Two friends are going dutch, with one scanning a QR code with his phone to facilitate a transfer of funds — but this is not an exchange of Singapore dollars over the PayNow or PayLah! platforms. Rather, what has exchanged hands is Bitcoin, traded over a programme known as Bitcoin Lightning — a payment protocol to facilitate rapid Bitcoin exchange.
Recent debates about Bitcoin have typically framed the digital asset as a commodity for investment or even speculation. What most people forget, however, is that Bitcoin was initially created as a means of exchange. It was originally devised to rival traditional central bank-issued currencies for day-to-day exchange, with hopes of reducing payment fees and facilitating decentralised transactions.
It was precisely this reason that drove serial entrepreneur Jamie Lim to adopt the use of Bitcoin in his business. The founder of Korean joint Joo Bar alongside wife Kristin, as well as the mastermind behind the iconic Sticky hard candy, Lim was frustrated by the accumulating transaction fees from conventional payment systems. All his businesses accept Bitcoin as payment, which he says allows for near zero-cost transactions.
“I realised that if I could get people to pay me in Bitcoin, at least I would be able to hold a value or a store of value,” Lim tells The Edge Singapore. “Technically the biggest ‘shitcoin’ (i.e. bad cryptocurrency) is actually fiat currency, because you can literally transact at a fraction of its price [through cryptocurrency],” he adds.
Lim is often described as a “Bitcoin maximalist’’ in that he refuses to trade in any other cryptocurrency. No other cryptocurrency, he believes, can act to the same degree as a store of value as Bitcoin. Regular customer Zhu Juntao, co-founder and CEO of financial services firm Hodlnaut, notes that Bitcoin has the largest network of users of all cryptocurrencies, consequently making it the most secure and valuable of them.
At Joo Bar, Bitcoin transactions take place either directly on the Bitcoin blockchain or on Bitcoin Lightning. The former has been criticised for being relatively slow and expensive, as the sheer size of the Bitcoin blockchain means it takes time for a new block to be added to record the transaction. Other users are also jostling to record transactions on the congested blockchain, increasing transaction time and costs.
Lightning simplifies the process by operating as a Layer 2 solution. Basically, it involves a smaller number of individual blockchain users establishing connections with one another where cryptocurrency can be traded more quickly for nearly zero cost. When the link is terminated, the final balances from the transactions are then automatically uploaded to the Bitcoin blockchain, saving time, money and blockchain space.
Pricing at Joo Bar is still in Singapore dollars, with a conversion made into Bitcoin should the customer wish to make payment in cryptocurrency. While Lim typically likes to store his earnings in Bitcoin — which he says he would be very happy to use for day-to-day transactions at any establishment in Singapore — he also has the option to convert the coins into cash, with the exchange subsequently classified as a cash transaction.
Lim admits that only an “extremely low” minority of customers use the Bitcoin option. Most of the users, he adds, are within his small circle of Bitcoin enthusiasts, since “the awareness is just not there” among the general public. People think that the asset is very hard to understand or use and thus shy away.
But scepticism remains about Bitcoin’s ability to serve as a means of exchange. “The government has the guns...and if they make it an act of ‘treason’, most people will stop using competing currencies,” says investor Jim Rogers at a talk by Bloor Street Capital. Bank of Singapore chief economist Mansoor Mohi-uddin also says that cryptocurrencies cannot keep up with growing economic activity by correspondingly raising their “velocity of circulation”.
And the Bitcoin alternative currency story is not even new, argues Yale economist Robert Shiller. Many disturbingly similar alternative currency ideas have fallen by the wayside. In 1932, he recounts, economist John Pease Norton even proposed a dollar backed by electricity at a time when electrification was glamourous — nothing came of it except ridicule in the press.
Yet, Lim hopes to gradually encourage the use of cryptocurrency over time. “We always encourage a Bitcoin circular economy, where we get more merchants and all professions in Singapore to adopt it,” he says, believing that this would increasingly make Bitcoin more commercially mainstream. The best time to buy Bitcoin, he and Zhu say, is now.
