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TMCNet:  Love it or hate it 'Bitcoin here to stay' [Cyprus Mail]

[February 23, 2014]

Love it or hate it 'Bitcoin here to stay' [Cyprus Mail]

(Cyprus Mail Via Acquire Media NewsEdge) By Elias Hazou "BITCOIN isn't going away," confidently declares Danny Brewster, seated in a swivel chair in his Nicosia office.

Well, he would say that wouldn't he? Then again, the young CEO of Neo & Bee has a lot riding on the project. Brewster has invested €6m of his own money into Neo& Bee, his brainchild. Whatever you may think about the bitcoin currency, it's hard to shake off the feeling that Brewster and the people behind him have done their homework. Time will tell, but this doesn't sound like a flash in the pan.


Tomorrow bitcoin marketers Neo& Bee open for business, the culmination of several months of preparations. They will initially be offering customers brand bitcoin wallets.

Explains Brewster: "Neo and Bee are two separate brands that fall under the same roof. Neo is a physical portal for people to get educated on the bitcoin technology. They can also buy bitcoins directly from us, but we won't sell to them until we know they got the right understanding of the technology." That's the Neo part. Coming soon is Bee, a payment network for merchants. In the future the company will be providing merchants with the physical hardware (POS terminals), or an online portal to accept payments in bitcoin.

And once merchants accept a payment in bitcoin, Neo & Bee will offer them the option of buying back those bitcoins from them instantly, so the merchants aren't exposed to the current market volatility of the crypto currency.

"It's not going to be a bank," says Brewster. "A bank does lending. All we are is an exchange and a hosted wallet provider. We can't put our hands into customers' wallets and take that money and gamble and create more money, like a bank does.

"If a customer has a wallet with us, and they buy bitcoins they deposit with themselves. And even if we don't exist they can still access and use those bitcoins. This is the first real alternative to banking. The beauty of bitcoin is that you become your own bank." What's bitcoin? It's a peer-to-peer digital currency that functions without a central authority. The crypto-currency was first introduced in January 2009 by a person (or persons, no one knows for sure) going by the handle 'Satoshi Nakamoto'.

The digital currency is stored in anonymous "electronic wallets," or code, and can travel from one wallet to another by means of an online peer-to-peer network transaction. Think BitTorrent, but with money.

Bitcoin uses a shared transaction database called the "block chain", or log, to achieve distributed consensus about coin ownership. Once accepted, transactions can't be undone or denied. And it's open source.

Now a lot has been said about bitcoin – it's just another bubble that will pop, etc. Yet even the most gung-ho advocate will tell you not to put all your wealth into this digital currency.

Brewster takes a similar line: "If an individual decides for themselves to buy them, we will facilitate that. But you'll never find me or anyone else saying 'go out and buy bitcoin." What with the 'Silk Road' incident, Brewster freely concedes that bitcoin is susceptible to money laundering.

"But contrary to what has been written about bitcoin, I don't know any smart criminal that would use a system that keeps a log, a record that can never be changed and in 10 years' time can come back and bite you.

"So we at Neo need to know who you are. We check that against PEPs (Politically Exposed Persons) lists and sanctions lists. It's not just a case of any Tom, Dick or Harry walking in to open a wallet." How will Neo & Bee make their money? "A lot is made through our own reserves in bitcoin. When we sell bitcoins we have our own index price, so we'll make on that spread. Plus we have our own trading desk. Also, when a merchant accepts a payment we'll buy the bitcoins off them instantly…essentially we're going long on bitcoin. We believe in it.

"Whereas if we were to hold everything in euros, we know that the European Central Bank can go and press 'Print' a few more times." Neo & Bee is part of Part of LMB subsidiaries, a UK-based company. So their main profits aren't made in Cyprus, but rather around the world through their other operations, such as the Neo Easy Coin online platform.

At this point let's explain the difference between lowercase bitcoin and uppercase Bitcoin. The former is the digital currency. It's just one application of Bitcoin, which encompasses the broader technology.

'Satoshi Nakamoto' designed the original Bitcoin protocol in 2008 and launched the network in 2009.Without getting too techie, the protocol for the first time satisfactorily solved the distributed consensus problem – how to get thousands of different computer systems to agree to a single dataset and timeline. It was a huge leap in computer science.

That's where it gets exciting. Going forward, and as the Bitcoin protocol is tweaked, people will be able to use it for such things as legal contracts, derivatives and so on. The possibilities are virtually endless.

And that's what Neo & Bee are eventually looking to tap into. At some point, they'd like to offer derivatives, futures and stock options. Right now bitcoin is not considered a financial instrument here, and the company have been talking to the Securities and Exchange Commission in the hopes of changing that.

Should they succeed, Cyprus could well become the first regulated bitcoin derivatives market in the world; but this needs to be done fast, because others are already working on the idea.

Brewster says he's already in talks with investors for hundreds of millions to come into the country. His outfit, he claims, can bring an extra €200m into the economy within the first year, just from their other operations.

The aim is to set Cyprus up as an "incubator" for bitcoin business, enabling entrepreneurs to come here, creating jobs and cross-selling opportunities.

"The first place that forms a concise set of rules will enable so much movement into the economy to provide the right environment. Right now everything is up in the air. A lot of people are expecting to move to the best jurisdiction to set up shop." If that happens, Brewster likens this Mediterranean island to a potential Silicon Valley for a Bitcoin industry.

And Neo & Bee aren't skimping on software development either. So far they've spent well over €5m, and have cobbled together a team of 25 developers, including some of the brightest computer science minds in the world. Tellingly, they've engaged leading Bitcoin evangelist and entrepreneur Andreas Antonopoulos as a distributed systems consultant.

There appears to be a lot more going on here than just bitcoin the currency, which may or may not turn out to be just another Ponzi scheme. Like it or not, Bitcoin with a capital 'B' is here to stay.

  Send to Kindle (c) 2014 Cyprus Mail Provided by Syndigate.info, an Albawaba.com company

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