the cost will be cut in half during the period of this promotion. We have had some criticism of the fact that our exchange price has been higher than the DEX price. The coupon code, which we will be advising all our wallet holders of, is 50offat5. This will effectively bring the DEX price and our exchange price into line.

The other thing we are testing at the moment is the website I mentioned above which will take SCOT for product. If you have items you would like to sell, please get in touch with me . Similarly if you would like to test for us, please let me know.

Scotcoin

Scotcoin Promotional code

Scotcoin has been around since 2013, but has been on the Counterparty Protocol since November 2014.

That means that in just a few days we will be celebrating the 5 year anniversary of what we call V2 Scotcoin.

We want to share our delight at being the longest surviving Country Coin and the fact that the existing protocol is coming up for its fifth anniversary.

To celebrate this, we have a special code you can use on our exchange

Here is the link:

https://exchange.scotcoinproject.com/shop/

The code you need is

50offat5

Which you put into the appropriate box when you get to checkout in your cart.

It takes 50% off the price you will pay.

That means that a purchase you thought was going to be £20 is only going to cost you £10.

We have been criticised in the past for charging a lot more than the Counterparty DEX price when we sell Scotcoin. This promotional discount puts us squarely in the DEX price bracket. Please note also that we will be making an announcement about our new coin imminently, and holders of V2 will, subject to conditions, receive a bonus.

For larger quantities or for any queries please email me at [email protected], and I will be delighted to help.

VIDEO: THE SCOTCOIN PROJECT CIC – interview with Temple Melville

Watch this interview with Temple Melville, where he shares an overview of SCOTCOIN and SCOTCOIN CIC with information on how you can get started with cryptocurrency >

Copyright © Bad Pony Media Productions.

Scotcoin MeetUp – Tuesday 15 October 2019

Join us for the next of our legendary meet ups – this time in EDINBURGH. 

Chat about cryptocurrency, pick up a copy of our book, find out more about the latest news from Scotcoin.

Meetup Date: Tuesday 15th October 2019 @ 6:30pm
Venue: Library Gallery, 1 Summerhall, Edinburgh EH9 1PL

BOOK HERE > Scotcoin Meetup

How Cryptocurrencies Already Help Sovereign Nations

How Cryptocurrencies Already Help Sovereign Nations

Article by Scotcoin’s own Temple Melville published in City AM on 28/8/19

Cryptocurrencies are almost as old as money itself. Indeed, crypto simply means concealed or secret. So the first man (or woman) who tried to exchange some rocks for a sheep could be said to have been using a crypto currency. Up to that point a sheep had been worth 15 chickens. It’s simple, really. You attribute a symbolic sense to something you do not see.

Finance Houses and liquidity

Move on to the 1600s when after the Thirty Years War belief in what then passed for “money” was at a low. Something else had to be found, and it was, in the shape of strong finance houses with robust links to other similar houses. They issued their own currencies when the State currencies could no longer be trusted. Move on again to the American experience of the mid 1800s. There were over 8000 “currencies” – usually paper – being traded around the country with a big business in accepting and exchanging them. There had to be some form of currency to enable trade to take place as America expanded. These of course were seriously open to abuse and eventually the individuals and banks that had issued them had to bow to the Federal Government creating its own, reliable currency.

Liquidity created – WIR

In the 1930s there was to all intents and purposes no liquidity in any markets. Things were so bad that some of the good citizens of Zurich created their own currency to enable them to trade. This was called WIR and was, indeed, like those currencies before it, a crypto currency. Over the years it has prospered (perhaps one would expect a Swiss monetary instrument to do this) until today it is used by more than half a million people, over 70,000 businesses and transacts some CHF2.5billion annually – that’s around half a percent of Swiss GDP. By doing so, it illustrates exactly what “Money” is – a trusted medium of exchange that others will accept, and a stable store of value.

Crypto today

The present crop of crypto currencies rely on digital technology to give them credibility. You can’t have a run on the “Bank” for example – there isn’t one. Despite being relatively small in terms of value (only some 0.1% of total world assets) they already show what digital and crypto currencies can do to enhance people’s lives. As an example, if you want to send £1million to anywhere in the world, that will cost you between £20-30,000. Using a digital currency, it can be done for 50p. In fact, the Philippines is looking to create a Bitcoin transfer system for its overseas citizens. Using this system would save their economy over USD1.5 Billion a year – a significant sum in a poor country.

The three cryptos no one talks about

There are three interbank tools that are in effect digital currencies and have been for years. These are:

1. Target2 – the ECB system, the old Bundesbank system which is currently so politically in focus in respect of Italy

2. IMF SDRs – Special Drawing rights

3. The highly secret interbank settlement system at the BIS in Basle.

These three were absolutely crucial in getting the world through the 2007 crisis.

Hyun Song Shin of the BIS argued last year that cryptos (and he was specifically talking about Bitcoin) had issues with scalability and finality. At that time he was right as you would expect, but he was talking about first generation blockchain. We have since had second generation in Hyperledger, and now third generation called Permissioned Decentralised Blockchain. Facebook’s Libra will largely use this system and there can be no doubt this will revolutionise the use of digital and crypto currencies world-wide. We’ve gone from around 35 million wallets to a potential 2.7 BILLION. But Shin’s central thesis holds good – you need people to USE these new currencies to make them both trusted and useful, and having exchanged goods for the currency, the person TAKING the currency needs to find someone else to take it as well.

Cash declining

The use of cash has been declining for years in most western countries, and the Central Banks have realised that it will have to be replaced with something. To this end both Sweden and Uruguay have run full scale crypto trials which have largely been successful, though not set for full implementation anytime soon.

The use of crypto currencies can and should mean social inclusion. Whilst Central Banks’ attitude remains “Bitcoin is not a good idea,” the idea behind it continues to fire imaginations all around the world.

The Brixton Pound

This remains a very positive initiative which is making a real difference within Brixton. Arguably it’s as old as Bitcoin. People are prepared to use it and pass it on – and the money stays in Brixton. That is different from the likes of Bitcoin which is world-wide, but it doesn’t detract from the social inclusiveness of it. We look to history for lessons on the nature of money and the role of central banks in building trust in the use of money in society. The issue of trust has again come to the fore in debates on the durability of cryptocurrencies such as Bitcoin, and how far private money can supplant central bank money as a medium of exchange.

Future payment needs

In the future, physical cash or even bank transfers as we currently know them are unlikely to be the main answer. Central banks are already working on systems and digital currencies that will be trusted and used. Existing crypto-assets have exhibited a high degree of volatility and are considered an immature asset class given the lack of standardisation and constant evolution. They present a number of risks for banks, including liquidity risk; credit risk; market risk; operational risk (including fraud and cyber risks); money laundering and terrorist financing risk; and legal and reputation risks. But new know your customer and anti-money laundering rules will mitigate much of this.

In many ways, the African sub-Saharan region has become a leader in mobile money resulting in a radical change in the delivery of financial services and significant gains in financial inclusion. Where there is a lack of payment infrastructure, the use of crypto currencies immediately enhances trade and social inclusion. You only have to think of Eastern Europe which hardly had a fixed line telephone system before 1989, and suddenly every man and his dog had a mobile phone, leapfrogging to a new world.

Christine Lagarde in an excellent speech to the November 2018 Singapore Fintech Conference, has posed the question – should central banks issue a new digital form of money?

Arguably they already have. As such, it can only be seen as a force for good.

Scotcoin awarded the ‘Most Community-Focused Digital Currency Platform 2019

A pleasure to announce that Scotcoin has been awarded the ‘Most Community-Focused Digital Currency Platform 2019 – Scotland’, by the CV Magazine’s Corporate Excellence Awards 2019.

Scotcoin - Corporate Excellence Awards 2019 Certificate