Bitcoin and Digital Transformation
Driven by the millions devices in use around the world, the pace at which technology is transforming all business sectors and daily life is staggering. The readily available technology and new technologies, like mobile tech and artificial intelligence, are driving innovation and business forward at an incredible rate. Among the new technologies is the highly controversial and debated blockchain, which is used as the means to create the cryptocurrency, Bitcoin.
Blockchain, The Means to Create Bitcoin
In, The Truth About Blockchain, Lansti and Lakhan (2017) describe blockchain as “an open distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way.” Without revealing any private information about the subject or parties involved, it records that a transaction took place, along with the details about when it took place and that it took place correctly.
Think of it as a piece of infrastructure just like the internet. Just as Facebook was created and operates on the internet, Bitcoin is an application created on the Bitcoin blockchain. This infrastructure is used to build a new class of verticals (decentralized applications) which include cryptocurrencies and crypto assets, but also includes education systems where your credentials cannot be revoked.
Bitcoin, The King of Cryptocurrency
The most famous and most frequently used example of blockchain is Bitcoin. In 2008, its mysterious creator, Satoshi Nakamoto, developed Bitcoin as an alternative to traditional bank governed currencies.
Bitcoin is an encrypted virtual currency that uses the blockchain protocols to perform financial transactions. Other cryptocurrencies, including Ethereum, Ripple and Litecoin, are used as a medium of exchanging encryption techniques to regulate the generation of units of currency and verify the transfer of funds, all of which operate independently of a central bank.
Bitcoin differs from traditional currencies in that its control is decentralized, anonymous, and requires no evidentiary documents to set up one account or even multiple accounts. It is also completely transparent where users can see every transaction ever done on the blockchain. More importantly, for each Bitcoin there is secure trading, selling, and spending, with both public and private keys. From its inception, its creators provided two options for acquisition: (1) mining, which requires miners to solve a complex computational problem that helps verify transactions and add them to the blockchain as a network participant; and (2) buying them on an
exchange. In recent times, a third option emerged, which allows users to accept them in exchange for goods or services.
Organizations and Consumers Digital Transformation of Bitcoin
Analyzing your business from the outside-in and simultaneously building the business from inside-out has become essential for adapting to changes in the market, the consumer journey, and marketing models. It requires more than digitizing existing services and adding technology. Digital transformation is a strategic, planned organizational change led by an empowered team equipped with innovative methods to create highly responsive data-driven strategy (McKeown, 2015).
Companies are going digital using the combinatorial advantages of scale, scope, and speed, and winning by orchestrating and participating across ecosystems, collaborating to co-create new capabilities and to amplify human talent with powerful machines (Venkatramen, The Digital Matrix, 2017).
From an organizational and financial perspective, Bitcoin and its blockchain technology are making waves in the financial services industry. Innovators such as Coinbase are demonstrating how massively lucrative Bitcoin can be. Coinbase is a Bitcoin wallet and exchange service which has become the leader in Bitcoin transactions. This company provides trusted delivery to the wallet and exchange to customers all over the world through cloud based operations in collaboration with Amazon Web Service (AWS).
Coinbase secures and stores its customers’ Bitcoin using AWS, quickly growing its customer base with greater visibility into its business and insight pipeline, all while concentrating on even more innovation. The collaboration with AWS, by building its exchange in the cloud, has created more agility than what is accessible from an exchange in-house. Using scale, scope and speed, deployment of new services are
only a few keystrokes away. Now, they are able to spend more time thinking about what they want to do instead of what they are able to. The adept response to changes in the market is helping Coinbase meet the desires of the consumers of fast business growth all over the world and launch more machines to support their users. (AWS Case Study)
Other Bitcoin startups leading the financial services industry include Blockchain, which is the world’s leading software platform for digital assets offering APIs at no cost to help entrepreneurs and techies start building bitcoin apps, payment processing, transactions and blocks data, and market data (Blockchain.com). Bitstamp is another company leading the Bitcoin revolution. It’s the world’s second largest Bitcoin exchange. Adopting a strategy of Bitcoin UX innovation, Bitstamp recently announced new digital currency trading pairs like LTC/BTC. LTC/EUR and LTC/USD trading. This is a major step toward wider acceptance and use of Bitcoin (Bitstamp.net). Other companies, such as 21 Inc., makes Bitcoin useful for developers and enables users to create, buy, and sell machine-payable apps with developers all over the world. 21 Inc. provides its users with an embeddable mining chip that may be integrated into internet-connected devices, supporting endless stream of digital currency to be used in a very wide range of applications.
Banks have also begun to leverage and receive incentives with Bitcoin by learning how to create new ways for individuals to directly exchange money and assets By November 2017, Coinbase had signed over 12 million customers, far exceeding the accounts of 46-year-old brokerage Charles Schwab. Within weeks it was worth US$300 billion in real money, while in Japan, 260,000 retailers adapted Bitcoin as
currency for transactions (Galeon, 2017; Helms, 2017).
Last week, Bitcoin suffered huge price fluctuations. This week, in pure value terms, a bitcoin soared above $10,000 (Brown, Feb. 2018). Despite its volatility, the popularity of Bitcoin and other cryptocurrencies on the rise, predominantly via social media and television.
According to Bob Wood of Nexxus University. At the moment, most organizations do not accept bitcoin directly, but are collaborating with bitcoin processing partners like coinbase to process bitcoin payments. For example, if you purchase from Dell or Microsoft, you are, in actuality, transacting with Coinbase, who then converts Bitcoins into USD which is then transferred to the merchant account.
Interest in bitcoin and other insurgent currencies are at an all the time high. Slowly, more businesses are investing and adopting bitcoin as a means of payment as they see the effectiveness and power of the underlying blockchain technology. Now, companies are using blockchain principles that include distributed database, peer-to-peer transactions with anonymity, records that cannot be reversed, reduction
costs and complex financial transactions to move past customer loyalty programs and financial services.
FinTech startups are disrupting the banking services industry. Banks are rethinking the future of service delivery in a way that transcends new technologies. It must be progressive, flexible, and embrace digital transformation. They must innovate and personalize the experience for their customers by listening to and anticipating their needs, recognizing changing tastes to deliver the best mobile banking service within a centralized landscape.
FinTechs have combined customer centricity and mobile data driven products to provide customer experiences that can be accessed by app services which retrieve data from across financial service providers. This, in itself, is challenging the traditional approach used by the banking services industry which is currently playing catch up and struggling to draw millennials.
Businesses recognize that the real focus of FinTech is using blockchain in existing financial systems, and identifying ways to profit from it.
It is safe to say that businesses are no longer relying on existing business strategies. Working with traditional or industrial-age ideas will cause a business to become obsolete as digital is consuming the world. Progressive businesses recognize that now
is the time to adapt their organizational structure, internal and external processes, resource allocation logic, incentives, and rewards so that they become active participants in shaping what comes after.