By Karen Ghazal
Decentralized currencies are growing and evolving, becoming accessible to anyone in the world holding a phone. The development of decentralized products allows traders to be more independent and helps them avoid relying on the traditional financial system.
We had the pleasure to gain more information and input from Shakepay’s co-founder Roy Breidi, who gave us his outlook on the industry today and his role in furthering the decentralization of money. The team at Shakepay is on a mission to create open access to building wealth. Shakepay allows Canadians to buy/sell Bitcoin and pay others.
While this field is still in its emerging phase, it has attracted the attention of many, including governments and regulators. Understanding how it works and the responsibility of holding a digital wallet is essential for any person transacting with cryptocurrencies. We interviewed Roy to delve into the inspiration for the app and understand how it has come to be perceived by its users across Canada today.
Background and Research
Cryptocurrencies are a new way to facilitate exchanges between two parties online without an intermediary, often a bank or financial institution. A key quality of crypto is that it is decentralized, meaning that it does not attach itself to any central authority. Although this is a vastly new concept, many individuals and companies are already taking advantage to transact worldwide in a permissionless way. This BitcoinGuide helps further understand the basics of this currency and how its processes work. Bitcoin is the first decentralized cryptocurrency and currently has the largest market cap of about 1 trillion dollars. Many other cryptocurrencies have since emerged and disappeared, but none had the same outcome as Bitcoin. Would it be safe to say that Bitcoin will remain the market leader in the cryptocurrency industry?
Background on Shakepay
"Back in 2016, there was no easy way to acquire Bitcoin in Canada," says Roy. "The available solutions were clunky, old school, and geared towards traders. You had to know what an order book is. You had to know the difference between a market order and a limit order. All that to purchase a few dollars worth of Bitcoin. My business partner Jean and I saw the opportunity to make this process as seamless as possible — with a click of a button. We wanted to spread Bitcoin far and wide, to get it in the hands of every Canadian. And so we set out to build Shakepay, the easiest way to acquire Bitcoin in Canada.”
When asking Roy how Bitcoin gains value, he mentioned that it was pure supply and demand and that the scarcity of Bitcoin plays a big role here: “There will never be more than 21 million Bitcoins. No single person, company, or government has the power to change that number. With a limited supply and a constantly increasing demand, the price of Bitcoin has been trending upwards.”
The Randomness of It All
When Bitcoin was introduced, it was not advertised and did not prepare the market for its arrival. It all started in 2008 with the publication of the Bitcoin whitepaper by Satoshi Nakamoto, titled: “Bitcoin: A Peer-to-Peer Electronic Cash System” and describes the original plan and protocol for Bitcoin. To this day, Nakamoto’s identity remains unknown, which ironically contributes to the idea of decentralization or “not having someone in charge.” According to Roy: “The imperfect unplanned launch of Bitcoin to the world is what makes it special compared to other cryptocurrencies. The random evolution of the currency is unreproducible and it cannot be copied by other projects or coins.”
Challenging Traditional Ways of Exchanging Money
When making a cash deposit at the bank, part of your assets will be kept as cash within the bank, but part will be freed to be used for lending. Your bank then has the liberty of choosing to which business or individual to lend out the funds, at a cost, in hopes of generating profit. This concept is called fractional-reserve banking and is used in almost all banking operations worldwide. Moreover, when you use your debit card, you are asking your bank to make a transfer from your chequing account to another party’s account. However, the bank does hold the right to refuse your transactions, to protect itself and its clients. In other terms, you are trusting the bank/a third party to secure your funds and return or transact them for you if you wish to send them elsewhere.
When comparing the traditional banking system to the world of cryptocurrency, accepting to have a third party such as Shakepay hold your assets means that you hold your cryptocurrencies under your custodial wallet: you have access to it anytime, but is ultimately being held for you by another party. In comparison, if you decide to hold your money as cash and want to use your funds in a permissionless way, you will hold your money in your non-custodial wallet. No one can refuse your transaction and it can be done without anyone else knowing. You have the liberty of choosing to hold your digital currency in a non-custodial wallet or a custodial wallet such as Shakepay.
As Roy said: “When you hold money in a bank account, it’s the bank’s money, not yours. They just promise it back to you. Now, what if you want to hold on to that money without having the bank as an intermediary? Digitally, this is impossible. But with Bitcoin, this is not only possible but encouraged. You could in theory carry a billion dollars worth of Bitcoin in your pocket without any intermediaries. In practice, however, please don’t do that, unless you want it to get stolen.”
The choice relies on you entirely, and you have full custody and control over your digital wallet. The question is, would people be responsible enough to protect their wallets from theft or loss? Some could argue that allowing people to move limitless sums of money could make them engage in financial transactions for which they are not well suited. Transaction limits and credit scores are ways that banks use to protect themselves and their clients from potential fraudulent situations, so in this case, would giving complete access and control to the clients be a privilege or a right?
Breaking Borders
Whenever part of a migrant's earnings is sent to their home country in the form of cash or goods, we refer to these transactions as “workers or migrants remittance.” According to the International Monetary Fund (IMF): “Remittances are especially important for low-income countries and account for nearly 4 percent of their GDP, compared with about 1.5 percent of GDP for middle-income countries.”
An important factor that needs to be highlighted with these types of transfers is the delays and steps that are incurred whenever someone decides to place a transaction. First, agencies such as banks or middlemen like Western Union do not offer real-time settlement periods. Additionally, if the funds are coming from a country that has a different currency than that of the receiving country, unpredictable foreign exchange rates can also have a toll on the total amount that will be received by the beneficiary.
With cryptocurrencies, not only would transaction delays be significantly shorter (almost immediate), but there would be no currency exchanges needed given that the currencies sent and delivered would be identical. As Roy said: “Cryptocurrencies know no borders. The Bitcoin protocol does not know about countries or jurisdictions or geographic locations. It doesn’t even know about planets, it could easily be used on Mars. Think of it like your email inbox. If you receive emails while at home or while travelling abroad, there’s not much of a difference.”
This opens many new investment possibilities and allows for people to move freely anywhere in the world, knowing that the value of their wallets will be the same everywhere, given that the cryptocurrency will hold its value in all four corners of the Earth, and beyond.
Business Advantages
Many companies are taking advantage of the crypto boom and started accepting coins such as Bitcoin as methods of payment. Some of them see this as a new way of expanding their customer base. As an example, PayPal’s draw to start accepting crypto was that Bitcoin’s transaction fees were much lower than the profit-killing 2%-3% charge that businesses were paying for credit card transactions.
Other companies are taking baby steps easing into the crypto world, gradually offering more tailored services to accept this method of payment. For example, sellers on Etsy Shop can choose to accept crypto as a method of payment. According to Yahoo Finance: “It’s up to the seller to add an “other” in their payment method option at checkout. When buyers click that option, they’ll be able to message the buyer with their payment preferences — Bitcoin, in this case.” Another giant easing into the crypto world is Starbucks. Again, it is not possible to buy products directly using Bitcoin, but other services such as pre-paying your Starbucks card are available. Now imagine being able to purchase your Big Mac using your Bitcoin wallet. If you’re ever in El-Salvador, you would be able to do so! Bitcoin can be used in all 19 Salvadoran McDonald’s restaurants and through the delivery app to pay for your meals. These are only a few examples of how small and big companies are entering the cryptocurrency world.
Government Control
Although cryptocurrencies were made to be run by the users, over the past few months there have been increased talks about regulating and taxing crypto users with their capital gains. As Roy conveys it: “Bitcoin has reached a stage where it is hard to ignore. Countries such as El Salvador adopted Bitcoin as legal tender and millions of El Salvadorians are walking around with bitcoin wallets. Lawmakers in the U.S. included crypto regulations as part of the recent infrastructure bill. ”
In fact, it will be hard for lawmakers to alter the way the cryptocurrency systems work because the system is secured by a fully decentralized network — it cannot be tampered with. Governments can only influence it from the outside by asking centralized exchanges to disclose information about incoming and outgoing transactions, taxing capital gains, etc. “Regulation is coming fast at cryptocurrencies. It’s a shame because it’s still a new technology that is not well understood by lawmakers. When regulation comes early, it stifles innovation,” says Roy.
In many small countries with poor economies and weak local currencies such as Panama, it is beneficial for the Central Bank to instore the concept of dollarization, where the local currency gets fixed against the US dollar to help it hold its value. Other times, a formation of a currency union, just like in Europe, can occur to strategically reinforce the economy of a whole territory. By legalizing a cryptocurrency such as Bitcoin, small countries have the opportunity to choose between their local currency or the digital one. In the long-term, we can even go so far as to say that they become more financially independent, where countries such as El-Salvador aren’t as reliant on the American dollar.
As Roy explained: “Is it a good thing to have Bitcoin as an alternate currency? Yes. You are usually born into a national currency. You use it because you don’t have a choice. The optionality of choosing another one with different characteristics is a benefit. If your national currency is devaluing at a rapid pace, you can opt for moving your savings into another currency that’s relatively stable. Yes, you could argue that Bitcoin is volatile compared to the US dollar, but compared to the Lebanese pound or the Venezuelan bolivar, it’s relatively stable.”
Cryptocurrency is a modern concept with lots of room for growth and development. It gives more freedom to traders, but also comes with more responsibility given that there isn’t anyone to call if you make a mistake in a transaction. People are encouraged to do their own research and due diligence.
As a last piece of advice from Roy: “Everyone should take the time to dip their toes into Bitcoin. Start with small amounts, experiment, send to friends, don’t trust what one source tells you — even me! Do your own research as you go.”
