News from Ban Krut by Kasama's & Bankrutfarang

Monday, October 13, 2014

Bitcoin, bit what?! But use it at Kasama's to pay

2 comments :
Once upon a time, not so long ago in fact, there were no mobile phones, no e-mail and no Internet. Only as far back as the early nineties, you would be happy if your home had running mains water and electricity. People were still sending each other letters and faxes, and making almost all of their payments via bank transfer or credit card in person. Despite being around since the seventies, 'the Internet' and 'e-mail' was something that only a handful of scientists, academics, researchers, hobbyists and geeks knew anything about. That technology arrived at the mainstream in the mid-nineties, and within a decade, everyone had an e-mail address, and almost everyone had a website, or would at least know what a website was. At first, people were sceptical and untrusting of it, but now, almost everyone can do their banking and pays their bills on-line with some degree of confidence.

Bitcoin

Typically, technology evolves to solve problems and make people's lives easier. The problem that the inventors of Bitcoin sought to solve was that of the problems inherent in the world's banking systems. The first 'block' of Bitcoin was 'mined' in 2009, by a group of crytocurrency specialiasts who were working on alternative currency technologies. Their plan was to invent a cryptocurrency that would mimic the availability of gold or other precious metals or finite resources in the real world, yet easier to use as a currency than existing on-line methods, like Paypal and banking. Using highly complex mathematics and encryption algorithms for security, they created a virtual 'ledger' of transactions, shared and synchronised between thousands of computers distributed around the world. This ledger, known as the blockchain, is the backbone of Bitcoin. It's transparency allows the markets to analyse and gauge Bitcoin's overall value and legitimacy at any given time. You can view the ledger, and associated statistics at the 'blockchain.info' website.


Since then, many variations of the Bitcoin protocol have evolved with different names and different economic properties, such as 'Litecoin', 'Darkcoin, 'Mastercoin' and 'Dogecoin'. These are known as 'altcoins' and are the silver to Bitcoin's gold. Bitcoin has remained the dominant one that most of the financial attention is focussed on, but most Bitcoin exchanges will also trade altcoins too.

With cryptocurrencies, an adaptive mining algorithm is used to distribute 'work' to miners across the Internet, who use the immense computing resources at their disposal to complete the work and earn new blocks of currency by presenting their 'proof of work', ratifying the ongoing transactions of non-miners into the ledger at the same time. The Bitcoin algorithm adapts itself such that the difficulty will increase adaptively so that the rate of new Bitcoins being mined will slow over the course of time, so much like real gold, there will only ever be about 21 million bitcoins in circulation. Currently, there are over 13 million bitcoin in circulation, with a market capitalisation of 5 billion USD. Bitcoin is considered by many to be the digital equivalent of a gold standard of currency.

For the first few years, it was only being mined by hobbyists and others experimenting with the digital currencies. Since the 'Bitcoin boom' at the end of 2013, where the price per Bitcoin reached $1000 dollars, this now a rapidly growing ecosystem of companies, large and small, heavily investing in Bitcoin developments, mining projects or other services based around Bitcoin or the blockchain technology. Many of these companies are focussing on ways to bring Bitcoin to the masses, both in the third world where the Internet is sparse, and in more developed countries, where it is ubiquitously available with 3G. The technology has matured quickly, and now more and more merchants around the world, both on-line and brick-and-mortar, are accepting Bitcoin for goods and services, are starting to accept Bitcoin in addition to their traditional payment methods.


I'm certainly not expecting Bitcoin to replace paper money within the next few decades, but given enough time I can see the technology, whether it's Bitcoin or a variation of it, replacing credit, debit and ATM cards, and other money transmission services. The 'plastic' technologies of the 80s and 90s are now far too easy for criminals to work around, and the associated security and insurance costs are spiralling, so it's inevitable that they will be replaced sooner rather than later. And many individuals and organisations are no longer satisfied to wait 3-5 days for banks to 'clear' international transfers.

For the buyer, paying for something in Bitcoin is easier and quicker than a traditional card transaction. For the merchant, it doesn't involve installing bank-approved equipment, binding agreements and the risk of charge-backs. In most cases, all the merchant needs is a smartphone or tablet and a wifi connection. The merchant will open the payment app and enter the required payment amount, usually in the local fiat currency as per their standard menu or price list. The app will calculate the Bitcoin amount required and present a QR code. The buyer then opens their Bitcoin wallet app on their smartphone, scans the merchant's QR code, checks the amount displayed is correct, and clicks the 'confirm payment' button. The buyer's app then signs a new ledger transaction and transmits it to the blockchain. Within a few seconds, the merchant's app will detect that payment has been made and it's display will change from 'payment requested' to 'payment received'.


At this point, the merchant can be happy they have received payment in full. With Bitcoin, there is a significantly lower chance of finding that the payment was counterfeit than if the customer had paid with paper money. It's impossible to fake Bitcoin transactions. In the Bitcoin system, transactions are confirmed by nodes on the network as they are distributed across the network. A merchant can consider the transaction irreversible once it has been confirmed by four or five independent nodes on the network. This can often take 20-30 mins, and for higher value transactions, merchants will often delay releasing the goods, or the customers, until they have seen a certain number of these confirmations.

According to coinmap.org, in Thailand, there are 12 vendors in Bangkok that accept Bitcoin, and 2 hotels down in Phuket. Recently, I bought a very tasy burger for Bitcoin from PaulyBee's American Burger stall on Rambuttri, near Khaosan Road, while in Bangkok attending a Bitcoin conference. There seems to be a growing interest, as the conference was well attended.

So far, as a Bitcoin user here in Ban Krut, there are still very few things I can actually do locally with my Bitcoin. I usually spend my Bitcoin online, purchasing goods on-line from sites that accept it, and topping up my mobile phone using a site called 'bahtcoin.com', and donating to various on-line charities around the world. However, that is starting to change.

Pay your Pizza with Bitcoins at Kasama's.
Bitcoin users can now come to Ban Krut, rent a beach resort bungalow for Bitcoin, and eat out at Kasama's with Bitcoin! I am also hoping that other local vendors will also consider accepting it in the coming few months, and join me in trying to make Ban Krut a Bitcoin-friendly tourist destination.

If you're interested in trying out Bitcoin, you can buy some from one of the on-line exchange services in Bangkok, such as bitcoin.co.th, or coins.co.th, or from a more informal world-wide marketplace at LocalBitcoins.com. I suggest you just buy a small amount to start with, just enough to make a few test purchases with. Then, transfer it to a wallet on your smartphone, and head on down to Kasama's and use it to pay for some of their lovely nosh!

For further advice or information on anything related to Bitcoin, please feel free to drop me an e-mail at ross@golder.org.


2 comments :

  1. They created a virtual 'ledger' of transactions, shared and synchronised between thousands of computers distributed around the world. This ledger, known as the blockchain, is the backbone of Bitcoin. It's transparency allows the markets to analyse and gauge Bitcoin's overall value and legitimacy at any given time. You can view the ledger, and associated statistics at the 'blockchain.info' website.
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