A couple of months back, I got into a car accident. I was driving straight out the basement parking lot of a shopping mall, when a car coming from the left side had unknowingly driven onto my bumper, rumpling the bodice in. The driver stepped out of his car, scratching his head with surprise. He admitted that it was his fault, we exchanged documents and agreed to sort things out ourselves. Things were quite civil, until the man—let’s call him Anton—learned that I did not have car insurance.
The damage cost P7,500 to repair. When I texted him this a week later, he said he didn’t have the money; that he had medical bills to shoulder, and his son’s tuition fee…he could only afford to chuck out P1,000 a month in installment. He tried to borrow some money, but to no avail. He promised to pay me over the course of more than half a year, if I allowed it—and because he always ended his sentences with, “God Bless,” I guess I figured, what’s the worse that could happen?
For the next few months, we would converse via text and online. He kept to his word—P1,000 a month—but always with me having to prod him for the money. And then, one day, during about the third installment, he messaged me first, that he would be able to pay the P1,000 with money he was able to earn through Bitcoin.
“Meron pumasok na P1,000 pera from coins.ph… kaya gusto ko nang i-send agad sa iyo. Kinita ko ito sa Bitcoin… nagte-trade ako now ng Bitcoin-crypto currency.”
I was taken aback. How could someone who couldn’t afford to pay the P7,500 suddenly have extra money to buy Bitcoins, which at that time, around August 2017, cost $4,000 apiece (although a Bitcoin can be divided into the smallest denomination). And even more, how was he trading it? And if he earned at least P1,000 from it—I wanted to know how.
“The reason that people can’t understand Bitcoin is that people don’t understand the concept of money.”
FROM GOLD TO CODE
Three years ago, the Bangko Sentral ng Pilipinas (BSP) issued a public warning against the use of virtual currency—including Bitcoin—in making financial transactions. They warned people of the precarious nature of cryptocurrencies, as there were no legal precautions: “virtual currencies aren’t backed by any commodity like cash, gold, or silver,” the circular explained.
Then in February 2017 this year, the BSP issued Circular No. 944: Guidelines for Virtual Currency Exchanges.
In an interview on national television with ANC, BSP Acting Deputy Director Melchor Plabasan explained that when they issued the first advisory in 2014, they were warning people against its risks. But now, after studying it for some time, they wanted to regulate it, to keep an eye out for sketchy behavior, like money laundering. So that when it comes to companies who wish to exchange virtual currency to fiat currency, and vice versa, they would need to be registered with the BSP.
In the interview, Plabasan was joined by Miguel Cuneta, Chief Community Officer and Co-Founder of Satoshi Citadel Industries (SCI), a small fintech company aimed at building the blockchain ecosystem in the Philippines, offering services as like a Bitcoin exchange, a Bitcoin wallet, and a Bitcoin remittance center (http://sci.ph/). I find Miguel on Facebook, and he agrees to meet up to talk about it.
The concept of Bitcoin is not easy to wrap your head around, and it’s tempting to lose interest completely, call it wishy-washy, and move on. To truly understand it, you would kind of have to start from the beginning.
“The reason that people can’t understand Bitcoin is that people don’t understand the concept of money,” explains Miguel. “One of the proprietary things of money is that it needs to be something that’s not so abundant that anyone can just have them.” Centuries ago, he says, in many parts of the world, people used shells to keep track of the exchange of goods. And then later on, it became gold. “Gold was the standard for money once, because gold is scarce, it’s hard to find, and you can divide it into lots of pieces and it will still hold its value. And then later on, we had paper money, which was used as a representation of how much gold the bank had. But then eventually, governments decided to make paper money out of thin air—by decree. So [maybe] Bitcoin came about because some people decided, ‘we need a way out of this system.’”
In essence, Bitcoin is quite the masterpiece. It is a computer science technology built on 20 years of research and 40 years of technology—a solution to a longstanding mathematical problem. It’s a digital currency which allows one person to transfer a unique digital property to another Internet user, a peer-to-peer exchange of funds without the need of an intermediary (like a bank), in a way that is safe, secure, and cannot be edited once the transaction is done.
What it is really, is software; it is code, a bunch of numbers and figures on computer. The open-source code was made by a certain Satoshi Nakamoto (a pseudonym) back in 2008. He released his thesis in a Whitepaper running eight pages long (https://bitcoin.org/bitcoin.pdf), and posted it in a cryptography mailing list right after the global economic crisis (a statement, perhaps?).
What the Whitepaper basically says is that Bitcoin is a secure method of transaction utilizing this thing called blockchain—a digital ledger that stores all the transactions, and is verified across a wide network of computers, or "miners." The transaction-clearing responsibilities are distributed to these miners who work for an incentive. Anyone with the appropriate software and hardware can function to be a miner. Why would you want to? Because miners compete for the newly "minted" Bitcoins released approximately every ten minutes. They fight for the reward by having more processing power and doing more work, which is verifying if transactions taking place are true, which entails solving very difficult math problems in the fastest way possible. If a miner falsifies a transaction, everyone can cross-check it and will be alerted about it.
Once a transaction is made and verified, it cannot be edited. Bitcoin works like a public database that everyone has access to, and everyone can see, and anyone can verify.
But the rate at which Bitcoin mints and distributes is fixed and terminal (it is already encoded in the system). So that eventually, the distribution of new Bitcoins will lessen, and then one day, it will just stop altogether…at 21 million pieces (currently there are around 16 million Bitcoins already released).
In essence, Bitcoin is quite the masterpiece. It is a computer science technology built on 20 years of research and 40 years of technology—a solution to a longstanding mathematical problem.
Anton was telling me excitedly about his investments with the Trade Coin Club—the membership trading club where he says he earned the P1,000 from. He put in about P12,000, hoping to earn profit from it after some time, and he was inviting me to their grand Philippine launch to learn more about the opportunity. “’Yung friend ko started 15 thousand for investment four months ago and earned 180 thousand in four months’ time,” shares Anton to me over chat. “Your investment will earn times five in eight months guaranteed.”
He also sent me this:
SIMPLE MOTIVATION!!! Simple lang ang prinsipyo ng buhay! Kung gusto mong manalo? Tumaya ka! Kung gusto mong magkatrabaho? Mag-apply ka! Kung gusto mo magwagi? Makipag laban ka! Kung gusto mong matupad mga pangarap mo? Umaksyon ka! What's the points here... lahat ng gusto mo kailangan lang ng aksyon!! But, hindi lahat ng aksyon mo na ginagawa ay makukuha mo na iyon.... Minsan kailangan natin ng: TAMANG ATTITUDE!! TAMANG PAGKAKATAON! TAMANG TIMING KUNG BAGA! TAMANG OPPORTUNITY! TAMANG COMPANY/TAO NA MAKAKATULONG SA ATIN... TAMANG SISTEMA.. Maglaan ng TIME at EFFORT... kasi alam ko lahat tayo masipag, may angking galing, angking talino, BE ONE OF US Crypto-Currency Traders & BITCOINERS!!!
When I didn’t go to the launch but was still keen on the topic, he added me to a group chat with other cryptocurrency traders like him, all members of the said Trade Coin Club. The club claims that their software, a unique trading system that makes millions of microtransactions, allows members to “generate profit every second, every hour, and every day.” You can take part by being member, and being member comes with fees.
To join, you pay 0.05 in bitcoin (currently around P20,837.11) to use the software. To trade, a minimum of 0.01 (P4,167.42) is required. Half of that amount is then traded, where you get small percent of profit daily, the other half is stored in their software. But they don’t dwell on this too much in their introductions, as they encourage you to get other people to join the group, to earn more money: 10% commission in Bitcoin of whatever amount your referee puts in as investment, and a smaller percentage for succeeding generations of referrals. If you are successful in building a team, you get a bonus.
The group chat is flooded with links to stories that highlight the rise of Bitcoin’s value. There are lots motivational blurbs and posters for conventions and meet ups. But the spiel, the promises, the language, and the business model—it sounded all too familiar. The emphasis on luxury was a bit of a tell-all too. Prizes like cellphones, cars, and tablets are wagged in your face as incentive, and in one of their promotional videos (https://youtu.be/F422IOD5HgU ), even material rewards are categorized by level: the lowest level trader will earn a pin; move some notches higher and you get a Montblanc Pen; stay on longer and you get a Rolex watch; make it to the top level and you get a Lamborghini .
With a little bit more reading, (and a quick search on Google), it didn’t take long before I realized that the Trade Coin Club was sounding much like a multilevel marketing (MLM) scheme. It seems the income promised to potential members doesn’t solely come from the trading, but from getting more people to join the club—a model that relies on referrals. So if you can’t get enough people in, maybe you only get a little bit of money by the end of the contract, or worse, lose money along the way because of all the fees they impose (a 25% trading tax fee, and a withdrawal fee of 8%).
In guise of an interest to join the Trade Coin Club, I contact some of their promoters, and to cut it short, I ask off the bat, “It seems like more of the profit comes from the networking, tama po ba?”
One responds, “It’s combined trading and MLM.”
He adds, “The trading part para sa mga big investor na ayaw na magtrabaho. The MLM part is para sa mga gusto i-work out ang software.”
But he goes on to say that if one didn’t do the networking, then they would only earn a small amount of Bitcoins, compared to one actively referring members.
“Yes I would say it is partly MLM,” admits another member, “but it is also trading.”
If you purchase a higher package, you don’t even have to do the networking bit, they say—but an MLM is still an MLM—in that the company still gets most of its money through commissions people bring in. They’ve also structured the scheme around a concept that is already hard to understand, making people who are sincerely interested in learning about Bitcoin confuse one for the other.
Movements like this inadvertently throw shade to real Bitcoin-based startups who are working to make a difference. The Trade Coin Club for example utilizes coins.ph, the biggest Bitcoin wallet app in the Philippines, as their storage and exchange.
I recount this story to Justin Leow, Head of Business Operations at coins.ph, and while he is aware that businesses of such nature operate, he says that coins.ph doesn’t condone it.
With a little bit more reading, (and a quick search on Google), it didn’t take long before I realized that the Trade Coin Club was sounding much like a multilevel marketing (MLM) scheme.
“Basically, the way that we think about Bitcoin should be framed within the context of why coins.ph is here, and why we’re doing what we’re doing. Our goal is to be able to make financial services easily accessible to Filipinos. It’s a big issue in this country because people who have access to banks are very limited, everyone else just uses cash. So why we’re here, and why we’re building this mobile wallet platform, is because we want to make people’s money more easily usable for services everyday.” The vision of coins.ph is simply about making that connection—to make money transfer an option available to all people by creating a mobile wallet that allows you to pay bills, send load, and even remit money from your phone.
“When you talk about mobile wallets—mobile wallets sound great—but if people can’t easily get their cash in or out, then it’s not very useful, right,” says Leow. Which is why the strategy for coins.ph was to foster partnerships with banks, convenience stores, and cash delivery outlets all over the Philippines and abroad—so that people could easily transfer online, and then withdraw offline anytime they wanted. It benefits most OFWs who are remitting money from other countries. “The reality is that that process [of remitting money home] is expensive.” By using digital currency, the process becomes quicker and cheaper or the families.
Coins.ph allows users to have two mobile wallets: one in peso, and one in Bitcoin. Currently, they have more than one million users in the Philippines, and are also licensed by the BSP.
“We wanted to make sure that we were providing access to as many different kind of use cases as possible, and by building our platform and connecting ourselves to the [Bitcoin] network means that any of our customers can actually pay anyone else on the Bitcoin network.” Which is a huge network.
WHAT IS MONEY ANYWAY?
If one does not get the concept of Bitcoin—and there are a lot of things about it that can be confusing—it can be dismissed as a scam, in one extreme; or a get-rich-quick scheme on the other. But we fail to give it due credit. Let’s try to ignore for a second the fact that one Bitcoin now costs $8,000 (it was $700 in January this year). Beyond the value, it is an invention as important as the Internet. In the beginning, maybe it was just some sort of social experiment, a game posed to the world by a (still) anonymous Satoshi Nakamoto—but its profound capabilities cannot be ignored. More and more companies are interested in blockchain technology: Dubai for example, aims to be the first city to use the blockchain technology to run their government businesses, making the data available, verifiable, and permanent in the ledger, and in effect making government systems more efficient.
What is money anyway? And who is to say what money is worth? We have to remind ourselves that at the end of the day, money is just data, a way to keep track of exchanges in value. With Bitcoin, it just so happens that all this information is gathered into one global ledger.
Logically, Bitcoin is sound. Since its birth, no one has been able to hack its network (not to be confused with third-party sites who build on top of the Bitcoin network, which are hackable if not secured). There’s no reason why the technology should be ignored; but we need to weed out the misinformation and the unnecessary noise to truly understand what it really is and what it isn’t.
What its future will be—your guess is as good as mine. For now, it sounds promising, except if the world fell under a digital apocalypse, or if a really evil person is able to take control over the entire system. Both are highly unlikely situations, but still plausible of course.