Bitcoin Soars In Japan, But What’s ‘Synthetic Currency?’

Bitcoin Hacker Residency Program

This week’s Bitcoin Tracker finds Russia’s resource-guarding of the ruble nixed by an acceptance of bitcoin, for now. Other news finds that regulation in Japan has spurred an astounding rise in bitcoin transactions, and a “synthetic currency” has emerged – a complex idea, but easier to grasp if you think “hedged gold.”

Russia’s love-hate relationship with digital currency continues. One minute officials are threatening to punish bitcoin operatives and traders, the next minute they are suggesting that citizens can use bitcoin “in areas where such activities are legal.”

A few days ago, Cryptocoinsnews said that Russia’s announcement that it would penalize whoever is involved in bitcoin operations would “end two years of speculation” on Russia’s stance. It didn’t. At that time, Russia considered cryptocurrencies to be channels for money laundering and other forms of criminal activity. Now, Russia has overcome its fears and has opened the first digital currency exchange.

The new exchange will provide 24/7 currency exchange services and, according to News BTC, the Russian exchange is an actual office. This could encourage the patronage of traditional consumers who are used to financial exchange through a bank or other service provider by easing the transition to digital transactions.

This might be an effort by the government to be on top of the bitcoin cyber world before its users disappear into the deep dark beyond of the dark net, and the government is closely monitoring the digital currency space in the interests of forming a regulatory framework later this year.

For now, traders can only sell on the exchange until the exchange is officially registered. One thing of note, however, is that if Russia is anything like Japan, regulation could have quite an effect on cryptocurrency trading.

Something’s Afoot In Japan For Bitcoin

One of the biggest hurdles for bitcoin is convincing potential traders that it is less volatile than other fiat currencies. Japan seems to be overcoming this hurdle by introducing regulations on bitcoin use. According to The CoinTelegraph, in Japan, there has been a rise in the value amount of bitcoin trades since the first half of 2016.

BitFlyer, which conducts market research, reports that the virtual currency exchange had the largest bitcoin trading volume in the first half of 2016 across Japan, and the number of registered users reached 200,000 in June.

In the first half of 2016, 7.8 million bitcoins (worth about 430 billion yen) were traded in Japan, and Seed Planning, another market research firm, estimates bitcoin’s annual trading volume to soar to 2 trillion yen this year. So, what’s going on?

Regulation. After the Mt. Gox scandal, Japan imposed rules and regulations to control bitcoin and virtual currency exchanges. These measures are accredited with a 50-fold increase in bitcoin trading year-on-year for January to June 2016.

As the government continues to support bitcoin’s legitimacy — it recognized bitcoin as a currency earlier in 2016 — trading may take off as the regulatory framework under the Financial Services Agency subsumes more users.

Japan is now the second bitcoin market in the world after China, beating out the U.S.

Airbitz is Airlifting Bitcoin

Airbitz is proving a strong ally in bitcoin’s rise to legitimacy. The leading bitcoin wallet provider has introduced its plugin API, which can integrate plugins for the Airbitz mobile application.

Bitrefill, which allows mobile phones to be topped up using bitcoin in the countries that it covers, is the first plugin from Airbitz. But perhaps most importantly for bitcoin, any application or service in the bitcoin space will be able to use the Airbitz Plugin API, which will likely encourage bitcoin mobile trades. For example, the bitcoin wallet Plugin API and the already released Airbitz SDK will support the Arcade City mobile ride-sharing app.

Think Digital Currency Transactions Are Complex? Try Synthetic Currency

If you once found the concept of digital currency complex, try synthetic currency. This is a concept developed by Bill Bardhydt, and it is so convoluted he is creating a series of blog posts to explain it.

Here’s the elevator-pitch version. Bardhydt has been parsing the problem of mobile money transfers and digital exchange for many years and thinks he has a solution with Abra, a money transfer service that sends money from one mobile number to another anywhere in the world.

Abra’s success is based on the absence of third parties from online payments. Bardhydt told American Banker Editor-in-Chief Marc Hochstein, “I realized what I wanted was a model that allowed two people to share a digital asset between them with no middlemen. That’s really hard; especially if the digital asset is supposed to be dollars on one end and pesos or euros on the other end.”

But what about digital currency such as bitcoin? Price volatility is the problem here; consumers need some type of assurance of its stability. Hence, Bardhydt’s idea of a digital dollar, or “synthetic currency,” as Bardhydt calls it, which acts a lot like hedged gold.

Here’s how it works. The Abra mobile app trade conducts a CFD trade. Each phone has a private stash of bitcoins in a smart contract hedged to the value of any Abra-supported currency.

According to Bardhydt, “A synthetic currency is basically the digital equivalent of hedged gold. If I owe you $100, in theory I could hand you $100 worth of gold. But, of course, if you couldn’t sell the gold immediately, you’re taking volatility risk on the price of gold. … A CFD would eliminate the risk in both directions. … We could more or less agree that I was handing you $100, even though no paper money was changing hands.”

Getting money onto the app in order to trade is done through bank accounts, credit cards and other traditional payment options. The unbanked can use cash at tellers who will sell digital cash for physical cash.

Solution chasing a problem that really doesn’t exist?

Bitcoin Yes, Blockchain No

Russia is not the only one to have a change of heart. Stefan Thomas, the man who once considered bitcoin “a resource for the masses,” has now written an essay espousing the incompatability of blockchain with industries such as finance, health care and international trade.

Thomas is creating waves among software developers and miners with his recent essay called “The Subtle Tyranny of Blockchain.”

“Blockchains are a pain to work with,” said Thomas, chief technology officer of Ripple Labs. Thomas’ main gripe with blockchain is that all stakeholders must agree to deploy new software before it is rolled out. This renders networks somewhat rigid, whereas the internet, for example, can be changed by anyone on a small scale, and those changes can then be adopted more widely.

“The fact that one corner of the system can be updated and good ideas can eventually spread to the system as a whole has been essential for the web’s ability to keep pace with technological innovation.” Thomas said.

Ripple uses a distributed ledger system for cross-border exchanges, which moves money in minutes. Thomas is not saying that bitcoin will not be a new type of currency, but he is discounting blockchain.

Ireland, on the other hand …

Blockchain To Decorate the Emerald Isle

To end on a more positive note, Rakuten, the Japanese eCommerce giant, is continuing its pursuit of blockchain technology and has announced that it will open a blockchain development lab in Belfast, Ireland. In November 2016, Rakuten put aside $100 million for the acquisition of promising startups in Europe and North America and has invested in including Currency Cloud, WePay and Bitnet.

Rakuten also gains the expertise of CTO Stephen McNamara and VP of Engineering Fergal Downey when it acquired IP assets from Bitnet Technologies. Bitnet Technologies provides blockchain-powered digital payments platforms, which Rakuten plans to apply to FinTech and eCommerce. PwC had announced earlier in the year that it was would be working on blockchain in Belfast with a team of 40 experts.

Must be the Guinness.


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