It’s been a crazy rollercoaster ride for Bitcoins this year. At the beginning of the year, the price of one Bitcoin was below $1,000. It hit $5,000 in October, then doubled by late November. And on Thursday (Dec. 7), the price of a single Bitcoin rose above $20,000 on some exchanges, according to Coinmarketcap.
Created in 2009, Bitcoin is a digital currency, also known as cryptocurrency or electronic cash that allows people to bypass banks and traditional payment methods. Often used in ransom payments and purchasing illegal goods online, Bitcoin is moving more into the mainstream which has prompted us to question if it has a place in logistics.
An excellent blogpost from UPS’ Rimas Kapeskas, Managing Director of the UPS Strategic Enterprise Fund discusses the potential of Bitcoin in logistics, particularly as a global currency. Consider that in 2015, when the article was written, that already more than 100,000 businesses accepted Bitcoin, including such companies like Microsoft, Home Depot, Dell, CVS, Expedia and Amazon. Mr. Kapeskas notes “Our whole concept of money and how it gets exchanged is going to change as we become increasingly digitized”.
The idea of cryptocurrency seems to be taking hold. Bitcoin rivals are appearing such as ethereum. Launched in 2015, the value of ether (ethereum’s currency) has increased more than 6,800% since the start of 2017 with one ether now worth almost $480. It has also been embraced by a Hong Kong-based company, 300cubits which plans to partially replace U.S. dollars in the container shipping industry with a token on an Ethereum platform. According to 300cubits, the difference between Bitcoin and Ethereum is that Ethereum is highly programmable and therefore designed to accommodate the construction of complex applications.
How it will work according to Maritime Executive is that 300cubits will issue a token called a TEU. The number sold in the initial coin offering will assign value to the tokens. The company will then give a portion of tokens to industry practitioners. The TEU tokens will be used as booking deposits for container shipping where value could be lost if a customer does not turn up with a cargo or a container liner does not load a cargo according to a confirmed booking.
As booking deposits, the TEU tokens’ value will be linked to the value of actual freight rates. Hence, the trading of the tokens will become a leading indicator for freight rates, serving much like a peer-to-peer crowd prediction platform for container shipping.
The volatility of Bitcoin, in particular, has led to many financial analysts to forecast a bubble burst. But, remember, the same occurred in the early days of e-commerce which resulted in the short term bankruptcies of various startups. But, since that ‘correction’, e-commerce has taken off and continues to grow. Will we see the same with cryptocurrency?
On December 18, Bitcoin futures will be traded on the Chicago Mercantile Exchange, bringing Bitcoin into mainstream investing. Much like the massive interest in blockchain which Bitcoin and other cryptocurrencies trade in, cryptocurrencies along with a growing number of fintech startups, will likely introduce more payment options within digitized businesses and potentially help redefine global supply chains. As a result, as noted by Mr. Kapeskas, “allow all consumers and businesses of all sizes and in all places to participate.”