Blockchain has been around for a while now. There’s no denying the fact that since it’s inception, the market of cryptocurrencies has grown by leaps and bounds and currently stands well above 50 billion USD. There are numerous startups growing around the block chain ecosystem today; countries like Denmark and Sweden are all in on the idea of eliminating cash in favour of cryptocurrencies. With all the buzz around this revolutionary technology, it becomes quite important that we understand what it is. So last week, Feynmand got the chance of having a one-on-one with Stefan Qin, consultant on blockchain, and founder of Virgil Capital, a diversified blockchain fund.
Below is the conversation edited for length:
Feynmand: Blockchain is a relatively new. People still find it difficult to wrap their heads around what exactly it is. So, what is blockchain, and how would you explain it to a 5th grader?
Stefan: Blockchain is this ledger that is basically a bunch of records all stored on a distributed network. It’s con-proof as all the transaction that has always happened is all stored in the blockchain. So, even if one system goes down, there won’t be a problem as there are, still, lots of computers that have the information.
Now, lets come to the point of expalining it to a 5th grader. Consider you have a a dime and you want to give it to a friend of your in another city. So, what do you do? You give your money to this uncle Joe of yours who has means to move your money back and forth. This uncle Joe was your bank. Now imagine – what if you could send your money to your friend without any middle men and without any middle fee? You can just sent it to him direct and neither he nor anybody else can question the credibility because it’s all there on the blockchain and you don’t need to manage it. Completely decentralized. So, you can’t cheat it and really don’t have to worry about anything except your wallet, and keys.
Feynmand: How did you get into blockchain?
Stefan: I used to work for a company that used to trade in cryptocurrencies and was getting paid in bitcoins, back when it was not all this big. Been in love with the technology ever since.
Feynmand: So, last week was a bit tuff on the market. Value dropped by around 10 billion USD. How do you think will be the future market?
Stefan: Yeah, last week was bit of a disappointment. These are caused generally by people pulling out their from the market. If you carefully study the market, you’ll find the people responsible. So, the future. The near future is going to be promising. The values will rise and everyone will be happy. Although there will be some changes to Bitcoin which, might bring about some surprises after the initial bubble pops. We must watch out when this happens. But still, it’s going to be profitable if you are careful.
Feynmand: According to the architecture, there are only 21 million bitcoins to be mined. When that limit is reached, what if even a quarter of the global population wants one?
Stefan: The beauty of bitcoins is it can also be used in small chuncks. One bitcoin can be divided into countless small pieces – you can even buy a fifth of one bitcoin. Hence, it becomes easy. But yeah, there won’t be enough for everyone. Demand will rise leading to increase in value of bitcoins. So, it is a good thing for those who got their hands early on this.
Feynmand: There are lots of blockchain startups coming up and they have this ICO that can be seen as an IPO in cryptocurrencies. How can common people get their hands on this and how safe is it to take part in an ICO?
Stefan: Okay, so for this, you got to have a bitcoin wallet, some bitcoins in your wallet, obviously, and you must be vigilante for when a certain company you are interested in opens up their gates. During the offering, you must transfer bitcoins to the company’s wallet and you’ll get tokens in return. You must keep them safe for when you want to cash them out. Anyone becoming a part of ICOs must be careful. Since, it’s a new area and bitcoin’s on the rise lots of guys just hold ICOs out of greed; as soon as they have the money, Boom!, they vanish.
Feynmand: You are the founder of Virgil Capital. What is it?
Stefan: We are a diversified block chain fund specialising in arbitrage. So, what is arbitrage? Consider you visit a place where rice is sold $2 a bag and where you live, it is $5 a bag. You buy 10 bags and sell it in you city. That’s straight out profit of $30. This is arbitrage. We do the same thing for crypto-currencies – look out for price differences at different exchanges and seal the deal when we see profit. It’s is really exhilarating.
Feynmand: Arbitage sounds cool , but there are also hurdles in the process. Transactions take a while to confirm, bitcoins transactions are expensive among others. So, any difference in values that are available at the moment will get killed by only the time delay. How are you tackling this problem?
Stefan: Back when it started, the price gaps used to stay for around two weeks so it didn’t matter how much time it takes in clearing a transaction. But now it’s more of a bloodbath. Differences don’t even last minutes, and that is what we specialze in. We have worked hard to set up a sophisticated network which allows us to quickly move our money from one point to another, thus, allowing us to take advantage of the opportunities. So, yes, we make it a point to get a profit whenever we roll the dice.
Feynmand: Are you also into mining Bitcoins?
Stefan: Mining is a very important process and really requires lots of patience. It might take some time before you get your hands on the first coin. Trading works fine for me.
Feynmand: We have a question for you requested by one of our readers. Here it is: What is your bout on Tezos claim of self-governance and it’s future performance?
Stefan: Tezos has good tech, a novel approach, but the people behind anything really matters. I am still sceptical about their exact motives, so I’m afraid of their ability to make something out of their recent raise.
Bitcoin News: https://news.bitcoin.com/
Bitcoin Wallet: https://coindesk.com
Gavin Andresen’s blog: http://gavinandresen.ninja/
IBM in blockchain: https://www.ibm.com/blockchain/hyperledger.html