Flip Side of Bitcoin: Cryptocurrency technologies maturing, finding place in business

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Cryptocurrencies like bitcoin may be today’s investing craze, but some are planning to use the new technology for more than speculation. From raising capital to point-of-sale transactions to reinventing the way data is stored, the development of cryptocurrency software may leave a lasting effect in business.

Caleb Arthur, CEO of Sun Solar, bet $2,000 on bitcoin last year and quickly saw it turn into $12,000. But it wasn’t until New York-based energy technology firm Grid+ raised $29 million by creating its own cryptocurrency, that he saw how it could impact his own growing business.

A “Sun Solar coin” is in the works, and Arthur said he plans to release it this year through a process known as an initial coin offering. Yes, it’s the cryptocurrency’s equivalent to initial public offerings for stocks.

There were 235 ICOs last year, according to cryptocurrency-tracking website CoinSchedule.com, raising a total of $3.7 billion. The amount of cash generated by this model peaked in September 2017 with $800 million raised, and fell steadily until December when only $50 million was collected.

“It's mostly a way for businesses to raise money without going to venture capitalists groups,” Arthur said.

He’s set an aggressive goal to rake in $50 million with his first ICO. That would eclipse the 10th largest ICO CoinSchedule.com tracked last year at $48 million.

Arthur is preparing to sign contracts within the next month with two undisclosed companies – one in Missouri and one in China – that develop blockchain software similar to what is used by cryptocurrencies, such as bitcoin and Ethereum. A limited number of Sun Solar coins would be created, he said, and the public will be allowed to purchase them through a website – not with cash but in exchange for their own bitcoins.

Since Sun Solar coins will initially have little to no value, Arthur said the exchange rate is unknown, and the price could fluctuate.

But he expects the coin’s value to rise rapidly, as have many other ICOs – through marketing and the allure of a quick return – thus providing a return for the investors who can then sell the coins in one of the many online crypto exchanges.

Website Coinist.io tracks the return on investment for ICOs, and it lists an average ROI of 33 percent, with the top 100 ICOs averaging 62,756 percent and the top 10 ICOs averaging 614,974.94 percent. Of course, there have been losers as well, with some dropping nearly all of their value.

Sun Solar also would accept the virtual currency as payment from its customers, Arthur said, giving the coins immediate utility. He is investing $250,000 into the development and marketing of his new crypto.

“Solar is a disruptive technology for the energy markets. Cryptocurrencies are disruptive for the money and banking market,” he said. “I feel like solar and cryptocurrency – and bitcoin, initial point offerings, all these things – go hand in hand.”

Bitcoin in retail
While some investors are hoarding cryptos due to their rising prices, some businesses are beginning to accept the virtual currencies as payment.

Online-based point-of-sale systems such as Intuit’s QuickBooks, Shopify, Stripe, bitpay and AlfaCoins Inc. allow any business owner to accept bitcoin and sometimes other cryptos. CoinMap.org lists 11,596 retailers worldwide accepting bitcoin, including China Wok on South Scenic Avenue. The restaurant accepts bitcoin through web-based restaurant platform Menufy.

Paying for goods with bitcoin online – from a consumer point of view – is comparable to entering a credit card number into an e-commerce site. But making a purchase in a retail location may require the store and the consumer to both have a smart phone or tablet with an app to transfer the currency from one party’s virtual wallet to the other’s, as opposed to using a traditional credit card terminal.

PizzaForCoins.com lists three pie shops in Springfield that take bitcoin – Domino’s, Pizza Hut and Papa John’s – but only when ordering through its website. Many other retailers are accepting bitcoins, although not necessarily voluntarily. Egifter.com sells gift cards to more than 250 stores and restaurants, while accepting bitcoin as the main payment option.

Blockchain at work
The technology behind cryptocurrency is gaining the attention of businesses, aside from its value as an investment or the utility of a coin.

Each crypto has a custom software solution called a blockchain used to process and track transactions. According to industry sources interview for this story, the software is decentralized, meaning it doesn’t run from a single location or on a server owned by the developer. It runs on a network of thousands or millions of individual computers called miners, which simultaneously document the transactions in a single “blockchain” document stored redundantly on each machine.

This creates a very secure and transparent process that could be used in other industries, the sources say.

Blockchain methodology also could reinvent the way business contracts are managed, said Jeremy Clopton, who recently left his position as a big data and analytics expert at BKD CPAs & Advisors to start a business consulting service.

When trying to track a large number of conditions that must be met by multiple parties in a complex contract, he said blockchain software could document when each condition is met, making it clear when obligations have been fulfilled. Additionally, the security features virtually eliminate the possibility of fraudulent changes to contract records.

“There’s typically a lot of litigation around contracts,” Clopton said. “It’s ‘he said, she said’ or ‘did this actually happen?’”

The redundancy of the data storage in blockchains, makes tampering with the data very unlikely, Clopton said.

“Say you wanted to change a transaction that occurred last week,” he said. “You would have to change, not only that transaction, but every transaction that ever occurred before. Because they’re all tied together – hence the chain concept. You have to change all of them at once simultaneously on every single computer that has it.”