2018: The Year of a Financial Revolution in Gibraltar! Cryptocurrency, Blockchain, FinTech…

By 2nd January 2018News
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When I was approached recently and asked to write an article about Blockchain technology and FinTech my first thought was ‘Minecraft and Japanese soup?’  and I couldn’t for the life of me work out why a recruitment company was asking me about such things.

Well, it turns out there’s been a financial revolution brewing while I had my head firmly in the Facebook abyss. (You know the phenomena when you have 12 things to do on your list so you just ‘have a quick check’ of Facebook and then you find your scroll finger worn down to the bone and it’s 4 hours later and you have achieved absolutely nothing on the list? Yeah. That. For years.)

You’ve heard of bitcoin, right? We all have. It’s one of those things that by virtue of being familiar with the name I assumed I understood. Until someone asked me to write about what it actually is and how it really works. At that point, my face did the ‘confused calypso’ and I realised I actually, really didn’t have a clue.

So, I did what any sane person would do in that situation; I started googling.

I had heard of the term Bitcoin in association with some, well, dodginess, quite frankly. The words ‘dark web’ and ‘silk road’ were flying through my head and my ‘confusion’ turned a bit ‘frowny’… For the innocent and pure of you out there; the silk road was an online marketplace – much like Ebay or Amazon but it operated undercover on the dark web because the products being traded weren’t exactly legal (I won’t go too far into it – let’s just say on the scale of legality not as bad as weaponry but worse than copyright theft). Bitcoin was at the time the preferred method of payment on that marketplace – probably due to its anonymity and therein lies the association. However, the silk road is a thing of the past and it was closed down by the FBI in 2013. Contrary to what was predicted Bitcoin totally shook off this association and did not lose any steam, it has continued to grow in value, popularity and strength.

 

the concept

From what I’ve learnt, cryptocurrencies came about initially as a side product of a newly developed method of peer-to-peer payments in 2009. No-one knows the real name of the person who invented it – he or she used the pseudonym of Santoshi Nakamoto. But it is known that they wanted to invent a method of transacting financially that everyone globally could access that wouldn’t need a centralised point of supervision and verification. IE, why do we allow banks to move and control all of our money? (We all remember how popular banks were in that era)

Here’s an example of why peer-to-peer cryptocurrencies came about: When we shop, we will take money from our bank accounts – usually with a purchase made on a debit card, or by taking money from our account via an ATM. The bank account that we use has fees and charges attached, not to mention our funds are used for investment purposes by the banks who make money from our money, and then again from us every time we go 25 pence over drawn (they once charged me for the letter they sent to me to tell me they were charging me for going overdrawn! I kid you not!). Then, the retailer pays another set of fees to their bank for the use of their PDQ equipment and the cost of processing each payment. Money spent, money earnt; both ways the banks take their cut. So, would it not be better for the consumer and the retailer alike to make payments directly to each other? Without the fees the banks charge?

Thusly, a digital currency is born. We transact directly between ourselves with no fees or charges or bonus-greedy fat-cats. But, without a ‘governing body’ how could we be sure that these coins weren’t being duplicated, copied, pirated or ‘double spent’? This is where blockchain technology and a shared ledger come in.

 

the technology

The important thing to know about the concept of cryptocurrency is its transparency. It doesn’t use a third party like a bank or financial agency to ensure fairness and honesty – it uses everyone involved. Yeah that’s where my head started to hurt a bit too.

Here’s how I understand it;if you have a physical object that you wish to sell, or give or swap you hand it over and it’s gone – transferred from you to them. It can’t be duplicated, copied, sold twice or thrice… because you no longer have it.

Not so with digital information. If we create a finite amount of coins/units/whatever you want to call it – how do you stop people cloning it? Selling it twice? Well, I guess you keep a record.

When you want to keep a series of records of a transaction you can use a ledger. You write in it everything that comes in and everything that goes out and what has moved where and keep a running total.

This is essentially what a cryptocurrency does; but that ledger is public or shared. Everyone has a copy of it and every transaction is logged on everyone’s copy. If someone tries to cheat and sell twice or fiddle the figures then their ledger won’t match up with everyone else’s and the transaction will be declined.

So; how are these transactions verified? This is where we come to mining. Aha, I thought, I’m qualified at this, I have an 8 year old and minecraft has been part of my daily life for several years now. And actually; I’m not too far wrong. Like the gold that lies at the bottom of the current monetary system, it’s the value of the man hours that go into mining that gold that makes it worth more or less, depending on how hard it is to find, how much there is of it, and how many people are digging for it.

When transactions are initiated through the network they need to be verified across a certain sample of ledgers to make sure they are bonefide. The system does this by generating an algorithm that is a combination of the encrypted security keys from each end of every transaction. People, and more often these days, software use a trial and error basis to solve these complex equations, of which only a few possible answers can exist. For each transaction they verify before anyone else does they earn a small amount of the coin base. This process is known as mining. The miners make their ‘gold’ and it ensures a fair, honest and infallible method of verifying transactions.

Each time a transaction is verified by other users it becomes a block that is added to the preexisting chain. Blockchain, geddit?

So, that’s the general concept of these cryptocurrencies and the technology that allows them to function.

 

the future

On a practical level, what does it actually mean for the future of finance and employment here in Gibraltar? It means that the revolution is a comin!!

In a world first, Gibraltar has recently launched a bespoke financial services licence for established Blockchain/FinTech companies – they can now transmit or store cash and assets in much the same way banks do. This is leading to plans to also regulate Initial Coin Offerings (ICOs) in Gibraltar – these are the less established newcomers into the FinTech world – startups that are just trading but so far haven’t been licensed and regulated.

This puts the established cryptocurrency companies in direct competition with banks and paves the way for new FinTech companies to set-up here – bringing huge amounts of industry and employment opportunities.

Gibraltar are way ahead of the rest of Europe with this new legislation – that combined with the lower rates of business tax here will ensure that this industry is set to positively explode onto the Gibraltar industry scene.

 

the opportunities

‘But I have never worked with Japanese soup, I mean, FinTech before – I don’t even know what it is so what bearing does this have on me?’ Ok, so the idea of Blockchain technology and cryptocurrencies might be new to you, but financial services, design, marketing, or technology aren’t.

Are you already an amazing full stack or front end developer? If so, making that switch from iGaming or finance won’t be a leap for you at all! Just learn a bit of the jargon (see jibber jabber below), have a willingness to learn and transfer those skills!

Not too techie? Never fear, because obviously, whilst there is a strong technological element, Blockchain/cryptocurrency startups will also need skilled people in the same way any budding company will – with backgrounds in areas such as operations, marketing and languages.

There are other reasons to look at when considering a career in this booming market – firstly, it’s always good to get in early… What I wouldn’t give to have got into gaming 15 years ago! Secondly, on the whole the salaries are between 10-20% higher and there is a 22% more chance of landing a job that lets you work remotely.

Sound good? Yeah, it does, doesn’t it?

So, all in all, I’m quite glad that I took my face out of Facebook for a while. I feel like I’m getting involved in the future of finance and that I have, for once in my life, not missed the boat!!

 

 

the jibber jabber

 

FinTech Abbreviation of Financial Technology; this term covers all aspects of digital currency and the technology behind them. Nothing to do with soup, incredibly.
Blockchain The method of public verification of transactions. Each transaction (block), once approved on many ledgers is added to the chain. Once added it is ‘writ in stone’ so to speak and becomes valid.
Cryptocurrency All forms of currency that do not exist in the physical world.
Bitcoin One form of cryptocurrency. The original.
Shared Ledger A digital ‘record’ of all coins in existence that everyone has a real-time copy of.
Mining Diggin’ for gold  coins! Miners verify transactions by solving complex problems and in doing so get paid in coin.
ICO Initial Coin Offerings. Cryptocurrencies to watch out for in the future.
Ethereum, Ripple, Litecoin, IOTA, NEM, Dash, Stellar Other cryptocurrencies.

 

By Amy Reyes