In 2009, an anonymous person, or perhaps a group of people, who goes by the name of Satoshi Nakamoto, invented Bitcoin, the now popular cryptocurrency. It is a digital asset and a worldwide payment system known to this date. Like cash, Bitcoin is used to pay for things, whether in a convenience store like 7-Eleven or it can even be used to book hotels on Expedia and more. Only difference is that transactions are done without a middle person (which means no banks). However, as time goes by many are beginning to doubt its value and viability.
Bitcoins are stored in a digital wallet, on computers or smartphones. It is somewhat a virtual bank account but is not insured by the Federal Deposit Insurance Corporation (FDIC). Although every transaction is recorded, the names of buyers and sellers remain anonymous. Only their wallet IDs are revealed.
On Saturday, January 20, Startup Ipoh organised a forum on Bitcoin at M Roof Hotel. The discussion was led by radio announcer Fabian James, or better known as Phat Fabes on Mix FM and Aaron Pinto, network content manager of Lite FM, Sinar FM and THR Gegar.
Bitcoin mining is the process of transactions being verified to the blockchain, a decentralised database system. The process involves assembling recent transactions into blocks and solving a computationally tough puzzle. First one to solve the puzzle gets to place the next block on the blockchain. People compete to mine, in order to be rewarded with bitcoins.
When you sign a Bitcoin mining contract, there are two ways to mine your Bitcoin; pool mining and cloud mining. Pool mining is where miners pool their resources to share their processing power over a network. The reward will then be divided equally, based on the amount of work contributed by each person to find a block. In other words, pool mining works stronger as a team.
Cloud mining, on the other hand, is when you pay an organisation a large amount of Bitcoin and in return, they give you a part of the mining income received, as they run their own mines. Most investors prefer pool mining over cloud as cloud mining is usually done by anonymous organisations and you will have no trace of them.
The difference is that pool mining is like physically owning a machine and this is taken care of by companies. In fact, you can even visit your mines and machines at selected mining farms. The machines are physical assets. The cost price to produce one Bitcoin is around USD1000.
"There’re two schools of thought: the bankers and the cryptocurrency world. People say there's no value to Bitcoin but there’s an intrinsic value to it. The value is determined by what the world would accept as the price of Bitcoin. If everyone were to trust it, the value will go higher," said Aaron.
"Some countries like Zimbabwe actually use Bitcoin on a daily basis to pay for everything since its currency has no value. The only thing you need to access Bitcoin is the Internet and everyone has that. With Bitcoin, it's like having everybody in the world having access to money," exclaimed Fabian.
Bitcoin miners are governed by the price and difficulty. The higher the price is, the more value it carries. Also, if more miners get into the act, it will only get harder.
The first Bitcoin ATM machine in Malaysia is right here, in Ipoh and is run by a company called Pinkexc. Pinkexc was established in September 2016. Two months after their establishment, they imported an ATM machine from Portugal, making it the first here. In the beginning, the machine only accepted Bitcoins. Recently, they upgraded the machine and it can now accept other cryptocurrencies like Ethereum, Dash coins and Litecoin.
To use the two-way machine, you need to instal a wallet application on your phone or tablet. Every wallet has its own QR code to scan when you buy or sell a Bitcoin. The minimum amount to buy or sell is RM50 while the maximum is RM500.
"As more people are starting to get involved with Bitcoin, the feedback here has been okay. We even have foreigners and people from all over coming to educate themselves on cryptocurrency and use the machine. Currently, we're planning to have another 100 Bitcoin ATM machines in South East Asia itself and 20 all over Malaysia," said Nur Inani Zayani, the person in charge.
For those keen on learning more about Bitcoin, Pinkexc is located at 1, Jalan Meru Bestari A14, Medan Meru Bestari, 30020 Ipoh. It is open Monday to Friday (9am-5pm) and Saturday (9am-1pm).
A word of caution for readers. It was reported on BBC News recently that Bitcoin is nothing but a scam employing the multi-layered pyramid system. There are claims that it is also a Ponzi scheme which benefits early investors over latecomers.
Regardless whatever, Bitcoin, being a newbie in the banking world, should be treated with extra care. And one other downside is the increase use of cryptocurrency such as Bitcoin by the underworld to cover its money trail. Since transactions are virtual it is near impossible to identify both depositors and recipients.