When bitcoin started in 2009, it was worth practically nothing.
Now, more than a decade later, the cryptocurrency industry has gone through several highs and lows, hitting an all-time peak of more than US$61,000 in mid-March. It has also been growing in acceptance amongst mainstream investors and companies.
Most recently, a Singapore investor made waves in the art world when he spent a record-breaking US$69 million (S$93 million) worth of cryptocurrency on a digital art piece.
The buyer of the digital collage, Vignesh Sundaresan, is one of the oldest investors in Non-Fungible Tokens (NFTs). NFTs operate as a new type of digital asset, and have rapidly gained popularity in recent years.
Anyone can “tokenise” their work to sell as an NFT and an interest to do so has been fuelled by million-dollar sales hitting the headlines recently. For example, an animated Gif of Nyan Cat — a 2011 meme of a flying pop-tart cat — has been sold for more than US$500,000.
Electric car giant Tesla has also begun accepting bitcoin as a payment method in United States. While the feature is not available worldwide yet, founder Elon Musk shared that it will be made available in new markets in the future.
Closer to home, established local players also have their eye on the digital assets space. Last December, DBS Bank launched a blockchain-based digital exchange that allows investors to trade in cryptocurrencies and firms to raise funds through asset tokenisation.
What Is Cryptocurrency And Bitcoin?
Cryptocurrency is the technology that acts as the medium for conducting financial transactions, providing a safe and secure platform for transactions with the help of cryptography technology.
On the other hand, bitcoin is the digital currency that utilises cryptocurrency. It was founded by Satoshi Nakamoto in 2008, and was created in order to speed up the cross-border transactions, reduce governmental control over transactions, and simplify the process without having the need for third-party intermediaries.
There are many characteristics of bitcoin that further makes it unique and unprecedented in the history of money. For example, they are immutable, transparent and private.
This means that it is impossible to forge or falsify bitcoin, every transaction is recorded on the blockchain, and it is almost impossible for an outsider to identify the owner of a bitcoin wallet.
While the characteristics of bitcoin will largely remain the same, an increasing number of uses and applications of bitcoin are being conceptualised at an exponential rate.
Some use cases of bitcoin include being a cheap peer-to-peer payments network — also the most prevalent use in the general public — a darknet currency, and more recently, a financial asset which many invest in.
Why Are Businesses Accepting Bitcoin As A Payment Method?
The increasing popularity of cryptocurrency payments is not the only reason for businesses to start accepting them. There are a myriad of compelling reasons that could prompt businesses to implement the new payment method.
Firstly, transactions made are permanent and cannot be modified or deleted so the chances of fraud are reduced to a great extent. Depending on the payment gateway, additional security services may be provided — this helps to build trust between businesses and their customers.
Next, privacy is guaranteed as anonymity is a hallmark of cryptocurrency payments. The amount of data collected will be significantly less than that of traditional banks, which could be a selling point for customers.
These are just some of the reasons why businesses are choosing to offer cryptocurrency payments. In Singapore, even a Kopitiam outlet has started accepting digital currency payments including bitcoin, ethereum and creatanium.
Kopitiam converts the cryptocurrencies to fiat on a weekly basis with the help of its fintech partner. It also bears the risk of currency fluctuations. Stallholders at the food court will then receive their earnings in Singapore dollars.
According to a report by Inside Bitcoin, Kopitiam CEO Alden Tan said that allowing cryptocurrencies on the system would help them learn more about the payments ecosystem.
Other stores which accept cryptocurrency payments in Singapore include Epic Gear, Oyster Bar, Artistry and more.
Progress Will Be Slow In Singapore
Even though it is gaining traction in Singapore, cryptocurrency trading remains small compared to shares and bonds.
The combined peak daily trading volumes of bitcoin, ethereum and XRP accounts for only two per cent of the average daily trading volume of securities on the main stock exchange last year.
This means that at the current volume of trading, the number of people who might be interested in cryptocurrency payments in Singapore is probably not significant enough for a widespread adoption.
Furthermore, Singapore has already been having trouble transiting to cashless payments. Even though digital payments such as PayNow have taken flight, Singaporeans are still loyal supporters of cash. There are now 4,100 ATM and cash withdrawal points, up from 3,700 five years ago.
Monetary Authority of Singapore (MAS) board member Ong Ye Kung, said in a parliament speech this year that “cash will continue to be a familiar and convenient way to transact.”
This is exacerbated by the problem of Singapore’s ageing society, with the older generation being more skeptical about technologies such as digital payments.
As cryptocurrency payments are such a new way to pay, it is likely to face greater levels of skepticism and criticism by citizens. Furthermore, the government has recently warned Singaporeans to “exercise extreme caution when trading cryptocurrencies,” which might lead to a lower uptake of such payments.
These warnings might resonate well with Singaporeans when the fluctuations in the bitcoin prices are considered. Furthermore, bitcoin transaction fees can go up to S$22.53 per transaction.
While we are unlikely to see widespread adoption of cryptocurrency payments in Singapore, early adopters will still buy and invest in it and we would probably observe more applications of blockchain technology.
Featured Image Credit: SIRIN LABS