KARACHI: You cannot carry it in your wallet, but it is susceptible to theft. You cannot see it, but it is still worth close to an ounce of gold.
It remains one of the most volatile ‘assets’ in the world, increasing close to 7,500% during calendar year 2013, the time it started to gain popularity. From January 2013 to November, its price rose from $13 to $980 before the fall began.
Bitcoin, the digital currency that has caused many to have sleepless nights, is not printed by any central authority but its market is worth over $17 billion — roughly 5% of Pakistan’s economy. It is produced by people known as bitcoin miners who solve complex mathematical problems by securing transactions and in return get rewarded with newly generated bitcoins.
Since its inception in 2009, Bitcoin has been a source of controversy and myths, but recently, there have been moves to popularise it and brand it as a state of the art, game changer in the world of finance. Japan is set to begin recognising bitcoin as a legal method of payment.
While mining ensures that a flow of the currency remains, solving those mathematical problems gets harder with each transaction.
If one wishes to buy Bitcoins they can register at one of the several exchanges located all over the world.
Bitcoin in Pakistan
The digital currency has been swiftly gaining worldwide popularity, but there is only one Bitcoin exchange trade operating in Pakistan at the moment.
Urdubit, established in 2014 by Zain Tariq and Danyal Manzar, gives Bitcoin users in Pakistan a platform to trade the digital currency. However, founders of the exchange hoped that, along the way, they would continue educating Pakistanis about the crypto currency.
In fact, in an interview with CoinDesk the same year, the two had said that they were hoping to make the market liquid for Bitcoin. “Back in 2014, we were trading one Bitcoin per month. Today we are trading 15 to 14 Bitcoins per day,” Tariq told The Express Tribune. “Recently 40% of our company was bought by (Tameer Microfinance Bank Limited CEO) Nadeem Hussain.”
However, as the world moves in the digital age, everything is susceptible to hacks. In fact, one of the factors that led to the digital currency’s fall in 2013, when it crossed the $1000 barrier for the first time, was because one of the largest trading exchanges, Mt Gox, was hacked.
“In order to secure ourselves, we have 75% of our Bitcoins in cold storage and only 25% on the hot wallet (online),” said Tariq, when asked about the security of the company’s server.
The digital currency has been subject of criticism, as it is believed that lack of regulation and anonymity have led to illicit trading. The most famous case involving illicit trade was the Silk Road website that was eventually taken down by the FBI.
However, Manzar dismissed claims that there is black money involved. He says all the exchanges are following a standard ‘know your customer policy’.
Apart from seeing themselves as an exchange house, the co-founders believe that they can help fill in the difficulties freelancers face while accepting payment for their services. Tariq said 99% of Urdubit’s customers are freelancers and only 1% are active traders.
Currently, there are two major markets of Bitcoin: China and the US. Moreover, it is not the first time that the crypto currency has crossed the $1,000 barrier in its short life.
According to CoinDesk’s Bitcoin price index, the currency hit an all-time high of $1,290 during March this year.
There are many reasons for its strong comeback, but market talk suggests global economic uncertainty along with surprising events of 2016 were major triggers.
For instance, in China, the Yuan has been facing downward pressure because as Chinese economic growth decelerates, money is pouring out of the country. Some of that money is going into Bitcoin, which operates anonymously and has a decentralised system which helps Chinese citizens avoid the government’s rules on taking money in and out of the country, says Vice News.
Furthermore, in the United Kingdom since its residents voted to opt out of the European Union currency prices jumped and have been on the rise since Brexit.
Moreover, the current demand can also be attributed to Donald Trump and his policy as well the price of the currency that has started to increase ever since his election.
Pakistan may not be as aware of Bitcoin as some of the other countries are, but this digital currency is very well here to stay. As the country moves towards digital payments, we could hear more of Bitcoin in the days to come.
The writer is a staff correspondent
Edited by Fareeha Mufti/bilal memon
Published in The Express Tribune, April 3rd, 2017.