Connect with us

Entrepreneurship

Bitcoin in China

Published

on

There has been renewed interest in Bitcoin in China as an alternative currency and speculative asset.

Much like the impact of shifts in demand in China on global markets, shifts in the volume and direction of Bitcoin trading in China has been driving the global price of Bitcoin.

Bitcoin’s first major price spike, to over $1000 USD per Bitcoin (BTC) in late 2013, was driven by a sharp rise in demand for Bitcoin in China.

At the end of 2015 Bitcoin’s price made a comeback, climbing to over $400 USD per BTC, and it was driven by another sharp rise in Bitcoin trading volumes and user activity in China.

So what is driving the renewed demand for Bitcoin in China?

Bitcoin's price has been led by sharp shifts in trading in China in 2013 and 2015.
Bitcoin’s price has been led by sharp shifts in trading in China in 2013 and 2015.

Apart from the volatility on China’s A-Share market, some outside observers claim that depreciation pressure on the Chinese currency, the Yuan, is driving the renewed interest in Bitcoin in China.

Zero Hedge, for instance, has also claimed that Chinese users are using Bitcoin to evade China’s capital controls and to move cash out of the country—a question to which we will return.

But first, some background on Bitcoin.

Bitcoin: a quick intro

Bitcoin is a digital currency–a form of digital cash–which enables individuals and businesses to make direct peer-to-peer payments without using banks or other financial intermediaries. Bitcoin is therefore a channel for financial disintermediation.

Bitcoin is also an alternative currency and a speculative asset. Whereas the major world currencies, like the US dollar or the Chinese Yuan, are government-backed fiat currencies, Bitcoin derives its ‘authority’ from an encrypted public ledger system called the blockchain.

The Bitcoin protocol was first outlined in a pseudonymous paper by Satoshi Nakamoto in November 2008 and the first version of the Bitcoin software client was released via a crypto mailing list in 2009.

Compared to traditional bank payments systems, Bitcoin’s blockchain is more secure and the time needed to settle Bitcoin transactions takes minutes rather than days.  Bitcoin is based on an encryption protocol, hence the term cryptocurrency, and all Bitcoin transactions are made through its encryption algorithm.

Bitcoin transactions are recorded on an encrypted public ledger system and verified through a process called mining. Bitcoin mining is the process by which distributed computer nodes compete to solve the encryption problem on the Bitcoin key-chain system. Bitcoin users have public and private keys (payments addresses), and the encryption process is used to match or resolve these keys.

As each transaction is verified it is recorded in the public ledger system as proof of payment, and this proof of payment or settlement is publicly available and accepted in the length of time it takes to solve the first computer node to solve encryption problem – currently about 10 minutes. In contrast, traditional bank payments take anything from 1 business day to settle local payments to 4-5 days to settle international payments.

Bitcoin therefore radically reduces the costs of making cross-currency and cross-border payments and one of the early Bitcoin applications is as a vehicle for migrant workers to make international remittance payments.

Bitcoin-based payments use in developing countries is growing rapidly, especially Latin and South American countries and across Africa, and for good reason.

Today using Bitcoin a Mexican worker earning US dollars in the United States could deposit Bitcoin to their electronic Bitcoin wallet, which is linked to a payments card held by a relative in Mexico, who could then use the card to make payments at the local supermarket chain.

Compared to international bank transfers, or Western Union, all of this could be done in real time at a cost of one per cent or less using current Bitcoin based applications.

It is also cheaper for merchants to accept Bitcoin payments than credit card payments. Whereas merchants are usually charged 2-3 percent per transaction by credit card companies, a business set up to accept Bitcoin can reduce this cost to as little as 0.5 percent.

And because users can make peer-to-peer transactions anywhere in the world without the need for banks or traditional payments companies, Bitcoin can bypass capital controls.

While the current global value of Bitcoin is small—an equivalent of $6.3 billion USD on January 1, 2015–over US $50 billion was invested in Bitcoin-based technology applications in 2015.

Bitcoin in China

Bitcoin in China got off to a slow start. This changed in May 2013, when China’s national CCTV television station aired a highly favourable documentary on Bitcoin.

The result was a flood of Chinese retail investor money into Bitcoin.

Downloads of Bitcoin clients in China for desktop computers, which allow users to buy and sell Bitcoins, surpassed downloads in all other countries.

In October 2013, Bitcoin was even briefly accepted as a means of payment by merchants on China’s e-commerce giant Taobao.com and by Baidui’s Jiasule software security company.

This briefly integrated Bitcoin into China’s payments system.

Chinese Yuan (CNY) denominated Bitcoin trades soon surpassed US-dollar denominated Bitcoin trades and this drove Bitcoin’s market price to an all time high of over $1000 USD per BTC in late 2013.

Bictoin mining also took hold in China as as people downloaded the open source Bitcoin mining software in the hope of turning some new coins into a rapidly increasing asset prices.

As bitcoin mining became more difficult, requiring more computing power to earn bitcoins, more powerful Bitcoin mining computers were manufactured in China and these also became available through Taobao, China’s largest business to consumer e-commerce platform.

Yet, as Zennon Kapron explains in his book Bitcoin’s explosive growth in China also triggered its downfall.

China’s authorities’ responded to this flood of cash into Bitcoin–which was not under government or centralised company control—by cracking down.

The People’s Bank of China (PBOC) issued a notice prohibiting financial institutions from dealing in Bitcoin on December 5, 2013. The following day, the PBOC also ordered the largest third party payment companies, including Alibaba’s Alipay to halt Bitcoin digital currency transactions. Two days later, BTC China, the largest Bitcoin exchange in China, was forced to stop accepting Renmibi (RMB) deposits.

Not only retail investors, but also Bitcoin miners sold out of Bitcoin as quickly as they could and Bitcoin’s global price fell more than 50 per cent, led by the sell-off in China.

Bitcoin’s future in China appeared to have been bought to early demise. And yet while Bitcoin attracted few new users in China since its 2013 peak, Bitcoin mining and trading activity in China continued to grow. Chinese Bitcoin exchanges now account for over 90 percent of global Bitcoin trading activity and China accounts for as much as half of all global Bitcoin mining activity.

__________________________________________

About the Author

This article was written by Luke Deer of Frontiers of Finance in China.

Entrepreneurship

Science is the Next Big Thing in Startups

Published

on

From pharmaceuticals to petrochemical processes: Newcomer companies and investors and investors alike are setting their sights on science. How the start-up scene moves beyond the mobile apps bubble…

For the last two years Silicon Valley analysts and venture capitalists are anticipating the burst of yet another bubble. This time, under the risk are the mobile start-ups which constitute the biggest share of the market. Out of 50 companies listed in Forbes’ “the hottest startup of 2015” (by valuation) only six companies are based on innovations in other-than-mobile area, one company provide cleaning services, while the rest are diverse mobile apps.

Meanwhile many products listed can be barely called innovative. A significant proportion of the listed start-ups are texting apps, apps for people search (starting from business partners to life partners) or delivery services. While those services can definitely facilitate one’s life, in general they differ from their predecessors by only a narrower audience.

Many venture investors expect stagnation if not decrease on the markets, which is why they start to transfer their capitals from start-ups offering customers software to start-ups offering specific solutions for existing businesses. Such companies are expected to demonstrate more stability in the near future.

The Market for Mobile Apps Might be Saturated

Back in 2012 a talented entrepreneur could walk into a venture capitalist’s office, say his startup was a mobile-first solution for pretty much any problem (payments! photos! blogging!), and walk out with a good-size seed investment. “That pitch was enough to get going,” says Roelof Botha, a partner with VC firm Sequoia Capital. “It’s not enough anymore.”

“I think investors are bored with investing in another messaging app. And our idea is crazy enough that it might just work. ”, has declared in 2014 Nadir Bagaveyev a founder of a start-up using 3-D printers to make rocket engines. By 2016 the company attracted investors funding sufficient to launch its first rocket.

Pharma and Biotech Start-Ups in High Demand

Currently the most successful science-based start-ups are the companies offering innovative solutions in the field of pharmaceuticals and biotechnologies. It’s noteworthy that despite the previous revelations and even judicial proceedings the list of the most expensive start-ups still includes Theranos, blood analyzing laboratory, whose story did not descend from the main pages of the global leading media from 2014.

It first amazed the audience with its fantastic take-off and then with its collapse. One of the crucial parts of the success story of this start-up is its fundamental difference from the majority of the services produced in the Silicon Valley. Unlike the others, it was not a story of yet another beautiful gadget for communication or mobile app, but the story of the scientific idea which intended to conquer the world.

The great success stories in other scientific areas are now happening on occasional basis. However certain facts allow to predict that the situation is to change soon. One of such factors is growing interest among the big corporations to attract innovative solutions from outside to develop their businesses.

Given the accelerating pace of scientific and technological development of the world, the activities of internal R & D departments are often turn to be insufficient to ensure stable development of innovative business. Outsourcing of the R&D may become the efficient mechanism to stimulate the growth of the company. And high-tech start-up can certainly benefit from it.

Start-Up Technology for the Petro-Business

In December, 2016 world leading companies in the field of gas processing, petrochemicals and chemicals announced their intentions to enforce their R&D capacities by attracting start-ups. 3M, AkzoNobel, BASF, The Dow Chemical Company, DuPont, Henkel, Honeywell UOP, LG Chem, Linde, Sibur, Solvay and Technip together created a global stage for startups and investors.

“The petrochemicals industry can and must rely on the potential of open innovations to facilitate further inventions and implementation of new solutions in all major application areas, from construction and medicine to packaging and 3D printing. Thanks to the participation of international partners, IQ-CHem is now the largest global project within the industry which attracts innovative solutions and provides for their implementation into practice,” said Vasily Nomokonov, Executive Director of Sibur, a company which coordinates the project.

Positive Experience in Chemicals and Beyond

Some of the listed companies have already gained positive experience in working with start-ups which may have driven them to elaborate a systemic approach to attract innovative companies.

At the beginning of 2016, SIBUR and RRT Global start-up reached an agreement to build a pilot plant for isomerization based on RRT Global technologies in Sibur’s Industrial Park SIBUR “Tolyattisintez”. According to Oleg Giyazov, co-founder and CEO of RRT Global cooperation with a large corporation bring significant advantages to his company.

“By cooperation with Sibur we get a huge industrial experience that enables us to develop technologies and solutions better fitted to the market demand. This advantage is often not given due attention, but we, on the contrary, see significant opportunities in it. Currently, RRT Global cooperates with several companies around the world” he said.

Another petrochemical leader BASF enjoys successful cooperation with Genomatica start-up. In 2013 BASF started the production of 1,4-butanediol based on renewable feedstock (renewable BDO) using Genomatica’s patented process and in 2015 the license was expanded to the Asian market.

Unlike traditional forms of cooperation between a start-up and a venture capitalist, a cooperation between start-up and a relevant corporation allows to minimize the risks associated with investing in a potentially promising idea where the key word is “potential” (but not “guaranteed”). While delivering services in the same field as the start-up the corporation gets an opportunity to more effectively and accurately estimate the market value of an innovative idea and to support its implementation.

Structural Changes Ahead: Outlines of A Coming Market

In the short term prospective, possibly in 2017, the global start-up market will face structural changes – both in terms of start-ups professional orientation and of funding mechanism. In the future science-based start-ups will dominate the market and will change our lives at a deeper level than the way of sending a text message or searching the restaurant for an evening meal. To be more concise this is already happening in the pharmaceutical industry, and the other scientific areas are to follow.

_________________________________________________

About the Author

This article was written by Dominik Stephan of Process Worldwide. See more.

Continue Reading

Callum Connects

Norman Tien, Founder of Neuromath and Early Math Matters

Published

on

From a young age, Norman Tien, found his passion helping students as a math tutor and went on to translate that into a successful business.

What’s your story?
From the age of 14, I knew I would be in business for myself and started designing my company logo.

Growing up in a poor family, I worked part time while I was in school. That’s when I started tutoring and realised I had a gift to help students “see” mathematics. I delivered good results, and my students started to love math as well.

A turning point was when I was down with dengue fever and I realised I had to grow my business to the next level. I started a learning centre and that was the beginning of Neuromath. The initial years were tough as costs went up while my personal income took a dive. I almost gave up, but I pushed through.

Today, we have 3 specialty math enrichment centres managed and delivered by my dedicated team of teachers.

What excites you most about your industry?
“How to win” has always influenced how I position myself in the industry. I researched the psychology of learning, why some students are so naturally good at math, while others struggled. I managed to find the connection, and have always sought out niches to position myself so I can win.

In the beginning, I fused academic delivery with psychology to differentiate my services. Now I have a good team of teachers fully equipped with a psychological skillset.

In the next evolution of our business, we will incorporate technology into education in order to customise each student’s learning experience based on his or her needs.

What’s your connection to Asia?
I was born and educated in Singapore. One key driver why I started a business was, as a youth, I witnessed how my dad struggled daily as a taxi driver trying to make ends meet.

That said, I am very blessed to be in Singapore and to be given the right education. I see this as a very important factor to my success today.

Favourite city in Asia for business and why?
Singapore – well, for one, most of my businesses are here. Singapore is convenient for business and is very well governed. There are rules and systems that make the entire entrepreneurial journey more secure here. One big plus is the location: Singapore is a hub that allows us to connect to the world.

What’s the best piece of advice you ever received?
船到桥头自然直 –
There is a Chinese saying that when a boat goes near the pier, it will automatically align itself (with the current). It means we don’t have to worry too much, that things will take care of themselves.

A mentor once challenged me: “But who can guarantee you can even reach the pier?”

It is such a highly competitive world we are in, who can guarantee success? This is the ONE question that has been etched in my mind for decades. The Chinese saying always comes to mind when I am positioning, designing and strategizing for my business.

Who inspires you?
Mr. Lee Kuan Yew – The fact that he started ruling the country just like a startup. With limited resources, he was able to find a strong positioning to differentiate his country from the rest of the of Asia. With hardwork and proper planning, he transformed Singapore from a fishing village to a prominent financial hub in Asia.

Because Mr. Lee Kuan Yew positioned Singapore so well, government owned companies, such as Singapore Airlines, have emerged as the best in the world.

His story inspires me, spurs me to understand that success is not by chance but by design – every little step, all the strategies are all planned out. Not at all by chance.

What have you just learnt recently that blew you away?
My business coach, Marshall Thurber, shared with me the power of the “Trim Tab” – a small part of the rudder system in a ship. This Trim Tab, despite its small size, is able to influence the entire ship’s direction by turning it.

This metaphor helped me see that a man can influence the entire world if the right effort is applied. We are now living in an entirely new world, the way we commute with an app on the phone – that’s the power of the Trim Tab at work.

If you had your time again, what would you do differently?
I would embark on the same journey but I would seek a mentor at a very early age.

I have been through many hard knocks along the way, and I definitely could have shortened the learning curve if I had a mentor to advise me on the many aspects of entrepreneurship.

How do you unwind?
Driving down long highways helps me unwind, that’s when I let my mind relax and wander.

I love long distance driving and riding. My wife gave me a Harley Davidson Tourer for my 50th birthday and we intend to embark on riding holidays together in Asia.

Favourite Asian destination for relaxation? Why?
Hong Kong – I love the fast pace and the vibrance of the city. I love the cars there and it’s a very unique and exciting experience for me. And of course, I love the food there too!

Everyone in business should read this book:
One Minute Millionaire – this book highlights the mindset of an individual that is the key determinant for success in whatever we embark on. As long as we know we have a very strong reason why we need to do it, we can do it!

Shameless plug for your business:
I am the CEO and Founder of 2 Math enrichment brands:
Neuromath is a Specialist Math Learning Centre that helps students from Primary 1 to Junior College, empowering them with strategies, skills and a strong desire to learn and problem solve. We use technology to train students to avoid careless mistakes reclaiming 30 marks or more in Math exams and achieve their full potential in math.
www.neuromath.com.sg

Early Math Matters is a premier Mathematics and Cognitive Development enrichment centre for preschool children aged 3-6 years old. Through purposeful play and our renowned EMM approach, we help learners build a strong foundation for problem solving at an early age, and instil in them a passion & love for math that will stay with them for life.
www.earlymathmatters.com

We are actively seeking passionate teachers, entrepreneurs and investors who are keen to grow the education business with us.

How can people connect with you?
I speak regularly at workshops for schools, parents and platforms demonstrating the use of technology for peak performance in education.

Do contact me at
www.NormanTien.com

Alternatively, you can connect with me:
www.NormanTien.com/facebook
www.NormanTien.com/linkedin

This interview is part of the ‘Callum Connect’ series of more than 500 interviews

Callum Laing is an entrepreneur and investor based in Singapore. He has previously started,
built and sold half a dozen businesses and is now a Partner at Unity-Group Private Equity and Co-Founder of The Marketing Group PLC. He is the author two best selling books ‘Progressive Partnerships’ and ‘Agglomerate’.

Connect with Callum here:
twitter.com/laingcallum
linkedin.com/in/callumlaing
Download free copies of his books here: www.callumlaing.com

Continue Reading

Trending