In this episode, we talk to the founders of Agent Not Needed.
It seems like only 5 minutes ago that hearing the term ‘cryptocurrency’ meant you had to do a Google search, bypass swathes of misinformation or ask your most clued-up and techy friend what this concept was all about.
Now, every man and his dog owns 0.01 Bitcoin, encourages all of their friends to sign up to Coinbase and acts like a financial advisor.
Beyond the jokes, cryptocurrency is serious, as demonstrated by the $425bn+ market capitalisation. Whilst money has been poured in, and early adopters have benefited, we are being asked this same question over and over –
‘Can you run a business with only cryptocurrency?’
Finding examples of businesses who only accept cryptocurrencies was actually a lot harder than we thought it would be. We had to ask around, do a lot of Google searching, and appeal to Quora (more on that later). Ultimately, we found several examples:
This Bitcoin only café in the capital of the Czech Republic was set up by crypto-anarchist collective Ztohoven, which translates as ‘Frozen’. The idea behind this café is to introduce Bitcoin and the concept of cryptocurrencies to the average person on the street, according to a barista who has a virtual wallet chip implanted into her wrist. A flat screen on the wall monitors the price of Bitcoin and a hole-in-the-wall machine by the entrance allows you to exchange cash for Bitcoin.
Inspired by Bitcoin Coffee in Prague, Nash Basel set up his own ‘crypto café’ on Aungier Street in Dublin. He had made some big profits in 6 months of cryptocurrency trading, sold out, and opened the café – his second in the area. Signs on the wall say ‘Hodl 4 life’ and a Coinbase stream of crypto-prices can be found on a screen. Whilst Nash’s intention was to make the café crypto-only, it hasn’t worked out that way, and despite accepting both Ethereum and Litecoin, he has had only 20 paying customers as of Feb 2018, and so decided to accept cash too. The thought is there, it’s still absolutely commendable. Good luck Nash!
This is a bit different, but it certainly leverages the privacy of cryptocurrencies and virtual wallets. It’s a Las Vegas Strip Club that accepts Bitcoin, and they have some hilarious marketing material, including posing dancers with theoretical Bitcoin manuals (see below). The idea came from martial arts expert Nick Blomgren, who wanted a more secure way for men to keep their strip club trips secret from their wives and partners. Even more bizarrely, you can pay for dances by scanning the barcodes on the strippers’ bodies, and get a 20% discount for doing so. Blomgren claims that this benefits the dancers, as some banks will shut down the accounts of those who work in the adult entertainment industry.
Again, this business is not crypto-only, but it’s close, and becoming increasingly popular.
Getting FIAT can be an issue. For businesses with physical premises, setting up standing orders to pay bills and suppliers is a major issue. To do these things, you have to sell your coins, it’s as simple as that. Until utility companies start accepting crypto, it will stay this way.
By only accepting crypto, you cut out a huge portion of the market. However, if you have faith in the market’s potential for growth, you can undercut large companies, charge a lower price, and use this as an incentive to get people to buy crypto.
Tax is complicated in the crypto world. In the UK, you would only have to pay tax on your crypto-assets when you convert them to FIAT… unless you’re using that FIAT money to pay expenses. So, if you keep all profits as crypto, and pay all expenses as FIAT, you will run at a loss whilst making a profit. Confused? Rightly so.
Online businesses are, right now, the most likely and best facilitated for accepting cryptocurrencies as a form of payment. Brick and mortar businesses are going to need more time to adopt, because if you rely on customers walking in off the street, you rely on everyone having crypto-assets, and this is not true yet. We believe that eventually, enough people will hodl crypto to allow for crypto-only brick and mortar businesses, but it may take a long time to adopt.
Online businesses selling digital assets, like ebooks, video tutorials or web services are even better placed, as they have no physical overheads for these products, and so can exchange digital products or services for digital currencies.
Litepay is one of many solutions, but in our opinion, it’s in the top 1% for the crypto-to-fiat exchange market. It is a payment processor that exchanges Litecoin for Government fiat anywhere in the world, cross-border, international, and with an emphasis on being easy-to-use for businesses who want to accept crypto-payments.
Litepay solves two problems – sellers who want to sell in crypto but end up with fiat, and the volatility of the market forcing losses on customers. In fact, the system converts Litecoin to fiat immediately, so sellers are not at risk of fluctuating prices. Litecoin has appreciated in value tremendously in recent times, and those who have it, want to use it, and those who want it, want to accept it.
Here is the top answer, from Franco Muñiz, Crypto enthusiast and investor.
“Yes, of course you can. But…there are limitations.
Do you mean running a business accepting only crypto as a payment method? Or maybe building it based on blockchain? Sure, you can. But you’d be limiting your reach to a relatively small audience. Also, cryptocurrency is meant to build decentralized services, so you won’t be precisely owning everything you make, it’ll be managed by the whole blockchain.
Crypto is still on it’s “dial-up” phase (remember when the internet made all these sounds and you couldn’t use it while someone was using the phone?), which means:
1- Not a lot of people use it. Nowadays it’s not a matter of accessibility, it costs nothing to get a wallet and all you need is a phone, PC, or any device with internet access. The problem is that crypto hasn’t yet been accepted as a currency by most people. Most of them think it’s just a bubble or only an investment method to get rich (or broke) quickly.
2- It doesn’t really have a use, because it’s still controlled by whales (people with a lot of money, even billions, controlling the market as they wish). Yeah, it works and everything, but did you notice what happens when Bitcoin goes down? Every altcoin goes down. No matter if it’s a token or a coin, if it has a great usage or an already working product, they’re all Bitcoin-dependant. And this problem won’t end until crypto gets more audience and it’s more reliable. We probably all agree that some, or most of our friends/family members don’t understand this world and just disregard it.
There are already a lot of companies using blockchain. One of my favorites is Dent. While still only available for Android/iOS just on USA and Mexico, it has an already working product. You can sell your unused mobile data every month, for Dent inside the app. Then, if you’re in need of data, or you travel to a country with a supported mobile carrier (yet to happen), you will be able to buy data super cheap and in a matter of seconds. No more expensive roaming. But as 99% of the coins, this one goes down if Bitcoin goes down.
So yeah. You can create your own coin/token, start an ICO, get some millions, and build a company based on the blockchain. It’s a great challenge and a modern/innovative project, but it’s still really early in crypto and if you intend to provide useful and common services, don’t expect your company to grow with the same audience other “normal” business may have.
If your intention is to make your company big, and earn money, you can start today with blockchain and see results in the long term, or you can run a business (anything other than crypto) and be able to go big, or, on the other hand, get knocked out by crypto in few years.
Thanks for reading! Any questions? email us email@example.com
‘It’ll never catch on’, ‘We’ve always done it this way’, and ‘I don’t see the point’. We’ve all heard naysayers, objectors and laggards try to reject change, but fortunately for the rest of us, change is inevitable.
Have you ever heard of, or seen the Innovation Adoption Lifecycle? It’s mostly applied in the tech world, for new gadgets and apps, but it’s equally applicable to cryptocurrencies. See the graph below, and rather than try to place yourself along this graph, try and make an educated guess as to where cryptocurrency has reached in wide society. It’s hard, right?
For cryptocurrencies to be widely adopted and accepted, they must first be trusted. How do they build trust? Well, positive experience and word of mouth is one way, but really the trust and adoption will almost correlate exactly. As more outlets become available for engaging different currencies, more people will start using them, and vice versa, as more people start using the currencies, more outlets will appear.
Wide adoption will come when everybody is using cryptocurrencies, but with objectors in the ranks, the only way to achieve this is to apply a system in which people don’t even realise they are using them. Then, we may face the issue in which people lose trust, because they feel that they are involuntarily using cryptocurrencies because of ‘the system’.
Central governments have been trading on the foreign exchange market for a long time, buying and selling their own currency in order to achieve a number of goals, such as controlling inflation, being competitive against rival currencies and achieving financial stability.
We don’t know about you, but generally, nobody likes to play a game where the house always wins. Since cryptocurrencies are decentralised, it’s a fair game across the board, with no governments interfering with values and movements.
Central governments also like to do something called ‘quantitative easing’, in which they print more money and inject it into the economy when it’s being sluggish, to act as a stimulant. It doesn’t always work, as it initially pushes down the price of the dollar.
With cryptocurrencies, miners are able to help process transactions in order to earn pieces of the currency, and this is how the circulating supply increases. The owners or designers of the currencies cannot simply invent new coins to throw into the marketplace, as this would be fraudulent. Some cryptocurrencies are capped forever, without the potential for mining, such as Ripple, IOTA, NEO and EOS.
Let’s bypass cattle, crop, human, and resource trading and start with actual coins. Between the Mesopotamians and the Babylonians, both currency, and the concept of debt, property, compensation and business really became a necessity.
After more than 3,000 years of refining the process of metal coins, the Chinese Song Dynasty began using paper to assign values to currency in the 7th century on a local scale, before it becomes more widely adopted in the 11th century. By the 12th century, there was 26 million times more paper currency being printed than coins being produced each year.
It took until the 16th century in London for paper currency to become widely used, with various goldsmiths accepting gold in exchange for their paper values. The paper ‘promissory notes’ that were given out started to be exchanged themselves, rather than collecting the gold and trading that.
The system was flawed from day one, as the integrity of the goldsmiths, who became banks, and how well known they were, directly related to how likely a promissory note would be accepted. In 1694, more than 100 years later, the government took over and were granted the sole right to issue currency.
Much later, credit cards were introduced by American Express and the Bank of America in 1958, in California. It took a long time for credit and debit cards to really catch on, and even today, in the first world, it’s quite normal to find shops, cafes and restaurants who don’t accept this form of payment. Talk about laggards!
There are three major indications that crypto is being widely adopted; the rise in value due to the rise in demand, the attempts of central governments to reduce the dependence on cash and increase the emphasis on credit and debit cards, and the emergence of new ways to apply cryptocurrencies.
In India in the summer of 2017, the government banned the 500 (£5.80) and 1,000 rupee notes overnight in an attempt to tackle cash hoarders. It was a spectacular failure, causing panic, unrest, and 99% of the newly illegal money ending up back in the banks anyway. For a country that mostly works on a cash basis, the people simply weren’t ready for this.
In 2015, the state of Louisiana tried to ban cash transactions between citizens, before it was deemed unconstitutional and thrown out. In the end, a law was passed banned the cash purchase of precious metals, like gold and silver. With some governments seeing cash as a threat, it’s only natural to see them pushing people towards a more digital system.
“Cryptocurrencies rise in value because they are being adopted, not because they rise in value”.
The rise in demand comes from various sources, such as the widespread popularity and discussion on social media, official government comments, airtime on news channels and the increasing accessibility of entry to the market (through platforms like Coinbase).
Our third reason that will affect how long widespread adoption takes, is how quickly big businesses start accepting cryptocurrencies. Microsoft and PayPal were early adopters of bitcoin payments (and donations), as were Dell, Steam, Save the Children, Wikipedia and Tesla.
Transaction fees make small transactions, like buying a cup of coffee, very inefficient with currencies like Bitcoin and Ethereum. Cryptocurrency IOTA, which does not exist on the blockchain, is one option for feeless transactions and could be a major player in encouraging widespread adoption.
In the UK, there are almost 90 Bitcoin ATMs, which allow you to buy bitcoins physically with cash, input a bitcoin wallet address, and credit your account all in one transaction. Some of these machines allow you to sell your bitcoin and withdraw cash too. Whilst this concept is yet to blow up and take off massively, it is a great indication of what’s to come when Bitcoin is fully adopted.
Who better to conclude this piece than Andreas Antonopoulos, author or ‘Mastering Bitcoin’ and ‘The Internet of Money’. In October 2016, at a Bitcoin meetup in Germany, he said: “How long until mainstream adoption? Previous revolutions in money. In the mid-90s, you still couldn’t pay with a credit card in many places. I predict it will take 15-20 years for mainstream adoption of Bitcoin. We are in a race because governments around the world are trying to ban cash and force us to adopt a different sort of digital currency with complete surveillance, where they can flip and switch and you will no longer exist as a person if you doing anything they consider radical. Adoption patterns and the Gini coefficient. The ownership of Bitcoin is not as diverse as it should be, primarily because of the way it grew. But people who got in early and took the risk have been enormously rewarded; no one’s coming to bail out Bitcoin.”
You can hardly escape the hype around Bitcoin, it’s everywhere, filling columns in newspapers, creating discussions on TV and spreading its way across the many various social media platforms, such as Facebook, Twitter & Instagram. The most difficult thing to do for anyone trying to educate themselves is to sort the truths from the lies, which is why we’ve busted the Top 10 Myths about Bitcoin, so you can know exactly what to look out for!
Many people do not understand (or are not yet willing to understand) the value of a global, decentralized, portable, peer-to-peer, censorship-resistant digital payment network, simply because it’s not backed by anything such as a government or a commodity such as gold or silver. The fact that Bitcoin can be used and transferred without the need of a bank account or the involvement of a central government is a HUGE plus when compared to traditional currencies.
There are, however, varying opinions on this point. Some believe that Bitcoin’s scarcity is the main attribute that gives it value, while others claim that Bitcoins are useful because they are required in order to use the world’s most prominent and secure decentralized ledger.
Some argue that Bitcoin is not backed by anything, like a precious metal or a traditional currency would be, thus making it incredibly risky.
So, let’s make the first comparison of gold or silver. Firstly, the value of these materials is purely based on what people are prepared to pay for them. Some people see gold as a safe haven from volatile currencies and other global market conditions. There’s nothing wrong with this, however, gold and silver are inflationary because they are viewed as scarce, but nobody knows how much gold is available on planet earth, so there is a flaw to the value.
Traditional currencies (FIAT currencies) were once backed by the value of gold. When we came off the gold standard in 1931 due to the Great Depression, currencies were no longer backed by anything physical. Traditional currencies are now backed by a central government. Maybe you’re fortunate enough to live in a country where your government and currency are quite stable, however, for many this isn’t that case and they can manipulate prices, just look at Zimbabwe and Brazil for example. In November 2008, the monthly inflation for Zimbabwe was 79,600,000,000%. In 2016, five major banks in Brazil (including HSBC and Barclays) were fined for creating a cartel in offshore foreign exchange markets.
The bottom line is that traditional currencies are backed by public faith. If an entire country stops believing that the currency works, has value, or that those who control it are acting responsibly, then the value of that currency is going to start seriously dropping.
The argument that criminals use Bitcoin and other cryptocurrencies is absolutely true. Of course criminals use Bitcoin! However, criminals also use cash, like dollars, euros, pounds, or whichever currency is desired at the time.
The problem with cash is that every transaction is NOT recorded and therefore cannot be accounted for on a public ledger, unlike Bitcoin. The fact remains that criminals will use the tools which allow them to complete their work as efficiently and discretely as possible.
The idea that criminals are using the internet and its tools, and therefore Bitcoin should be stopped or banned is quite laughable in reality. Perhaps automobiles should never have hit our roads because they allow criminals to make smooth getaways from crime scenes! Let’s not allow the concept of criminals using Bitcoin as a deterrent for what is a great piece of modern technology.
At the time of writing this, nearly $600 billion has been poured into the cryptocurrency market, with more than a third of that ($218bn) on Bitcoin alone. The technologies in play have been designed to revolutionize money, data and transactions, allowing currencies to be disconnected or decentralized from governments, who, as we mentioned, like to meddle.
“Absolute power corrupts absolutely”. Think of this Lord Acton quote as a reason to support decentralization. Roman emperors considered themselves gods and went mad with power, even Napoleon declared himself an emperor and now those who rule our governments also want to control our money. This isn’t right.
Let’s use the .com boom as an example of a bubble. There was a great deal of hype around the technology and huge amounts of money poured in. Thousands of companies thought that they would be the next big thing and threw ‘dumb money’ at their ideas. People were investing without understanding. Prices were speculative, and when the market his $5 trillion, the bubble burst.
But, we still have the internet? We still have companies trying to be the next big thing. We have more functionality than ever before. This is because the 90% of websites who jumped in without a clue simply went away, and the useful 10% remained, like Google, Amazon, eBay etc. Learning what to do and what not to do, further down the line we saw new .com businesses arrive, like Facebook, Netflix and Twitter.
If we take the .com bubble and apply the same logic, then the useless or poorly designed cryptocurrencies will be the first to crumble when the bubble bursts. This would indicate that the best thing to do is pay attention to the cryptocurrencies that have longevity, and follow the news about ICOs and stock exchange listings.
An alternative theory is ‘mini-bursts’, in which the market will jump up ten steps and then fall five steps, and repeat. If you see the history of Bitcoin pricing, this autonomous correcting of prices after a rally is always there. We must look at the bubble in its entirety, be bullish and cautious, educate ourselves, remain optimistic and learn from the mistakes of the past.
Bitcoin is not a company, it’s a technology (actually, it’s a protocol, but let’s keep it simple) just like the internet and nobody owns the internet. There are different stakeholders in Bitcoin, which includes Bitcoin owners, miners, development teams, and investors.
The founder of Bitcoin is unknown, except for an alias they used called Satoshi Nakamoto. It is rumoured that Nakamoto has more than 1 million Bitcoins, which would make him or her a billionaire if they were to sell. However, since some test transactions in 2009, Nakamoto has never touched the Bitcoins. If they are getting rich, they’re doing it in another way.
We are at the start. As we’ve written before, wide adoption of payment methods takes time, as we can observe throughout history with coins, paper money and plastic cards. Money used to be stored under mattresses or in cash boxes, now we manage it from our mobile phones; our approach to money has constantly changed throughout time. Despite being right at the start of this journey, companies like Overstock and Microsoft are already accepting Bitcoin.
The Litecoin Foundation report that they are seeing more companies create methods to facilitate transactions with their cryptocurrency too. Bitcoin may instead become a digital storage for future value, rather than an everyday currency used to purchase goods and services (it’s most likely that both will occur). The reason for this is that other cryptocurrencies have been designed for faster transactions and lower fees, like Litecoin, Monero & Bitcoin Cash.
In Venezuela, Bitcoins are illegal, both to mine and to own. But, you just have to look at the sorry state of their government and situation to understand that this isn’t reflective of Bitcoin, but something more oppressive. Those who choose to mine Bitcoin in Venezuela are helping bring themselves and their families out of poverty, thanks to the decentralized nature of the cryptocurrency, even at the risk of jail time.
Because Bitcoin is borderless and doesn’t exist in just one country, it thrives on the blockchain, meaning that it is immune to the economic crises of any one country (like Venezuela).
Aside from Venezuela, Kyrgyzstan, Iceland, Bolivia, Vietnam and Ecuador have all banned Bitcoin. China and Russia have some technicalities on usage too. But, if you’re from the US or Canada, the UK, Australia, New Zealand, or the European Union you’re able to use Bitcoin, and may find out soon that your country has included digital currency in new tax laws to make things more accommodating.
As we wrote before, Bitcoin transactions are all kept in a ledger that is publicly accessible. So, if you choose to launder money through Bitcoin, you’re making the mistake of leaving a trace. There are more efficient methods of money laundering, we can only assume. Whether people are using it to launder money or not, it’s certainly not the primary use.
It has been mentioned by many cryptocurrency experts that the reason so many governments and institutions support decentralised cryptocurrencies is because these ecosystems are much cleaner and contain less dirty money than traditional banks! Banks are incentivised to get as much money inside them as possible, allowing for corruption and paying off fines when caught. With Bitcoin, there’s no incentive to launder money.
When Bitcoin first launched, this myth may have been truer, but over time, security has increased tenfold.
Exchanges, such as Bitfinex, Gdax, Binance and Coinbene offer 2-factor authentication when logging in, meaning that a mobile device is required to confirm your identity. As well as this, when signing up for an exchange, you are required to provide pictures of your passport or identity, making your account even more secure.
For those who are concerned about losing their Bitcoin to hackers, it is very common to store your coins and protect your crypto-assets in a soft or hard wallet. Soft, or software wallet, is a programme on your computer that stores your Bitcoin safely, though they are not perfect, it is possible to hack them. Hard, or hardware wallets have 0 reports of theft, and the reason for that is that they are encrypted physical devices, such as hard drives, pen drives or miniature digital signage tools. Whilst the devices themselves could be stolen, the Bitcoins they contain cannot (unless the login information is stolen too).
For those who keep their money in their exchange wallets, there is little to worry about, unless you are trading noticeably large amounts that might gain the unwanted attention of highly skilled hackers.
There are many different cryptocurrencies and crypto-assets, in fact, at the time of writing this there are 1000’s available. Many of them are built on the Bitcoin protocol, so in fact use a ‘system’ which is proven to scale.
Litecoin, for example, was developed by former Google employee Charlie Lee, who improved on the current system by making it faster, and with lower fees. There are also other cryptocurrencies, such as Monero and ZCash, which allow anonymous transfers. In addition, we also have Ethereum, which can be best explained as a giant, decentralised world computer with the ability to run smart contracts and also allows developers to build ‘crypto-assets’ on top of it.
There are a lot of cryptocurrencies out there which serve different purposes, but in this early stage of using this type of technology, and the enormous opportunities to raise millions through ICOs, there will be a lot of bad ideas, inexperienced teams, and projects which are likely to fail (See point 4 about the Bitcoin ‘bubble’).
The bottom line is that Bitcoin has scaled the most, in the most secure way so far, and continues to lead the march in terms of their market cap.