“Imagine you’re sitting around a table at a restaurant, and the bill comes. It’s 500 bucks for a big group dinner, but $440 if you pay Bitcoin.”
This is Joseph David, CEO of the Canadian Virtual Exchange (CAVIRTEX), Canada’s largest virtual exchange by market capitalization. “That’s where I see everything going eventually.”
Back in October I had a chance to speak with Mr. David and Kyle Kemper, the Director of Marketing and Business Development at CAVIRTEX, during the World Money Show in Toronto. Currently the two estimate that only 1% of the Canada’s population engages in the use of “cryptocurrencies” such as Bitcoin. Yet they are confident that as new technologies facilitating the use of Bitcoin emerge, that figure will balloon in the coming years.
I start by asking David and Kemper to bring me up to speed on the basics. “Bitcoin is both a protocol and a unit of measurement.” Joseph explains. While the unit of measurement simply refers to the coins themselves, the underlying protocol is the source code comprising the ‘laws’ of the currency; it is the network that validates every Bitcoin transaction. This protocol is reinforced across the Internet through a network of nodes that maintain the currency’s global infrastructure, making BitCoin a truly decentralized currency.
Contained in the code is the protocol for Bitcoin creation. Through a process called ‘mining’, individuals or organizations use considerable processing power and access the Bitcoin ‘blockchain’, a running public record of all the currency’s transactions. Through a process of complicated programmatically problem solving, the mining operations race to search for ‘blocks’ of transactions that when discovered, award Bitcoins to the successful party. As more people devote computing power to such endeavours, the computation power of the system overall increases.
This complex process carried out by the protocol follows a roughly pre-determined pattern of supply. Bitcoin supply is set to cease once 21 million bitcoins have been created. While this amount is only set to be attained in 2140, Kemper notes that 99.9% of this amount will have been created by 2045.
The imposition of this limitation in the source code is one of the more interesting aspects of Bitcoin’s design; it is essentially a digital mimicry of the gold standard. “We know with rough certainty how many bitcoins there will be in 2025. Do we know how many US dollars will be in circulation by then?” Kemper say, shrugging rhetorically.
Kemper knows the economic ideology behind Bitcoin, though attractive to some, is not going to be what sways the average consumer. “Everyone wants to know how Bitcoin works,” says Kemper, “but most people don’t know how the money they use works”. What truly dictates the success of a currency is a societies confidence and faith in adopting it. Kemper believes that in the case of Bitcoin, this confidence can be won through the clear advantages it poses to consumers.
Bitcoin is capable of bypassing the lattice of infrastructure currently in place between banks, credit companies, and numerous other financial institutions. Bitcoin transfers are encrypted, irreversible, and transaction fee-free. The movement of coins, which can take as little as three seconds to complete, are sent directly from user to user. There is no minimum transaction amount, meaning online micro-purchases are possible.
The perks here are clear to consumers and retailers looking to avoid transaction fees and risky transfers. As such David foresees a system in which the advantages of Bitcoin will cause many retailers to incentivize Bitcoin payments through discounts, as they come to accept it as a more efficient and preferable form of trade.
As a virtual exchange, CAVIRTEX allows individuals to buy and sell Bitcoin for Canadian dollars with other customers. The company currently only provides accounts to Canadian citizens and residents holding Canadian bank accounts. They accept Interact transfer, wire transfer, and electronic fund transfers (EFT) from those for those looking to purchase Bitcoin. Users are also able to sell Bitcoin, either at market value or a price of their choice.
CAVIRTEX has even recently released debit cards that work on 750,00 point of sale terminals and 68,000 ATM terminals in Canada, allowing customers to access Canadian Cash earned from Bitcoins they have sold. Though the transfer of this cash to the card currently takes a few hours to complete, CAVIRTEX is targeting instant loading in the coming months, for those looking to insulate their consumer spending from the banking system.
“Then, you’ll have a debit card in your pocket with a $0 balance on it. You’ll have bitcoins on a phone, and you’re at a store where you want to buy something. You press a button and now you’ve got $20 on the card five seconds after. Now you’re paying your 7/11 bill for your Slurpee, and 7/11 has just taken bitcoins without even knowing it.”
Both David and Kemper are confident that as digital currencies become more widely used, innovators will bring more proprietary technologies to the table in order to further enhance Bitcoin’s usability and security. “It’s really the early days,” says Kemper. “As advances come out, there’s a huge ecosystem of companies looking to make everything more secure, and improve the user experience.”
While the degree to which Bitcoin will penetrate the Canadian marketplace remains to be seen, CAVIRTEX remains confident that the key to its success lies in its ability to empower consumers. “Being born a Canadian, I’ve only ever had the option to use Canadian dollars.” Kemper says. “Now, for once we have a choice.”
“It’s disrupting our entire payment system.” David agrees. “For good, by the way.”
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Evan Ottoni is an associate producer at a video production company based out of Toronto, and moonlights as freelance writer.
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Photo courtesy of flickr.
