PYMNTS-MonitorEdge-May-2024

Bitcoin: Fact, ‘Fiction’ Or A ‘Virus?’

What do a Russian presidential advisor and JPMorgan CEO Jamie Dimon have in common? 

If you guessed a disdain and hatred for bitcoin, you’d be on the money – so to speak.

So for anyone who thinks bitcoin is like the “Internet of money,” this advisor would probably have some pretty harsh words for them. And they wouldn’t be alone. (See: MPD CEO Karen’s Webster’s thoughts on this subject of why “everyone should stop wasting braincells on bitcoin.”)

In an interview with a Russian news agency, German Klimenko — who serves as Vladimir Putin’s Presidential Internet Adviser (cool title, right?) — was quoted as saying that virtual currencies are a “virus going straight into the head,” and are “a mere fiction.”

Maybe he’s been reading PYMNTS.com?

These remarks come just weeks after lawmakers in Russia launched a plan to crack down on bitcoin and all digital currency activity by making it a crime that comes with some serious jail time. The most recent conversations involve lawmakers wanting to curtail any possible bitcoin activity by slapping a seven-year jail sentence on anyone who uses bitcoin for any sort of activity.

And who wants to spend time in a Russian prison? But if someone ends up there, they can at least engage in commerce – just not using bitcoin.

Anyone in the country who is involved in the production, sale or distribution of any digital currency could already end up with a one-year correctional labor sentence. At least that’s better than Siberia?

But then again, the Ministry of Finance wants other stipulations attached to the laws, including a fine of up to 500,000 Ruble (~$7,100). And if the “criminal” can’t pay? They would have to give over their salary for a three-year period. Or go to prison for four years.

It’s safe to say that Russia won’t be getting bitcoin-friendly anytime soon.

Bitcoin’s Rival Picks Up Steam

Move over bitcoin, there’s a newer digital currency in town gaining more attention.

That’s bitcoin’s latest rival on the market, known as Ethereum. Its value has jumped 1,000 percent in three months, according to a report from The New York Times’ Nathaniel Popper.

Dubbed by some as “bitcoin 2.0,” the virtual currency is garnering attention from bigwigs in the financial and tech sectors, such as JPMorgan Chase, Microsoft and IBM.

Some suggest that where bitcoin’s possibilities end, Ethereum’s begin. Outside of acting as a virtual currency, it also has the potential to provide smart contracts for online markets. But, as the report notes, this virtual currency is still in its early days and could have the same growing pains that bitcoin has faced.

Security problems of the complicated software, for one, have been mentioned by bitcoin supporters. And the possibility of other issues, like being a source for fraudulent contracts (Ponzi schemes), could be another one that some suggest could be integrated into the software of Ethereum itself.

IBM has suggested that Ethereum could be used in the Internet of Things market. Microsoft has views on how it could be used on its computing cloud.

So will it give bitcoin a run for its money? We’ll have to wait and see.

Bitcoin Meets NFC 

“There exists a bizarre gap in today’s state of financial services.”

That’s the philosophy of Shake, a new startup in the bitcoin world that is (unsurprisingly) trying to pitch a payment method that doesn’t involve banks, governments or regulators. Instead, its latest product rollout is all about making bitcoin and digital currency payments easier to make.

Which, in this case, means tapping into the power of NFC. The Shake app allows anyone with an Android phone equipped with NFC to tap and pay for purchases at any Visa-accepting contactless terminal

“What could happen if we link bitcoin to the existing financial infrastructure?” the company wrote in a recent blog post. Well, according to the startup, that means enabling more consumers to use bitcoin wallets, where they can pay by using their mobile device to tap — and that starts with contactless-enabled terminals (which the startup claims will work with its Android app).

“All contactless-enabled terminals around the world will now accept your phone as a method of payment,” the company confirms on its blog, which also details its plans to enable virtual bitcoin cards to be used for online payments.

Bitcoin’s Power Suck

If you’re Al Gore and you see the headline “Bitcoin could soon use more power than Denmark,” it’s pretty unsettling, since the volume of bitcoin transactions are still pretty nominal.

As is well-established, processing bitcoin transactions takes a massive amount of electricity – as the blockchain has to update with each and every transaction. But no one has ever calculated just how much. One projection reported this week claims that “by 2020 bitcoin could require more than 14 Gigawatts of electricity just to run.”

That’s the equivalent of running an entire small country, like Denmark. Researcher Sebastiaan Deetman, who took his inspiration from another researcher at Motherboard wrote: “Adopting bitcoin as a major currency anytime in the next few decades. [It] would just exacerbate anthropogenic climate change by needlessly increasing electricity consumption until it’s too late.”

Deetman calculates that miners use about the same electricity amounts as 280,000 U.S. households. 

How Big Could Bitcoin’s ‘Bits’ Go?

The debate about bitcoin’s block size just got some interesting attention from a team at Cornell. 

This includes a new study from a team at the Jacobs Technion-Cornell Institute that in its research found that bitcoin’s blocksize could ramp up to 4MB without impacting its structure and without harming decentralization of the digital currency. 

What the tests concluded is that when 4,000 bitcoin nodes were tested, 90 percent of them could operate using the 4MB blocks, which could mean something for the future of bitcoin’s blocksize and the debate that’s framed around it.

“Through a structured presentation of the design landscape for blockchain protocols, we illustrated the variety of potentially successful approaches to such scaling, categorized a range of recently proposed and new ideas, and framed a number of important open technical challenges for the community,” the researchers wrote.

What’s been happening over the past couple months in the bitcoin community has centered on the debate about if bitcoin’s blockchain block size should get expanded. 

Because traditional bitcoin has a limit on how many can be produced and how many transactions it can handle, there are challenges the bitcoin community has faced since Day 1 in terms of making it go mainstream. It’s also under the sway of a small number of people who control a large part of the bitcoin universe.

Bitcoin Exchange Hacked

Cointrader, a Canadian-based bitcoin exchange, has halted operations after it was reportedly hacked. This eventually led to delays in withdrawals and a halt on customer activity. 

“This issue is currently under investigation and it is our intention to have the balance of your account settled as soon as possible. We sincerely apologize for this unfortunate inconvenience and will keep you posted on the progress of this issue. In the meantime, we have halted deposits, withdrawals and trading activity until this matter has been resolved,” read a note from the company.

Unfortunate, indeed. The exchange is closed until further notice.

PYMNTS-MonitorEdge-May-2024