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“A sophisticated investor will simply look at these coins as another investment opportunity — a purchase of something now for future value”


be testing its own national digital currency among the country’s commercial banks. All of this points to the fact that now could be the ideal time


to add cryptocurrencies to your investment portfolio. But even with the potential for huge returns, tread cautiously. Many ex- perts are still declaring the cryptocurrency market a Wild West where losing everything is still a real possibility. In fact, in Sep- tember 2017, the Bank of Russia declared that the tenders would not be traded there anytime soon and China banned block- chain-based startup financing. The perception of core cryptocur- rency users as criminals is not entirely unfounded, either. The perpetrators behind the massive 2017 cyberattack affecting 150 countries were demanding bitcoins in exchange for decryption keys to unlock computers.


How does the technology work? All cryptocurrencies work through the support of a blockchain, which Bragonier describes as a kind of digital ledger that in- stantly records all transactions in chronological order. As he explains in a series of CPA Magazine articles on blockchain (Technophilia, September, October and November 2016), “Each and every transaction is broadcast to participating computers on a peer-to-peer network so they can all record transactions in their individual ledgers.” He adds that, because this database is not owned by a single proprietor, common consensus among all these connected ledgers is needed to authenticate each transac- tion, which is then stored on a block in the blockchain. Each computer participating in the network maintains a copy of the complete ledger, which is updated in real time as new blocks are created and validated. Not only does this eliminate the need for a financial institution or any third party to control exchanges, it also allows for almost instant digital asset transfer in a secure environment. In a 2016 Ted Talk on the technology, entrepreneur and re-


searcher Bettina Warburg likens blockchain to Wikipedia, only instead of storing words and images, the technology keeps a secure record of the ownership and location of assets such as digital currency. She believes the blockchain’s ability to reduce uncertainty by keeping a secure record of transactions will radi- cally transform economies, allowing all kinds of companies and consumers to interact with complete transparency. It would cre- ate the perfect ecosystem to bring digital currencies into the mainstream. The transparency of blockchain is a huge selling feature, say


cryptocurrency fans. MLG’s Gord anticipates we’ll eventually have a completely open financial system, making it “faster and simpler to move money around the world” while simultaneous-


36 | CPA MAGAZINE | JANUARY 2018


ly tracking the entire supply chain and movement of goods. “I think the banks are coming on board for fear of missing out, but I don’t think they’ll be able to innovate as quickly as the startups in this space,” he says. Gord also points to the benefits of better security around


digital exchanges. “With bitcoin there is no anonymity because all transactions are stored on the blockchain,” he says. “Sure, there are still fraudulent people who use bitcoin, but there is way more fraud happening with regular currencies.” Duncan Brown is tackling the security issues around digital


exchanges head-on. The 24-year-old coding whiz is cofounder of Toronto-based Distributed ID, a company building infrastruc- tures for managing digital identities using blockchain tech- nology. In 2016, he was part of a four-person team that won a US$20,000 hackathon competition using the ethereum network to develop a prototype for digital identification. The exposure enabled him to secure a contract with a Chinese company to


HOW TO BUY A DIGITAL CURRENCY


Cryptocurrencies are exchanged on trading platforms such as Coinsquare or QuadrigaCX in Canada, or Bittrex and Kraken in the US. To get a sense of the market price and daily volume of the specific blockchains producing coins, the experts suggest going to coinmarketcap.com. When you’re ready to buy coins—which will cost any-


where from pennies to several thousands of dollars, depending on which type you choose — you’ll need to exchange hard cash for bitcoin or another recognized cryp- tocurrency such as ethereum, or go through an experi- enced crypto broker to do it for you. You’ll also need to download an app to create a digital wallet, which you’ll use to store, trade and sell your digital monies. This can be linked to your traditional bank account so you can continue to use traditional monies to buy and sell cryptocurrencies. To access your wallet, you’ll need a public and private


key made up of a random sequence of numbers and letters. The first is used to identify your wallet and the latter enables you to access your funds. You can sell your cryptocurrencies back for cash via the exchange platform or by scanning a code on the buyer’s phone and collecting cash in hand. There are several meetups around the world where people directly buy and sell these currencies as well. For more information, go to coindesk.com/information/sell-bitcoin. —RS


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