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Cryptographic currencies are a high-risk asset class that could be very useful if they get greater adoption, says Nicolas Cary (right), co-founder, Blockchain.
The value of virtual crypto currencies, such as bitcoins, has remained volatile since the bitcoin code was released. Yet Nicolas Cary, co-founder and president of the UK cryptocurrency portfolio start-up, Blockchain, is optimistic. In a recent telephone interview from London, Cary explained why he still believes that bitcoin is "digital gold" and why he is optimistic that India will embrace cryptocurrencies. Modified extracts:
Given the volatility of the crypto currencies, what is your advice for those wishing to bet or invest in them?
When it comes to encryption, if the price rises or falls rapidly, there is often criticism that it is too volatile to be used as a medium of exchange.
When the price is stable, there is criticism that it is not something people should invest in because they are not increasing in value. Ultimately, it is important for consumers to do their research and have a long-term vision. Cryptographic currencies are an emerging high-risk asset class that could have a profound utility if they get greater adoption. As more people use them, they can become more valuable as a store of value and a means of exchange. Bitcoin has been called digital gold because of its specific properties. It is counterfeit, fungible, easily divisible, purely digital (which is very useful for a more globalized economy) and is scarce.
But why regulators around the world, including India, do not feel comfortable with cryptocurrencies?
India continues to be in the market of the top five for us in the world, which I think is quite interesting, especially considering the cautious positioning that regulators and authorities are adopting in the country. But for people who already have it (cryptographic currencies), having tools to exchange and exchange and securely store crypto is still very valuable. I am still quite optimistic that in the long run India will be one of the places where digital currencies could have a very powerful and significant impact in helping people with access to smartphones to be able to transfer money with the same ease with which it sends a message. That said, there are reasonable and understandable concerns and risks that should be addressed. In other markets, we are seeing very strong pro-innovation regulatory environments that enable rapid iteration of these features. We have received strong guidance and regulatory clarity throughout Europe and the United States. South Korea and Japan are also very forward with these things.
But public blockchains still lack the transaction speed of, say, a Mastercard or Visa.
The original networks were not designed for high throughput. They have been designed for settlement with a high degree of certainty. We wanted to make sure that the transactions were completed with purpose. On the other hand, when you pass a credit card and buy something, you can recover the transaction for 90 days. I think credit cards are really a terrible mechanism for banks, especially on the Internet.
In terms of throughput, there is not much work to do to increase capacity on these transaction networks (blockchain). Just two weeks ago, we (blockchain.com) announced the introduction of Stellar, which allows a much higher volume of transaction volume on a per second basis than for example for bitcoins. We also spent a lot of time on the "lightning network". Basically, it is a hyper capacity capability that will far exceed Mastercard and Visa in terms of total capacity there. Those networks can make about 50,000 transactions per second while the lightning network looks much higher than those at almost zero cost.
Tell us a little bit about your hardware portfolio and the Swap functionality for cryptographic exchanges.
We have built a custom hardware solution with Ledger for a hardware portfolio that can connect to the laptop. It's a way for people to increase control of security operations on the funds they want to use.
Lockbox is the name of the product, but Ledger is a winning hardware security portfolio solution. And basically with Lockbox, you can swap near, in and out of different cryptos, using our function called Swap, which is a crypto-cryptographic exchange.
