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Bitcoin in China

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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.

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About the Author

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

Callum Connects

Malcolm Tan, Founder of Gravitas Holdings

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Malcolm Tan is an ICO/ITO and Cryptocurrency advisor. He sees this new era as similar to when the internet launched.

What’s your story?
I’m a lawyer entrepreneur who owns multiple businesses, and who is now stepping into the Initial Coin Offering/Initial Token Offering/Cryptocurrency space to be a thought leader, writer (How to ICO/ITO in Singapore – A Regulatory and Compliance Viewpoint on Initial Coin Offering and Initial Token Offering in Singapore), and advisor through Gravitas Holdings – an ICO Advisory company. We are also running our own ICO campaign called AEXON, and advising 2 other ICO’s on their projects.

What excites you most about your industry?
It is the start of a whole new paradigm, and it is like being at the start of the internet era all over again. We have a chance to influence and shape the industry over the next decade and beyond and lead the paradigm shift.

What’s your connection to Asia?
I’m Singaporean and most of my business revolves around the ASEAN region. Our new ICO advisory company specialises in Singaporean ICO’s and we are now building partnerships around the region as well. One of the core business offerings of our AEXON ICO/ITO is to open up co-working spaces around the region, with a target to open 25 outlets, and perhaps more thereafter.

Favourite city in Asia for business and why?
Singapore, since it is my hometown and most of my business contacts originate from or are located in Singapore. It is also a very open and easy place to do business.

What’s the best piece of advice you ever received?
Be careful of your clients – sometimes they can be your worst enemies. This is very true and you have to always be careful about whom you deal with. The closest people are the ones that you trust and sometimes they have other agendas or simply don’t tell you the truth or whole story and that can easily put one in a very disadvantageous position.

Who inspires you?
Leonardo Da Vinci as a polymath and genius and leader in many fields, and in today’s world, Elon Musk for being a polymath and risk taker and energetic business leader.

What have you just learnt recently that blew you away?
Early stage bitcoin investors would have made 1,000,000 times profit if they had held onto their bitcoins from the start to today – in the short space of 7 years.

If you had your time again, what would you do differently?
Seek out good partnerships and networks from day one, and use the power of the group to grow and do things together, instead of being bogged down by operations and going it alone from start.

How do you unwind?
I hardly have any time for relaxation right now. I used to have very intense hobbies, chess when I was younger, bridge, bowling, some online real time strategy games and poker. All mentally stimulating games and requiring focus – I did all these at competitive levels and participated in national and international tournaments, winning multiple trophies, medals and awards in most of these fields.

Favourite Asian destination for relaxation? Why?
Phuket – nature, resort life, beaches, good food and a vibrant crowd.

Everyone in business should read this book:
Rich Dad Poor Dad by Richard Kiyosaki

Shameless plug for your business:
Gravitas Holdings (Pte) Limited is the premier ICO Advisory company and we can do a full service for entrepreneurs, including legal and compliance, smart contracts and token creation, marketing and PR, and business advisory and white paper writing/planning.

How can people connect with you?
Write emails to [email protected], or [email protected]

Twitter handle?
@malcolmABM

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

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Entrepreneurship

Women on Top in Tech – Pam Weber, Chief Marketing Officer at 99Designs

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(Women on Top in Tech is a series about Women Founders, CEOs, and Leaders in technology. It aims to amplify and bring to the fore diversity in leadership in technology.)

Pam Webber is Chief Marketing Officer at 99designs, where she heads up the global marketing team responsible for acquisition, through growth marketing and traditional marketing levers, and increasing lifetime value of customers. She is passionate about using data to derive customer insights and finding “aha moments” that impact strategic direction. Pam brings a host of first-hand startup marketing experiences as an e-commerce entrepreneur herself and as the first marketing leader for many fast-growing startups. Prior to joining 99designs, she founded weeDECOR, an e-commerce company selling custom wall decals for kids’ rooms. She also worked as an executive marketing consultant at notable startups including True&Co, an e-commerce startup specializing in women’s lingerie. Earlier in her career, Pam served in various business and marketing positions with eBay and its subsidiary, PayPal, Inc. A resident of San Francisco, Pam received her BA from the University of Pennsylvania and MBA from Harvard Business School. Pam is a notable guest speaker for Venture Beat, The Next Web, Lean Startup, and Growth Hacking Forum, as well as an industry expert regularly quoted in Inc., CIO, Business News Daily, CMSwire, Smart Hustle, DIY Marketer, and various podcast and radio shows. You can follow her on Twitter at @pamwebber_sf.

What makes you do what you do?
My dad always told me make sure you choose a job you like because you’ll be doing it for a long time. I took that advice to heart and as I explored various roles over my career, I always stopped to check whether I was happy going to work every day – or at least most days :). That has guided me to the career I have in marketing today. I’m genuinely excited to go to work every day. I get to create, to analyze, to see the impact of my work. It’s very fulfilling.

How did you rise in the industry you are in?
I had a penchant for numbers and it helped me stand out in my field. This penchant became even more powerful when the Internet and digital marketing started to explode. There was a great need for marketers whose skills could span both the creative and the analytic aspects of marketing. I capitalized on that growth by bringing unique insight to the companies I worked with, well-supported with thoughtful analysis.

Why did you take on this role/start this startup?
I’m not sure this is relevant to my situation as I had been a marketing leader in various start-ups and companies. I took on the role at 99designs because I was excited by the global reach of the brand and the opportunity the company had to own the online design space. I especially liked the team as I felt they were good at heart.

The challenge I’ve faced in my time at 99designs is how do I evolve the team quickly and nimbly to address new challenges. The work we do now, is very different than the work we did a year ago and even the year before that. There is a fine line between staying focused on the goal ahead and being able to move quickly should that goal shift.

Do you have a mentor that you look up to in your industry or did you look for one or how did that work?
There is no one I’ve sought out or worked with over my entire career as my “mentee” needs have changed so much over the years. There are many people who have helped me along the way. For example, one of my peers at eBay, who was quite experienced and skilled in marketing strategy and creative execution, taught me what was in a marketing plan and how to evaluate marketing assets. As I have risen to leadership positions over the years, I often reach out to similarly experienced colleagues for advice on how they handle situations.

How did you make a match if you and how did you end up being mentored by him?
I learned early in my career that it rarely hurts to ask for advice. So that is what I have done. Additionally, there are people that are known to be quite helpful and build a reputation for giving back to others in advisory work. Michael Dearing, of Harrison Metal and ex-eBay, is one of those people. I, as well as countless others, have asked him for advice and guidance through the years and he does his best to oblige. Finding mentorship is about intuiting who in your universe might be willing and whether you are up for asking for help.

That being said, generally, I have found, if you are eager to learn and be guided, people will respond to the outreach.

Now as a leader how do you spot, develop, keep, grow and support your talent?
I generally look for a good attitude and inherent “smarts”. A good attitude can encompass anything from being willing to take on many different types of challenges to working well amongst differing personalities and perspectives. Smarts can be seen through how well someone’s done in their “passion areas” (i.e. areas where they have a keen interest in pursuing).

I try to hire those types of people because in smaller, fast-growing companies like many of the ones I’ve worked in, it’s more often than not about hiring flexible people as things move and change fast.

Once those people are on my team, I try to keep them challenged and engaged by making sure they have varying responsibilities. If I can’t give them growth in their current job or in the current company, I encourage them to seek growth opportunities elsewhere. I’d rather have one of my stars leave for a better growth opportunity than keep them in a role where they might grow stale.

Do you consciously or unconsciously support diversity and why?
I consciously support diversity. When I am hiring, I am constantly thinking about how to balance the team with as broad a range as possible of skill sets, perspectives, etc. to ensure we can take on whatever is thrown at us, or whatever we want to go after.

What is your take on what it takes to be a great leader in your industry and as a general rule of thumb?
I’m going to assume a great leader in my industry to mean a marketing leader in a technology company. I think a great leader in this industry is not afraid to learn new tricks no matter their age – it’s the growth mindset you may have heard about. I have a friend who inspires me to do this – she purchased the Apple Watch as soon as it was available, and was one of the first people I knew to use the Nest heating/cooling system. She’s not an early adopter by most definitions, but she adopts the growth mindset. This is the mindset I, too, have sought to adopt. In my field of marketing, it most recently has meant learning about Growth Marketing and how to apply this methodology to enhance growth. Independent of your industry, I think a growth mindset serves you well.

Advice for others?
I have been at 99designs for 3.5 years. During that time we’ve invested in elevating the skills and quality of our designer community, we’ve rebranded to reflect this higher level of quality, and have improved the satisfaction of our customers. Our next phase of growth will come from better matching clients to the right designer and expanding the ability to work with a designer one-on-one. We have the best platform to find, collaborate, and pay professional designers who deliver high quality design at an affordable price, and it’s only going to get better. I’m excited to deliver on that vision.

Pam Webber
Chief Marketing Officer of 99designs
Twitter: @pamwebber_sf

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