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Price news
Following its failure to break the $300 barrier, the bitcoin price is continuing to slump, with murmurs building in the community of yet lower prices ahead.
Seven-day average price: $243.13 End of week market cap: $3.2 billion
(Prices quoted according to Coindesk Bitcoin Price Index)
BNY Mellon Testing Blockchain Technology
Headed by CIO, Suresh Kumar, Bank of New York Mellon have begun extensive testing of bitcoin technology, with particular focus on the blockchain. Rather than utilise the existing bitcoin blockchain, BNY Mellon have decided to fork the code and create a separate chain, with the new coin being called “BK Coin”.
“IT managers with virtual accounts will dole [BK Coins] out to staff as a reward for creating certain software services. BK Coins may be redeemed for gift cards, vouchers and other perks…the program [may eventually be expanded] to allow business managers to reward employees with BK Coins for publishing marketing articles or giving presentations.”
This seems like a fantastic project to get staff at the bank familiar with the concepts behind the technology through hands-on experience. But beyond that, creating an internal blockchain and coin dependent on its own separate mining network is unlikely to lead to any improvement in efficiency at the bank.
Bitcoin’s strength lies in its decentralised nature. This increases the security of the network and funds, but comes at the expense of efficiency. A centralised server is always going to be more efficient than a decentralised one. Why use miners when there is no value incentive to protect the network? Why have a fixed limit on the token supply?
I would argue that if BNY Mellon want to create an internal value transfer system, they could instead create their own centralised ledger which verifies each transaction immediately, rather than expending the processing power and time required for bitcoin transaction verification.
Due to the prevailing (but arguably wrong) perception that the blockchain is the real innovation behind bitcoin, I think we’ll be seeing more of this kind of experiment. While they may throw up some interesting results, I would just be concerned that a failure to produce increased efficiency may be blamed on the technology, rather than the implementation.
Exchange News
- Buttercoin Exchange Closing.
Google Ventures and Y Combinator backed bitcoin exchange, Buttercoin, gave a surprise announcement last week that they were deciding to close their business. In what is sadly an unusual outcome for bitcoin company closures, Buttercoin is completely solvent and will be returning customer funds in full.
With the consistently falling price, it’s a difficult climate for bitcoin businesses. Buttercoin’s lack of results in providing any meaningful solution for international remittances seems to have spooked investors, and the failure to raise any further investment led to the decision to close doors.
If bitcoin prices continue to fall or stagnate, we are likely to see yet more bitcoin businesses get squeezed out. Let’s hope they can all close in as honourably as this.
- Canadian Exchange Acquired by Coinsetter.
Cavirtex, the former leading bitcoin exchange in Canada, has risen from the ashes after an acquisition by US exchange, Coinsetter. Coinsetter will be bringing their trading technology, security and banking relationships to the exchange, which should give current leader, QuadrigaCX, a few things to worry about.
Full disclosure: Neil Woodfine is an employee of bitcoin exchange OKCoin and is invested in bitcoin. The views expressed above are purely the author’s own and do not represent any organisation. None of the above should be considered as investment advice.
