[header date=”12 March 2019″]A closer look at bitcoin ownership in the UK, ethereum’s processing fees, and Samsung’s new phone doesn’t support bitcoin.[/header]
Portraits of bitcoin buyers
Perhaps not surprisingly, people who buy cryptocurrencies often hope to “get rich quick,” according to recent research published by the United Kingdom’s Financial Conduct Authority.
A survey of approximately 2,000 UK consumers, commissioned by the regulator, estimated that just 3% of respondents actually purchased a crypto-asset. Of that group, only 8%—or fewer than 10 of the total— performed “deep research” before taking the plunge into crypto ownership.
The survey, conducted by a research firm called Revealing Reality, also provided vignettes of UK crypto buyers. Some are amusing—and perhaps relatable—while others are just sad:
Kyle, 22, student, Manchester
“Kyle ‘partied hard for a few years’ but now runs the volleyball team and has stopped smoking cannabis, which has allowed him to have enough money to purchase cryptoassets…
Kyle dealt with crypto assets when he was 16 to purchase illegal drugs online, but it was ‘only when I was 20 or 21 when I saw it as an investment.’ Kyle bought £1,100 ($1,400) worth of Bitcoin, Ripple, Tron, Excelen, Appcoin and Elastos with his student loan in January 2018. His purchase was made ‘at the worst possible time’ by his own admission, as the value of Bitcoin plummeted just a few weeks later.”
[takeaway]Kyle’s experience illustrates how bitcoin morphed from an obscure curiosity—often used for illegal online purchases—into a mainstream investment phenomenon. The researchers said Kyle may have “post-rationalized” losing his student loan money on cryptocurrencies, claiming “he would have wasted the money anyway.” [/takeaway]
Sandy, 43, part-time book designer, London
“Sandy lives in London with her partner and two sons… She learned about “financial investments” from her step-father and brother, who are “businessmen and love money,” and had experience of buying stocks in 2016.
Sandy was first exposed to the crypto assets world through mainstream newspapers such as the Guardian and the Independent. She purchased £2,000 of Bitcoin, Ethereum and Litecoin, and at the time of the interview she said she had £800 in her holdings. Sandy says she ‘doesn’t care about the profit,’ but rather is a big believer in ‘crypto assets having a bright future.’ She wants to have her ‘foot in the door’ because of the promise she sees in the technology.”
[takeaway]Like Kyle, Sandy takes her losses in stride. However, she seems to want to hedge her bets, just in case cryptocurrencies became a large part of our future. [/takeaway]
Fred, 26, social media content creator for a tabloid newspaper, London
“[Fred] received some inheritance money a couple of years ago, which is in a current account and he is not sure what to do with it. He has been researching hedge funds on Google to work out how to invest his money.
Fred first heard about crypto assets from his brother who had purchased some. However, his decision to purchase some came after talking to a taxi driver, who said he had put himself through college with profits from ‘investing’ in crypto assets. Fred purchased £300 ($400) spread across Bitcoin, Ethereum and Litecoin, which he said at the time of the interview was now worth £95 ($120). Fred regrets his decision to purchase crypto assets, and believes it was a bad idea: ‘Looking back I am ashamed of my investment and losing money.’”
[takeaway]Poor Fred actually listened to investment advice from his taxi driver. [/takeaway]
Elena, 34, former marketing director for an initial coin offering, London
“Elena has a relatively long history with crypto assets as she previously worked as a marketing director for one of her friend’s ICOs. Elena knows how external influences can drive market movements, therefore affecting crypto assets’ value. Elena has purchased many crypto assets and recently bought Polkadot with €60,000 ($67,494), reporting a profit of €40,000. She valued her current crypto asset holdings at €200,000 at the time of the interview. Her main influence is a friend whom she describes as a ‘genius’, and whom she believes is well connected to an ‘inner ring’ of crypto assets influencers – such as founders of ICOs.”
[takeaway]Elena’s good fortune seems to be the result of her connections. It’s evidence that, for people involved in the marketing and sale of new cryptocurrencies, the deck is stacked in their favor. [/takeaway]
Angela, 26, HR in luxury fashion, London
“Angela had read about the rapid rise in value of crypto assets in newspapers and magazines such as Business Insider, the New York Times and the Independent. She has several friends who work in ‘financial services’, who would talk about investments in crypto assets and stories of others making gains – something that ‘made it seem much more legitimate’…
Angela purchased two Litecoins at £650, deciding not to consult her boyfriend or peers who knew more about the market: ‘I wanted to feel like I did it on my own.’ She felt that Bitcoin was a ‘safer investment’ but couldn’t afford to buy a ‘whole one’, so instead preferred to buy two whole Litecoins. Her purchase fell quickly, and at the time of the interview was worth £86 in total. Angela regrets her decision to buy crypto assets: ‘I only did my research after I had already bought them, which is when I started reading about how a lot of people created ‘hype’ around particular cryptocurrencies.’”
[takeaway]Luckily, Angela didn’t lose too much money, but she realized too late that the cryptocurrency industry is primarily driven by savvy marketing and media coverage. [/takeaway]
About half of all crypto buyers who were surveyed bought less than £200 worth, and speculators typically used disposable income to make their purchases, which the FCA saw as a relief. The survey “suggest[s] that currently the overall scale of harm may not be as high as previously thought,” wrote the regulator.
What you need to know—and why
Samsung’s Galaxy S10 phone offers crypto support, but not for bitcoin. Through its Blockchain Wallet—available on the Samsung Galaxy Store—buyers of the Galaxy S10 can use digital tokens based on ethereum, a blockchain platform which supports ether, the second largest cryptocurrency after bitcoin. Per CoinDesk Korea, the phone can be used for a handful of ethereum-based applications, including CryptoKitties—a digital, collectible cats game—as well as Cosmee, a beauty product rating service, and Enjin, a crypto-for-gaming platform.
[takeaway]Bitcoin has been excluded from the Galaxy S10—at least for now—but Samsung’s focus on ethereum indicates that the company is interested in crypto applications beyond currency alone. Still, if you hope to use the S10 for your crypto beware that the phone’s facial recognition software is hackable. ➡️[/takeaway]
[supplemental headline=”De-jargonizer: Gas”]
In ethereum, “gas” is a small fee that is required when a person wishes to send ether or perform some action on the network. The more computationally intensive the request, the more gas that is required. Gas, in conjunction with block rewards, helps compensate the miners who contribute computing power to process the network’s transactions.
If gas didn’t exist, malicious actors could mercilessly spam the ethereum network without consequencs, so small processing fees are an irksome but necessary evil.
[mailto filter=”Jargon” subject=”De-jargonize this…”]Heard a new crypto term? We can tell you what it means.[/mailto]
[/supplemental]
Please send news, tips, and investment advice from taxi drivers to privatekey@qz.com. Today’s Private Key was written by Matthew De Silva and edited by Oliver Staley. Nearly anyone can stand adversity, but if you want to test their character, give them power.