Digital Marketing. Annmarie Hanlon
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of peer-to-peer financing. There are no banks, no third parties, no bank vaults, no cash machines involved with Bitcoin.
Bitcoins are stored in a digital wallet which is kept on your computer or stored in the cloud. You buy or sell Bitcoins on Bitcoin exchanges, such as Coinbase and Gemini Exchange. You can buy Bitcoins in any currency and transaction fees are smaller than standard currency exchange rates, which makes them popular for large overseas payments.
Transactions are recorded online in a transparent register which is called a blockchain and all transactions are checked electronically.
Discover More On Blockchain
1 Visit the Blockchain support centre online: https://support.blockchain.com.
2 Read the Harvard Business Review article ‘The truth about blockchain’ (Iansiti and Lakhani, 2017).
New Bitcoins are created by mining and an industry of Bitcoin miners has developed. Bitcoin miners de-code online encrypted mathematical challenges using algorithmic processes. In exchange for their work in finding and recording Bitcoins on the blockchain, they are given Bitcoins. Becoming a Bitcoin miner requires hardware in the form of super-fast computing systems as well as software.
There are downsides to Bitcoin as the whole process is anonymous, giving rise to potential for money laundering as well as illegal or terrorist uses, and this has resulted in many mainstream banks refusing to accept Bitcoin or closing accounts trading in the currency.
Other downsides are that there are no guarantees if the coins are lost, and there have been many scams with all aspects of bitcoins, from hacked wallets to software scams.
See ONLINE RESOURCE: Comparison of traditional currency and Bitcoin
Case Example 1.2 The Lost Bitcoins
James Howells, a computer engineer, was tidying up his old computers and accidentally threw away a laptop containing 7500 Bitcoins in 2013, which was worth £750,000. Today it is more likely to be around £40 million!
He spilt a drink on the device and decided to leave it for collection and removal to the household waste recycling centre near Newport in Wales, only realising later that the hard drive contained his digital wallet (McCormick, 2013). Howells visited the waste recycling centre only to discover that his computer, along with significant amounts of other waste, was buried deep under metres of items, somewhere in a space bigger than the size of a football pitch, and could not be recovered.
This case highlighted one of the vulnerabilities of bitcoins, that if stored on a device, there is no way to retrieve them other than via that device. Since this time many bitcoin owners have backed up their systems, just in case.
Case Questions
Perhaps you don't own any Bitcoins, but how do you back up your data?
Have you lost data when a Macbook or laptop has failed? If yes, how did you cope with the data loss?
What might be the impact if your Macbook or laptop failed later today?
Whether Bitcoin has a future as a real alternative to traditional currency is debatable. Payment specialists Consult Hyperion think it is unlikely as people would need to be comfortable sharing all their transactions as well as needing to manage their own Bitcoin security (Consult Hyperion, 2015). The bank BNY Mellon also thinks it is unlikely, especially as countries including Iceland, Vietnam and China have banned the use of Bitcoins (BNY Mellon, 2015).
Whilst Bitcoin is the best known, there are alternatives, such as Ethereum, Litecoin, Ripple and many more. What Bitcoin has achieved is awareness of a new disruption digital currency.
1.8.1 Blockchain – the Distributed Ledger
One technological innovation generated through the development of Bitcoin was blockchain or distributed ledger technology (DLT). A blockchain is a distributed database so no one person or organisation stores all the data, it is securely shared over several systems, records all actions and is open for verification (Workie and Jain, 2017).
Blockchain was initially aimed at securely recording all Bitcoin transactions but its usefulness on a wider scale for ‘interorganizational cooperation’ was realised (Gupta, 2017, p. 3). There are experiments taking place at the moment to see how this type of disintermediation (see Key Term) can work. The benefits of the DLT are:
One single person does not control all the data
Data sets are portable
Records are transparent
Greater data integrity as records cannot be changed later
More efficient system
There are opportunities to use blockchain technology for:
Medical records: Every specialist, every appointment, diagnosis, treatment and prescription history could be viewed in one place. The doctor has the key; so too does the patient and can share where needed.
Education and training data: All results, certificates, accreditations, memberships and awards are in one place. The individual has the key and can share with potential employers before interviews.
Property records: A property passport could be established that lists all safety checks, mortgages attached to the property, equipment installed (and removed), planning permissions and ownership. The current owner has the encrypted digital key that is handed to new owners when needed.
As a company, Blockchain is promoting itself as ‘the world's leading software platform for digital assets’ and has secured funding from major investors including Google's Venture Capital company Lakestar and Sir Richard Branson (Blockchain, 2017, p. 1).
There are drawbacks to blockchain technology too: supercomputers use a lot of energy; some say as much as a small country! The database keeps growing and it is getting slower; if you make a mistake, it is there forever and can't be changed. Once content is added, it can't be corrected – whilst that has advantages, it is also a disadvantage. It is also complicated and will take time to be used routinely by many major companies.
Key Term Disintermediation
Disintermediation is about removing the middle man or the intermediary. Researchers Manjit Yadav and Paul Pavlou suggested that disintermediation was ‘the elimination or significant curtailment of the role played by intermediaries’ (Yadav and Pavlou, 2014, p. 34).
Further exercises
1 Imagine you are working for an organisation with an older audience, mainly digital immigrants. Write 500 words explaining the key changes in traditional to digital marketing and what this means to them.
2 Create an outline plan to start a blog as an opinion leader. What tools or skills would be needed? What would be the subject area? What types of content would be included?
3 Analyse the Internet of Things in your environment, whether at home, work or university. How are these items connected or how could they be connected?
Summary
This chapter has explored:
The critical factors in the digital marketing landscape from ubiquitous computing to micro-influencers.
Why the move from traditional to digital marketing tools has occurred and the difference between digital natives and digital immigrants.
How digital disruption can change market sectors.
Ways that the Internet of Things can be applied to consumers.