Most of you have probably heard about Bitcoin – it’s big business and has made a lot of people very rich! There are 17 million bitcoins in circulation and by May 2018 the Bitcoin market was valued at $140 billion. One Bitcoin is currently worth circa $7.6k and in 2017 the price of a bitcoin has ranged from $20k (Dec 17) to just under $1k (Jan17). It’s clear that there is money to be made here but it’s a volatile market which can be quite off-putting to business.
Bitcoin is a type of cryptocurrency (a digital or virtual currency that uses cryptography for security). What is cool about Bitcoin is that it is decentralized and runs across a distributed ledger using something called blockchain technology. This means that Bitcoin transactions are recorded across many computers instead of in a single place. This is essentially a security feature and makes cryptocurrency difficult to counterfeit. Also, because it is not issued by any central authority it is theoretically immune to government interference or manipulation.
To make things even more complicated, there are now over 1,500 different cryptocurrencies in play – each with its own interesting sounding name, marketing spin and passionate group of supporters telling you that their technology will change the world. There are numerous potential use cases for crypto in sport and Laura K Inamedinova, from LKI Consulting said: “It could be divided between sports fans and actual professionals. For example, crypto use could provide a more convenient way to purchase tickets to certain events.
Also, Blockchain could operate the data of sportspeople, including physical measurements and doping tests.”
Cryptocurrencies are easy to buy and sell - there are loads of digital currency exchanges on-line that will allow you to do this. You simply convert your fiat currency (a more traditional government backed currency such as a Euro or a pound) into the desired cryptocurrency and pay a fee for the privilege (just like doing a currency exchange at the Post Office). Also, some reputable companies such as Expedia, Gyft and Microsoft now accept Bitcoin and other cryptocurrencies as a method of payment. It’s quite easy to do and there are lots of payment gateway services that can easily enable your business to accept cryptocurrencies. It’s a big market and certainly an opportunity for companies that are willing to accept these currencies.
However, there are other things to consider before we all rush to accept cryptocurrencies. The anonymity of crypto means that technologies such as Bitcoin have been used for illicit activities. Look up the silk road on-line and you’ll see some of the negative use cases for crypto. Some people have a strong ethical opposition to crypto and reputationally this is something that your business might need to consider – do you want to accept currency that has an unknown point of origin? Furthermore, HMRC may ask you to account for its value, and then pay tax on the virtual profits as crypto is viewed as an asset not a currency. Some countries are even banning cryptocurrencies or actively making them harder to buy.
Industry heavyweight David Parker, from Polymath Consulting, said: “All Cryptocurrencies that operate in an unregulated manner without full AML and KYC in place should be made illegal to own, trade or sell in my view. I am not against crypto per se, just unregulated crypto. All it needs is one exchange not to KYC customers and the whole crypto currency becomes open to use by the black market. Yes, you can trace who owned it, but how does a random set of numbers support real identification of ownership.”
Anti money laundering (AML) and Know Your Customer (KYC) are very important things to consider, so if you do decide to engage with crypto, it’s worth evaluating this further.
Another option might be to create your own cryptocurrency! At a recent conference in Belgrade called xCEEd, we built our own cryptocurrency (programmed in Ethereum and called xCEEdium). Every delegate was given an allocation of xCEEdium as part of their ticket and they could spend this at our retail outlet on-site. By having a shop onsite, xceedium had a value – my 800 coins could buy me a hat and a t-shirt, but if I gathered another 1,000 coins then I could “buy” a phone or a bag or some other pretty cool prizes. We then allowed people to earn xCEEdium by performing key activities that we wanted to encourage at the event, such as requesting meetings or scanning QR codes on sponsor stands, delegate badges and other key areas. Because this was a closed loop use of the technology, there was no need for KYC and it essentially worked a bit like a loyalty card and was a huge success. It was so good, in fact, that we will be showcasing this same technology via our event app at the National Running Conference in January 2019. It’s an interesting use case and, I think, showcases some of the alternative applications for these technologies.
To conclude, you absolutely cannot ignore cryptocurrencies – the market is growing exponentially and is showing no signs of stopping. There are opportunities for companies that are willing to accept cryptocurrencies and engage with these new ways to pay. However, if you do decide to engage, it is important to understand and minimize your exposure to the risks associated. Exposure to market volatility can be managed but managing the reputational risk is harder to evaluate.
A panel of experts will be discussing cryptocurrencies and alternative methods of payment at the National Running Conference at the NEC on 18th January 2019