Bitcoin

Balance sheets are useful terms from accounting showing a snapshot of the financial state of a company. Balance sheets consists generally of 3 columns:

• Assets
• Liabilities
• Equity

These map directly to the Rights and Obligations I rambled on about a couple of weeks ago.

An Asset is a Right and a Liability is an Obligation, just with numbers assigned to it. The Equity I will get to shortly.

In my previous article I talked about Rights and Obligations and how they apply to blockchains.

If you have the right to someone’s obligation there may be a risk that the other party can’t (or won’t) comply. This is called Counter-Party risk.

A simple example of counter-party risk is if you lend money to your nephew who lives on his parents couch playing computer games all day long, there is a risk he doesn’t pay it back.

Differences in counter-party risk explains the differences in prices for currencies and shares. It also explains why different levels of risk provides different interest rates, both for personal loans and for individual country’s bond rates.

There are whole industries of rating agencies that are supposed to analyze this risk and allow people to take this risk into account.

Rights and Obligations are the 2 most fundamental building blocks of trade and finance. Contracts exist to protect rights and enforce obligations. Trade consists of trading one right or obligation for another.

They are also fundamental in understanding how Financial Systems, Blockchains and Smart Contracts work, yet most people haven’t really thought too much about what they actually work.

I believe it is vital to understand and think about these basic concepts to be able to successfully understand Bitcoin, Ethereum and eventually replace the traditional financial instruments and systems that are all based on this.

This article is a quick introduction rights and obligations and how to think about them in financial applications, in particular when writing Smart Contracts.

Tomer Kantor just posted another really good article about Bitcoin’s Competitiveness In Kenya.

Tomer worked on a great Documentary on Bitcoin in Kenya, where he interviewed me and other people in the Bitcoin scene in Kenya.

As part of his article he posted previously unreleased interviews with me and Elizabeth Rossiello from BitPesa.

Kipochi the startup I helped found 3 years ago is in the news again. While the whole story ended up pretty painful for me I did learn a lot from the experience. It's been a while now so I think it's time to tell the story from the inside.

First some background

I started Kipochi in Feb 2013 together with a consortium of Danish guys with experience in telcom in Africa. I brought technology from a previous startup Economi.co that I shut down and they were in charge of money and sales.

Our original goal was to partner with telcos in Africa and Asia to create an alternative to local operator owned mobile money operators (MMO) like MPesa.

This was to be based on Bitcoin and allow interoperability with any vendor. Our goal from a tech point of view offer a consumer wallet based on USSD and mobile web. This would be branded by local operators.

We would also provide a solution for operators to use their existing agent network to buy and sell bitcoin.