Up until 2021, cryptocurrency seemed to be a niche, obscure internet fad that was either associated with computer geeks, the dark web or get-rich-quick schemes.
We’ve all heard of that one person who put twenty quid on Bitcoin and turned around thousands, or of the Newport local who accidentally binned £230m of Bitcoin in mid-2013.
This year though, there have been some quiet rumblings in the cryptosphere which suggest this once-small corner of the internet is slowly growing into something that is quite – forgive me, crypto-lovers – mainstream.
Read more: Elon Musk says Tesla will stop accepting Bitcoin as payment due to environmental concerns
To kick things off, in late 2020, Swansea City partnered up with its first cryptocurrency partner, Mercuyro.io.
It’s the first partnership of its kind, and it’s a strikingly different partnership to the corporate hardliners of the past, such as Lucozade or Carling.
Fast forward to 2021 and a bigger rumbling could be heard: Britcoin. (Yes, like Bitcoin, but British.)
In April, 2021, Rishi Sunak ordered the Bank of England to lead an investigation with the Treasury into the feasibility of Britcoin – a British sterling-backed alternative to Bitcoin. It’s not clear yet whether or not this will grow into legal daily tender, but it has definitely stirred up some curious conversations.
On this side of the border, Sol Cinema, a small Welsh independent mobile cinema, has also started to take payments in cryptocurrency.
It might be a fad, or it could be the future, but regardless – cryptocurrency has touched down on Welsh soil, and it’s time to talk about it.
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To start: what is Bitcoin?
In its most simple form, Bitcoin is a form of cryptocurrency, which is a digital or virtual currency. There are lots and lots of different cryptocurrencies around, including Ripple, XRP, Ethereum and Cardano – but Bitcoin is the biggest.
It was first invented in 2009 by a person (or group of people) by the name of Satoshi Nakamoto who wanted to provide an alternative method of banking after the 2008 financial collapse.
This may be a real name, or it could be an alias, it’s unclear. Very mysterious, indeed.
Got you. But, I still don’t know what cryptocurrency is.
Cryptocurrencies are digital assets that you can use as a method of exchange online – meaning you can use them to buy, sell or trade on various platforms.
Unlike assets like gold, cryptocurrencies ‘represent’ value, rather than hold physical value.
Cryptocurrencies operate within a something called a ‘blockchain’, which is essentially a gigantic database of information that cannot be altered or tampered with.
Where does the name come from?
From the word ‘cryptography’, a noun meaning the art of writing or solving codes.
Cryptocurrencies are secured through complex cryptographic computer code, which means that they are impossible to replicate or hack.
Safe to say, it’s a secure method of transaction.
Great, so if I buy some right now, can I pay for my next Asda shop using it?
No – not yet, at least. All of the money that we know and use flows through a centralised bank or institution like Barclays, HSBC or Natwest, so tabs can be kept on everything. Normal banks for instance can flag suspicious activity and flag up who’s paying their taxes and who hasn’t.
Cryptocurrencies on the other hand are ‘decentralized’ through the blockchain (that gigantic, complex database of code), meaning that central banks or other institutions cannot control or question your account.
It’s easy to see why big banks like Barclays have blocked payments to Binance, which is one of the biggest cryptocurrency exchanges in the world.
Sounds dodgy, no offence. Doesn’t this mean that people will use cryptocurrency with illegal motives?
In some cases, yes. When Bitcoin first went mainstream, it was commonly associated with the ‘dark web’ where people would use Bitcoin and other currencies to buy drugs and various other contraband.
It’s also been used by money launderers looking to evade tax.
But, on the flip side, public blockchains like Bitcoin and Ethereum are extremely transparent. The nature of blockchain technology means that all of the data is immutable, traceable and permanent, meaning anyone can see the balance and transactions of any wallet address.
This means that nobody – not the government, not even advanced hackers – can challenge, alter or delete what you own on the blockchain.
If I buy some cryptocurrency, can I keep it in my bank account?
No, because your bank account is centralised – whereas cryptocurrency is by nature decentralized (i.e. it’s independent).
When you buy any sort of cryptocurrency, you store it in a digital wallet that uses advanced encryption, rather than a standard bank account.
Sometimes, people also store their cryptocurrency on external hard-drives, which is often called a ‘cold wallet’ (cold meaning offline). This is the safest option, but you might want to be careful to not throw it away, because lost cryptocurrency is impossible to recover.
This one person from Newport knows all about that.
So what you’re saying is that if I lose the password to my digital wallet, there is nobody who can help me recover it?
Nope. Nada. Nobody. You will be locked out until you somehow find the password.
Currently, there is roughly £119 billion worth of lost Bitcoin in the world as a result of lost or forgotten passwords. That’s the downside of decentralization – you’re on your own.
Could very well be a fad, though.
It could very well be, indeed. But, as cryptocurrency enters its 12th year with more and more big-time adopters and investors, it’s unlikely to disappear into the sea of fad phenomena like Temple Run or Heelys.
What is questionable though is the extent to which it will be used as a daily method of exchange.
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Swansea City have just signed a partnership with Mercuyro. What’s that all about?
Indeed – last year, Swansea City announced its partnership with Mercuyro.io – a European cryptocurrency payment processing provider. It’s the first partnership of its kind, and it points to the fact that cryptocurrency is worming its way into daily life.
Petr Kozyakov, co-founder and CBDO of Mercuyro.io, said: “Our partnership with Swansea City rests upon similar values – determination, teamwork, and performance – and signifies the union of sports and technology.
“The journey starts on a football field and goes beyond it driven by the alliance of two passionate communities: football fans and cryptocurrency enthusiasts.”
Is it true that in May, Tesla CEO Elon Musk started to accept Bitcoin payments for Tesla cars?
Yes, and that’s one small example of how cryptocurrencies are becoming more mainstream and less associated with criminal dealings. The company however stopped this after learning that Bitcoin mining consumed more energy in one year than the whole of Argentina.
PayPal, which has the largest merchant spending network in the world, now also lets US spenders make purchases with various cryptocurrencies.
Wait – you said ‘mining’. What do you mean by that?
In the world of cryptocurrency, ‘mining’ is done by complex high-powered computers rather than pickaxes and hands. It refers to the process of putting more Bitcoin (or other currencies) into circulation.
Read more: Police bust suspected cannabis factory but find illegal Bitcoin ‘mine’ instead
These computers solve computational problems that are too complex to do by hand – hence why they consume so much energy. This will be less of a concern when (and if) the services use an alternative green energy source.
You mentioned Britcoin. What’s that?
Britcoin was a cryptocurrency that was launched in the UK in 2011 on the Intersango exchange, but it was delisted in 2019 after failing to gain traction.
In April, 2021, though, Rishi Sunak launched a new taskforce between the Treasury and the Bank of England to ‘coordinate exploratory work’ on a new potential digital currency (well, a central bank digital currency, backed by sterling).
Shortly after, he tweeted a simple word: ‘Britcoin’.
But, as of today, it stands at just that: an investigation, a potential.
I know somebody who made millions on Bitcoin. Can I expect the same to happen?
Not really, not anymore – many of those who made money made it because they got in very early when one Bitcoin cost as little as £1 (2011). Today, one Bitcoin is worth a massive £34,617.
The cryptocurrency market is extremely volatile. While some people have made money on it, others have lost significant amounts, too. The market is so volatile that even a rogue tweet can send a coin flying or crashing.
When Elon Musk tweeted that the company would no longer accept Bitcoin payments, the value of the coin dipped by nearly 8.5% over one weekend.
Also, in 2018, the value of one Bitcoin crashed to around $3000 – so unless you’re an investment expert, your risk of losing money is arguably bigger than your risk of gaining.
What do you think about cryptocurrency? Let us know in the comments: