The Rise of Blockchain & Cryptocurrency

A war is going on, but you probably don’t know about it. The sad thing is that the money you have in your pocket is being used for it.

Every country which is trying to boost its exports, is devaluing its currency. Also known as competitive devaluation of the currency, it’s hurting the money in your pocket, depending on which country you’re from. For example, those in the US or pegged to the US Dollar are affected the most when the central banks start “printing money”.

Smart people are working on a solution and this particular solution has the potential to be the biggest financial development of this century.

But before we dive into that, let’s walk down memory lane…

In the past, money was a means of exchange. Prior to this, societies used “bartering” as a way for exchanging goods and services between people. You could exchange 10 chickens for a goat. Or tobacco, for staying as a guest in a tent (yeah… early days of Airbnb). Any commodity could be used, even salt, which is where we get the word ‘salary’ from.

Over time, money evolved to a more suitable form of “gold” & “silver”. Then the Chinese devised “paper” currency, which was nothing but certificates (a.k.a. “drafts”) backed by gold and silver held in a safe location or vault, like a bank. Another version were “bills” which could be converted at a later date.

You could easily carry this paper around and infact you could have your banker write different denominations – this is what you could call the predecessor to the currency “notes”.

However, along the way… people got too smart for themselves and started falsifying records.

The bankers also realized that most of the time, owners would never move the gold & silver, so there would be ‘no harm’ making loans against the deposits as everyone didn’t want their gold & silver at the same time. And they could earn interest on them (keeping a bulk for themselves and sharing a part with the depositors).

So they started printing more notes – this would stimulate trade and everyone would be “making” more money. Yeah baby! And the baby “fractional reserve banking” was born!

Well, another clever lot came along and said, hey, why do we even need the gold & silver, let’s just work on demand and supply of the notes. The more people that demand the note – the more value the note would have. This would stimulate more trade by removing any sort of restrictive ‘weights’ holding it down. (There is some weird logic going on here…) And so the concept of “fiat” currency arose.

Hmm… so now it was ok to have a piece of paper, that supposedly had some value. And as long as everyone thought it had some value, there was no problem.

But things got even more strange, they converted these notes to a digital format.. it was now easier to manage, easier to tax also. And so instead of printing more paper, you could just add a zero to the end of the balance recorded in the ledger and increase supply. Interesting…

Alright, so now that we can increase supply of money – we can also increase the amount lent out and that means we can earn more money a.k.a. interest on money. HUH?! Talk about creating money from air!

So how do you protect yourself from a currency that is quickly losing ‘value’ because its supply has increased?

Ok,we’re just warming up…

“Give me control of a nation’s money and I care not who makes its laws” – Mayer Amschel Rothschild.

A group of people gathered in a place called Bretton Woods, New Hampshire, in the United States to determine the future of the global financial system. The idea was simple – The US would become the center of the universe and other nations would revolve around it.

All trade worldwide would be settled in the US dollars. Whenever an Indian merchant paid a Chinese supplier – it would be in US dollars. You name it, any product or service or commodity across the world would be in US dollars. So every commercial bank, multinational corporation, central bank, sovereign government must hold (in reserves) and transact in US dollars.

This is how the US dollar became the “world’s reserve” currency. Smart move, come to think of it…

If everything is denominated in US dollars, we would be talking about billions, no… trillions of assets being held in a currency called the US dollar terms. The demand for this currency was now HUGE.

This provided an incentive – the US government could now borrow, by lending US dollars to countries who needed to make payments in US dollars. So long as everyone continues to need the US Dollar, all is fine…

What about repayment, no problem? Let’s just “issue” a.k.a. print some notes to pay for that debt.

As long as this system continues, the US can continue to go deeper into debt without suffering any consequences. Is there a limit?

If you watch Game Of Thrones (big fan here), you’ll soon learn that when a king wants to go for war, he needs to ensure he has enough gold and silver on hand to pay for soldiers and weapons. If the war chest was empty, there was no war.

But what if you could print money? Then you wouldn’t have to worry, right?

Or look at the Chinese. They learned the lesson the hard way (hey they were smart enough to figure out paper currency), but China was already going through a fairly advanced financial crisis at the time: the production of paper notes had grown until their value plummeted, prompting inflation to soar.

Even the Roman Empire was not immune, what people don’t know is that the tipping point came when Indian merchants refused to accept the Roman Denarius… a silver-based currency coin that contained silver. Over time, the amount of silver was actually reduced, making the coins worthless.

When people stop trading with you, the wheels of commerce slow down and you know something is wrong. As regulation increases, people stop doing business with you. Commerce needs to be as frictionless as possible.

Could technology provide the solution we’re looking for… a cheaper, faster and possibly superior way of managing money? What if you could settle all trade anywhere in the world, in almost real-time, without any transaction fees and in a fully transparent manner?

Who would need banks as intermediaries? Ouch…

Well, the world is warming up to this idea.

Enter. Blockchain & Cryptocurrency.

You see technological innovation has always enabled a level playing field. The internet for instance has enabled ordinary people everywhere to achieve more freedom, gain more access to information and infact even earn a living. No more gatekeepers, no one to say you can’t.

Blockchain and Cryptocurrency have the potential to be the biggest financial development of this century.

In my humble opinion, one of the biggest developments of our century was the Internet (or as some know it… the world wide web) in particular the underlying protocol (framework) called TCP/IP.

This protocol revolutionized the way we communicated, the way we do business, the way information is disseminated. And now, we’re seeing the birth of another revolutionary protocol, Blockchain.

Without getting too technical, Blockchain is a globally distributed ledger (electronic public book or database) that is able to record and verify ownership of the (electronic) currency which keeps all the records in tally – without the need for a third party – it’s distributed like the internet across a peer-2-peer network, guided and secured by a mathematical formula allowing anyone to send funds to anyone, anywhere in the world and as quickly as email.

What the Internet (TCP/IP) was to communication, Blockchain is to currency.

Cryptocurrency refers to virtual or digital currency because it uses cryptography that provides security of transactions and protection from counterfeiting. There are many cryptocurrencies around these days, but Bitcoin is the obvious leader of the pack since it is the oldest and most popular.

Famed venture capitalist and founder of PayPal, Peter Thiel thinks it is what PayPal should have been; “Bitcoin is the opposite of PayPal, in the sense that it actually succeeded in creating a currency…”, which is interesting, given that PayPal’s original slogan was ‘create a new world reserve currency’.

Just like various apps are built on the Internet, one of the earlier versions that sprung up from the blockchain protocol was Bitcoin – a cryptocurrency. Some would consider Blockchain – a record of ownership, part of the second generation of the Internet.

This is so disruptive, that banks are taking note.

And why are banks worried about this? Well, there’s no intermediary. And that means you won’t be charged a wire fee or merchant fee or any other ‘creaming’ fee to transfer funds like those used in wire transfers, credit cards, cheques or online payments. However, this also means that there is no recourse if something goes wrong as it has in the past.

Infact, banks are now trying to get a foothold in this as they fear this could change the way their industry works.

Canadian financial services company – ATB Financial sent €666 (why 666 is a conspiracy theorist’s paradise) the first-ever institutional cross-border payment using blockchain to Germany’s Reisebank in 8 seconds. Not a few days, or 24 hours… 8 seconds.

Other banks that are also joining the fray include Santander, UniCredit, UBS, CIBC, National Bank of Abu Dhabi (NBAD), Bank of Tokyo-Mitsubishi, Standard Chartered, Westpac, National Australia Bank (NAB), Mizuho Financial Group (MHFG), BMO Financial Group, Siam Commercial Bank and Shanghai Huarui Bank and the number that are signing up are increasing as many plan to use the protocol. It’s estimated that banks will pay about 90% less in fees.

Let’s just say the winds of change are upon us…

There are over 700 cryptocurrencies (click this link with caution, takes time to load). Of the cryptocurrencies, in order of market capitalization, here are the ones you should be keeping an eye on:

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Another thing to note is that there is both controlled issuance and limited supply. As each currency grows, because the supply is limited – the units simply get smaller to accommodate greater economic activity. In short, you can’t inflate the currency like normal fiat currencies.

So will this go mainstream?

Bitcoin (the largest cryptocurrency) is more of a minority sport, it’s estimated that there are just around 5,000 people who have a working knowledge of the cryptocurrency. Today, I hope you’ll be one of those 5,000. In any case, you don’t need to be an expert.

Economist CoverWhen financial publications such as the Economist cover blockchain and technological publications by reputed IT research firms like Gartner add this to their coverage – you know something is happening already in the ‘fintech’ space.

What’s my personal opinion – no, I don’t think this will go mainstream in its current form. Here’s my justification for it: right now it’s not easy to deposit / withdraw / trade / exchange cryptocurrencies not just in terms of ease of transfer, but also in terms of geographical and technical restrictions.

For example, I can’t trade Bitcoin or Ether cryptocurrencies on Coinbase because I’m based in Bahrain. And Bahrain is considered one of the financial hubs in the Middle East along with Dubai! But I couldn’t do it in India either, a country with a population over one billion.

So you can see how this hasn’t really caught on yet.

[[ If you follow through on my how to buy / sell / exchange crypto currency – using examples for Bitcoin (BTC) and Ether (ETH) – you’ll notice all the hoops I had to go through just to make it work and that too at a large cost. ]]

But I’m not the only one who says this, even the person who introduced millions to Bitcoin is now saying blockchain is a bust. Stephan Thomas, founder of WeUseCoins.com helped simplify the Bitcoin concept for the masses. He admits that blockchains are a pain to work with. The same guy is now working on new technology called Ripple, which he is trying to differentiate it as not Bitcoin and as a competitor to Ethereum. And banks are taking interest.

I also feel that there are too many versions of cryptocurrencies and “forks” that no single currency is becoming popular. There are over 700 cryptocurrencies out there such as Bitcoin (BTC), Ether (ETH), Ether Classic (ETC), Ripple (XRP), Litecoin (LTC), Dash (DASH), Feathercoin (FTC), Reddcoin (RDD), Blackcoin (BLK), Dogecoin (DOGG), Auroracoin (AUR), Lottacoin (LOT), Megacoin (MEC), Novacoin (NVC), Potcoin (POT), Viacoin (VIA), DNote (NOTE), Namecoin (NMC) and so on.

It would be a fool’s endeavor to list them all here. But such variety won’t help if a single currency wants to become the world’s ‘reserve currency’.

Is blockchain technology secure?

Yes & No.

Anything created by man, has its flaws. Including the current fiat currencies we use. Cryptocurrencies are not immune either – Mt. Gox, the biggest Bitcoin exchange disaster, in which almost 4 percent of the finite supply of Bitcoin (at the time worth $450 million) was lost through that exchange – is just an example of how things can and do go wrong.

Also with the DAO Hack (DAO stands for Distributed Autonomous Organization, an example of how a democratic organization can be set up) – millions of ‘dollars’ worth of Ether cryptocurrency were removed or stolen.

And the recent most issue was with Bitfinex (the largest cryptocurrency exchange) and that caused the Bitcoin cryptocurrency to fall by 30% before recovering half way. This goes to show that it’s not immune and hackers will do what hackers do.

Think about this for a moment – building trust, verifying, identifying, clearing, settling and record keeping were done by middlemen or intermediaries (Banks, Google, Paypal, Uber, Apple) – but they’re vulnerable to hacking as they’re centralized.

But because there are checks and balances with Blockchain – the system corrects itself. The proponents of cryptocurrency believe that such issues actually strengthen the currencies as it is easier to trace the root cause of the problem, unlike with existing systems such as SWIFT – which took months before they even disclosed that there was a hack.

So why would I spend all this time and effort to talk about this? Well, for one you need to know, just like I did. Technology will evolve, and so will our love with currencies. What comes next is anyone’s guess – but this is something you’ll need to closely follow in the coming years.

How can I start with one of these top cryptocurrencies – Bitcoin, Ether or Ripple?

Opening a crypto currency “account” does not require you to prove who you are, or provide any sort of government ID, reference or disclosure of financial information. Although providing this will help the companies that provide cryptocurrency services, enable more advanced features – it’s not a must, it’s optional.

Before you start, you’ll need a special wallet – yes, somewhere to purchase (receive), store or spend (send) and even earn your cryptocurrency. These wallets work both on your mobile or desktop and there are some that are like USBs or what we call hardware wallets. It’s like your own private bank account.

The value of the cryptocurrency coins stored in the wallet, could rise as economic activity increases, even without interest payment. This encourages people to save instead.

You can check the price / chart of these cryptocurrencies at CryptoWatch or CoinGecko or TradingView or check them against various fiat currencies at BitPay to see how they’re doing.

How do you buy cryptocurrency?

Ok, so once you have your wallet setup – in order to fund it, you have to purchase the cryptocurrency. Whilst there are many options to do so, some are simple, some require a bit of technical knowledge (and this is where my tiff with cryptocurrency begins).

You can buy from private vendors (exchanging your fiat currency for the cryptocurrency) like LocalBitCoin or even use a cryptocurrency ATM like the Bitcoin ATMs popping up around the world.

Bitcoin Ether ATM Map

You can also use an exchange service to exchange one form of cryptocurrency for another – which is what I’ve done.

What is cryptocurrency mining?

In order to bring this currency into circulation, you require massive amounts of computing power – remember this is guided by mathematical formula. So the process of making this calculations requires a distributed network of very powerful computers to verify all cryptocurrency transactions. For contributing to this processing power, “miners” or individuals who share their computer’s processing power are rewarded with the cryptocurrency.

[[ There are pools for mining, where miners can come together. They get rewarded by mining new blocks of the blockchain as a transaction fee. But this leads to centralization and this could also lead to a Distributed Denial of Service (DDOS) attack of the pool, which is what you want to avoid as it defeats the purpose of blockchain. ]]

How do I use / spend the cryptocurrency?

Your wealth has suddenly increased that you’re itching to spend it. It’s the fruit of your labor, why not? There is a growing market of cryptocurrency accepting merchants, even online retailer Overstock is into the game and you can use Bitcoin to pay for products sold on their site. As this catches on, more and more will be coming online. One such site is Gyft – unfortunately, it’s only for those based in the US (which is unfortunate for online consumers). You could also sign up for a BitPay Visa card that enables you to use the card at any store or even withdraw at an ATM – again, you can only sign up with a US address.

How do I accept cryptocurrency for my products / services / business?

Just like you would have a normal merchant account, there are cryptocurrency merchant services to enable you to setup a payment gateway or shopping cart. Two merchant services worth looking at are Coinbase and Bitpay. Signing up with BitPay is a straightforward process, except you can’t add a bank account if you’re based in the Middle East!

How do I trade / exchange the cryptocurrency?

In order to trade a crypto currency, you can head over to Poloniex or Bitfinex or for only trading Bitcoin, try Kraken.

How do I invest in cryptocurrency?

Because of the restricted supply, the supply and demand equation kicks in and as the demand soars as more and more people use it as a means of exchange. Those who purchase these cryptocurrencies in the early days are fortunate enough to see massive increase in value as it catches on – this is part of what we call the network effect, i.e. it becomes more valuable as more people start using it. Take for instance the case of Bitcoin, see the chart below:

BTC Chart

You see, as fiat currencies are suffering from inflationary pressures and losing value as more and more is being “printed” i.e. increasing supply. The cryptocurrency will also increase in value, because the fiat currency is actually decreasing. And as the demand for the cryptocurrency increases, with more people exchanging goods and services – you see a new dynamic play out.

But as in the case above, the cryptocurrency is still in its infancy, being around for just less than 5 years since 2011. Currencies generally take time to mature, there’s a cycle that should pan out – and by the looks of it, these cryptocurrencies are following the pattern similar to that of Gartner’s Hype Cycle of Innovation, as we enter the Slope of Enlightenment and pass into the Plateau of Productivity.

Gartner Hype Cycle

I’m guessing there will be a huge interest in cryptocurrency in the coming few years. But you should be looking for asymmetric bets (i.e. where you risk $1 to make $5, $10 or $100) so that you can profit from it.

[[ Read on to find out how you could position yourself before the crowd starts piling on to this. ]]

What do I have to worry about, is it legit or illegal?

That’s a tough question. If you understand the world of finance, you will wonder what is legal and illegal. Is taxing an individual legal, apparently some countries think it is, while others think otherwise.

Whenever you talk about cryptocurrency and the independence of the currency from any government support – you wonder whether it is legit.

Well, think of it like your PayPal account where you have digital currency in either US Dollars or Singaporean Dollars or other currencies. Today, PayPal works with various governments across the world to make it more accessible. On the other hand, Ripple, a new cryptocurrency, is doing this today in the financial world… a smart move.

Unlike fiat currencies – cryptocurrencies are not issued or controlled by a central bank. However, there is a limit on the circulation supply and it’s controlled issuance. Different countries treat it differently. For example – Switzerland treat it as currency, US treats it as convertible decentralized virtual currency and Australia treats it as an asset, not a currency – and thus subject to taxes on the gain.

Governments are looking for ways to tax citizens, to collect more revenue. It’s a known fact. But what if you can’t tax so easily – which is why gold was outlawed at a point in time in the United States and how many people were arrested? I’ve heard none.

And would it be used for illegal activity? You might have heard of this thing called The Silk Road, a black market which was cracked down by the FBI… Well, money knows no religion, race, it’s color blind and doesn’t care who owns it. Just like a scalpel can be used in the skillful hands of a surgeon, it can also be used a weapon to murder people. What you do with it is dependent on the individual. But what is surprising is that banks are now warming up to the concept of Blockchain & Cryptocurrency.

Which ones should you focus on and how? Well, let’s take the ones with the highest market capitalization. This gives you an indication of the amount of transactions taking place and which is becoming more popular.

What is Bitcoin?

The best-known cryptocurrency is Bitcoin. Bitcoin was created in 2009 by Satoshi Nakamoto (likely a pseudonym for a group of cryptographers). By 2013, it had witnessed a meteoric rise by over 1,000%. The stories of those who invested and made a killing are plenty. But those are gone opportunities. Because of the first mover advantage, people are familiar with blockchain because of bitcoin. We’ll try to understand the evolution of this and what might replace it – and how you could possibly benefit from newer versions. As time passed on, newer versions with more advanced features are being added.


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There is so much written on Bitcoin, that you would be going down a rabbit hole to just understand it.

But bitcoin is just the start. There are other types of cryptocurrencies popping up. The latest being Ether from Ethereum and is becoming the hottest currency in 2016.

What is Ether?

Since its start in Jan 2016 – Ether (ETH) has risen 1,300% so far from nearly $1.00 to $13. This cryptocurrency is the brainchild of 21-year-old college dropout Vitalik Buterin (co-founder of Bitcoin Magazine).


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While it is taking off, it is not quite there for consumers – you can’t buy using Ethereum as you could with Bitcoin on Amazon.com – but you never know, give it some time.

However, having said that Microsoft is taking a big interest in it. Microsoft recently announced that they are expanding its use of Ethereum blockchains on their Azure platform.

It’s not something that a layman can use, but I think with time – the cryptocurrency clan will start to make it really simple to buy / sell / hold this currency. Check out this slightly technical video about Ethereum.


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Ether was inspired by Bitcoin… infact some call it Bitcoin 2.0 (or the next version). I’d call this the next stage of crypto currency evolution which works off the blockchain concept, where information could be stored in the currency itself, making it smart.

For example, contract details could be programmed into the currency – such that only when the agreed terms are fulfilled, would the currency be transferred or released to the other party. This is an amazing development because all the financial contracts in the world can be broken down into 30 essential contracts – and those contracts can be ported to Ethereum. (A contract is a ‘set of rules’ – executed, validated and enforced by the platform and does not require the user or programmer to know cryptography.)

So Ethereum will go beyond just currency and allow anyone to create specialized applications on top for almost any purpose imaginable. Thus removing the limitations of Bitcoin. If Bitcoin is like gold, i.e. a store of value, then Ether is more like oil, which lubricates and creates the energy for trade.

Ethereum is also “Turing Complete” framework, meaning it works off Alan Turing’s Artificial Intelligence idea that you can’t distinguish between a machine or real person when interacting. Furthermore, the issue with bitcoin is that it takes a few minutes to cross check. With Etherium, it takes a few seconds – and that’s a game changer.

In modern day finance, for trading – there is always an issue of trust, transaction fees and speed. You can use Ethereum contracts for trading bonds (to avoid complex transactions with third parties), crowdfunding, insurance, stocks, escrow, reputation systems and it can also be used as certificates, for example certificate of ownership of commodities or real estate.

What is Ripple?

If the first generation of blockchain and cryptocurrencies was about transactions that transferred value (Bitcoin), the second generation is transactions that transferred value & instructions aka smart contracts (Ether) and the third generation is a about governance system, ideally self governance & treasury (Ripple / Dash).

We’re moving from Internet of Information > Internet of Value. Unlike with Internet of Information, where I retain the copy… and I give you a copy, this is called the double payment or double spend problem. With the Internet of Value – I can’t do the same for you – I transfer something to you and it’s yours. Infact, the company is even ‘coining’ the term – Internet of Money. Watch this video to understand this better.


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Ripple is probably the next level of blockchain transformation, and now banks and financial institutions are willing to accept this.

What makes this interesting is that Ripple has raised a total of $93 million venture capital including earlier investments from Google Ventures, Andreessen Horowitz, IDG Capital Partners and AME Cloud Ventures. For the recent Series B round of funding, it is backed by Standard Chartered, Accenture Ventures, SCB Digital Ventures, the venture arm of Siam Commercial Bank and SBI Holdings as well as Santander InnoVentures, CME Ventures, Seagate Technology and Venture 51. Making Ripple one of most-funded blockchain firms. Clearly, they’re seeing something in this new version of the blockchain technology.

Stay Abreast…

Keeping abreast of the developments in blockchain and cryptocurrencies is going to be a task in itself, so I’d recommend following the headlines on CoinDesk. With each day, developments are taking place and if you’re going to be investing in blockchain and cryptocurrencies – you might as well add this site to your reading list.

P.S. Check back in a few days, as we release the step-by-step guide to buying Bitcoin (BTC) or Ether (ETC).

Update: Check out this video a blockchain expert:

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