Below is a long article that appeared in Wall Street Journal today. The following caught my attention. In my previous posts I had mentioned our vision of DNotesVault being a critical part of a Global DNotes Financial network that would include a regulated exchange, a DNotes Bank and partner banks. DNotesVault depositors, to the extent of their pre-approval loan to deposit ratio can be instantly approved a loan anytime, anywhere worldwide without a bank or a third party. The funds can be immediately credited to a multiple currency debit card or a bank account.
With due respect, we may already be one step ahead of the Professor of Finance. Our strategic plans are ahead of regulations. I am quite certain that it will become a reality in four to five years. That is one more reason to save your DNotes whether it is to supplement your retirement, help pay off your student loans or for your dream vacation.
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Just as block-chain technology has created a currency that operates without need of a bank, it could help users get loans without a bank, or make investments without a broker or exchange."
Wall Street Journal:
March 1, 2015 11:09 p.m. ET
JOURNAL REPORTS
http://HTTP://WWW.WSJ.COM/ARTICLES/DO-CRYPTOCURRENCIES-SUCH-AS-BITCOIN-HAVE-A-FUTURE-1425269375Dr. Harvey is a professor of finance at Duke University in Durham, N.C. He can be reached at
[email protected].
Do Cryptocurrencies Such as Bitcoin Have a Future?
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Innovative alternative currencies come with great possibilities—but also great risksDespite the mystery, the whiff of scandal, and general public unfamiliarity with the concept, somebody out there is buying, and selling, not just bitcoin but dozens of other cryptocurrencies as well. The total market capitalization for these unregulated electronic forms of payment was roughly $4.04 billion as of mid-February, according to coinmarketcap.com, a website that tracks trading in alternative currencies. More than 500 altcoins, as they are also known, were represented on the site recently. ……………………..
Valuing Bitcoin as a TechnologyTrue, bitcoin isn’t backed by any central authority. But that doesn’t matter. Bitcoin exists because users assign value to it. To say it violates the rules of finance because it lacks a central issuer is problematic on many levels. Governments don't “guarantee” stability of their currencies—look at the ruble and Swiss franc. Similarly, the fair price of a bitcoin as measured by the discounted value of future cash flows may be zero. But the same is true of fiat currencies, including the euro and U.S. dollar. No commodity underpins the value of a euro or dollar. You tend to lose money when you hold cash. This doesn’t deter people from holding cash.
But forget about exchange rates for a moment. The most exciting thing about bitcoin is the technology behind it, the block chain, an online, transparent record of every transaction on every bitcoin. It is a giant electronic financial ledger that is used to authenticate each transaction and, in the process, produce more bitcoins.
The block chain’s potential reaches far beyond bitcoin the currency. It is a way to both verify ownership and to set up contracts. Imagine getting into your car. Through your mobile device, the car locates your identity code and proof of purchase in the block chain. This allows the car to start. But say you have missed three payments on your car loan. Additional terms in the block chain make sure the car will only start for the person or institution that lent you the money.
Making contracts part of a block chain would be easy by introducing “if, then” statements to the chain in computer code. Almost any financial instrument, including stocks, bonds or options, could be represented and made verifiable in such a format.
Disrupting MarketsJust as block-chain technology has created a currency that operates without need of a bank, it could help users get loans without a bank, or make investments without a broker or exchange.
Yes, the value of a bitcoin has fallen sharply over the past year. However, it is a serious mistake to judge bitcoin’s future based on the movement in the exchange rate. A better indicator is the activity of highly respected venture capitalists who are pouring money into hundreds of bitcoin- and block-chain related ventures.
It is true that bitcoin is currently too volatile to be a long-term store of value. But much of this is due to illiquidity, which is not unexpected when the technology is so new. A regulated, insured, U.S.-based bitcoin exchange opened in January that is backed by the New York Stock Exchange, which should add liquidity and reduce volatility.