Bitcoin vs. Gold: 10 experts told us which asset they'd rather hold for the next decade, and why

• As bitcoin continues its meteoric run, more investors are now reviewing the longstanding comparison between the famous cryptocurrency and gold.
• Bitcoin crossed the $1 trillion market capitalisation mark on Friday, while gold touched $1,784 (R26,151).
• Insider surveyed ten experts to see which asset they'd rather hold for the next ten years—and why.
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As bitcoin continues its meteoric rise, breaching new records and crossing the $1 trillion market capitalisation mark in just the last week, more investors are assessing the longstanding comparison between the famous cryptocurrency and an equally well-known asset class: gold. 

Both assets, experts say, are often seen as ways to diversify a portfolio or as a hedge against fiat currency inflation brought about by what some observers see as unsustainable fiscal and monetary policies.

Yet, until recently, it was rare to see Wall Street analysts, chief executives, or established investors seriously compare the two assets. Bitcoin, commonly referred to as digital gold, has historically been seen as a risky speculative investment for those looking to profit in the short term. Gold, meanwhile, has always been considered a historical safe haven.

Now, bitcoin's rapid ascent to over $57,000 per coin, backed by new investments from Tesla and other institutional names, has led some to question whether old assumptions about these assets are correct.

Given the digital asset's dizzying climb, Insider surveyed ten experts to see they'd rather hold bitcoin or gold for the next ten years, and why. We asked bitcoin bulls, gold lovers, analysts, executives, and more.

Here's what they had to say:

Holding Gold

• "My vote would be for gold because it has thousands of years of a historical record as a store of value, has one-fifth the volatility of bitcoin, and doesn't face the same competition risk. The day that Queen Elizabeth trades in the five pounds of gold in her crown for crypto is the day I'll shift course." - David Rosenberg of Rosenberg Research, former Chief Economist and Strategist for Merrill Lynch Canada and Merrill Lynch in New York
  
  
  
• "Gold and silver have been stores of value and mediums of exchange for at least 4 millennia in every civilization in every corner of the world. It has unmatched accessibility to people of all economic standing and technological knowledge. And gold is the ultimate currency of central banks, silver of the people. There is room for cryptocurrencies too since their digital nature is a fundamental difference from gold and silver. But that characteristic also ensures that cryptocurrencies will never replace gold and silver and will ultimately improve the metal's value." - Phil Baker, President and CEO, Hecla Mining Company 
  
  
  
•  "Gold has long been considered to be the safe-haven asset of choice, and, while bitcoin is 'the new kid on the block,' it's debatable that it will eat into gold's market share for a number of reasons. Bitcoin and gold both have significant advantages over fiat currencies because neither can be diluted or debased. There is a possibility that bitcoin could one day cease to exist through hostile legislation. Some bitcoin derivatives have already been banned. Companies such as Facebook who have attempted to start crypto have been prevented from doing so. So, while bitcoin is a more recent form of investment that is certainly receiving a lot of hype, gold has retained its value through centuries. Whether bitcoin will offer the same level of longevity is highly questionable." - Sylvia Carrasco, CEO and founder of the gold exchange platform Goldex. 
  
  
  
• "One of the assumptions underlying bitcoin's bull case is its limited supply, but the supply of cryptocurrencies, on the whole, is theoretically unlimited. Some extol bitcoin as a portfolio diversifier, but it has so far exhibited higher correlations to equities than gold, particularly during periods of equity market stress when diversification tends to add the most value. The demand for bitcoin may be over its skis relative to its likelihood to carve out a significant economic or financial use case." - Michael Reynolds, Investment Strategy Officer at Glenmede.
  
  
  
• "Both crypto and gold have passionate investor bases… However, there are very clear differences. Gold's history as a basic building block of global money is 5,000 years old and time-tested; Bitcoin is ten years old and has existed in only one monetary regime. The standard deviation of bitcoin's price is 75%, making it a horrible store of value. Recent price history shows a large bias toward speculative interest, so much so that companies are tempted to include bitcoin on corporate balance sheets to help grow assets in excess of corporate performance. Crypto is a poor monetary substitute. In the US, filing your taxes requires a voluntary disclosure of your cryptocurrency profits. If a crypto trade automatically generated a statement to the IRS as a brokerage transaction does, the speculative outlook could dim."- Robert Minter, Director of Investment Strategy, Aberdeen Standard Investments
  
  

Bitcoin Bulls

• "Bitcoin is a 100x improvement over gold as a store of value. The world is realising this and beginning to reprice digital currency in real-time. Although bitcoin has increased hundreds of percent in the last few months, it is likely to continue appreciating in US dollar terms over the coming years. I suspect that bitcoin's market cap will surpass gold's market cap by 2030. For this reason, I own no gold and have a material percent of my net worth invested in bitcoin." - Anthony Pompliano of Pomp Investments and Morgan Creek Digital Assets
  
  
  
• "The crypto bull run has seized the attention of millions of people who previously had never considered digital currencies like Bitcoin to be an alternative asset. While gold and bitcoin are both sometimes used as a means to diversify and hold a range of valuable assets, in many ways they are quite different. Bitcoin and other digital currencies can be easily traded on platforms. We have seen progressive global firms offering to receive payment in bitcoin and advocates such as Tesla taking an active role in promoting it. This liquidity, ease of exchange, and wider use in the modern economy are some of the major differentiators. Gold has a relatively defensive purpose- to hold value, whereas Bitcoin and other currencies are intended to have several uses, not least ease of exchange, purchase, and liquidity." - Pavel Matveev, CEO, Wirex.
  
  
  
• "Based on the trajectory of this digital gold path and use cases globally, we believe bitcoin will be a mainstream asset class in the future. While gold has clear value and safety, the upside in bitcoin is eye-popping if it stays on its current course over the next decade." - Daniel Ives Managing Director and Senior Equity Research Analyst at Wedbush Securities
  
  
  
• "Gold is, no pun intended, the standard if you want to measure purchasing power over millennia. The liquidity of gold has been consistent over time. Gold is what defines the X-axis of purchasing power over time. Bitcoin, while it shares defensive qualities with gold, has the additional attribute of being aspirational. What bitcoin would seem to possess is the potential to go up to multiples of a moonshot. No one thinks gold will moonshot. Bitcoin is also finite, unlike gold. No increase in demand can change that. There is zero elasticity." - JP Thierot, CEO of Uphold, a digital money platform 
  
  
  
• "I would probably pick bitcoin but why not both? Gold and bitcoin have a very similar aspect to the portfolio. I would add gold as a diversifier. I would add bitcoin as a diversifier. The hedge is diversification. Bitcoin is a tool to get there. Bitcoin is a hedge to losing money to something stable." - Mike Venuto, co-portfolio manager of the Amplify Transformational Data Sharing ETF, a $1 billion ETF.

What a year – a global pandemic, a wavering stock market, rising numbers of unemployed people and continued uncertainty in global markets. Yet, we saw the bitcoin price recover from $5,300 in March to almost $18,000 at time of writing.

That’s almost a 240% return within nine months.For regular investors, the burning question is whether bitcoin is becoming overpriced. Is it too late to buy bitcoin?

Hong Fang is the CEO at OKCoin, a U.S. licensed, fiat-focused cryptocurrency exchange headquartered in San Francisco. Hong spent eight years at Goldman Sachs, leaving as VP of Investment Banking. She is a graduate of Peking University in Beijing, China, and has an MBA from the University of Chicago’s Booth School of Business.

If we put aside short-term volatility and take a long-term perspective, there is a reasonable path for the price of bitcoin to reach over $500,000 in the next decade. To go even further, I think BTC is likely to hit $100,000 in the next 12 months. Significant upside has yet to play out for bitcoin.

Bitcoin is a 'store of value'

When we talk about the valuation of an asset, the first step is to understand the fundamental economics. Equities, bonds and real estate, for example, often derive their value from generating cash flows; therefore, valuation of these assets involves projecting future cash flows. Commodities, on the other hand, are more utility based and therefore their prices are anchored by industrial supply and demand.

Before taking any action on bitcoin, I suggest asking yourself, “What is bitcoin for?” Use this as a baseline to form your own view of the value of bitcoin and its fair price range in a given time horizon.

Here’s my take as a HODLer:

• Bitcoin is sound money and the first native internet money in human society.
• It is scarce (21 million fixed supply), durable (digital), accessible (blockchain is 24/7), divisible (1 bitcoin = 100 million satoshis), verifiable (open-source Bitcoin Core) and most importantly, censorship resistant (encrypted).  With these superior monetary qualities in one asset, bitcoin is a great store of value. Once it reaches a critical mass of adoption as a store of value, bitcoin has huge potential to grow into a global reserve currency (and universal unit of account, too) over time.
• The history of money shows us that natural forms of money generally go through three phases of evolution: first as collectible (speculation on scarcity), second as investment (store of value), third as money (unit of account) and payment (medium of exchange). As bitcoin goes through different phases, its valuation scheme varies, too. In my view, bitcoin is currently in the early stage of phase II. Below is a short summary of the two phases bitcoin has been through and respective value implications.

Bitcoin as collectible

Between its inception in 2009 and 2018, bitcoin was in its “collectible” phase. Only a small cluster of cypherpunks believed in bitcoin as “future sound money.” It was hard to come up with a valuation scheme for bitcoin that matched its fundamentals. It was also too early to tell whether bitcoin could succeed in building consensus around its “store of value” superiority. 

Bitcoin is built as a basic utility and doesn’t generate cash flow, so there is no way to forecast its price based on cash flows. Its circulating supply was easy to calculate, but it was really hard to estimate demand given the fickle nature of speculative trading.

When speculative demand surged and drained out of the system, particularly around the initial coin offering (ICO) boom in 2017, we saw bitcoin’s price explode from $900 in early 2017 to $19,000 by the end of 2017, and then down to $3,700 by the end of 2018.

Bitcoin’s opponents usually attack bitcoin’s price volatility as a bug, but I believe that bitcoin’s price volatility is a unique and smart self-marketing feature. It was key to its survival in the early days.

Bitcoin operates as a decentralized global network. There is no coordinated marketing team out there promoting bitcoin’s utility to the world. It is the dramatic price volatility that has continued to attract attention from non-followers, some of whom were later converted into believers, thus driving the continued momentum of bitcoin adoption. 

Bitcoin as investment

Bitcoin went through an identity crisis as “sound money” before it graduated into the second stage as an investment vehicle. Starting with the scalability debate in 2017, when the network became congested with historical high volume and transaction costs surged, its community had serious controversies (some called it “civil war”) involving the future path of bitcoin. 

See also: Bitcoin 101

As a result, on Aug. 1, 2017, the bitcoin blockchain was hard forked to create the Bitcoin Cash (BCH) chain to allow larger blocks as BTC stuck to a block size limit with SegWit adoption to enable a second-layer solution. On November 15, 2018, the BCH network forked again into Bitcoin Cash and Bitcoin Satoshi’s Vision (BSV).

Fortunately, bitcoin (BTC in this case) survived its growing pains (and the industry-wide bear market) and thrived thereafter. It is also through such public disputes (and price performance after hard forks) that BTC support and dominance has been further solidified, with an increasing number of addresses holding BTC and decreasing volatility. 

Then came 2020.

Banner year

This year has been an extraordinary year in many aspects, but it is truly a milestone year for bitcoin. The coronavirus pandemic has brought emotional and economic stress to many people on a global basis.

On top of that, 12 years after the 2008 financial crisis and the publication of the Bitcoin white paper, we are reminded how easily our economy could be flooded with new money printed out of thin air; $3 trillion in new money was created in just three months in the United States, about 14% of U.S. GDP in 2019. The U.S. was not alone.

In 2020, it has been extremely hard for responsible savers to find reliable, real yields to preserve their hard-earned wealth.

American middle-class families have had to either accept zero to negative interest rates at banks and debasement risk or bet in the all-time-high equity market when the real economy struggles, not knowing when the music will stop. In other countries, people must fight an uphill battle everyday to simply preserve the earning power of their salaries.

These macro themes are too strong for anyone to ignore. In contrast, the Bitcoin network had its successful third halving on May 11, 2020, highlighting the beauty of having monetary discipline pre-written into code and executed by the global network smoothly ever since.

As a result, more investors in traditional finance (Wall Street institutions included) have started to realize that bitcoin has a unique hedging capability against long-term inflation risk, with a risk-reward profile better than its closest monetary cousin, gold.

Different from its 2017 ride, bitcoin’s current run-up is characterized by more vocal institutional endorsement: Square and MicroStrategy allocate treasury cash into bitcoin; the Office of the Comptroller of the Currency (OCC) allow U.S. banks to offer crypto asset custody; PayPal enabling crypto buying and selling; Fidelity making a case for 5% asset allocation and doubling down on crypto engineer recruiting; well-established traditional asset managers including Paul Tudor Jones and Stanley Druckenmilller announcing public support for bitcoin.

The mainstream momentum is building up.

For the first time since its historic inception, bitcoin officially entered mainstream media as “digital gold,” a legit and credible (and liquid) alternative asset to consider for both individuals and institutions. The earlier comparison to “Dutch tulip mania” starts to fade.

As more people educate themselves about what bitcoin is and start to embrace it not as a speculative trading asset but as a long-term asset allocation option, we can now look at its fundamentals and anchor price ranges with a simple supply-and-demand math.


Below are three scenarios used to triangulate bitcoin’s potential one-year trajectory.

Scenario 1: 1-2% US household wealth allocation?

• According to the Federal Reserve, U.S. household wealth reached $112 trillion by June 2020 (top 10% owns two-thirds of the wealth).
• 1%-2% of $112 trillion = $1.1 trillion to $2.2 trillion potential demand (Fidelity’s most recent report actually recommends 5% target allocation).
• Current total circulating BTC is about 18.5 million. To keep it simple, let’s assume 21 million max supply are all up for sale.
• Divide the potential demand by max supply, we get a price range of $56,000-$112,000. This scenario does not account for the rest of the world ($400 trillion global family wealth, according to Credit Suisse Wealth Report 2020). If we assume 1%-2% allocation of global family wealth, we will be looking at a $228,000-$456,000 price range. Would this happen in the next 12 months? Likely not. Can this happen within the next decade? I think that’s very possible. 

Scenario 2: 2%-3% of global high-net-worth individual allocation?

• According to Capgemini World Wealth Report 2020, global HNWI wealth stood at $74 trillion by end of 2019 (~13% alternative, 14.6% real estate, 17% fixed income, 25% cash and cash equivalent, 30% equity).
• 2%-3% of $74 trillion = $1.48 trillion-$2.22 trillion potential demand.
• Divide the potential demand by max supply, we get a price range of $70,000-$105,000.
• This scenario does look at global data, but only accounts for high-net-worth individual (HNWI) allocation, assuming that this segment has more assets to invest and investment decisions are more driven by institutional asset managers and advisers. I am also assuming a higher range of allocation here because HNWI are generally better positioned to take on more risks in search of higher risk-adjusted return.

Scenario 3: Catching up with gold?

• There has been a long-standing argument that bitcoin would catch up to gold in market cap once it is widely accepted as a “digital and superior version of gold.”
• Current gold market cap is $9 trillion. This is about 2% of total global wealth and 12% of global HNWI wealth.
• 100% gold market cap means $428,000 price point for bitcoin. Can we get there in 12 months? Probably too aggressive an assumption. Can bitcoin rise to 20%-25% of gold in 12 months (aka 2.4%-3% global HNWI wealth allocation)? Possible. That would give us a price range of $80,000-$110,000.

There are additional factors that could add more upside to bitcoin. Given that we are still in the early stage of mainstream adoption, I don’t want to over-emphasize them, but I want to lay them out just to keep the perspective.

• Potential allocation from corporate treasury management. We are already seeing early signs of that with Square and MicroStrategy. Square recently allocated about 1.8% of its cash balance to buy $50 million in bitcoin. Sizing up corporate demand for bitcoin is tricky, though. Each company has its own cash flow and growth profile, which will affect its risk appetite in asset allocation.
• Potential allocation from foreign exchange reserves of all sovereign states. According to the International Monetary Fund, the global foreign exchange (forex) reserve was $12 trillion by June 2020, with the top three reserve currencies in U.S. dollars $7 trillion (58.3%), euros $2 trillion (16.7%), and yen $650 billion (5.4%). Is it possible to see sovereign countries allocate some of their forex reserves into bitcoin? I believe that trend will emerge over time when bitcoin’s superiority in “store of value” further plays out in the next five to 10 years. Assuming 25% allocation ($3 trillion, a little more than euro allocation), that is another $140,000 upside. Bitcoin catching up on the U.S. dollar as a dominant global currency reserve could take a long time to materialize, if at all but it is not impossible to see bitcoin among the top 3 list. 
• Not 100% of bitcoin’s max supply would be available for trade. There is about 18.5 million in circulation. About 10% of that has been dormant for over 10 years. It’s tricky to estimate how much of the total bitcoin in circulation will actually be up for sale at different price points.
• None of the above account for the dollar's inflation rate in the years to come, which is about 2%-3% annually as a baseline. Neither do these scenarios account for the network effect of bitcoin, the possibility of bitcoin becoming more ubiquitous and reliable as a unit of account.

What could go wrong?

A one-sided investment case is never a good one. It is prudent to play devil’s advocate and assess downside risks. What are the major risks that may derail a bitcoin bull run?

Protocol risk

The biggest risk always comes from inside. Bitcoin has inherent value only because it has the unique characteristics of “sound money” (scarce, durable, accessible, divisible, verifiable and censorship resistant). If any of those qualities are compromised, the foundation to its investment case will be eroded or gone.

Such protocol risks were high in its first few years, but after two major controversial hard forks and three successful halvings, it seems that protocol-level risks are somewhat contained. The Bitcoin ecosystem has been consistent in independent developer support.

According to Electric Capital’s developer report, the Bitcoin developer ecosystem has maintained 100+ independent developers every month since 2014. Additionally, we’ve also seen an increase in commits to the Bitcoin Core codebase in 2020, reaching a peak in May (around the time when the third halving happened).

It’s also encouraging to see major development milestones emerging on the Bitcoin Core network, including the merge of Signet, Schnorr/Taproot and increased focus on fuzz testing, to name a few. These protocol-level developments continue to enhance the privacy and scalability of the network, boosting bitcoin’s technical stability as a currency.

To ensure a healthy and safe future for bitcoin, it is critical to ensure the Bitcoin Core developer community remains independent and decentralized and continues to make steady improvements in critical areas like security and privacy.

This is also why we have been passionate about providing no-strings sponsorship to Bitcoin Core developers and projects at OKCoin. Investing in bitcoin development helps reduce the protocol risk.

Concentration risk

This, to me, is the second0biggest risk to bitcoin. Bitcoin’s ethos is to empower individuals through decentralization, but the risk of concentration always exists.Within the network, the risk lies in the concentration of mining power. It is not an industry secret that 65% of the world’s hash power is in China.

If mining power is coalesced, a mining pool or group of miners can manipulate network transactions, creating fake coins through double-spending, in turn impacting the market price.

However, there is also the argument that such concentration risk is inevitable but to some extent harmless, too, given how the network incentive has been designed for bitcoin.

In other words, the incentives in the form of new bitcoins and transaction fees should work to keep the majority of the nodes honest because it is economically costly to cheat (not because it is hard or impossible to cheat). The assumption is that the mining participants are all rational and make economic decisions.

Externally, similar risk lies in ownership concentration. Investors, or “whales,” holding significant amounts of bitcoin can influence and even manipulate the market by triggering a change in price based on their buy/sell timing. Given that an individual (or an entity) can own more than one bitcoin address, it’s hard to paint an accurate picture of bitcoin ownership.

So this risk does exist. This is also why I feel very passionate about promoting financial literacy and crypto knowledge. I believe that we can build a healthier and more sustainable future if more individuals come to understand what bitcoin is about and start to embrace it.

The first institutional wave is exciting to see, but if bitcoin ownership tilts too much toward the institutional end, we would be defeated in our mission of building a more inclusive and individually empowering network.

Political risk

Another major risk comes from sovereign governments. Given that bitcoin is positioned as future money, it is possible that sovereign governments ban it for fear of threatening fiat currencies. Again, such risks are highest in earlier years before bitcoin builds meaningful adoption momentum. Actually, such bans have already happened in several countries (India in 2018, for example, which was revoked in 2020).

Central bank digital currency (CBDC) experiments around the world could also have an impact on how bitcoin’s future plays out.

This year has seen the first wave of institutional endorsement for bitcoin, and therefore 2020 will be recognized as a milestone year in alleviating this political risk. When publicly listed companies, asset managers and well-known individuals start to own bitcoin and speak in favor of bitcoin, such a ban is going to become very unpopular and hence harder to implement in countries where popular votes do matter. I hope the momentum will continue to build, making a risk of total bitcoin ban increasingly remote as time passes.

IN A WORLD OF UNCERTAINTY, BITCOIN GIVES HODLERS LIKE ME CONFIDENCE. IT HAS A HUGE NETWORK EFFECT THAT CAN ULTIMATELY EMPOWER EVERY INDIVIDUAL WHO BELIEVES IN IT AND USES IT. 

A successful and complete ban on bitcoin will also need to take coordinated efforts of all sovereign governments, which is very unlikely. As long as there are countries that let bitcoin legally flow, bitcoin will have a chance to win – a decentralized global network cannot be shut down by any single party.

That being said, bitcoin price volatility could be amplified from time to time by domestic and geopolitical changes. In my view, political risks remain the second-largest risk to bitcoin until it becomes too big to be tampered with. We are obviously far away from that point.

There can also be a wider payment ban on bitcoin while it is being recognized as legal financial assets. Such a risk is not totally out of the picture yet.

The good thing is, we are not banking on bitcoin becoming the unit of account and medium of payment in our $100,000-$500,000 scenario. When bitcoin does progress to phase III, we will not be talking about bitcoin price anymore, but instead talk about everything else’s price in bitcoin.

Adoption risk

This is a timing risk. It is quite possible that it may take much longer than expected for bitcoin to go mainstream.

The only way to manage this risk is to make sure your bitcoin portfolio is properly sized.

If you invest in bitcoin (or anything else) and worry about where its price would be in the next 12 months, your portfolio of bitcoin is probably too big for you. Size it based on your own risk tolerance and conviction level in bitcoin. Don’t do more than what you can afford (or believe in).

I also believe the unique quality of bitcoin will speak for itself over time. Bitcoin’s price chart between 2017 and 2018 very much looked like a bubble.

However, if we look at bitcoin’s full trading history, there is a clear upward trend together with growing asset-holding addresses, growing active addresses and growing network computing power.

The increasing mean hashrate of the Bitcoin network represents the security level that one would want to see in a network where people’s wealth is stored.I may be on the bullish side for bitcoin’s 12-month price trajectory but I truly believe that with bitcoin, time will be our best friend.

Looking ahead

Bitcoin is unlike any other asset we have encountered before. This is a truly sound and global wealth network that will continue to grow as the world recognizes the significance of its properties. To put things in perspective, here is a recent tweet from Michael Saylor, CEO of MicroStrategy, that summarizes the relevance of bitcoin as a utility and store of value.

In a world of uncertainty, bitcoin gives HODLers like me confidence. It has a huge network effect that can ultimately empower every individual who believes in it and uses it. I look forward to the continued evolution of the bitcoin ecosystem and feel excited about being part of it.

Bitcoin is the leader of the pack in the crypto space. It has recovered from the disastrous crash of 2018 and is heading back towards the price it reached in December 2017. So what does the future hold for bitcoin?

Could it eventually replace the dollar as the global reserve currency, as its loyal supporters claim? Will it eventually crash and die, as Nouriel Roubini has predicted? Or is it destined to remain a speculative asset, spicing up investment portfolios but never being adopted as a main medium of exchange?

More than a decade after its emergence from the ashes of the financial crisis, bitcoin is still a minority sport. Predictions that it will reach $1 million or more seem wildly over-optimistic.

Nor is it showing any signs of becoming a main medium of exchange. Over the last 10 years, the U.S. dollar has entrenched itself ever more firmly as the world’s premier settlement currency. Bitcoin is no nearer universal acceptance than it was when it started.

Frances Coppola, a CoinDesk columnist, is a freelance writer and speaker on banking, finance and economics. Her book “The Case for People’s Quantitative Easing,” explains how modern money creation and quantitative easing work, and advocates “helicopter money” to help economies out of recession.

But bitcoin has survived two major crashes and numerous smaller ones, and is now on the way up again. Unlike many smaller cryptocurrencies, its value has never fallen to zero – indeed, over the 12 years of its existence, its value has risen considerably. Volatile though it is, it has demonstrated that it can hold value over the longer term. It has achieved a degree of maturity as a store of value, though not as a medium of exchange. 

It’s tempting to predict Bitcoin’s future based on its performance so far. Speculative high-yield asset, yes. Long-term store of value, maybe. Medium of exchange, not so much.

But as any investor knows, past performance is not a guide to future returns. So let’s examine whether despite its apparent resilience, bitcoin’s value could still fall to zero, and conversely, what it might take for bitcoin to replace the dollar as the global reserve currency. 

To understand how either of these scenarios could happen, it’s instructive to look at how fiat currencies work. What gives fiat currencies value – and how do they lose it?

There are two competing theories for what gives fiat currencies value: what we might call a “metallist” theory, that the value of a fiat currency is conferred by the gold to which it used to be pegged, and the “chartalist” theory, which says that a fiat currency has value because people have to pay taxes in it.

Of course, neither applies to bitcoin: it has never been pegged to gold, and no government accepts taxes in it. So are there other ways in which a currency can acquire and hold value over the long term?

See also: Frances Coppola – Banks Are Toast but Crypto Has Lost Its SoulUnderpinning both the metallist and the chartalist view of fiat currency value is a deeper fundamental: the belief that what backs the currency is itself trustworthy. In the case of metallists, it is the belief that gold will always be valuable.

This belief has been tested over millennia and never failed, so it is probably reasonable. Less reasonable is the notion that a currency currently not pegged to gold is valuable because it used to be pegged. However, many metallists believe fiat currencies will eventually be re-pegged to gold (more on this shortly).

For chartalists, the underlying belief is the government is capable both of imposing tax liabilities and collecting them. Ability to tax doesn’t have to mean authoritarianism: Reasonable taxation by a government perceived as fair and benign is actually more likely to result in a stable currency than punitive and unfair taxes harshly enforced. 

What gives currency value, therefore, is trust in whatever is backing it. So what is backing bitcoin? Responding to the criticism that “bitcoin isn’t backed by anything,” the investment website Fidelity Digital Assets said, “Bitcoin is backed by code and the consensus that exists among its key stakeholders.” 

THE SORT OF SOCIAL AND POLITICAL COLLAPSE THAT WOULD DESTROY THE DOLLAR WOULD SURELY ALSO DESTROY GLOBAL CIVILIZATION.

This is a statement of faith. It amounts to “the code is perfect, and the key stakeholders would never do anything to make it less than perfect.” Neither is necessarily true, but all is necessary for bitcoin to hold value is for a sufficient number of people to believe it. 

The code isn’t perfect, of course. If it were, it would never have been hard forked. But Fidelity Digital Assets has an answer to that one too. Bitcoin may not be immutable, but its community is: “While Bitcoin’s open-source software may be forked, its community and network effects cannot.” 

Many people have commented on Bitcoin’s cult-like nature, which appears to be a design feature – the pseudonymous leader who disappeared after three years, the refusal of those who know who Satoshi is to reveal his/her identity, the reverence with which followers treat the sayings of Satoshi and his/her close associates.

Network effects are particularly strong in cults, and the incentives of cult members are not necessarily financial. True believers remain invested in bitcoin and actively trading even when the price is falling catastrophically, because of their faith bitcoin will eventually become the heart of a new world order. While they exist, there will always be an incentive to mine bitcoin – and while that remains the case, the price cannot fall to zero. 

See also: Jill Carlson – Cryptocurrency Is Most Useful for Breaking Laws and Social Constructs

So the faith of bitcoiners is what gives bitcoin its value. If they were to lose that faith, the currency’s value would fall to zero. But is their faith alone enough for bitcoin eventually to replace the U.S. dollar as global reserve currency?

There are at present no indications whatsoever that the world is likely to ditch the dollar anytime soon. If anything, the present pandemic has increased reliance on the dollar, forcing the Federal Reserve to provide more liquidity to financial markets. Even in crypto markets, there is a growing need for greenbacks – after all, what are stablecoins but a means of tying cryptocurrencies ever more tightly to the dollar? 

A global switch to bitcoin would cause the mother of all financial crises, destabilizing not only conventional markets but crypto markets, too. However, a significant number of people, including but not limited to bitcoiners, think this is not only possible but inevitable.

 They believe that quantitative easing (QE) will eventually trigger uncontrollable hyperinflation of all major fiat currencies. This belief has proved persistent despite the failure of QE to generate significant price inflation anywhere in the world. 

In the early 2010s, people who believed in this hyper-inflationary Armageddon thought the inevitable result would be the return of the global gold standard. Some of them still believe this. But bitcoin’s true believers argue it is bitcoin, not gold, to which the world would turn when fiat currencies crashed and burned. 

Why bitcoin? Because it has both the advantages of gold and the convenience of digital currency. It is not issued or controlled by a government, and – unlike gold – its supply increases predictably and will eventually be permanently fixed. It can be subdivided into tiny amounts, making it more usable than gold as a medium of exchange.

 And as its value increases, the prices of real goods and services bought with it will fall. A digital currency independent of government and naturally deflationary would be just what would be needed to restore trust in money after the dollar’s hyper-inflationary collapse. 

But hyper-inflation is very much associated with social, political and economic collapse. So those who believe bitcoin is destined to replace the dollar as the premier international reserve and settlement currency, and investing in it for that reason, are essentially betting on the collapse of the U.S. and the unravelling of the current international order. Sudden disastrous hegemonic collapses are the stuff of apocalyptic fiction, not reality.

It took over half a century and two world wars for hegemony to transfer from Great Britain to the U.S., and even then the transfer was slow and not particularly disorderly. The sort of social and political collapse that would destroy the dollar would surely also destroy global civilization. 

See also: Frances Coppola – Why Bitcoin-Like Scarcity Would Be a Disaster for the Dollar

Would people even have the devices, broadband and electricity needed to use and mine bitcoin after such a catastrophe?

The apocalyptic fiction of the Cold War era, when nuclear war was a real threat, unanimously says “No.” Not only would the devices and the electricity fail to survive, but in their own struggle to survive people would quickly forget they ever existed.

You can’t eat bitcoin. 

It’s possible the world might avert a deflationary collapse by agreeing to make bitcoin the underpinning of a global system of digital fiat currencies, much as gold underpinned the “Bretton Woods” system of the post-World War II period. But the Bretton Woods system barely lasted 20 years before global economic imbalances and conflicts fatally destabilized it. Why would “Bitcoin Woods” last any longer?

When faith rules the roost, people believe all sorts of incredible things. Bitcoin replacing the dollar as the global reserve currency is such an incredible thing. The chances of it happening seem very small.

But as long as bitcoin’s supporters continue to believe that it is destined to rule the world, bitcoin will have value; others can benefit from that value even if they don’t share the belief. Thanks to the faith of bitcoin’s true believers, bitcoin will continue to be a good bet for investors.

A perennial question surrounding blockchain technology is: When will it make a mainstream impact? 

Understandably, enthusiasts in the industry are anxious to see this technology live up to its promise of empowering consumers, accelerating cross-border payments and bridging the financial inclusion gap for the under- and unbanked.

The reality is that today, its scope is limited. From what little data we have available about cryptocurrency adoption, we see that the pool of active users is relatively small in size and scope — largely millennial and largely male.

Related: Crypto could save millennials from the economy that failed them

Some countries have proven to be trendsetters; for example, one survey showed that 32% of respondents in Nigeria, Africa’s largest economy, said they’ve used or owned cryptocurrency.

To put that into perspective, only 7% said the same in the United States and 8% in China.In part, this limited adoption can be attributed to the fact that today’s products are designed for users who know what they’re doing.

It’s designed for people who know or are willing to learn the hoops they need to jump through to take their financial assets from fiat into crypto and back again and the benefits of doing so.

Crypto utility — that allows people to use it in their daily routine — will come from putting in the time to develop the right foundational infrastructure.

This infrastructure will enable some of the most powerful crypto use cases, such as hedging inflation in volatile economies, enabling remittance and cross-border solutions, paying bills, and charging for goods and services as a merchant.

Stablecoins — tokens backed by fiat currencies — are essential to that infrastructure; they create a bridge between the digital and physical worlds, between virtual and physical value.

They make digital currency useful so that they can be quickly and efficiently traded, exchanged, saved and spent — no matter where you are in the world. They represent the promise of blockchain technology.But stablecoins won’t be useful on their own.

They need a simple platform that makes it easy for consumers to use digital assets. Many of today’s platforms are designed for traders, sophisticated investors and experienced crypto adopters, not your average retail users.

Driving greater blockchain adoption will rely on creating platforms that are accessible and familiar to consumers so they can trust in connecting their digital and physical assets.

With mainstream consumers in mind, platforms that obfuscate the blockchain back-end should be designed in a way that is intuitive and integrates customers’ current digital habits.

Blockchain for business

That last component is essential for building the right infrastructure for greater blockchain adoption. However, it nevertheless requires a business-to-customer focus, as well as business-to-business.

Blockchain infrastructure should be readily available and easy to integrate for businesses.

In its most recent analysis of the blockchain landscape, Big Four audit firm Deloitte argues that the appeal and sustainability of this technology hinge on “its use of digital assets and the roles those assets will play in the future of commerce.” To get there, it requires making crypto and crypto wallets business-friendly.

With digital payments on the rise, both e-commerce and brick-and-mortar — or, more generally, online and offline — businesses already have to adapt quickly to new payment methods.

To incentivize them to see blockchain and innovations like stablecoins as a compelling addition (or alternative), there needs to be the right infrastructure, such as one-stop API endpoints so shops and businesses can offer crypto payment methods without bearing a significant operational burden.

Building infrastructure with B2B in mind and creating the ecosystem to support it ultimately drive greater consumer adoption because it means blockchain technology is available where consumers use it, delivering portable, universal money that can be used across business platforms.

The momentum is here to move blockchain technology into the mainstream. In the same Deloitte survey, 89% of respondents said that they believe digital assets will be very or somewhat important to their industries in the next three years.

Now it’s up to us to build this technology to get the infrastructure right and prove that blockchain can live up to its promise.

This article was co-authored by Lisa Nestor and Mary Saracco.The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

The University of Cambridge and the school’s Centre for Alternative Finance has published the third “Global Cryptocurrency Benchmarking Study.” The 71-page in-depth study examines the current growth of the crypto industry, mining, offchain activity, crypto asset user profiling, regulation, and security.

The September 2020 third edition of the Global Cryptoasset Benchmarking Study concentrates on four market segments which include mining, payments, custody, and exchange.

A great number of participants from the cryptocurrency industry took part in the University of Cambridge (UC) study including wallet providers, exchanges, miners, cloud mining providers, crypto custodians, and more.

The 71-page UC report says it leveraged two surveys from March and May 2020 to get a number of report’s metrics.

Employment Figures and Growth of the Crypto Industry

The UC report first delves into the crypto asset ecosystem’s employment figures and notes that even though the industry provides opportunity, there’s been a decline since 2017.

“Respondents across all market segments, reported year-on-year growth of 21% in 2019, down from 57% in 2018,” the UC authors detail.Furthermore, the mining sector was hit the hardest as it’s aggregated employment level saw a 37 point decline. Asia-Pacific (APAC) respondents recorded the highest share of high-growth enterprises in 2019 according to the data.





High growth is primarily younger firms that are 3-4 years old, and this represents 49% of the share of respondents. A few service providers polled detailed they saw an increase in profits in 2019 compared to years prior.

“Industry-wide, the growth in FTE employment declined by 36 percentage points between 2017 and 2019, whereas the median firm reported a 75-percentage point downward change in employment growth,” the UC benchmarking study notes.

Hashers and Global Mining Operations

The UC study then discusses the cryptocurrency mining ecosystem and the report highlights that mining is steadily reaching an “industrial scale.” The findings detail the criteria miners (hashers) leverage in order to choose which coin the operation should mine is entirely based on profit scaling.






The utility cost for the average miner is roughly 79% of the aggregate operational expenditures.

The benchmark report notes that bitcoin (BTC) is the most popular coin with 89% of respondents mining the crypto asset. BTC is followed by ethereum (ETH – 35%) and bitcoin cash (BCH – 30%) respectively. Certain regions have different miner popularity ratings depending on the region and demographic.

“For instance, ethereum mining appears to be particularly popular among Latin American hashers, whereas bitcoin cash is more popular in APAC and North America,” the authors detail.

“The mining of privacy coins in Western regions also differs from the global average: 28% and 19% of European and North American hashers report mining zcash, and as many North American hashers also engaged in monero mining.”

Crypto Mining Operational Expenditures and Renewable Energy

Moreover, the UC findings show that the utility cost for the average miner is roughly 79% of the aggregate operational expenditures. But there are differences that arise at the regional level, the study’s authors note.

“For instance, since the introduction of new tariffs on Chinese imports, US hashers have to pay 28% tariffs on ASICs shipped to the USA,” the report says.





While discussing electricity costs one takeaway from the study suggests the median Asian and North American miner pays roughly the same amount for electricity.

The mining section also examines Proof-of-Work’s (PoW) energy consumption, in general, and the subsidies or tax exemptions stemming from governments. Government benefits have entered the fray, but only “28% of the surveyed hashers report receiving support from governments.”





Additionally, the renewable energy estimate is much lower than prior reports concerning renewable energy and bitcoin mining. “39% of miners’ total energy consumption comes from renewables,” the UC study highlights. However, 76% of the survey respondents leverage a “mix” of traditional fuels like coal and renewables like hydropower.





“Hydropower is listed as the number one source of energy, with 62% of surveyed hashers indicating that their mining operations are powered by hydroelectric energy,” the UC study details.


“Other types of clean energies (e.g. wind and solar) rank further down, behind coal and natural gas, which respectively account for 38% and 36% of respondents’ power sources.”

The Digital Asset Landscape and Crypto User Profiling

As far as the growing crypto asset landscape is concerned, bitcoin (BTC) is still the most popular cryptocurrency by representation on custodial services, payment processors, exchanges, and wallet providers. “Support has declined slightly over time from 98% of service providers in 2017 to 90% in 2020,” the UC authors mention.



Ethereum (ETH) is the second most commonly leveraged coin and the crypto asset is widely supported, while LTC, BCH, and XRP are available on at least 50% of 2020’s crypto service providers.Moreover, despite the negative news and delistings, “zcash and monero are still becoming increasingly more available, and are supported at 24% and 17% of service providers respectively

” Since the second UC benchmark report, identity-verified crypto asset users have increased significantly.The UC crypto study states:

In 2018, the 2nd Global Cryptoasset Benchmarking Study estimated the number of identity-verified crypto asset users at about 35 million globally. Applying the same methodology, an update of this estimate indicates a total of up to 101 million unique crypto asset users across 191 million accounts opened at service providers in Q3 2020. This 189% increase in users may be explained by both a rise in the number of accounts (which increased by 37%), as well as a greater share of accounts being systematically linked to an individual’s identity, allowing us to increase our estimate of minimum user numbers associated with accounts on each service provider.

A Variety of Other Key Crypto Factoids

The vast amount of findings within UC’s study discusses a number of other subjects like stablecoins, IT security, and government regulations. Stablecoins like tether (USDT) have become very prominent and “increasingly available” the report highlights.





“Tether support [grew] from 4% to 32% of service providers and all non-Tether stablecoins [grew] from 11% to 55%. This increase is not simply from service providers holding stablecoins diversifying their holdings, but rather more service providers offering stablecoins,” the study insists.

The report also says, at the same time crypto asset companies are complying with new regulations, the “decoupling of duties, such as between custody, clearing and settlement responsibilities, appears to be underway” as well.
UC’s authors say the number of crypto companies that didn’t adopt know-your-customer rules (KYC), dropped from 48% to 13% during the last two years. This metric highlights that regulatory guidelines and compliance is on the rise. The UC study insists that the standards enforced by the Financial Action Task Force (FATF) invoked this significant change





Despite the increase of KYC/AML procedures, UC’s third benchmark study underscores the recent emergence of decentralized finance (defi) platforms.


UC’s authors Apolline Blandin, Gina Pieters, Yue Wu, Thomas Eisermann, Anton Dek, Sean Taylor, and Damaris Njoki emphasize defi has introduced “more risky and experimental innovations.” In the near future, it is possible that crypto service providers will be impacted considerably by the defi space, the study notes.

Defi will likely impact large crypto service providers in particular and their business models “in the next 12 months.

”The third “Global Cryptocurrency Benchmarking Study” in its entirety can be viewed here.

The rapid pace of innovation and increased investment in the cryptoasset industry
is increasing the need for information analysing these developments.

 With the
publication of the first edition of the Global Cryptoasset Benchmarking Study
three years ago, the CCAF set out to progressively track and take the pulse of
this nascent industry by transparently collecting, analysing and disseminating
knowledge about cryptoassets.

Similarly, the 3rd Global Cryptoasset
Benchmarking Study seeks to shed light on the market dynamics of the
cryptoasset industry since late 2018.
The report collates data from entities operating in four main segments of the
industry: exchange, payments, custody, and mining.

A total of 280 entities
from over 50 countries across various regions responded to the surveys. This
benchmarking report is compiled using data from one of the most comprehensive
and robust databases currently available in the cryptoasset industry.


The research findings suggest that the industry has entered a growth stage
despite the notable headwinds the cryptoasset markets had encountered since
2018.

Additionally, regulators’ collaborative dialogue and regulatory interventions
in the industry appear to be supporting its growth by providing regulatory clarity
and harmonisation on the treatment of cryptoassets and related activities.

This
is an important development that has had immediate effects. For instance, the
publication of updated AML and CFT standards by the Financial Action Task Force
(FATF) in June 2019 encouraged compliance by industry participants, with an
increased share of the surveyed service providers performing KYC & AML checks
on their customers.


Nevertheless, our analysis has identified several hurdles – ranging from regulatory
compliance, IT security, and insurance – which need to be addressed for the
industry to grow to scale.


Our hope is that the findings captured within this study will offer insight into the
evolution of the industry and inform the decisions that industry stakeholders
will face as the space matures.

As with all of our research projects, we appreciate
that our ability to produce high quality research is highly dependent on the
cooperation of industry players and we extend our thanks to all the entities that
have contributed towards the publishing of this report.

Finally, I want to gratefully
acknowledge the financial support of Invesco as a long-standing supporter of
CCAF’s research and whose support made this study possible.
Dr. Robert Wardrop
Director
Cambridge Centre for Alternative Finance

Download the full 71 Page Report here: https://www.jbs.cam.ac.uk/wp-content/uploads/2020/09/2020-ccaf-3rd-global-cryptoasset-benchmarking-s...

With crypto trading products appearing ahead of the legacy financial curve, it’s only a matter of time before they enter the mainstream.

In 2017, many traders and investors flocked to cryptocurrencies because they were attracted by the kind of returns not available in the less-volatile traditional markets.

However, volatility inevitably comes with risks as well as opportunities. 

But crypto offers many opportunities that go far beyond traditional instruments. Programmable tokens and smart contracts create the potential to automate trading and investment vehicles, making them easier to understand and more accessible to retail users of all risk appetites.

The race to innovate in centralized finance

Derivatives trading platform FTX was the first centralized exchange to pioneer the use of leveraged tokens, enabling users to gain margin exposure without the hassle of managing margin, liquidation or collateral.

Leveraged tokens are derived from the exchange’s perpetual swap contracts and operate as tradeable ERC-20 tokens that can be withdrawn and traded.

They rebalance every day and can also be redeemed based on the user’s trading activity. These are higher-risk instruments suitable for traders looking for more exposure to volatility.If imitation is the sincerest form of flattery, then FTX can take comfort from the fact that Binance was relatively late jumping on the leveraged token bandwagon.

After initially listing FTX’s leveraged tokens, Binance suddenly u-turned and removed them, citing user confusion as the reason. Only weeks later, the exchange giant announced it was launching its own version of leveraged tokens.

However, FTX has been determined to continue providing innovative trading solutions to crypto users.

One such example is its MOVE contracts, which are basically an options straddle strategy with centralized liquidity for speculating on Bitcoin’s (BTC) volatility. 

Rather than managing two options contracts with the same strike price and expiration, known as a straddle, MOVE contracts allow users to access a more sophisticated type of investment with a more user-friendly and understandable format. 

Synthetic assets and other derivatives flourish in DeFi

Due to its immaturity and experimental nature, decentralized finance applications have experienced several notable setbacks in 2020, including the bZx and Balancer exploits. Nevertheless, the value locked in DeFi has soared and is set to touch the $7-billion mark soon.

Much of this popularity can be attributed to the fast pace of innovation, as the fertile ecosystem layers on more sophisticated products beyond lending pools, insurance instruments and stablecoin-issuing decentralized autonomous organizations.

Aave is one example of an application that has moved up the rankings to rival the popularity of MakerDAO.

The main reason is the opportunity for flash loans that involve borrowing and repaying a loan in a single blockchain transaction. Their demand has been fueling the practice of yield farming — running funds through a series of DeFi applications in an attempt to extract maximum returns.

Some of the current limitations of derivatives products on DeFi platforms are worth noting, however. Ethereum congestion and gas fees could pose a threat to the continuing expansion of DeFi DApps, while the network continues to grapple with the complexities of the Ethereum 2.0 upgrade.

 Furthermore, Vitalik Buterin himself has warned traders about the risks of yield farming.

Nevertheless, for professional traders, the volatility of crypto paired with an increasingly impressive suite of trading products is enticing, to say the least.

As more analysis firms and traders conduct their due diligence of the booming derivatives market, expect the deluge of products to continue parallel to growing interest. 

Simplifying investments for the risk-averse 

For the more risk-averse average Joe investor, passive investment is usually the optimal risk-adjusted method for investing in the crypto space long-term. Using strategies like dollar-cost averaging into Bitcoin and Ether (ETH), users can gain exposure to an asymmetric call option on the future of money. 

However, piling into a single crypto asset risks maximizing the drawdowns during price crashes, such as March’s “Black Thursday.

” Attempts to offset this risk have led centralized finance and DeFi innovators to develop more passive investment vehicles.Unfortunately, there is no crypto exchange-traded fund yet, but the vanilla option for a broader market exposure of large-cap altcoins is index funds.

Similar to major stock index funds, crypto index funds encompass a basket of crypto assets aggregated into a single investment vehicle. They are independently weighted based on investor preferences and the fund’s design and can range from baskets of the leading 10 assets to the top 200 by market capitalization. 

Some centralized finance index funds have been stealthily gaining traction in a way that’s somehow escaped the attention of the crypto media. Adrian Pollard, a co-founder of bitHolla — a producer of white-label crypto exchange software — pointed out:

“Many have been so focused and concerned about Bitcoin’s price volatility not noticing a secret stash quietly piling up at Grayscale, which now manages the largest crypto investment vehicle around.”

Related: Interest in Grayscale Crypto Products Not Easing Up, Not Just BTC NowFunds that include more assets, particularly lower cap altcoins, grant investors more potential upside should anything resembling the mania of 2017 repeat.

However, they also mean more exposure to drawdowns, as lower cap altcoins still tend to fare poorly during sharp downswings in larger-cap crypto assets.

Tokens as a fund 

The caveat with Grayscale is that it’s only available to accredited investors, which is somewhat antithetical to the notion of crypto becoming a more inclusive financial system. That’s where “tokens as a fund” of different shapes and sizes enter the picture. 

A tokenized fund is essentially an ERC-20 token on the Ethereum network that mirrors the price of an index fund using oracle price feeds and other technical components.

Coinbase’s Index Fund, which covers Coinbase’s listed basket of assets, is an optimal method for retail investors to gain index exposure, and since Coinbase is also the largest fiat-to-crypto gateway in the United States, its index would be easy to access for many.

The retail-friendly funds remove the accredited investor hurdle, making them more appealing to retail investors who want broader exposure and less volatility.

To manage volatility spikes, index funds are ideal passive options for investors who are hesitant to dive all in on BTC, ETH or a handful of large-cap altcoins. 

Now that the stock market is beginning to resemble crypto with its absurd bankruptcy stock runs, crypto doesn’t seem so much like the Wild West of finance anymore.

Retail traders now have broader exposure to more risk-averse instruments available, and the progressively bigger pro-trading crowd can enter a market thriving with long-overdue derivatives innovation.

This article does not contain investment advice or recommendations.

Every investment and trading move involves risk, readers should conduct their own research when making a decision.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Andrew Rossow is a millennial attorney, law professor, entrepreneur, writer and speaker on privacy, cybersecurity, AI, AR/VR, blockchain and digital currencies.

He has written for many outlets and contributed to cybersecurity and technology publications.

Utilizing his millennial background to its fullest potential, Rossow provides a well-rounded perspective on social media crime, technology and privacy implications.

The beginning of 2020 saw a sharp increase in the trading of cryptocurrency such as Bitcoin and Ethereum among others. It jumped to a new high in February and plateaued there as Coronavirus crisis soared from March.

Who is investing in Bitcoins?

Cornerstone Advisors in a new study found that 15 percent of American adults currently own some form of cryptocurrency and more than half of these investors are first-timers who invested during the initial six months of this year.

On average, these new investors spent roughly $4000 per person in cryptocurrencies which adds up to approximately $67.5 billion.

American investors who invested in cryptocurrencies prior to 2020  have self-reported that their assets have an estimate of $111 billion, or approximately $7000 per person.

Bitcoin Buyers Demographics

Who is causing the sharp increase in the Bitcoin investments in this time of crisis?

Well educated, high-income men

It has been observed that 8 out of 10 cryptocurrency buyers in 2020 have been men who have an average income of around $130,000. Four out of ten hold a Master’s degree and 70% of them have a Bachelor’s.

Millennials and Gen Xers

Study shows that 57% of the buyers of cryptocurrencies in 2020 to be millennials (26-40 years old) and 30% of them are Gen Xers (41-55 years old). Overall, 21% of Gen Xers and 27% of Millenials have assets in the form of cryptocurrencies in comparison to 3% Baby Boomers and 7% Gen Zers.

BoA Customers

Bank of America is the primary bank for roughly 21% cryptocurrency buyers. It has been observed that 47% of the consumers that went on this Bitcoin binge in the time of the Coronavirus crisis are customers of BoA. One would believe that Bitcoin investors would be customers of digital banks, but a paltry 6% of them call digital banks their primary bank.

The Benefit of Bitcoin

It has been noted that 44% of the American population has already invested in cryptocurrencies such as Bitcoin. Others have reported better financial health conditions since the beginning of the Coronavirus crisis, though there might be other variables that may affect the equation.

First Time Investors

Demographically, though there is a similarity between the first time investors and the groups that invested before this period, the significant difference is that they are bringing about a change in the financial institutions they do business with.Half of the first-timers of 2020 shifted their primary banking in the past 6 months – one-third of whom did so in the last 3 months alone.

The Apple effect

It is interesting to note that even though Apple Card holders comprise only 5% of all the credit card holders, 47% of them have invested in some form of cryptocurrency – two-thirds of whom have invested in 2020.

The next wave of investors

From a demographic perspective, the next wave of investors in Bitcoin comprising 11% of Americans are different from the current set of consumers. They are :

Women

Currently, only 22% of the consumers of cryptocurrency are women. The change in investors will see this figure rise to 35% of the total.

Minorities

Hispanic and African-American consumers comprise 28% of all Americans and 23% of current consumers come from these minority backgrounds. It is anticipated that the next 12 months will see an increase in investment from these ethnics groups to raise the percentage to 37%.

Younger and older

Currently, 6% of Gen Zers and Baby Boomers are cryptocurrency investors. In the next few months, the figures are predicted to increase to 17% Gen Zers and 11% Baby Boomers.

Less-educated 

Only 18% of the current crypto investors do not hold an Associate’s college degree. This number is expected to rise to 36% with the next wave of investments.

One area of concern about the next wave of crypto investors is that just 30% consider themselves to be well educated in handling finances in comparison to 54% of investors already owning these assets.

Banks and Crypto opportunity

The spike in the cryptocurrency investment has been a boon for Square. Revenue generated from Bitcoin for its Cash App for the first quarter of 2020 was $306 million in comparison to $65million generated in the first quarter of 2019.

Quite predictably, reports show that Paypal plans to use Venmo and PayPal apps to offer consumers to purchase cryptocurrencies.

While many banks do not allow their customers to buy cryptocurrencies using their cards, the rise in the crypto investments leads to the question of whether or not the banks should provide more crypto-related services altogether.




While some banks are still in the decision making phase, a few have taken a head start over others. A “crypto friendliness” score is provided by Moon Banking for banks and USAA and Ally Bank have taken the lead. 

All banks, especially credit unions and community banks should consider providing Bitcoin wallets and other crypto trading services as a way to offer better services to their customers.

DeFi Dad is a DeFi super user sharing his money experiments and tutorials on Twitter and YouTube. He is an organizing member of the Ethereal Summit and Sessions, host of The Ethereal Podcast and a weekly contributor to The Defiant and Bankless.

Ethereum has always been difficult to explain. Even the founders of Ethereum have sometimes struggled to communicate the project’s transformative potential in layperson’s terms.

Metaphors such as “world computer” and “gas” tried to translate Ethereum to the world, but looking back it’s clear how little we understood about the platform’s true capabilities. 

By 2017, big promises were being made that Ethereum would “bank the unbanked.” But that promise seemed to go largely unfulfilled in the wake of the initial coin offering (ICO) craze. Nevertheless, the oft-repeated slogan represented the first attempt to describe Ethereum’s potential to transform personal finance. 

See also: Ethereum History in 5 Charts

While the ICO mania showed Ethereum’s potential as a distributive technology that could emulate, improve upon and democratize the initial stock offering, what was missing then was a simple personal financial use case that could be demonstrated to a friend, such as a mobile app. In those early days, there were many white papers, promises and signs of progress by a few teams (some of which have led to the top DeFi projects such as ChainLink, Kyber, and Set), but most of the benefits had yet to be delivered.

Meanwhile, there were lots of inspiring speakers from the Ethereum community who drew us into believing Ethereum would change the world. It just required a patient newcomer willing to wade through new ideas, intricate foreign concepts and a firehose of new information daily. Nothing was a simple elevator pitch.

When I saw Joe Lubin speak at Ethereal SF 2017, there was an inspiring message to take home. A lot of detail flew over my head at the time, but if you listened carefully it was impossible to not buy the idea that Ethereum could change the world for the better.

It’s worth noting that in 2017, ConsenSys and other early adopters and builders were also educating institutional players and enterprise software companies on how they could benefit from many blockchain use cases on Ethereum. Partnerships with Microsoft, IBM and Hyperledger helped cement Ethereum’s credibility in the enterprise blockchain race.

See also: How the EEA Made Ethereum Palatable to Big BusinessFast forward to July 2018, when I started full-time work in Ethereum. We were all recovering from the hangover of 2017, thinking the bull run might return sooner before watching markets unravel and get even bloodier.

We were emerging from an era without a coherent elevator pitch to be easily understood, including language that sounded like it had come from a “Big Bang Theory” script.

I recognized that Ethereum had to find any small group of fanatical users. For better or worse, I began drawing on my experience in SaaS, which taught me that startups need loyal users who find so much utility in an application that, if it were taken away, they wouldn’t have an alternative.

DeFi days

By spring 2019, I am working full time on the Ethereal Summit, a series of events celebrating the founders and builders of the decentralized web on Ethereum. It was around then that Ethereum’s narrative began to change. I heard about Compound, where you can lend and borrow – similar to MakerDAO, but with better loan-to-value (LTV) ratios. 

I was astonished – $50 MILLION in an app built on Ethereum! It was exhilarating to learn a second finance application had been built, launched and had been running on Ethereum for more than six months. 

All this activity came to be known as decentralized finance, or DeFi. The term was coined in 2018 by members of the 0x team, but the industry was just getting going. I couldn’t stop thinking about it.

I began researching every project we were hosting at Ethereal – PoolTogether, Kyber Argent and Zerion. And I did something even more radical: I began testing and using the damn products! 

See also: Why DeFi on Ethereum Is Like Algorithmic Trading in the ‘90sI needed to see my investment make money to realize the power of these DeFi applications. I started lending dai on Compound for over 10% APY and it just clicked. I’m lending dai and others borrow that money, but there’s no bank to collect the middleman fees. So, in turn, I earn better lending interest and borrowers pay smaller fees, and without know your customer (KYC) or anyone’s permission.

WHAT STOOD IN THE WAY OF DEFI MASS ADOPTION WAS BETTER STORYTELLING AND MORE VISUAL DEMONSTRATION OF HOW DEFI CAN WORK FOR ANYONE

It had long been a talking point in crypto the user experience (UX) had to improve for Ethereum to see adoption, but I found those same people espousing such criticisms often had zero experience with DeFi applications. It seemed like a lie that had stuck around long enough to become a truth, even though I was finding some DeFi UX better than my experience with legacy banking. 

For me, what stood in the way of DeFi mass adoption was better storytelling and more visual demonstration of how DeFi can work for anyone. 

EthHub.io and Cami Russo’s The Defiant were already doing lots of legwork in this space but there was clearly more to build upon.In late 2019, the DeFi community was still small compared to today, only a few thousand or possibly even a few hundred users, but it felt like we were on a bustling rocket ship of excitement.

We rallied around this term DeFi, the simplest term to describe any peer-to-peer finance app built on Ethereum, requiring a Web 3 wallet like MetaMask, that doesn’t need KYC and has no single point of failure. If ETH is money, DeFi is your bank. 

What started as a concept is now an economy of interlinked applications with more than $4 billion in value invested. But it’s more than just money. DeFi has changed the way people think about Ethereum itself and given rise to new narratives and memes.

A meme is born

Shortly after this spark was really gaining momentum in the fall 2019, DeFi users naturally found a second totem to rally around. That was the concept of Total Value Locked (TLV), coined by the team at DeFi Pulse. 

TVL refers to the sum of all value deposited into a DeFi app’s smart contracts, whether that’s measured in U.S. dollars (USD) or in ETH. TVL reflected a new, un-gameable metric for adoption. It was a way to compare how much trust DeFi users put into an application. It has its flaws, but those flaws are no worse than reducing Bitcoin to its price. 

See also: Nathaniel Whittemore – ‘Stacking Sats’ vs. ‘ETH Is Money’ – The Memes That Shaped 2019

DeFi also helped solidify the “ETH is money” meme. As co-host of the Bankless Podcast David Hoffman said, ETH is a triple-point asset, because it acts as a store-of-value, a capital asset, and a consumable asset.

“ETH is Money” is an intentional pivot from “ETH is gas,” and updates the world on how ETH is actually used on Ethereum.  

Plain and simple: ETH is money. It always has been money and to label it otherwise was a product marketing mistake in the early days of Ethereum.Yield farming is the latest viral meme in Ethereum.

DeFi is a larger all-encompassing category of p2p, self-custody, KYC-less, finance apps built on Ethereum, but yield farming describes a popular incentives program where you often provide liquidity to a DeFi application in exchange for a combination of rewards. 

As Dan Elitzer of IDEO CoLab Ventures put it, yield farming is like aquaponics because it creates a symbiotic relationship between DeFi protocols, meaning DeFi participants can earn three or more forms of yield such as interest, market-making fees and pooled rewards such as a governance token like BAL or COMP.

Because of the most composable incentive designs in DeFi, yield farming (aka “liquidity mining”) is like passive income on steroids, with programs delivering anywhere from 10-200% daily APY on average. 

Universal appeal

Five years ago, you could argue Ethereum was attempting to do too much. Even two to three years ago, that was still a valid hypothesis, with stagnant adoption.

Today, the bold experiment of Ethereum is working. Alongside the $4 billion in assets deposited into DeFi, we’ve seen a 227% year-on-year increase in ETH locked in DeFi, and a 20X increase in tokenized BTC on Ethereum (equivalent to ~$220 million) since January 1. 

See also: One Billion, Two Billion, Three Billion, Four? DeFi’s Knocking on TradFi’s Door

What was a drawback – doing “too much” – is now a strength and a reason why Ethereum’s daily transaction volume and daily network fees have eclipsed Bitcoin’s.

Although Ethereum is less than half Bitcoin’s age, it has accomplished more in the last five years, building the most advanced permissionless p2p finance system in the world while Bitcoin has continued to champion the narrower digital gold meme.

It’s getting easier every day to point to DeFi apps that clearly demonstrate value and utility you cannot find elsewhere. If you’ve managed to ignore these developments, now is as good a time as ever to catch yourself up. The story of DeFi and Ethereum is just getting started.

Dapper Labs – the company behind CryptoKitties – has a simple mission. They want to introduce a billion people to blockchain.“The reason we decided to go for entertainment — specifically games — is because we felt that it’s just a much easier way to introduce folks to decentralization,” explains co-founder Mik Naayem.

“Gamers are the perfect target market as they already understand virtual currencies and virtual worlds.”In November 2017 CryptoKitties was Dapper Labs’ Trojan Cat, and the game introduced the revolutionary concept of NFTs (Non Fungible Tokens) to hundreds of thousands of people who had never used the word “fungible” in their lives.

It is widely believed, at least by those in the blockchain industry, that these unique or scarce digital objects have the potential to transform the internet and underpin new virtual economies.

Dapper is now leveraging the power of major sports, entertainment and music brands — including the National Basketball Association and Warner Music — to help draw their passionate fans into blockchain too.

The NBA isn’t the only major organization excited about NFTs. Some of the biggest brands on the planet are developing blockchain based games, collectibles and virtual worlds including Formula 1, MotoGP, Atari, Ultimate Fighting Championship, Nike, and even Shaun The Sheep.It’s a massive opportunity with the potential to bring about adoption by mainstream users. 
 

Between them Fortnite and Minecraft alone have 300 million users per month — a user base that dwarfs the 16 million blockchain wallet users per month. Formula 1 reached 471 million unique viewers in 2019. And the NBA claims to reach over a billion people.

Games generated revenue of $150 billion last year and if blockchain is adopted by the gaming and collectibles industries — and marketed by global brands — in the way believers think it will be, then NFTs may well be blockchain’s killer app. 

The revolution will be gamified

Galaxy Interactive is a $325 million investment fund that’s helping fuel this revolution. Its investment thesis is based on the conviction that the billions of people who spend their lives glued to screens want more meaningful ways to connect and engage with each other.

“The virtual goods that we buy, trade and sell will imbue status and define our identity just like their physical counterparts,” a Galaxy Interactive pamphlet explains.

“The value we create inside of our virtual worlds will become indistinguishable from the value we’ve historically created outside of them.”Sam Englebardt, who co-founded Galaxy Digital with Mike Novogratz, heads up the Interactive division.“I think where brands are concerned, I just think adoption is going to happen in games and in content,” he says.

“If you’re thinking about digital worlds and a technology that enables you to do really interesting things with digital objects, and to create scarcity of these objects, it just feels to me like that’s the sort of environment where this (blockchain) tech is likely to scale first.

“That’s where the people are and where the eyeballs are. That’s where the brands go.”A story that culminates in the creation of The Metaverse, starts with CryptoKitties in November 2017.

Cool cats of the blockchain

Naayem explains the whole idea behind CryptoKitties was to teach new users about blockchain.

“When we created CryptoKitties, what we were trying to do was test whether we could get people who’ve never used a blockchain before to use it… and understand why it’s different and why it’s valuable.”

Until now everything in virtual worlds has been endlessly reproducible and consequently of little value. But NFTs ushered in the revolutionary concept of real and persistent ownership of unique objects.

Three million people visited the website to buy a virtual cat, but only about 100,000 succeeded — thanks in part to the game clogging up the Ethereum network, and in part the hoops users need to jump through to obtain cryptocurrency.

But it proved that the ownership of cute NFTs appealed to people who didn’t care less about Bitcoin.“With Crypto Kitties, a little over 40% of our audience had never owned a cryptocurrency before and through analyzing their user behaviors we can see they’re behaving differently in this game than they would in regular mobile games,” he says. “And so we got convinced around that.

”The game enables users to ‘breed’ their NFTs with others and sell the offspring, which helped encourage the creation of a virtual economy (a couple of million cats have now been bred).

The value-accretion deck was heavily tilted in favor of users who made $20 million in the first year, while Dapper Labs only took $7 million. Users also created an ecosystem of DApps, building everything from racing games to Tinder and Facebook for cats.“In terms of user behavior they didn’t see it as spending, so much as value transfer,” he says.

“People were spending a lot more because they felt this was more akin to a digital stamp or a piece of art that I can liquidate at a certain time, rather than spending virtual currency in a game.” 

 Naayem says that once users have experienced uniqueness, scarcity and ownership in a virtual world, handing over cash in ordinary games completely loses its appeal.

“When someone has had that experience, it’s hard for them to go back and spend in virtual worlds where they don’t have those promises. A big part of the way I’ve been thinking about it recently is that it’s almost akin to giving users digital rights in their virtual lives.

”Blockchain in gaming is still a fledgling industry at the moment. My Crypto Heroes made $1.5 million in its first year and players took home $118,000. Gods Unchained made $4.2m with the company pocketing the lot. But the success of CryptoKitties saw some of the biggest brands in the world sit up and take notice.

“A lot of great IPs were reaching out to have these conversations,” Naayem says. “And we thought that was a really great way to tap into their vibrant communities.”

Sports fans: the perfect score

Sports fans are some of the most devoted on the planet and sports brands make a significant proportion of their revenue from video games, merchandising and memorabilia. Combining all of these things using blockchain makes a lot of sense.

The numbers involved are huge: in two decades the NBA 2K game sold 86 million units and last year the NBA signed a seven-year deal to extend the license for a cool $1.1 billion.With that sort of money on the table, it’s not that surprising that the NBA had already set up a working group on blockchain to think about ways the brand could benefit from the technology.

They approached Dapper Labs and the result, NBA Top Shot is in beta and due for release soon.The platform allows fans to ‘own’ their favorite sporting moments. That time your hero hit a three-point buzzer beater to win the game? You can now own a limited edition NFT commemorating the occasion.

The idea evolved through discussion with the NBA’s fan panel.“We gained an understanding that one of the reasons people like sports a lot is because of what I call ‘moments of greatness’,” Nayaam says.

“That’s where you create that really strong emotional attachment with that player, with that team, with a moment that essentially brought you, your family, your city a lot of joy.“We realized that could be turned into a digitally native piece of memorabilia.

”The moments will also be game pieces too, and players will be able to compete with them, trade them and use them in online tournaments and leagues.

The mixed martial arts Ultimate Fighting Championship has also partnered with Dapper to release a range of UFC branded digital collectibles on its Flow blockchain and Warner Music is exploring how its artists can leverage their technology too. 

“A big part of it is these brands, whether it’s the NBA or UFC, allowing us to tap into very passionate fan bases which then allows us to hopefully bring those communities to blockchain,” he says.

The opportunity is not just limited to sports and music — passionate fans of anything from comic book heroes to cult TV shows are obvious contenders. “We think it makes a lot of sense around characters — I’d love to work with the Batman brand, or Marvel and create digital worlds for those characters.

But it can also be things like sneaker brands. You can imagine making digital shoes for Nike or Adidas. Eventually we’ll have augmented reality. And in that case digital fashion may make a lot of sense there.”

Virtual fashion and sneakers

As it happens, Dapper Labs has already auctioned off a virtual fashion garment for $9,500 at the Ethereal Summit in New York. The owner bought the token for the opportunity to ‘wear’ the garment virtually.

And in December last year Nike patented shoes as NFTs called CryptoKicks. The concept pays homage to CryptoKitties by essentially stealing the idea outright: you can ‘breed’ different pairs of shoes to create new custom sneakers that can be made in the real world.

Englebardt expects this will be a growing trend.“Sneaker brands are going to be a very big and important leader in this space because the sneaker culture overlaps so heavily with gaming culture and you’re already seeing a whole culture around the creation of custom sneakers,” he says.

Yat Siu, the CEO of Animoca Brands, believes that a pair of virtual Nikes may end up transferable between different worlds – enabling you to take them from one game and use them in another, or on social media.

“In the real world you don’t buy Nike shoes so that you can only use them in a Nike Basketball court,” he says.

“If suddenly millions of people end up owning Nike virtual shoes, how many game companies out there might actually say, let’s make use of those Nike shoes inside our virtual games?”

While NFTs allow for objects to exist outside of the games, interoperability is probably a little way off yet. Englebardt believes it is more likely that NFTs will first become usable across multiple games owned by the same publisher.

So a Formula 1 car NFT from Animoca Brand’s F1 Delta Time game (out in July) may end up being able to drive around The Sandbox, which the company also owns.

Driving change with Formula 1   

The company made headlines in May last year when it auctioned off the first F1 car NFT for the game. Theoretically made of ‘black carbon’, the ultra-fast 1-1-1 was sold for 415.9 Ether – $106,000 at the time. Two other F1 cars sold for around 100 ETH each, demonstrating that designing collectibles that appeal to the sport’s cashed up fanbase was a clever strategy. 

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Subscribe for thoughtful explorations and leisurely reads from Magazine. “We did not expect that the 1-1-1 would sell for 415 ETH, which by any measure is an astounding amount of money,” Siu says. “It set a bar for the price of these cars which consequently also informed us of how we need to work on that scarcity model because now the cars have a certain price point.

And we now have to be mindful about how we keep issuing these NFTs.

”They’ve also auctioned off 2000 ‘crates’ of in-game NFTs conferring various advantages for players for $360,000 in total. Just like CryptoKitties, a secondary market sprung up with users buying crates simply to resell various items.

In August they’ll be reverse auctioning off three Star Trek vessels to rabid Trekkers to be used in the forthcoming CSC game, with bids starting at the ETH equivalent of $200,000 when the Enterprise NCC-1701 goes under the hammer.

Animoca is also developing another blockchain game using collectibles for MotoGP — the motorcycle racing world championship.While most purchasers of NFTs so far have mostly been crypto natives, Sui expects that to change after the games are released. 

That’s what happened with an experimental sale in May of 100 in-game NFT items for Crazy Defense Heroes “The top buyers are not crypto guys and that taught us something about adoption. They were players that played a lot and they wanted these collectibles because they were fans and because it had a benefit inside the game,” he says. 

325 new brands onboard

As the name suggests, Animoca Brand’s entire game plan is to leverage the power of existing brands in gaming — everything from Garfield to Snoopy and Thomas and Friends.

As part of this strategy it teamed up with blockchain network Harmony to jointly acquire the digital collectible startup Quidd last year, which has sold more than 2.1 billion digital collectibles since 2017. Quidd has license agreements with 325 brands including Marvel, Game of Thrones and Rick and Morty, and Sui says they are in negotiations with the IP holders to begin releasing collectibles at NFTs.

As a first step, they’ll start recording ownership on blockchain.Siu says that speaking to brands about NFTs currently requires a lot of education. “We do have to go out and tell people about the opportunity,” he says. “It’s not yet at the point where IP holders are coming to us and saying ‘Hey I heard you guys do crypto and NFTs, let’s see how we can work together’.

We’re not there yet.”“But I think this is where Animoca Brands has an advantage because we’ve already talked to them on non-blockchain games in the past, we’ve had a long history with them.

Playing in The Sandbox

Some brands have seized the opportunity — among them Atari and Shaun the Sheep (of Wallace and Gromit fame), two brands that are building their own virtual theme parks inside the blockchain powered virtual world The Sandbox.

First released in 2012, mobile game The Sandbox gave users the freedom to create whatever they wished, and it’s since been downloaded more than 40 million times.

The new version uses blockchain to power the creation of an immersive ‘metaverse’, much of which will be built by the users themselves. They’re targeting one million monthly active users.

“It’s a 3D decentralized virtual world where the players can make 3D assets and monetize them through the use of blockchain technology, essentially NFTs and our own cryptocurrency,” explains co-founder Sebastien Borget who is also President of the Blockchain Game Alliance.

Competitor Decentraland has created a similar, but more realistic looking blockchain world.The Sandbox has held three major pre-sales of ‘land’ inside the game map: the most recent of which sold out in five hours and netted 3,400 ETH ($760,000).

“What’s amazing is this strategy has been working really well,” he says. “We have already sold over $1 million of virtual land even though we are not yet launched, and we have over 1,500 land owners who are either artists, game developers, creators, crypto users and investors who believe in that vision.” 

OBSERVATIONS FROM THE FINTECH SNARK TANK

Trading of Bitcoin, Ethereum, and other cryptocurrencies increased sharply at the beginning of 2020, then jumped to a new high in February—a level that was sustained for the height of the Coronavirus crisis from March through May.




Cryptocurrency Monthly Trading Volume SOURCE:

CRYPTOCOMPAREAccording to Coin Metrics:“If historical growth rates can be maintained, Bitcoin’s current daily volume would need fewer than 4 years of growth to exceed daily volume of all US equities and fewer than 5 years to exceed daily volume of all US bonds.”Where is this Coronavirus-fueled trading volume coming from and who will drive the future growth?


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Who’s Buying Bitcoin?

A new study from Cornerstone Advisors revealed that 15% of American adults now own some form of cryptocurrency—a little more than half of whom invested in cryptocurrency for the first time during the first six months of 2020.





Percentage of Consumers Holding Cryptocurrency Assets SOURCE: CORNERSTONE ADVISORSOn average, these new investors obtained roughly $67.5 billion in cryptocurrencies, roughly $4,000 per person.

The self-reported value of cryptocurrencies like Bitcoin and Ethereum for Americans who owned these assets prior to this year is about $111 billion, or close to $7,000 per person.

At 15% penetration, the US cracks the top 10 countries with the highest adoption of cryptocurrencies according to data from September 2019 (although a lot has changed since then).





Cryptocurrency Adoption SOURCE: STATISTA

The Demographics of Bitcoin Buyers

Who fueled this Bitcoin buying binge during the crisis?

• High income, well-educated men. Nearly eight in 10 of 2020 crypto buyers were men with an average annual income of $130,000. Four in 10 have a Master’s degree or higher (70% have a Bachelor’s degree or higher).
• Millennials and Gen Xers. Millennials (26 to 40 years old) comprised 57% of the consumers buying cryptocurrency in 2020 with Gen Xers (41 to 55 years old) accounting for 30%. Overall, 27% of Millennials and 21% of Gen Xers now hold some form of cryptocurrency, in contrast to 7% of Gen Zers, and 3% of Baby Boomers.
• Bank of America customers. Overall, 21% of all consumers call Bank of America their primary bank. Of the consumers buying cryptocurrencies during the Bitcoin binge, almost half—47%—are customers of Bank of America. You’d think Bitcoin buyers would be customers of the digital banks, but only 6% of them call a digital bank their primary bank—in line with the population as a whole.

The Bitcoin Benefit

It’s hard to prove that holding cryptocurrencies is the cause of this, but 44% of Americans who have already invested in Bitcoin and other cryptocurrencies said that their financial health is “much better” since the beginning of the Covid crisis. That’s in contrast to just 5% of all other US consumers.




Change in Financial Health Since Covid 

SOURCE: CORNERSTONE ADVISORS

First Time Investors

From a demographic perspective, the first-time investors are very similar to the previous group of crypto holders, but they’re different in at least one significant way: They’re changing up the financial institutions they do business with.

Among the consumers who invested in cryptocurrency for the first time in 2020, half of them switched their primary banking relationship in the past six months—one-third did so in the past three months alone.

The Apple Effect

Apple Card holders only comprise 5% of all credit card customers, but among those that do have the card, 47% own some form of cryptocurrency—two-thirds of whom purchased crypto in 2020.

The Next Wave of Investors

The 11% of Americans who expect to invest in Bitcoin and other cryptocurrencies are somewhat different, demographically, from the current set of investors. Specifically, they are:

• Women. Women only make up 22% of current cryptocurrency investors. In the next wave of investors, they account for 35% of the total.
• Minorities. African-American and Hispanic consumers, who comprise 28% of all Americans, account for 23% of current crypto investors. Among those that anticipate investing in the next 12 months, 37% are from these two ethnic groups.
• Younger and older. Just 6% of Gen Zers and Baby Boomers already have cryptocurrencies. In the next wave of investors, 17% are Gen Zers and 11% are Baby Boomers.
• Less educated. Among current crypto investors, just 18% have not earned at least an Associate’s college degree. Among the consumers expecting to invest in cryptocurrencies in the next 12 months, that percentage rises to 36%.

One area of concern regarding the next wave of investors: Just 30% consider themselves to be “very financially literate,” in comparison to 54% of those who already hold cryptocurrencies.

The Crypto Opportunity For Banks

The surge in cryptocurrency investing has been a boon for Square. Bitcoin revenue for its Cash App for Q1 2020 was $306 million, up from $65 million in Q1 2019.

Not surprisingly, reports indicate that PayPal intends to offer crypto purchasing through its PayPal and Venmo apps.

While many banks prevent their customers from buying cryptocurrencies using the cards they issue, the mainstreaming of crypto investing raises new questions for banks—not just regarding allowing their cards to be used, but whether or not they should provide more cryptocurrency investment-related services altogether.

A new announcement from the Office of the Comptroller of the Currency (OCC) may be opening the door to that. According to an article here in Forbes, the OCC letter:

“Clarifies that national banks have the authority to provide fiat bank accounts and cryptocurrency custodial services to cryptocurrency businesses. This clarification may open the doors for larger financial institutions to provide bank accounts to cryptocurrency companies, as well as actually provide custodial services for customers’ private keys.

”Among the large banks, a few appear to have a head start over the others. A site called Moon Banking provides a “crypto friendliness” score for banks, with USAA and Ally Bank leading the way in the US.





Crypto Friendliness Score SOURCE: MOON BANKINGAll banks—in particular, community banks and credit unions—should look at opportunities to provide Bitcoin wallets and other cryptocurrency trading services as a way to differentiate their services.


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Ron Shevlin

Ron Shevlin is the Managing Director of Fintech Research at Cornerstone Advisors. Author of the book Smarter Bank and the Fintech Snark Tank on Forbes, Ron is ranked… Read More

One-third of traditional financial institutions have invested in digital assets or derivatives, according to a Fidelity survey. Yet cryptocurrency still hasn’t achieved mainstream adoption.

Volatility is often blamed as the primary culprit and is certainly a barrier, but the solution to that barrier might be easier than people think. In order for cryptocurrency to become stable and scale, it must first become an acceptable payment method across the board.

Universality is one of cryptocurrency’s greatest attributes, but acceptability, ironically, is absent. 

How can anything be considered a currency or some sort of exchange of value if it’s not universally accepted by vendors? At the heart of acceptability lie two problems: Fungibility and getting institutions and merchants to not just consider crypto payment adoption, but actually pull the trigger.

When referring to a budding currency powered by a novel technology outside the bounds of traditional, centralized principles of global finance, fungibility can be quite complex.

In order to effectively be considered money, a currency must meet six defined characteristics. It must be durable, portable, recognizable, stable, have limited supply, and be fungible.

To be fungible, a currency’s units must be indistinguishable and interchangeable from one another. The U.S. dollar is a prime example of a currency that is universally accepted and meets all six requirements, including fungibility.

For example, one U.S. dollar, even if a celebrity like NBA legend Michael Jordan autographs it, is still worth one dollar as a means of currency. Cryptocurrency, however, often suffers from the absence of this type of quality.

Adoption of the world’s first cryptocurrency, Bitcoin, was initially centered around its characteristics of privacy and decentralization. But its reputation for privacy has recently been compromised with the advent of sophisticated analysis tools and chain firms that can identify Bitcoin users based on their transaction history.

This means users can see who has owned the specific units of crypto crypto, ultimately changing the potential value of the coins. In other circumstances, the value of specific bitcoin units rose above market value because they didn't have transactional histories.

Minted without transactional histories, these “virgin bitcoins” appeal to criminal organizations and investors seeking to evade taxes. The solution to both problems must incorporate uniform price per unit for any cryptocurrency seeking to be accepted by merchants.

The proposed model could be multi-tiered, wherein official local exchanges feed information into official online exchanges, enabling real-time price discovery. Legitimate demand as unscrupulous businesses will be voted out in the interests of the community as a whole.

There would also need to be a system preventing the ability of creating premium coins worth a higher value.

In order to overcome the problem of coin traceability, which, as mentioned, can raise or lower the value of individual units, a process known as coin "mixing," or "tumbling"－typically applied to Bitcoin－can resolve this issue.

The process involves using software that mixes multiple coins from different wallets and redistributes them back to the originator wallet. Essentially, tumblers combine different sets of coins and proceed to return this combination with differing transaction histories, thus negating the traceability issue.

Tumbling doesn’t totally anonymize the transaction, but it does make it tougher to trace. Considering existing alternatives, Bitcoin tumbling has proven to be the most fool-proof way of maintaining transaction privacy. In addition to the issues of fungibility, there is another question: Who takes the first step?

The problem remains not just a matter of fungible units of exchange, but also a matter of who will adopt this medium of payment first. Will merchants adopt first or will users?

Without shops offering crypto payment options, non-crypto enthusiasts, who are a majority of the consuming population, won't use it. On the other side of the coin, if not enough consumers own and use crypto on a regular basis, then merchants won't be incentivized to offer crypto payment options.

We can harken back to the credit card story of the 1940s to better understand how cryptocurrency can enter the wallets of the people, and not remain sidelined.

As legend holds, in 1946, a Brooklyn banker named John Biggins created the first modern credit card consumers could spend in local shops, and his bank acted as the transactional intermediary. Shortly after, Diner's Club followed suit, and a new age was born of cashless payments. 

The value of the credit card was convenience, and it became apparent when the founder of Diner's Club Frank McNamara, as the story goes, forgot his wallet while attending a business dinner. He allegedly returned months later with his business partner to pitch the idea to the restaurant of a charge card.

Likewise for crypto, the "Eureka!" moment has yet to pass. 

Economic recession was not enough in 2008 to motivate consumers to adopt crypto in the same way they did credit cards.

Despite the clear business opportunity, like a market size of 50 million users spending €3.4 trillion annually; blockchain wallet adoption rising 425 percent between Q3 of 2016 and Q1 of 2020; cheaper transaction feeds for merchants; and drastically reduced user data attack potential, merchants still don't quite understand it.

A Dutch study on virtual currency adoption found that "unfamiliarity with cryptos is the most cited reason for non-acceptance," at 58 percent. The same study also concluded that not enough consumer demand for crypto is the reason merchants are unwilling to offer crypto payment options.

Just as McNamara accomplished in 1950 and paved the way for the credit card era, cryptocurrency companies must be able to replicate the same value propositions. In essence, stronger awareness campaigns are required to foster the demand among, not just consumers, but retailers, too.

Most importantly, cryptocurrency campaigns must focus not on supplanting fiat currency and credit cards, but coexistence. Fiat currency will likely never disappear, but cryptocurrency has a unique place in our world as an alternative payment method with its own applications and benefits.

Widespread acceptability among merchants is one of the final few hurdles before crypto achieves price stability and, as a result, mainstream adoption as a relevant form of currency, rather than remains a fad that will eventually fizzle out.

A wider awareness campaign alongside intra-crypto regulatory changes provides for a roadmap that will ensure the further advancement in the acceptability of crypto, thereby removing the hurdles in its long-term adoption alongside credit card and fiat currency as viable payment options.

About author: Josh Tate is a seasoned executive officer with more than 20 years of experience as an entrepreneur, practitioner and legal professional. Prior to founding ForumPay, he founded and launched multiple companies in diversified industries such as fintech, media, real estate, and energy.

Josh concurrently holds positions as Director, CEO and General Counsel of several companies and provides a wealth of experience in both fintech and traditional finance. He holds a Bachelor of Science from Kansas State University and a Juris Doctor from the University of Kansas.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Way back in 2014, I debated the merits of bitcoin with cryptocurrency evangelist Andreas Antonopoulos. It was a wonderful, civil and not too disobedient dialogue. I was sceptical, not cynical.

Six years later, I remain sceptical but now have a cynical bias.Let me explain what I see as the good, the bad and the ugly across the cryptocurrency landscape. I won’t cover the blockchain (for that, I have only optimism).

Cryptocurrency: the good

• A democratised currency can only be described as good.  
• A decentralised currency that cannot be controlled by any — misanthropic, missing or maddening — government leader must be described as good.
• A digital currency that does not recognise sovereign borders and so requires no conversion taxation or limitations is good.
• A currency for places that do not have a stable or developed one is very beneficial.
• Hooray for a currency that is ready, maybe too willing, and able for our global, digital world without all range of account establishment hurdles, capital movement restrictions and other challenges.

If you believe the rule of three, then those five points ought to be more than enough to wipe out the scepticism and initiate our living the crypto dream.

Cryptocurrency: the bad

What if the world fully embraced a cryptocurrency? No more paper money. The social contract that we fear is fraying today would be torn to shreds.Without delving into what led to our social contract challenges, how would ‘universal sovereign individuals’, based upon their money, be taxed to enable and support a social contract with their schools, police, fire stations and safety nets?

Answer: they could not, I cannot imagine, without creating a violation — breaking the sovereignty — that would tear down the crypto kingdom as it stands. Moreover, governments with social contracts know this and will do whatever it takes to stop any real breakaway from their currencies.

Now, re-visiting the five ‘goods’, because hope and hype is not a strategy, we can lose the first one because a democratised cryptocurrency is kind of fictional.

Why? Because today, big controlling hands exert an influence on the cryptocurrencies that exist through mining or any other process.

Cryptocurrencies have not been distributed like some type of universal basic income (UBI). To be sure, introducing a form of cryptocurrency could make for a brilliant UBI, but it would be guaranteed to be controlled by a central, sovereign state actor – so much for that idea.

And, for all those who think crypto is fabulously anonymous, it is not. Hello blockchain – the real dream tech!

There is a reason that governments have threatened or begun to remove from circulation larger denominations of paper currencies. Hint: cash is much more anonymous.

Cryptocurrency: the ugly

All paper currencies can be lost or stolen. Ugh! But crypto is not demonstrably more secure. There are big thefts and hacks and people lose their crypto keys all the time (ugh again!).And, don’t forget the infamous American bank robber Willie Sutton.

When asked why he chose banks, Willie allegedly responded “because that’s where the money is”. Well, crypto exchanges are arguably bigger and easier targets than any individual bank today. And exchanges don’t offer complimentary insurance.As if that isn’t ugly enough, try to stomach these:

• Cryptocurrencies can be manipulated or schismed – such as the schism in bitcoin’s most notable spin-off, bitcoin cash, in 2018.
• How would you feel about paying the equivalent of several thousand dollars for a pizza? If a cryptocurrency cannot remain stable, why would buyers/sellers be motivated to use it? Aside from potential illicit applications and maybe for collectibles, there is no use, no purpose. Unless…
• You view your cryptocurrency as an investment. Maybe just don’t. Investments offer dividends or a yield. Cryptocurrencies have neither. They are… speculations, collectibles? Does the world really need any more private ornaments? And digital gold? Really? That’s nice marketing. But why not just buy gold?

Be careful if you’re crypto dreaming

The sceptical me remains sceptical and not crypto dreaming. You may wish to be careful, too.Furthermore, the idea of sovereign digital currencies – the stuff of efficiency/effectiveness dreams – could be dangerous, too. Take a moment and think of the temptation to tax, repress, fine or devalue with the proverbial press of a button if there’s any form of centralised control.

Fiat currencies – that is, government issued money – are no panacea, but for me still, today, I’ll take paper or plastic/credit, please, at least until decentralised digital is a reality.

If you liked this post, don’t forget to subscribe to the Enterprising Investor.For more research and analysis, visit CFA Institute.

By Michael S. Falk, CFA, partner at the Focus Consulting Group.All posts are the opinion of the author.

As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.

• In the U.S., unidentified federal officers herded peaceful protesters into unmarked vehicles and the government prepared to deliver another $1 trillion in spending to politically connected entities.
  
• In China, the government granted six public blockchains access to its Blockchain Services Network and the Supreme Court called for stronger definitions of private citizens’ digital currency property rights.

Which one is the centrally managed police state? Which one is the pro-innovation jurisdiction embracing open-source technologies and decentralized governance networks?

OK. I’m being a tad facetious. The reality is Chinese President Xi Jinping has severely concentrated power. In general, his government, with its Hong Kong crackdown and Uighur detention camps, has encroached upon people’s freedoms more than at any time since Mao Zedong’s rule.

Also, the default assumption should be that China’s blockchain vision favors cryptographic backdoors, centralized master keys and transaction monitoring systems more than it does the permissionless, censorship-resistant ideals of those six blockchains – Ethereum, Tezos, NEO, Nervos, EOS and IRISnet. 

You’re reading Money Reimagined, a weekly look at the technological, economic and social events and trends that are redefining our relationship with money and transforming the global financial system. You can subscribe to this and all of CoinDesk’s newsletters here.

Nonetheless, the contrast between China welcoming open-source, permissionless systems and the current U.S. government’s tendency toward anti-science insularity, authoritarianism and cronyism is telling. One is thinking outside the box. The other doesn’t know it’s in a box.

The long game

China’s moves are consistent with its desire to challenge U.S. financial hegemony, an effort that revolves around its forthcoming digital currency project, known as Digital Currency Electronic Payments, or DCEP. 

The BSN, which will offer tools and hosting services to developers of blockchain-based applications targeted at Chinese development goals, will eventually integrate DCEP. That will bring the efficiency of programmable fiat currency into top-priority use cases such as decentralized supply chains and smart city applications.



Credit: Sonny Ross

Widening the range of blockchain protocols integrating DCEP will allow the Chinese government to spread adoption of its digital currency, helping China challenge Washington’s gatekeeping role in international finance.

(To be clear, I see very little prospect of a digital renminbi becoming a dollar-like international store of value for central banks.

Rather, the DCEP’s programmable qualities could render redundant the very need for a reserve currency intermediary in international transactions, allowing cross-border users to bypass the U.S. banking system.)

This comes as Chinese entities are seeking to avoid U.S. financial oversight in other ways. 

Ant Group, which runs Alibaba’s Alipay mobile payments platform, this week announced its public listing will occur in Shanghai and Hong Kong but not New York.

This is a big deal. Alibaba is signaling a giant $200 billion valuation for Ant, whose Alipay service accounts for more than half of Chinese mobile payments, which are forecast to hit RMB 777 trillion ($108 trillion) in 2020. U.S.-based investors will now be denied access to this monster primary share offering.Why would Alibaba, which in 2014 held its own record-breaking $25 billion IPO on the New York Stock Exchange, take this step? 

For answers, look to Beijing and its tit-for-tat mini-Cold War with Washington. With the Trump Administration pressuring the U.K. into joining its ban against Chinese mobile provider Huawei’s 5G wireless business and closing China’s Houston consulate on allegations of trade secrets theft, Xi’s government is in retaliation mode. 

Excluding the Wall Street establishment from Ant’s deal is one way of retaliating. More importantly, by doing away with the Securities and Exchange Commission oversight of the company’s operations, it removes a lever U.S. regulators would otherwise have over China’s payment systems. 

THE DCEP’S PROGRAMMABLE QUALITIES COULD RENDER REDUNDANT THE VERY NEED FOR A RESERVE CURRENCY INTERMEDIARY IN INTERNATIONAL TRANSACTIONS.

Ant is likely to play a distribution role for the DCEP. It’s also big in the non-monetary world of blockchain; this week, Ant announced that users of its blockchain service, soon to be renamed Airchain, are uploading 100 million digital assets a day – mostly records of transactions, property and copyright claims.

Excluding the company from SEC oversight is consistent with China’s resistance to allowing the U.S. any gatekeeping capacity over future blockchain-based payments and value exchange systems. 

Until the digital assets era, the U.S. enjoyed uniquely influential powers over the exchange of analog money and property around the world.

This was on account of the dollar’s reserve status, which meant the currency settlement in any international exchange almost always flowed through a U.S.-regulated bank. China’s blockchain-integrated digital payments system could bring an end to that era.

The Hong Kong play

Ant’s listing strategy will also infuse badly needed funds into Hong Kong, where protests over China’s new security laws have left many wondering about the future of the multinational companies headquartered there. 

This brings us to the other U.S.-China financial flashpoint – the Hong Kong dollar – and whether China’s embrace of public blockchains could help it preserve this vital source of financial stability. 


Hong Kong. (Bady Abbas/Unsplash)

When the Trump Administration briefly considered undermining the Hong Kong dollar’s peg to the U.S. dollar, some CoinDesk editors debated whether it was even possible.

We concluded that while the U.S. could not directly deny the Hong Kong Monetary Authority (HKMA) access to its onshore foreign currency reserves – the backstop that guarantees the local currency’s fixed U.S. dollar value – it could impede their circulation by ordering U.S. correspondent banks not to transact with Hong Kong banks. 

That led us to question how a China-led HKMA might maintain its peg even if U.S. banks were blocking Hong Kong banks. The possible answer: blockchain-based stablecoins. 

Hong Kong banks could use their domestic holdings of U.S. dollar reserves to back a stable-value token that circulates between blockchain addresses anywhere, all without U.S. bank intermediation. China would make those tokens interoperable with DCEP digital currency. 

I’ve no knowledge such calculations lie behind China’s embrace of public blockchains. But given the surge in Ethereum’s stablecoin transactions (see the “Global Town Hall” section below), Beijing surely has its eyes on the sector. Stablecoins may provide an avenue for China to achieve monetary autonomy without destroying the region’s financial order. 

The irony: China’s ability to escape U.S. control over a centrally managed digital currency, one that many fear will become a surveillance tool, could depend on decentralized systems.

Is the U.S. awake to what all this means?

Folks like Christopher Giancarlo, former Chairman of the Commodity Futures Trading Commission, who this week again testified to Congress on his Digital Dollar Project, are trying to encourage a counteractive technological initiative from Washington. 

It’s not clear the message is sinking in.

Commodity tokens’ moment

In thinking about how to value new forms of money, it’s useful to consider how people value old forms of money.

So, let’s look at this post from Zero Hedge about the price of silver recently outperforming gold.

Describing gold as “more money-like” and silver as “more commodity-like,“ the article said the recent decline in the gold-to-silver ratio (see chart below) signaled a modest improvement in economic confidence, which was fueling an early revival in inflation expectations.

Interestingly, there are modest parallels in the relationship between bitcoin, often regarded as a “digital gold” store of value, and “altcoins,” some of which are often described as “commodity-like” network tokens.  






Contrary to a rather simplistic view of gold as an inflation hedge, this analysis views it more broadly as a safe haven when investors become bearish about the state of the economy, which is what happened in March with the onset of the COVID-19 global lockdown and market panic.

Even though this brought on expectations of deflation, gold rallied after an initial decline as the extent of the economic meltdown set in and concerns grew about the political failures.

But more recently, as central bank stimulus has breathed life back into stock markets and as European and Asian economies have gradually reopened, expectations for a credit-fueled rebound in demand for commodities, and concurrently, in inflation, have grown, even as the pandemic has spread further through the U.S. Hence silver’s recent outperformance.

Interestingly, there’s a mirrored trend in bitcoin’s performance versus a number of altcoins. The outperformance has been especially pronounced for tokens such as Cardano’s ADA and Chainlink’s LINK, but it’s also evident in the classic dichotomy of bitcoin vs Ethereum’s ether.




This might seem like a bit of spurious comparison, but hear me out. Whereas many crypto community hard money advocates described bitcoin’s spring recovery from its March lows as a function of rising inflation concerns – captured in the “Money printer go brrrrr” meme – I think it reflected a similar “hell-in-a-handbasket” trade to that of gold.

Conditions were all-out scary, creating an uber-bearish picture of impending dystopian breakdown, which favored bitcoin as the must-have crypto reserve asset.

Now, with liquidity sloshing around the crypto economy (itself a spillover from the Fed’s injections into the fiat currency economy), speculators are looking at surging demand for DeFi credit products and improving sentiment around new blockchain- and smart-contract based projects such as China’s. That’s compelling them to buy ether, the underlying commodity that fuels Ethereum’s smart contract engines. 


I’m not wedded to this analysis. Just thought it was fun. Open to critiques of it. Have at me.

Global town hall

WOODEN MONEY. “Yeah. ‘What is economics?'” Fournier laughed. “I’m a firefighter. I’m not an accountant, I’m not a, you know, I guess I’m a mayor, you know?” – CBS News, July 19.

We reported three months ago on the small Italian town of Castellino del Biferno deciding to print its own money to restore monetary liquidity after the COVID-19 pandemic triggered a deflationary contraction.

Now in Tenino, Washington (population 1,884), Mayor Wayne Fournier is taking similar actions. But in Tenino’s case, it’s cranking up an 1890 printing press that’s producing a throwback: local currency made out of wood. 

The idea behind community currencies, which lock spending within the local economy, is not unique to the COVID-19 era. There were already more than one hundred such units of exchange around the U.S. alone. But desperate times are forcing creativity around money.

People like this firefighter mayor and his neighbors are inspired to ponder what money represents and how its design and management have social implications. 



Tenino dollars (Numismatic Bibliomania Society/Flickr)

SETTLEMENT SUCCESS: One of the challenges for widespread acceptance of blockchain technology lies in taxonomy: how we describe what it is and what it does. These unprecedented new models of value exchange don’t lend themselves to clear analogies, which means people misunderstand them.

So, it’s good to see a smart take from Ryan Watkins over at Messari, a research firm, who is asking investors to think differently about what blockchains actually do before they jump to conclusions about their success in facilitating payments. 

Rather than holding bitcoin to a “you can’t buy a cup of coffee” test, in which its small transaction viability is undermined by volatile BTC exchange rates and high transaction fees, Watkins describes blockchains as the settlement layer to facilitate larger-scale payment flows.

A better comparison than cash, he says, is Fedwire, the Federal Reserve’s system that allows banks to settle their balances with each other. Bitcoin and Ethereum are on track to settle a record $1.3 trillion in combined value in 2020, the third consecutive trillion dollar-plus year, a success by any measure.

A big chunk of that is driven by surging stablecoin transactions on Ethereum, which should surpass half a trillion dollars in value this year, putting it in striking range of the $712 billion in payments PayPal settled last year.

Blockchains do much more than just enable fiat transfers; they offer a whole layer of settlement functionality that’s giving rise to an alternative financial system. Hard to call this a failure.

WHO “OWNS” YOUR TWITTER HANDLE? Anyone who’s gone down the early bitcoin discovery rabbithole of “what is money anyway?” will know that the digital asset age is challenging our notions of value, rights and the law. In that vein, a friendly debate, triggered by last week’s Twitter hack, saw Coin Center Executive Director Jerry Brito line up against Castle Island Ventures partner Nic Carter.

Carter set it off with his thesis, laid out in one of his regular CoinDesk columns, that ownership rights over Twitter accounts should accrue to users, not the company.

His anti-deplatforming point was that users create most of the value attached to their handles through their posts and interactions, and that this establishes a form of digital property that cannot be taken from them. 

Brito’s response, invited by Carter, was that the relationship between the user and Twitter lies in a contract that the former signs with the latter in setting up their account.

By extension, any discussion about Twitter’s rights to kick someone off their platform hinges on whether the contract is enforceable or not, not on who owns the platform itself. 


Whichever argument would win in court, the debate – which was extended by Carter’s “rebuttal to the rebuttal” on (where else but) Twitter – helps frame the discussion about how to design a better social media platform.

The bottom line, and both Carter and Brito agree on this, is that centralized social media platforms have done great harm. We are way past due for a model that gives users’ autonomy over their content and data, all attached to a clearly defined concept of self-sovereign, digital identity.

Relevant reads

Banks in US Can Now Offer Crypto Custody Services, Regulator Says
Big news for the crypto industry: Banks are now allowed to provide digital asset custody services.

The announcement put to rest the debate over whether Brian Brooks’ past as in-house counsel for Coinbase would make him more or less willing to prioritize cryptocurrency regulatory projects in his new role as Acting Comptroller. Nikhilesh De reports. 

Wyoming-Based Avanti to Open in October With a New Bank-Issued Digital Asset.
Wyoming is ahead of the U.S. OCC’s curve. With a state bank charter already in place, Wyoming blockchain advocate Caitlin Long’s Avanti Financial will issue a new digital asset, known as Avit, Nathan DiCamillo reports.

Long argues a bank charter is necessary to ensure that digital assets such as stablecoins have all the power of immediate-settlement programmable money – a topic Money Reimagined is a little obsessed with, as indicated by this shout-out in Long’s explanatory tweet thread.

3 Reasons Bitcoin’s Price Could Soon Rise to $10K.

By bitcoin’s volatile standards, it has been a remarkably dull past month. Since June 23, the leading cryptocurrency has traded back and forth within a $600 range, failing to break out either way. Now, maybe, just maybe, we have the chance of a breakout. I like to think the mid-week jump was fueled by the OCC news.

But CoinDesk’s Omkar Godbole reports on three other reasons why bitcoin might be poised for a breakout, with the newfound volatility being a reason unto itself. Also: growing institutional investor interest in bitcoin futures and a positive “risk-on” trend in traditional financial markets: 

Crypto Needn’t Fear GPT-3. It Should Embrace It.

For producers of content and creative output such as journalists, graphic designers and even software coders, the bombshell release of OpenAI’s powerful general language model programming system is a little terrifying. Might the programmed creative take our jobs? And what of the risk that crypto scammers will use it to create fake news to move markets?

Forget it, argues our contributor Jesus Rodriguez, who says the groundbreaking AI technology will be more valuable than threatening to the industry. The reason: It can devise powerful quant trading strategies that will bring liquidity and sophistication to crypto’s otherwise volatile, Wild West markets. 

Ethereum 2.0 Developers Announce ‘Final’ Testnet Before Network Launch.

Maybe, just maybe, the vitally important Ethereum 2.0 release will come by year-end. That’s one interpretation of this important final test run for the massive upgrade’s development schedule.

With DeFi and decentralized exchanges sending gas fees soaring on the bloated Ethereum blockchain, the moves to boost throughput with “sharding” and to introduce a more energy-efficient proof-of-stake consensus mechanism can’t come soon enough.

(Incidentally, on September 29, CoinDesk will host CoinDesk Invest: Eth 2.0, a virtual conference on this very topic and what it means for investors. Details to come.)

A complete analysis of token definitions, their main uses, the future of decentralized applications and token-economy, in an evolutionary path that goes beyond the 3.0 paradigm, crosses that of Industry 4.0, to attain a Society 5.0 concept.

These are the contents of this article that, starting from the examination of the term “token”, very often confused in its own meaning, wants to offer the reader a scenario vision, supported by an analysis of the fundamental principles. 

Why we use tokens Offering a universally valid definition of token is a difficult and, in all likelihood, worthless undertaking.

Even before attempting a taxonomic exercise, it’s perhaps useful to think about the common use of tokens and what are the main reasons that support their use in our daily life.

Generally speaking, we can assume that when we need to manage an asset in its value or in its existence, without having to report to it punctually and in all circumstances of use, the creation of a token becomes essential, where it is able to represent a surrogate.

 Why on earth would we need to report to an asset considering only its representation?

To answer this question, look at the good that, in an economy of trading, must be able to be allocated, transferred and extinguished. If we thought we could use the asset in every transaction (and not its representation), we would have quite a few difficulties in most cases of use.

This very simple concept allows us to think about a couple of considerations that lead back not so much to the concept of token, but to that of "tokenability".

The use of a tokenized good allows the efficiency of a large number of processes, but it is necessary that someone guarantees the legitimacy, or rather the goodness, of that "good-token" coupling at the origin, both from the point of view of valorisation and attribution.

Where this guarantee is met, the benefit of using tokens in exchange transactions is undeniable. 

We already use tokens... but we don't notice it.Let's make some examples of "tokens" (deliberately between double quotes) taken from the common world.

The meal voucher expresses a value related to an employee benefit. When we use the vouchers, we are certain of their nominal value, guaranteed by the issuer and we know that we can spend them at the restaurants that accept them, thanks to an agreement with the emitter itself.

The casino chips represent an accumulative and expendable monetary value for the enjoyment of the games within the casino; the player knows that they can buy and exchange them at the central cashier and are certain that the croupier will accept his bets, paying with the same eventual winnings.

The car wash token allows us to take advantage of the service offered by the washing pumps that automatically activate and deliver everything needed to clean our car.

The value of the token is commensurate with the duration of the service and each of us knows that this value corresponds to a certain number of minutes during which we can suck the mats, or a quantity of splashes of perfume and so on.

The points that are used within a promotional mechanics, allow us to be rewarded for our loyalty to a brand; the value of each point is established by the brand holder who can define the rules of allocation (depending upon the products we buy, or correlated to the quantities, as well as the time of purchase) and exchange (on the basis of which we know what reward we can get by redeeming a number of points). 

Why should we use tokens via blockchain (… and why might we tokenize by the blockchain)?So far we have been talking about what could be considered, from a functional point of view, the simplest definition of token, but we have not yet talked about how (and why) the token could be exchanged on DLT platforms, such as a blockchain.

In order to prepare ourselves for a better understanding, it is appropriate to share some reflections that, without hesitation, we could consider "essential".In each of the examples given we must highlight how, although not always consciously, there is a requirement assumed as implicit, but necessary for the proper functioning of the case of use described: the trust.

The company, the employee and the caterer, trust the issuer of the meal voucher, otherwise they would not (or could not) use the voucher. The croupier and the player trust that the casino will provide the necessary liquidity to pay the chips.

People who wash their cars at a car wash trust the automatic program that controls the pumps.

The consumer believes in the brand and knows that he or she can redeem the accumulated points at any time, obtaining a reward in return for the trust he or she has decided to place in it.

Well, the exercise of that trust, or rather the way in which that trust is guaranteed, in each of the exchanges we have described along with the use case, is not always carried out efficiently and, in some unfortunate circumstances, could be affected (or attacked) by the episodic occurrences of corruption.

The controls in the different processes analysed in the above examples, could be more efficient where there is a distributed business logic, which operates in respect of a (more) decentralized governance.

And that's where the blockchain comes in.  Proceed now with a more detailed examination of tokens and tokenisation in the Distributed Ledger context. A didactically useful definition of tokenWho writes - convinced of the "didactic usefulness" of such a definition, rather than the sound lexical correspondence - by token means a "digital binding" of the legitimation of a right to the right represented by the cryptoasset

[1] 

itself , that allows to create a link between a physical or digital asset (or, more simply, an "off chain" asset, i.e. that is outside the blockchain) and a native asset of the blockchain.The token is exchangeable on Distributed Ledger platforms and in a token transaction on such platforms, the validity of the underlying legal transactions could be "technically guaranteed" by a blockchain protocol, using appropriate Smart Contracts

[2].

The expression "technically guaranteed" is intended to indicate that the Smart Contract (waiting for the legal enforcement of them …) must be able to guarantee an unstoppable execution of the transaction and preserved from contamination risks, such as those that may affect the quality of the software, or that arise in the face of the occurrence of corruption.

Having regard to the opportunity to make efficiency, while ensuring a good level of guarantee of the validity of the trading, from these very first few lines it’d already be sufficiently clear what the main benefits of using tokens on blockchain are.

Each of the assets considered in the exemplified use case, when they were "tokenized" and exchanged thanks to the execution of a Smart Contract operated on blockchain, could be managed with processes (perhaps) more efficient, ensuring compliance with a series of distributed controls, in accordance with rules inscribed in decentralized governance models. 

A possible classification of tokensA possible classification of tokens wants to decline the typology in at least three macro-categories that we will describe shortly.

The Security Token, to which it refers identifying a new product obtained thanks to the contribution of the technology that shares some characteristics with the traditional security and that could not be connected to a real

[3] 

asset.

The Asset Tokens, representing rights on assets including non-financial assets, exchanged between different parties and adopted in the technological context made possible by the blockchain to create a new channel for the exchange.

Where they represent financial securities, this makes their market expandable and increases their liquidity. When referring to non-financial values (think of the case where they represent a digital identity or voting rights under a decentralised governance model), the new channel allows them to be managed more securely than centralised systems.

Finally, the Utility Tokens, i.e. securities representing the future use of the product or service provided by the company that "issues" them, not designed to be investments and executed in accordance with a blockchain protocol. 

A technological definition of tokenFrom a more technical point of view the token can be understood as an algorithm implemented as Smart Contract, executed on blockchain.

Each Smart Contract contains a list of addresses that allow the identification of those who can have the tokens (the so-called "token holders") and their balance. It is the algorithm itself that defines the characteristics of the token (see below the details of some types of Ethereum tokens).

The tokens are accessed by the token holder, demonstrating the ability to dispose of them through knowledge of the private key associated with the public key from which the above address is derived

[4].  

Let's now deepen the more technical nature of tokens, explaining their possible "programmability". The tokens issued on EthereumThe largest number of tokens in circulation is issued on Ethereum

[5]

and it is appropriate to present a macro-classification to which to inscribe them: ERC20[6] and ERC721.

Both categories characterize tokens by their ability to have a value, to be transferable, fungible or non-fungible, to be able to count a balance sheet when used in an accounting system.

The first category, unlike the second, sees tokens identical and divisible into sub parts, while in the second, each token has a unique identifier and is not divisible.

Imagining the ERC20 token as an object that prepares to the interface - at least - the following functions: 

totalSupply, balanceOf, transfer, allowance, transferFrom, approve and that is able to report events like Transfer, Approval, one can easily understand how it can be used by Smart Contract, allowing the development of decentralized applications (the so-called Dapp).

ERC721 tokens, conventionally referred to by the term Non-Fungible Token, require the interface to pass the unique identifier (_tokenId) to certain functions or to be uniquely associated with the occurrence of certain events. 

The main use case of tokens (Fungible and Non-Fungible)Having clarified what a token is and how it is used within a Smart Contract, let's now describe some of its main uses. Due to the substantial differences between Fungible Token and Non-Fungible Token, different use case must be appropriately depicted.

The first category normally includes all the uses in those contexts where there’s a need to plan a monetary policy (for the control and value of the token itself) and where their use supports economic and financial mechanics.

By way of example, in such adoption contexts fall all the initiatives based on the so-called "programmable money" that enable, albeit with different degrees of openness and flexibility, the development of a "purposed money" that can be adopted in the areas of insurance, welfare, donations, public funding (just to mention a few examples).

This type of token also lends itself to support some potential developments of CBDC Central Bank Digital Currency (particularly those involving both "wholesale only" and "general purpose" CBDC digital tokens issuance and distribution models).

Similarly, Fungible Tokens can form the backbone of a stablecoin whose uses are the basis of many DeFi Decentralized Finance projects.

Widening the range of observation, we can see countless cases of use of these tokens in the context of so-called branded currencies (also known as branded tokens).

Used as tools to tokenize “corporate value” (think of the development of loyalty programs on blockchain), they enable new dynamics of engagement between consumer and brand or increase the efficiency in such promotional mechanics based on multi-brand loyalty programs, in different co-marketing initiatives.

A further field of application for Fungible Tokens is represented by the development of sharing economy models, where the value of reputation is expressed in specific Reputation Tokens, whose attribution and verification is programmed by Smart Contract, appropriately designed to support the commercial dynamics (transactions, interactions, controls) typical, for example, of Decentralized Marketplaces.

The Non-Fungible Token typology, among the applications that are best suited to capture the value of tokenisation on blockchain, are those that require the need to uniquely identify an object or, in a broad sense, an entity.

For example, the following applications can be found in the range of such applications: 

Digital Identity management (in particular in the DID Decetralized Identity and Verifiable Claims scenarios), traceability and automation of supply chain processes, e-voting in those contexts where a decentralized governance model is adopted (e.g. Decentralized Autonomous Organizations), systems based on the colletibles

[7]

matrix (such as most online games).

 In a broader sense, we can include any application that manages tokenized assets or, better, “assets that could be tokenized”, in the Non-Fungible Token field. The emphasis placed not so much on the token but especially on the tokenisation, implies reflecting on the nature of the tokenisable asset.

Where this is digital (e.g. a digital property that can be traced back to online games or a digital document), or where the exchange and negotiation process has already been digitized (e.g. security, letter of credit, legitimacy or intellectual property), the blockchain is an excellent opportunity to streamline the processes underlying its management.

If, on the other hand, the original asset has a "physical" nature (e.g. a property - house, land, work of art -, a temperature or humidity level or, in general, a measurement detectable by sensors), the use of so-called "digital twins", i.e. digital copies obtained, for example, through the joint use of smart objects in an IoT (Internet-of-Things) context and digital certificates, can be of great help in tokenisation processes.

The passage of such tokenized information to the Smart Contract, however, when there is no super-partes third party able to guarantee by law the ex ante genuineness or accuracy of the data itself  (i.e. before entering the blockchain), requires the use of so-called oracles, systems through which one (or more) parties can contribute to the interaction between Smart Contract and everything that is off chain. 

Broadening the scope of Non-Fungible TokensThe scope of application of the Non-Fungible Tokens represents, in the writer's opinion, a ground on which to move with caution, being aware of how much their adoption can express particularly relevant and pervasive levels of disruption.

By raising our eyes a little and projecting it towards not so remote horizons, we can understand how it is possible to tokenize business models, thus creating the conditions for the development of an authentic token economy, in which the relationship between brand and consumer, as well as the relationship between infrastructure manager (think of the cloud) and user, exceeds paradigm 3.0, crosses that of Industry 4.0, to arrive at a scheme of Society 5.0

[8],

a model of "super-society" in which man and innovative technologies coexist, mutually beneficial contributions and benefits. A model in which the democratization of data and access to them, made possible by the blockchain, makes it possible to express in an effective and sustainable way a universal value that frees man from the risk of depersonalization, placing him at the centre of the techno-evolutive dynamics of an ecosystem of which he is both author and interpreter. 

This article was also published in Italian on Blockchain4Innovation: http://bit.ly/2RlLGE5  

[1] 

For "cryptoasset" we can assume a digital representation of univocal value made unique thanks to the use of cryptographic mechanisms; cryptoassets can be "placed" and "exchanged" on Distributed Ledger platforms respecting the rules of a blockchain protocol.

[2]

With Smart Contract we can understand a set of instructions expressed in computer language and visible to all,which are automatically executed by a DLT platform when predetermined events occur. Once the Smart Contract is activated, its execution is guaranteed and cannot be stopped. In some platforms a smart contract is also able to receive and send transactions.

[3] 

A "real asset" is defined as any tangible or intangible entity capable of economic valuation, whose rights related to use and exploitation may be concentrated in financial securities representing the rights themselves; the assets are exchangeable on traditional exchange platforms.

[4] 

Token holders can manage their tokens through appropriate wallets that contain both the private key and the Smart Contract address.

[5] 

There are also other Distributed Ledger platforms that allow the issuance and management of tokens, including Hyperledger Fabric (via chaincode) and Corda.

[6] 

The acronym ERC means Ethereum Request for Comments.

[7] 

The most widespread use of ERC721 tokens is represented by the collectible CryptoKitties, an online game that allows you to collect NFT that impersonated cyber cats.

[8] 

The concept of "Society 5.0" builds on some initiatives launched in Japan during 2017-2018, defining itself as a human-centered society that integrates cyberspace and physical space.

The proliferation of digital currencies over the last few years has led to a rapidly growing list of use cases for tokenised assets.

Thanks in no small part to the development of blockchain technology, as well as the recognition and anticipation of what cryptocurrencies such as bitcoin and ethereum (ether) could achieve in the future, tokenised assets are hotly anticipated to deliver a variety of benefits to the world—from boosting specific industries such as banking and real estate to helping to solve global challenges such as supply-chain issues and financial inclusion.

Indeed, we are already seeing hundreds of projects issuing digital tokens with the intention of growing both user adoption and utilisation of the tokens as well as promoting the use of particular blockchain platforms.

But given that these tokens now represent an increasing array of useful assets and functions, each one is exposed to numerous economic forces, including supply and demand, changes in the prices of competitor currencies, and inflation.

 And because each has an economic value that can change in response to such factors, it becomes crucially important to understand each token’s inherent utility.

This ensures that both token users and investors are confident that they are buying an asset that is valued accurately.

And it is also important for them to ensure that a token will be employed more extensively going forward, which in turn will mean that more people will demand to use the token, and thus its value should appreciate.

So, what is a token’s utility? This question has led to the early development of new economic models that aim to account for the forces that determine the value of digital tokens. As such, token economics seeks to analyse the various economic factors and mechanisms that are involved in the value-creation process of a tokenised ecosystem.

It refers to how economic forces lead to the creation of sustained user adoption of both the token and the ecosystem as a whole, and it is thus ultimately used to determine whether tokenised assets can be useful in the real world over the long term, beyond merely functioning as a digital currency.

The methods through which cryptocurrencies are created and issued into circulation play a significant role. Whilst some are issued in a one-off manner, others are circulated more gradually. This has significant implications for the relative scarcity of the token at any point in time, which in turn influences how much each token is worth.

Similar in manner to how real-world commodities such as gold derive much of their value from their relative scarcity and utility, the scarcity and utility of digital tokens such as ether also go a long way towards determining their value.

Token economics also deals with how robust blockchain systems can be designed to produce desirable outcomes for all network stakeholders, including token users and those responsible for validating transactions. With that in mind, one of the most important forces for which to account when designing such models is incentivisation.

With blockchains invariably involving a decentralised architecture, there is no need for relevant parties within the ecosystem to trust or rely on an intermediary entity to maintain the integrity of the ledger of transactions (as is generally the case with centralised applications such as Facebook or Google).

Instead, blockchain enables all validating nodes to maintain their own copies of the same ledger, which in turn greatly enhances the security of the data. But to ensure long-term sustainability, relevant stakeholders must be adequately incentivised to act in the best interests of the system as a whole.

If this is achieved, it should instil confidence in the integrity of the system and thus facilitate greater user adoption of the system’s token.

Bitcoin, for instance, involves senders and recipients of the cryptocurrency, as well as miners who are responsible for validating transactions and adding the next block of transactions to the blockchain.

This is done using cryptography, which provides irrefutable proof of all previous transactions within the system. Incentives are thus designed to ensure that the system continues to produce desirable outcomes.

The miner receives bitcoins as a reward for validating transactions in accordance with the network rules. If, however, miners break the rules in one way or another, they can be penalised, typically through a loss of their tokens.

This system incentivises miners not to behave nefariously and, as such, ensures individuals are acting to benefit the security of the system rather than for self-interest.

The world’s second-most valuable cryptocurrency project, ethereum, meanwhile, is designed principally to execute smart contracts that are employed for a variety of use cases, such as creating decentralised autonomous organisations (DAOs) and decentralised applications (DApps).

The smart contract code is stored on ethereum’s blockchain. And while it is similar to bitcoin, in that miners validate new blocks and are rewarded with ether, the ethereum ecosystem also requires users to pay ethers if they want to execute smart contracts on the platform.

Similarly, the actual users of each ecosystem (such as the senders and recipients of coins in the case of bitcoin) must be suitably incentivised to ensure that their behaviour promotes the continued sustainability of the ecosystem.

This means that issues such as the sustained growth in both the overall numbers of users adopting the token and the number of users actually using the token for its intended purpose are taken into account. As far as the latter is concerned, this is proving to be far from straightforward.

Given the massive price swings that much of the cryptocurrency space experienced until 2018, the myriad of opportunities to benefit from short-term price appreciations has caused most users to date to hold their tokens as an investment that could generate potential substantial returns rather than actually use the tokens.

Even today, many investors continue to hold on to their tokens in the hope of seeing bitcoin scale the heights it managed to achieve in late 2017.

Simply buying and holding is far from ideal from the perspective of the token issuer, especially given that such tokens have been created mainly to be used for a specific purpose within the ecosystem.

Indeed, it is unlikely that violent price swings will even be considered desirable by token issuers, especially if those price swings are not reflective of the endogenous value of the token itself but instead of the trading activities conducted by investors looking to exploit opportunities for profit.

Nor will a static price over the long term incentivise users to hold on to their tokens. As the ecosystem grows and more users begin to adopt the token, one would reasonably assume that the increase in utility associated with this growth will induce a steady rise in the price of each token, which in turn will deliver at least respectable returns for token holders.

The economics associated with designing such an ecosystem, therefore, is likely to prove challenging for token-project designers, especially for those projects for which the inherent value of each digital asset is not easy to calculate.


Some models have been posited to address some of these challenges. For instance, Factom, a system for securing millions of real-time records using blockchain, has tried to implement a “burn-and-mint” process, whereby users burn” their Factom (Factoid) tokens each month in order to use the Factom ecosystem, while the issuers separately mint 73,000 new tokens each month that are distributed to transaction validators.

Should users end up burning less than this figure per month, therefore, Factom’s overall token supply in circulation increases, which should exert downward pressure on the Factoid price. But the total supply will fall if users end up burning more than the 73,000 tokens, which in turn should boost prices.

 As the usage of the Factom ecosystem grows over time, therefore, more tokens should hypothetically be burnt, which would help to progressively raise prices in direct proportion to network usage. But the burn mechanism should also incentivise token holders to actually use their tokens rather than simply hold them.

There may also be other issues that will have to be considered when ascertaining the token economics required for designing a suitably robust model, including the governance system, the mechanisms for revenue sharing and the ease of access for users.

Ultimately, with each protocol likely to be different and dependent on the specific utility of the token, the approach to token valuation will also be different for each project.

As such, designing the appropriate mechanisms and incentives to ensure that participant behaviours are always as desired will not be a standard process.

And that makes token economics a challenging field for project designers to navigate during these early years of blockchain’s evolution.

• The COVID-19 crisis forced startups to rethink everything from their management to their business models.
• Pivoting taught these 10 startups key lessons on leveraging capabilities, moving quickly, and maximizing teams.

COVID has transformed how businesses run and how leaders lead. The World Economic Forum’s Global Innovators Community, a group of innovative start-ups and scale-ups, explained recently how they used their technologies and expertise to fight the pandemic – and what they learned in the process that they’ll apply to future crises.

STARTUPS

What is the Global Innovators Community?

Show

1. Move fast and fix things
MachineMetrics, an industrial IoT platform for machines, doubled down on remote technology monitoring during COVID-19 to help manufacturers monitor their factory productivity and supply chains from afar.

Additionally, the company developed a program to provide free access to its technology to any manufacturer involved in the production of COVID-19-related manufacturing, such as ventilator components or testing and protective equipment or any COVID-19 related manufacturing.

Pivoting meant developing educational programs and delivery mechanisms for its new programs in about one week. The experience helped the company lean on strengths such agility and organizational trust, which were essential to both the company and its manufacturing customers’ success.

Through this experience MachineMetrics learned how to balance the needs of the company with the needs of the industry its serves. When these needs are in alignment, you can move quickly to achieve remarkable things, said Graham Immerman, the Vice President of Marketing.

Have you read?

• 17 ways technology could change the world by 2025
• 10 technology trends to watch in the COVID-19 pandemic

2. Learn first, act later
KONUX, a technology company that uses artificial intelligence to support predictive maintenance of industrial plants, didn’t pretend to know what to do next or how the company should react. In the moment of great flux, Founder and CEO Andreas Kunze asked himself: “What is really the core of what we do? And in a scenario where our market collapsed, what assumptions would I still not challenge?” Such questions helped him focus on his core beliefs and the company’s strengths and values.

Said Kunze, in times of great change, “The role of the CEO needs to transform to Chief Learning Officer.” He said, “We need to learn about the market, customer, product, and people impact as fast and as much as we can. That is where innovation truly happens.”

3. Find new problems to solve
Orbs, a public blockchain stack that helps businesses and governments develop blockchain applications, saw an opportunity to adapt its technology to the new challenges that COVID introduced to daily lives.

A key challenge? How countries could safely open up their borders to both residents and visitors, and how individuals could prove authenticity of their health condition while maximizing privacy. “From the very first days of the COVID outbreak, we set our minds to figuring out how blockchain can be the technological foundation for current challenges,” said Netta Korin, co-founder at Orbs.

As a result, the company designed a blockchain-based health passport in which test results can be signed cryptographically. This allows holders to prove when, where and by whom they were tested for COVID or potentially any other diseases. Based on this data, countries can determine the terms under which an individual may or may not enter. Furthermore, it allows authentication of results wherever travellers go in order to track and monitor people’s paths in case of an outbreak, all the while minimizing privacy infringement.


This experience taught Orbs that the real challenge is identifying the opportunity within a crisis. Thanks to these efforts, the company is currently in discussion with a government looking to adopt Orbs’ solution as part of the country’s public health platform.

4. Know your “why”
Avellino shifted its business model during the crisis, pivoting from genetic data and diagnostics, to filling a gap in the testing market for the COVID-19 crisis. The change came about after just 3 weeks of brainstorming sessions. The company credits its agility to the team’s alignment on purpose and priorities, said Eric Bernabei, the Chief Sales and Marketing Officer.

There was "never a debate" about whether or not Avellino should make the pivot, explained Bernabei. The only discussion was about how to do it successfully, identifying potential risks and collaborating to ensure that it could identify trigger points for decisions and actions.

5. Find ways to foster community
The pandemic brought unprecedented challenges with no established roadmaps or best practices for guidance. In that space, many companies saw the power and support networks that could provide. For instance, agtech company Mooofarm realized the value of community among its members.

The company supports marginalized dairy farmers in underserved markets around the world and the pandemic underscored how the farmers that used its platform shared and learned from each other regarding cattle health and nutrition management, government schemes, subsidies and cattle trading. Progressive farmers shared dos and don'ts with each other and responded to queries about dairy farm management. To support this effort, the company is currently in the process of developing an online community to help this community better interact and strengthen its existing bonds.

6. Rethink business as usual
Early in the crisis, 3D printing company 3YOURMIND Inc., saw a way its technology could help generate PPE and respirator connectors. In only a few days, it leveraged its software technology to create a virtual factory of more than 40 professional 3D Printing suppliers and a digital inventory of more than 60 validated designs.

This made it possible to deliver thousands of pieces of printed equipment, on-demand, with the highest degree of IP and data security.The move has helped the company future-proof its business, as it saw the need for digitizing stocks and relocating production for key products and components.

“Over the next 10 years, more than 8% of stock units will be virtualized and produced with on-demand 3D printing,” said Aleksander Ciszek, Chief Executive Officer at 3YOURMIND Inc. As a result, the company is helping firms to collect and assess parts data and create their own digital warehouses. “This is a tremendous task ahead of us,” said Ciszek.

7. Strengthen relationships
Thanks to lockdowns and the need to communicate virtually, financial services and blockchain company Diginex went remote. It switched from running in-person consultations to a new approach that accommodated remote technology implementation. This meant standardizing its product offering to enable rapid scale-up of its technology solutions.

This approach allowed Diginex to focus on its strength, the technology infrastructure, while engaging local partners to handle effective implementations. Said Miles Pelham, Diginex Chairman, the company has always valued its long-term partnerships, but this period has shown the importance of those relationships in helping the company adapt and scale.

8. Get creative
The pandemic provided a special opportunity to contribute for Livinguard, a maker of innovative face masks and other PPE. Still, when work went remote, it needed to scale up while ensuring staff could work safely and transport goods after COVID halted air travel and other transport.

While most staff worked from home, the company found a locality not in full lockdown where it could run some key operations and where flights were still available. “We had to really switch gears and stretch our limbs,” said Livinguard’s EVP of Business Development Jonathan Pantanowitz.

9. Leverage your capabilities
AI-powered insights company Contextere found the current pandemic created a transformational opportunity to advance productivity initiatives it couldn’t have imagined before the pandemic. The company, one that uses machine learning and industrial data to help employees execute their jobs more efficiently, saw the opportunity to apply its technology to its own company.

This approach helped the team eliminate rework at Contextere and even identify new opportunities to contribute to the COVID-19 fight. Subsequent COVID-19 AI research the company conducted for its own staff led to the deployment of AI to support frontline workers, eliminating productivity barriers to overburdened workers during a critical time.

In times of great change, the role of the CEO needs to transform to Chief Learning Officer.

10. Embrace new challenges and new opportunities
COVID exposed existing weaknesses and vulnerabilities – and made them more complex. Venture debt, for instance has become increasingly constrained due to regulatory restriction and conventional lending practices by financiers that demand physical collateral.

For partner banks and VCs, “It is an even tougher environment, then it used to be, in relation to financing,” said Mohamed Wefati, the Founder and CEO of MIZA, a fintech company that helps support small and medium enterprises in the MENA region. “Access to finance is an issue for small enterprises.”

However, there are multiple initiatives launched by central banks and banks across the MENA region, for example, to stimulate credit for SMEs. MIZA’s main learning was that with the inevitable digital adoption sparked by COVID, small enterprises stand to benefit from increased access to finance due to their increased digital footprint. This new paradigm opens up increased opportunities for driving financial inclusion across the MENA region.



The World Economic Forum's Strategic Intelligence Platform helps put the COVID-19 into context.

Image: World Economic Forum, Strategic Intelligence Platform

Last year, the World Economic Forum launched Strategic Intelligence, its flagship digital product to help individuals and organizations see the big picture on the global issues facing the world. It provides a tremendous resource for exploring the interconnections between over 250 different topics and keeping up to date on everything that could potentially be an opportunity or a risk to you or your organization.

Strategic Intelligence enables organizations, like the Global Innovators, to keep abreast of risks, opportunities and trends, enabling them to take more of a data-driven approach to managing their business.

Cryptocurrency funds are a new type of investment vehicle that parallels traditional portfolio investments, like hedge funds, but are composed entirely out of digital assets. Because of this, they play by slightly different rules than their legacy counterparts.

Knowing how they differ and where to get involved is key for those who want to jump into this intriguing new world, so we’ve outlined the main points in this helpful guide.

What are cryptocurrency funds?

The term “cryptocurrency fund” refers to a portfolio containing a variety of different digital assets and is usually managed by one or a few individuals. Investors are then able to buy into these funds so that they can share in the profits as the value of the fund grows.

According to data from Crypto Fund Research, a little over half of these act as venture capital funds, while the rest are predominantly hedge funds. Venture capital funds involve a variety of investors pooling their money in order to buy into smaller businesses with high growth potential. Of course, in cryptocurrency funds these businesses are new projects and altcoins.

Once the asset or assets have grown by a sufficient amount, they are usually sold off and investors take a cut of the profits. Hedge funds act as portfolios that are actively managed and work to minimize risk in the market, hence the name “hedge.

” These can be made up of any assets, but different assets are typically used in both long and short strategies, diversifying the portfolio in order to make the fund resistant to, or even profitable during, high volatility.

Again, these funds are usually managed by small teams and are often only available to high-end investors, with minimum investments ranging in the tens to hundreds of thousands of dollars. 

Traditional hedge funds also usually have minimum time constraints attached to them, so investors would be committed to keeping their money in the fund for at least one year, for example.

They also tend to have fairly high fees, around 20% of profit, as incentive for the managers to provide solid performance. On that note, this entails putting trust into the team managing the strategies, and there is no guarantee that the fund will ultimately see a return. If poorly managed, the market volatility that these funds are supposed to protect against can also quickly wipe them out.


 This was seen in March with the sharp drop that came amid the coronavirus market panic. Some cryptocurrency funds weren’t prepared for such a sudden drop, and collapsed as a result.

Common strategies used by cryptocurrency fund managers

At this point, we should explore the strategies that fund managers use to grow their investments. One common tactic often invoked is called “long/short equity.

” In this scenario, fund managers look at the assets they believe are undervalued and overvalued, and then place long and short positions accordingly. If their analysis is correct, then their portfolio should see gains whether the market is rising or falling. 

A similar strategy is known as “market neutral.” Here, the goal is for the long and short positions to balance out, so that the market exposure nets to zero.

Therefore, a manager may take a 50% long and 50% short in the same industry or asset in the hopes of reducing risk from volatility. It should be noted that reduction of risk generally means lower returns as well, which is an acceptable trade-off for some.

Another common strategy used is arbitrage. There are many types of arbitrage, but the general idea is to buy assets on one exchange and then sell them on another that is offering a better price. This is common in traditional hedge funds, but the cryptocurrency market often offers more lucrative opportunities due to its young and volatile nature.

It is common for different platforms to offer slightly different prices on various assets, and if the move can be made fast enough, then making a profit can be relatively easy. That being said, speed is key, making this strategy a common favorite among high-frequency traders.

There are other strategies as well, such as “global macro,” which looks to take positions based upon larger trends within a market, and “short only,” which basically focuses on explicitly shorting assets that the managers feel are overvalued.

Lastly, there is “quantitative,” which focuses solely on models, data and research to craft the portfolio. Realistically, it is not uncommon for multiple different strategies to be used, but it is essential that the fund managers understand what they are doing in implementing whichever one and are transparent about it with investors.

A variety of different ways to invest

This is generally the largest risk involved with investing in a cryptocurrency fund: clients need to put their trust into those behind it, which is why it is important to do research.

The more information the managers are willing to share about who they are, how they are managing and what their track record is can help determine if they are right for an investor.

That’s why, for many, partnering with a reputable firm is an essential part of the trust that they will see a return on their investment. Some of the biggest names in cryptocurrency funds include the Digital Currency Group, Galaxy Digital and Pantera Capital, among many others.

All focus specifically on cryptocurrencies and other digital assets.Of course, these will still generally require large, upfront investments from qualified individuals.

However, retail investors who want to be in on this type of action might want to look at projects like Tokenbox. In addition to acting as a general wallet and exchange, Tokenbox allows users to “tokenize” their portfolios as well as invest in the tokens attached to the portfolios of others.

This acts as a streamlined way to either begin a new cryptocurrency fund or get involved in an existing one. The tokens that are tied to winning portfolios can themselves be bought and sold, and their value is tied explicitly to the performance of their fund.

Managers can then showcase their success to try and attract more backers. All of this is possible without the need for a massive initial investment, but rather acts more like purchasing any single cryptocurrency on an exchange.

What can this market look forward to?

The cryptocurrency fund outlook is fairly bright these days. According to a report by PricewaterhouseCoopers and Elwood Asset Management Services Ltd., the overall value of Assets Under Management in these funds grew from $1 billion in 2018 to an impressive $2 billion in 2019 — doubling the market’s size in a single year.

On top of that, the median return on these investments in 2019 was 30%, down a little from 2018 but still far above most traditional hedge funds. This is, of course, due to the room for upside that is available in the market.

Though a wide variety of cryptocurrencies can be found in various offerings, the study found that 97% offered Bitcoin (BTC), followed by Ether at 67% (ETH) and others such as XRP (XRP), Bitcoin Cash (BCH) and Litecoin (LTC), all being offered by about a third of the funds available. This all points to a market that is really only beginning to be explored.

As cryptocurrency grows into mass adoption, it is only logical to assume that the number and value of these investment vehicles will continue to rise. Risks will always be present, which is why investors must always do their homework, but the untapped potential of digital assets looks promising.

If more retail investors can be brought into this realm as well, then the story of cryptocurrency funds may be just beginning.

Millions of Britons now hold cryptocurrency: LEE BOYCE delves into official figures to see what a typical bitcoin speculator looks like

• The FCA has released an annual detailed report focusing on cryptocurrencies 
• It lifts the lid on why people have bought in and why 
• Consumer Trends asks: Will the number of coin owners keep growing? 

By LEE BOYCE FOR THISISMONEY.CO.UK PUBLISHED: 09:25 BST, 4 July 2020 | UPDATED: 09:34 BST, 4 July 2020

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Not so long ago, sandwiched somewhere in between the EU referendum and the coronavirus pandemic, bitcoin and cryptocurrencies briefly became the hottest global topic.

With prices soaring, many blindly took a punt, worried they would miss out on a chance for a quick and large profit – the only way was up and all that Yazz. You heard overheard conversations about buying bitcoin, ripple, ethereum and more everywhere. 

It seemed everyone was piling in, young and old, with the hopes of turning hundreds or thousands of pounds into something more substantial.

Many subsequently had their fingers burnt – bitcoin prices fell from a peak of nearly $20,000 in December 2017 to $3,000 a year later, others saw their currency vanish, exchanges disappear, or were scammed.



Bitcoin boom?

The FCA has provided a snapshot of crypto BritainA lucky few, likely to have been involved when the price was low and the industry unknown, may have turned a handsome profit.

Fast forward to today and while cryptocurrencies remain niche, there is still plenty of interest around bitcoin and the like, with ways to buy it far easier than a few years ago. And for those who managed to buy in at $3,000 a coin in that dip a year after the boom and held on, they would have witnessed the price triple.  

We see comments dominated by two extreme camps: those who say bitcoin will race to $100,000, or even a $1million a coin in the next few years, and others saying it is a scam or casino-style gambling, with those getting involved having no idea what it is all about.

The Financial Conduct Authority has taken a keen interest in recent years and this week marked its annual report on the cryptocurrency, to reveal whether the interest in bitcoin has died down or continues to boom.Consumer Trends dives into the statistics to see whether the fad is over, or if people are more interested than ever…

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Who is a typical crypto holder?

Around 1.9million Britons own cryptocurrencies, according to the new data from the FCA – or nearly 4 per cent of the adult population. These are people who actually 'own' a coin in a wallet, not have their money tracking the price.

A further 700,000 people have also held crypto at some point, or 5.35 per cent of Britons – up 2.35 percentage points on a year earlier.

That means more than one in 20 Britons have been tempted into dabbling in crypto at some point.

What about the price?

The price of bitcoin soared from $1,000 a coin in early 2017 to $20,000 by the end of the year.

A year later, it had fallen to $3,000. Last summer, it managed a spell back over $10,000 a coin, it fell back to $6,000 in March and currently sits at around $9,000.According to the study, 78 per cent of all people had heard of bitcoin.

The next most familiar? Libra, which hasn't launched, followed by bitcoin cash, ether, bitcoin SV and litecoin - these were the only ones with a 10 per cent or more familiarity with the British public.  

The data, which was gathered in December 2019, also showed that people were far more likely to have heard of cryptocurrency: nearly three quarters are now aware of it, compared to just 42 per cent a year before.

What is the make-up of a typical punter and how much have they gambled of their own cash?Well, 79 per cent are male, 69 per cent over the age of 35 and the majority – 73 per cent - are classed as being in the highest ABC1 social grades.

Furthermore, nearly half of cryptocurrency holders earn £20,000 to £50,000, with exactly half of all owners holding under £260 worth and 75 per cent under £1,000.

This suggests that most have dipped their toes in the market in the hope of a crypto like bitcoin rising to $100,000 a coin.If you bought £260 worth today, and it did - for whatever reason - rise to $100,000 a coin, it would see the value rise to around £3,000 from that initial investment. It is small enough for most to write it off if needed, but big enough to have more than a passing interest. 

The most popular reason for consumers buying cryptocurrencies was as 'as a gamble that could make or lose money', acknowledging that prices are volatile.

There has also been a shifting generational change – just 7 per cent of all crypto holders were 55-plus in 2018. Despite seeing largely as a millennial or generation Z purchsae, this figure has increased to 22 per cent in the new study.

Meanwhile, the number of 18-24 year-olds involved dropped from 18 per cent to 10 per cent. The most likely age range to hold crypto now is 35 to 44 year-olds at 27 per cent.The year previous, 25-34 year-olds were most likely, at 39 per cent. The survey is of a nationally representative online panel of 3,085 respondents.

Money, money, money: Half of those with cryptocurrency have less than £260 worth

Some have borrowed money to get involved

In the survey, the FCA used the term cryptocurrency, but notes: 'This term is more widely used in public domain than the broader "cryptoasset" term we tend to prefer'.

This highlights that the city watchdog would prefer it not to be described as a form of currency.

The survey indicated that 8 per cent of people borrowed the money from financial firms, friends and family, other sources or using a credit card or existing credit facility.

While this seems a low percentage, the FCA says this is still 215,000 people. For a speculative investment, that is a worrying figure.It does point out, however, that those who did borrow money purchased small amounts – half bought less than £120 worth.

Another titbit from the survey is that fact that 27 per cent of people who bought crypto are in the C2DE social grade.

These are described as skilled manual workers, semi-skilled and unskilled manual workers, state pensioners, casual and lowest grade workers and unemployed with state benefits only.

The FCA concluded that those displaying a lack of basic knowledge and are unaware of the absence of regulatory protections are more likely to be in this social grade than the typical cryptocurrency owner.

Consumer Trends

This is Money assistant editor and consumer journalist, Lee Boyce, writes his Consumer Trends column every Saturday.It ranges from food and drink and retail, to financial services and travel. Have an idea or suggestion? 

Get in touch:[email protected] 

On that note, most consumers seem to understand the risks associated with the lack of protections, the high volatility of the product and have some understanding of the underlying technology, the study says.

Nevertheless, the lack of such knowledge among some presents potential consumer harm - 11 per cent of current and previous cryptocurrency owners thought their money was protected. Again, while the minority, it still amounts to approximately 300,000 adults.

Nearly half of people said they bought crypto as a gamble that could make or lose money. Just 15 per cent expected to make money quickly.

A quarter have bought in as a part of a wider investment portfolio, while a similar number said they did as they feared missing the boat.Meanwhile, 17 per cent said they have got involved as they don't trust the financial system and the same amount did as part of a long-term savings plan, such as a pension.


+4

Earnings: It appears basic-rate taxpayers are the most likely to hold crypto

Never been used and use non-UK exchanges

According to the study, 47 per cent of people have never used cryptocurrency for anything. This suggests that many are buying it and holding it in the hope of the value growing, not for any practical use.


Last month saw the announcement that PayPal will begin supporting bitcoin transactions - which may change all that. The majority bought their crypto through an online exchange. Of those that used an online exchange, 83 per cent used non-UK based exchanges.

While there are plenty of reputable exchanges, as we've pointed out before, it can be the Wild West, with people potentially transferring their money overseas.   Coinbase is by far the most popular exchange to use - 63 per cent of those who have bought crypto used the San Francisco based firm. 

The next four that most people use are Binance, based in Malta, Kraken, also in San Francisco, Bittrex in Seattle and Bitfinex, Hong Kong - the only other firms to score above 10 per cent.  



Keen interest: A year ago, the majority never looked at their crypto value - now, most keep a keen eye on it

Are they holding it for the long-term?

In general, cryptocurrency holders expect to hold onto it for long periods of time - again, highlighting that most are now buying and leaving it, in the hope for long-term growth.

In the previous study, 35 per cent said they never monitored the value of their crypto holding - however, this has dropped to 12 per cent.    

Most current owners who have a plan for how long they intend to hold crypto expect to keep them for three years or more. At the same time, almost 40 per cent said they don't know for how long they will hold onto it.

Google trends data showing searches for bitcoin, with the big spike during the boom

Have more people got involved during lockdown?

It is highly likely that the number of people involved in cryptocurrencies has surged during lockdown, thanks to stock market volatility, savings rates collapsing and having extra cash.

There have been plenty of reports suggesting that some households have managed to save extra cash - much of which has poured into savings accounts or National Savings and Investment products.

Some of this would have been diverted into bitcoin. On 11 May, in the midst of lockdown, we also saw bitcoin half - an event that happens every four years.It means the reward for digitally mining Bitcoin has halved from 12.5 coins per block to 6.25, constricting the supply.

The event saw some exchanges report an influx of investors, hoping to see prices surge after the event.    According to Google Trends, worldwide searches for bitcoin reached their highest amount since the halcyon days of late 2017 and early 2018, when crypto chat became all the rage. 

This suggests that more Britons are likely to have piled in since the data in this report was gathered - but as the study suggests, the majority are wisely not expecting quick gains or sticking too much of their cash in crypto.  

If you do buy into bitcoin 

Find out how bitcoin and the blockchain works, so that you have some understanding of the system, the ledger, the major players and the public and private key elements.

Remember bitcoin yields nothing and its main source of value is scarcity. 

Most bitcoin activity is trading not investing. Research coin wallets, the digital vaults where cryptocurrency is held, and consider security carefully. Bitcoins have been stolen before, understand how this happened.

Be prepared for extreme volatility. The price can move by 20 per cent in one day and you could easily lose half of your cash in a far quicker time that investing in the stock market.

Consider how you would cash in any gains. 

There are reports that this has proved hard for some people. A time of market stress could lead to people being locked in and unable to trade.

Read our guide to How to be a successful investor, which looks at the far less high octane world of long-term investing and how to make it a success. What is bitcoin?

The digital currency that most will be familiar with is free from government interference and can be shared instantly online. It doesn't rely on trusting one central monetary authority.

The underlying technology is blockchain, a financial ledger maintained by a network of computers that can track the movement of any asset without the need for a central regulator. 

The persistence of the Covid-19 pandemic has led governments and companies to resort to the unthinkable: increased surveillance. 

In Beijing, which on June 11 marked its first new case after two months, authorities utilized geo-spatial information collected through mobile tracking devices in people’s smartphones to identify and isolate potential virus carriers.

To lessen public concern Norway announced its decision to cease its coronavirus contact tracing app, Smittestopp, after criticism from the Norwegian Data Protection Authority, which claims that a present low rate of infection no longer justifies the use of the app.

Meanwhile three states — Alabama, South Carolina, and North Dakota — have committed to using Apple and Google's contact-tracing tech.

The Exposure Notification Privacy Act, a new US bill which introduces federal rules to prevent privacy violations, would require all tech companies working on contact-tracing apps to collaborate with public-health authorities and mandate that data collected by contact-tracing apps not be used for commercial purposes.

However, the question remains, who owns the data and as an individual is it illegal to be commercially incentivized to profit from one’s own data? 

With the coronavirus outbreak bringing digital health to the front of healthcare today, secure and trusted data custody is needed more than ever and blockchain may prove in helping to solve this issue.

Although enterprise adoption of blockchain today seems to go without the application of a token or cryptocurrency for financial use cases, in some ways this is understandable. Paying for healthcare is not unknown in and of itself, but buying tokens to pay for it is a little harder to grasp. 

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Like cryptocurrencies that are striving to gain mainstream adoption, blockchain in healthcare is setting its own slow pace to adoption.

Companies are at the early stages of development, building infrastructures and business models that would guarantee more privacy of individual data, especially to be used by organizations in times of global distress.

Even though the pandemic proves these solutions are urgent, is mainstream adoption in the healthcare industry on the horizon? 

Kadena, the first blockchain technology company to come out of JPMorgan’s Blockchain Center for Excellence, has partnered with Rymedi, providers of a data platform revolutionizing healthcare supply chains.

Rymdei’s main goal is to use data chains to monitor drug and medical device use as well as their outcomes. Rymedi’s system is being used by the World Health Organization to monitor vaccination records, treatments, and prevention methods in Mongolia. If there is a noticeable effect there, the process can be applied to other countries and other conditions and the solution can undoubtedly be applied to covid-19 initiatives..

Another blockchain based healthcare company Immuto Inc, has used J.P. Morgan JPM’s Quorum, an open-source framework for blockchain networks, to set up their Documen system. 

The system eliminates third parties in the custody of medical documents and provides a secure digital signature to all data involved as it goes through the chain of custody.

BlockInterop is one of the companies that has chosen to use a digital currency in its work.

Founded in 2018, it’s team focuses on the development, acquisitions and investments of Healthcare Meaningful Use Applications, Web Services and Data Transformation tools.

The company noted the huge increase in the cryptocurrency market in 2017 with ICO’s (intial coin offerings, where a token is exchanged for legal tender or other cryptocurrencies) and related offerings. Ultimately, they decided to work with a Security Token Offering (a type of cryptocurrency where the token represents a direct security offering).

In BlockInterop’s case, the tokens represent one share of class B stock. Unlike traditional stock offerings, these are monitored by a digital blockchain exchange and are much more secure.

When asked if healthcare is prepared for blockchain, CEO Gina Malak explained, “Blockchain technology has the potential to transform healthcare [industry], putting the patient at the center of the healthcare ecosystem.

Along with increasing data security, privacy, and interoperability, making the data immutable and interoperable.

” This concept aligns with Meaningful Use, the term established in 2011 for standards of electronic health record which is now called Promoting Interoperability as CMS focuses on health information exchange and patient data access.

Essentially it sets out how that data can be exchanged and accessed. While this initiative nearing a decade of work continues to evolve, blockchain technology can improve the coordination of data and address many of the privacy concerns heightened by current events as seen by the companies building these solutions.

Inevitable scrutiny and backlash will continue to challenge authoritarian structures that wield power in accessing individuals personal information for their benefit. Before implementing another contact-tracing app, will they seek to integrate a decentralized distributed-ledger system?

Global GDP rose by 2.2% in 2019, the slowest since the financial crisis of 2008 - 2009. Despite the impact of Covid-19, the global economy is expected to expand by 2.4% in 2020.

The World Trade Organization (WTO) believes that new technology can help to reduce trade global trade costs, allowing for increased global economic growth.

If we can successfully reduce global trading costs, we can expect global trade to grow by 31-34% over 15 years. In 2017, over 160 WTO member countries came together to sign the Trade Facilitation Agreement (TFA), which plans to reduce trade costs by an average of 14.3% and boost global trade by up to $1 trillion per year, with the biggest gains in the poorest countries.

Blockchain technology can play a huge part in boosting the global economy due it's many applications which include:

• Transporting real-life data to the blockchain via Chainlink
• Verifying supply chain integrity via VeChain (Document is in German so run the PDF file through Google Translate, yes they translate files too).
• Reducing costs and saving time via the implementation of smart contracts with Ethereum
• Transferring data between different blockchains via Pantos
• Verifying transaction integrity through a public ledger and mining protocols like Proof-of-Work, Proof-of-Stake, and Delegated Proof-of-Stake

Through collaborations between blockchain companies and traditional enterprises, we can expect to see an increase in efficiency, reduction of costs, and reduction of barriers to entry.

Notable examples include OmiseGo, who plan to provide financial services to millions of unbanked people worldwide.

Another example is VeChain who helped DNV GL, an internationally accredited assurance company, to develop a blockchain-enabled infection risk management solution in the midst of the Covid-19 outbreak.

Blockchain technology can also help companies to exchange data and value through blockchain networks, which can be linked to off-chain networks via Oracles.

Blockchain-based data exchanges can bring much-needed transparency and speed to the global economy. However, this wouldn't be without its challenges. Data exchanged via the network needs to be validated, which is no problem for blockchain technology.

The problem lies with regulations. European countries in particular re very strict when it comes to data privacy, for example when you buy a domain name in Europe your personal details are hidden by default.

Whereas if you buy a domain name in the USA, domain privacy is an additional feature you pay for. Another example is the annoying GDPR Cookie Popups you have probably seen 100 times today.

This is all due to the strict data privacy regulations in Europe, regulations that could make it different for companies to exchange data.

However, I believe these are problems we can overcome.

Blockchain technology has garnered interest from traditional businesses, with adoption increasing year after year. For these companies to succeed in a blockchain-enabled global marketplace, they’ll need a decentralized governance model.

This will help these organizations to gain trust on a global scale. By using blockchain technology they can easily set up a decentralized custodian of trust with no third-party interference.

IBM identified three types of organizations, based on the roles each one plays within a blockchain network:

Joiners - 1/3 of respondents, they are likely to join existing or new blockchain networks. They seek efficiency, compared to other organizations that prioritize revenue growth and cost reduction.Builders - the smallest group with just 18% of respondents. They create blockchain networks within their industries to provide new services and new value.Expanders - the largest group of organizations with 51% of respondents. They plan to build industry or cross-industry networks. They could even join other blockchain networks, in order to grow in just market share and overall market size.
Reference (PDF File): Advancing Global Trade with Blockchain (Page 4: Dawn is Coming: Blockchain as a Profitable Investment)

These organizations share a common objective, which is to drive innovation by creating services and apps that improve the value of the network whilst putting consumers in control of their data.

Services that could be offered include payment remittance or document validation. Whilst all three organization types prioritize blockchain for billing and settlement and payments, they intend to use the blockchain for different purposes depending on their role.

• Joiners intend to consume services on multiple blockchain networks, they also prioritize data sharing and consumer insights.
• Builders struggle with scaling the platforms they create, so they focus their blockchain efforts on global fraud and compliance issues.
• Expanders create innovative blockchain applications to share, reconcile, and manage data spanning cross-industry ecosystems.

These organizations acknowledge that network roles heavily influence the distribution of all revenue generated on blockchain platforms. Builders are expected to take a majority of that revenue for the costs incurred due to their setup work.

The reason for this is that networks are mainly monetized based on the value and volume of the transactions generated on these networks.Networks usually charge a small fee on a huge volume of transactions which can bring in billions of dollars in revenue. Payment processors are a great example of this.

Final thoughts

To nurture a growing, global marketplace, it’s important to focus on interoperability across the different systems that process transactions.Decentralized blockchains can work with organizations to increase global economic growth.

Interoperability blockchains like Pantos and Oracle platforms like Chainlink can help to reduce costs, transfer data efficiently, and improve global economic performance.

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You’d be forgiven for thinking of cryptocurrency when you hear the word blockchain. However, it has come a long way since its inception in 2008 as a public transaction ledger for Bitcoin. At the core of every blockchain is Distributed Ledger Technology (DLT).

Originally built to underpin cryptocurrency exchanges, it has now evolved into one of the world’s fastest-growing and most publicised technologies with the potential to reshape our economy and society in ways not seen since the advent of the internet. 

With so many powerful benefits, organisations large and small are clamouring to take advantage of this innovative technology to give their businesses a competitive edge. But what exactly is Blockchain, how can it impact your business and is it too good to be true for SMEs? 

Back to basics

Perhaps the most well-known use of Blockchain is the sending and receiving of payments to anyone in the world. However, Blockchain has much broader applications and the benefits for small businesses extend far beyond just providing a secure payments platform.

Blockchain is creating new opportunities for businesses in every sector to solve existing challenges and develop new business models. The technical definition describes Blockchain as a distributed database designed to facilitate transactions and keep track of assets.

But the best way to understand this is to imagine a massive, virtual spreadsheet, duplicated across multiple computers, or nodes, which are all connected to each other forming a chain. When you add to the spreadsheet, each copy on the chain gets updated with a timestamp, making it almost impossible to tamper with. 

Smart contracts

One of the biggest universal challenges plaguing small and medium size businesses is cash flow. In fact, recent research by We.

Pay found that more than 40% of businesses reported cash flow issues within the last year. Blockchain promises to solve this problem in the form of ‘smart contracts’, which as their name suggests, not only automate agreements but also enforce contracts between customers and suppliers.

Think of a smart contract as a self-executed, coded agreement that delivers guaranteed outcomes if certain preconditions are met.  This will potentially make life significantly easier for businesses. Creating frictionless and efficient transaction processes and allowing invoice payments to be done more quickly and without the need to chase for payment.

Decentralisation and securityAnother advantage of Blockchain is the security benefits it provides. Blockchain applications are inherently decentralised, meaning that data is distributed to different computers around the world in parallel. Transactions cannot be manipulated or deleted through a cyber-hack because each transaction is linked to the one that preceded it. 

With cybercrime costing small businesses across the UK an estimated £13.6 billion in 2018, and four out of five companies in Europe experiencing at least one cybersecurity incident over the past year - this couldn’t come at a better time. Supply chain management

Blockchain has the potential to help SMEs build smarter and more secure supply chains. Since most products are not made by one single company, a Blockchain-backed supply chain means that each transaction from point of origin to point of sale can be tracked through a transparent and traceable audit trail with real-time visibility. 

This not only helps reduce fraud as mentioned but also improves inventory management, which has traditionally been a complex and laborious process, especially for small businesses. 

Not if but when?

HSBC UK supported the first transaction on the blockchain supply chain finance platform we.trade last year. Our client, Beeswift Limited and its corporate buyer in the Netherlands participated in the transaction.

Use of the we.trade platform allowed Beeswift to complete its trade finance transaction within a day, rather than the average 40-45 days it traditionally takes. It was the first transaction where two buyers used the system end-to-end, including the ability to write the invoice, agree to trade terms, provide the online letter of credit, know as a bank payment undertaking (BPU), and additionally receive funding from that.

Blockchain has the potential to answer a number of issues businesses encounter; payment transparency, supply chain issues, cybercrime and a lack of necessary information to conduct business efficiently. However, businesses need to be cautious. Blockchain and its potential benefits are well publicised but like all new technologies its benefits, applications and limitations are only just beginning to come to fruition.

Businesses need to question whether Blockchain truly answers the challenges the business has. First and foremost, you need a peer network to use Blockchain otherwise it is obsolete. For instance, in a supply chain each component supplier of a particular product would need to be in the chain for the company that assembles and markets the final product. 

The cost of data centres, electricity and servers that need constant upgrading may be a barrier to entry for many businesses. Whilst Blockchain may sound like a simple virtual solution they use a significant amount of energy as it constantly updates.

Although it is improving, this isn’t currently a ‘green’ business solution.It’s very easy for Blockchains to become too big, too quickly. Any changes to the Blockchain needs to be thoroughly tested and mirrored across every part of the chain otherwise it can blow out.

Blockchain is a sequential chain of blocks or data records, that contain transactions, files or other important data.When you try to then cut that into more controllable slices it isn’t always possible and it doesn’t eradicate the cyber-crime risk completely. Each slice could provide an opportunity for fraudsters to hack into the system.T

he process of adoption will be slow and steady, and there will be setbacks. Nonetheless, Blockchain is at a tipping point, and for those willing to accept decentralisation as the future of business, it could solve many of the fundamental challenges SMEs experience on a daily basis. And it could level the playing field when it comes to competing against larger enterprises.

Much like the infrastructure that supported the roll out of the internet, Blockchain is less a ‘disruptive’ technology than a ‘foundational’ one.

For more information on all topics for FinTech, please take a look at the latest edition of FinTech magazine .

Despite seeing substantial growth in popularity, topping Google search trends amid the recent halving, the coronavirus pandemic and mainstream coverage, the cryptocurrency industry has somewhat been left out of the advertising world by online ad networks, social media platforms and even national governments. 

In 2018, Facebook banned cryptocurrency advertising amid the initial coin offering hype.

Later that year in March, Google followed, banning all advertisements of cryptocurrencies, especially ICOs, and binary options. In the same month, Twitter also banned all cryptocurrency advertising, except for a few public companies. 

Several social networks in China also applied bans to crypto advertising, following the introduction of restrictions by the Chinese government. These bans, of course, were not random attacks on crypto but rather a blanket measure to prevent scams and illegal fundraisers from acquiring users through these platforms. 

In fact, it is possible to advertise on Facebook, for example, if the user files a formal request with Facebook. This measure is used to force potential scammers to go to Facebook rather than the opposite. Milo McCloud, the creative director at Paradox Group — a crypto-focused marketing agency — told Cointelegraph:

“With recent developments on both [Google ads and Facebook] platforms allowing for blockchain-related content to be advertised only after undergoing heavy scrutiny, it is the first step in the right direction to the mainstream acceptance of blockchain technology as an important industry that can tackle many problems we currently are facing.”

The aftermath of the crypto adpocalypse 

The industry fought back against the many bans and restrictions on cryptocurrency-related advertising. In fact, several companies in Russia, China and South Korea have banded together to form the Eurasian Association Of Blockchain and subsequently filed a lawsuit against some of the social media companies behind the bans. 

Although things have somewhat improved for cryptocurrency advertisers and publishers, there are still many restrictions. Tanya Petrusenko, the head of business development at Bitmedia — a crypto advertising network — told Cointelegraph:

“Today, things have changed, and now they allow some ads, but in order to launch a campaign, a crypto company should undergo a number of procedures, show multiple licenses, and there’s still no guarantee that even if everything is ok, Google or Facebook will approve the ad in the end. This limits marketing freedom for many businesses because even if someone runs a shop where crypto is used as means of payment, it will be difficult for them to advertise it using traditional digital channels.”

Innovating out of necessity

Given the bans on major advertising networks, the booming crypto industry has been forced to adapt. Several crypto-centric networks, along with many other marketing and PR agencies, have been created to fulfill the demand of advertisers in the space, as well as to improve the earnings of crypto-centric publishers, by making ads more targeted and relevant.

Tiberiu Stingaciu, the CEO of Coinzilla — a crypto advertising network — told Cointelegraph:

“Being a niche sector, the crypto advertising industry primarily focuses on solidifying partnerships with major fin-tech publishers. This helps broaden the potential audience advertisers can reach. At the same time, a lot of work is being put into more technologically advanced advertising tools such as programmatic advertising, RTB, and overall optimization of the advertising campaigns.”

While advertising companies and even publishers have been able to circumvent these restrictions and even innovate within their own right, the issues within the advertising industry extend far beyond the world of cryptocurrencies and blockchain technology.

Centralization of the industry by IT giants like Google and Facebook has led to a lack of any real threatening competition and no reason to strive for improvement.

However, some blockchain projects have been trying to find ways to appeal to advertisers, publishers and the advertising audience to benefit greatly, creating an incentive for significant changes to be made.

The many challenges in the online ad industry

There are many fundamental issues in the advertising network like an overabundance of middlemen and third-party service providers that are required to navigate the space to a lack of transparency and even advertising fraud which is rampant in the industry.

As Cointelegraph previously discussed, only around $0.35 for every dollar of advertising revenue makes it to the publishers, which, of course, leads to lower revenue for publishers and higher prices for advertisers. 

Advertising fraud is also a major issue in the industry, as $44 billion will be lost to ad fraud by 2022, which creates major losses on all sides, including the end-user, and leads to even higher prices for advertisers.

Transparency is also a major issue even when actual fraud is not involved. Advertisers may have little notion of how their money is being spent as Petrusenko explained:

“I believe that transparency is and has been the main issue. The lack of knowledge as to where advertiser’s money goes opens a large loophole for fraudulent traffic. Censorship is another huge issue now because traditional ad networks are restricting many ads especially when the subject relates to crypto. This prevents many online businesses from growth and drastically limits their reach.”

Along with these issues, consumers have also grown increasingly concerned with their privacy even when it comes to online advertising. The aforementioned tech giants glean an immense amount of data from and about their users and their preferences.

While this does lead to more targeted advertisements, it’s usually not very welcomed by the consumers whose data is “sold” without their full knowledge or consent or even the possibility of monetizing said data.

Stingaciu told Cointelegraph that adblockers have become an issue, as “users are oversaturated with ads from all directions, and more are turning to adblockers to escape the barrage of ads coming their way.”

Blockchain tech in the ad industry

Although crypto has been left out of the industry, blockchain technology has been making waves in the digital advertising space in the same ways it is doing so in many other industries: by eliminating unnecessary middlemen, streamlining direct relationships between the contributing parties, and providing monetization tools.

Companies aim to cut the middlemen by providing a self-service platform built on top of a blockchain network. Ivan Manchev, the communications manager at AdEx Network, explained how this system makes use of the Ethereum blockchain in a conversation with Cointelegraph:

“On a self-serve platform, advertisers can start a display ad campaign in less than five minutes and send their ads to targeted publishers,” adding: “Both parties receive real-time reporting, and payments flow directly between them once impressions are verified.

”Another company in the space, the Brave web browser, has tried a different approach, positioning itself as a competitor to Chrome and other browsers. It has created a utility token known as Basic Attention Token, which serves as an incentive mechanism for users to share their data with advertisers.

Brave browser enforces this by offering users more privacy by blocking online trackers.

While Brave is indeed an innovative solution and has been gaining traction, it certainly has its flaws. Recent reports of links being replaced with referrals have been made. And while these do not have a devastating effect on the end-users, this has forced the company to apologize and removed this function.

Other blockchain-backed ventures like All.me and Atayen have also been pushing this type of model forward. All.me, a digital network featuring a built-in wallet and exchange, aims to share 50% of all advertising revenue with its 600,000 users.

The Smart Advertising Transaction Token, or SATT, was created by Atayen to reward influencers and other users who create customized advertising campaigns, as well as to receive payments directly, which targets a more niche corner of the ad industry with a similar model as Brave’s.

What the future holds for crypto and advertising

Will blockchain technology be able to change online advertising? While the outlook is extremely promising, these alternatives have a long way to go when it comes to competing with giants like Google or Facebook, which dominate the online advertising market, given their massive user base and reach.

Nevertheless, there are many signs that point to the growing use of blockchain technology in the advertising industry. For example, Brave browser has recently joined the instant global payments network PayID, and IBM has even partnered with big advertisers to create a blockchain-based solution to reduce inefficiency and fraud and improve the digital advertising industry.

According to Manchev, blockchain technology’s immutability and direct payment capabilities can truly revolutionize the world of online advertising, telling Cointelegraph:

“The immutability of the data and the consensus on instructions and payment terms pre-delivery can help reduce the supply chain steps and decrease costs for advertisers and publishers. On the other hand, crypto payments can introduce new payment methods. [...] This can increase publishers’ liquidity, eliminate the need of custody of funds by ad networks, and increase security for both parties.”

As blockchain technology continues to take over the advertising industry and as crypto itself continues to strive for a more regulated and transparent market, it is likely that cryptocurrency companies will be once more allowed back in the “advertising party” and be able to target a more mainstream audience, which may be imperative for mainstream adoption of Bitcoin (BTC) and crypto as a whole.

A few years ago, when MIT Media Lab researcher Joy Buolamwini was leading an interactive digital art project, she found the facial recognition technology it employed was far better at recognizing her lighter-skinned MIT colleagues. 
 The discovery sent Buolamwini on a mission. She founded the Algorithmic Justice League and started doing research that builds awareness about biases in software algorithms. One paper she co-authored with Timnit Gebru, the technical co-lead of the Ethical Artificial Intelligence Team at Google, found facial-analysis software had an error rate of 34.7% for dark-skinned women versus just 0.8% for light-skinned men. 

Facial recognition is the tip of the iceberg. Biases are inherently present in all forms of artificial intelligence algorithms, those digital machines that increasingly run our world. 

You’re reading Money Reimagined, a weekly look at the technological, economic and social events and trends that are redefining our relationship with money and transforming the global financial system. You can subscribe to this and all of CoinDesk’s newsletters here.

Over the years, an extreme lack of diversity in computer engineering has left white men with a disproportionately large influence over all software design. Unconscious bias – now, finally, a topic of great discussion across the United States – means they end up creating products to serve the needs of people like them, not necessarily those of others. 

This is a vital issue for the algorithm-dependent cryptocurrency and blockchain industry. If this technology is to have a broad impact on the world, it must engage a wide population. 

If bitcoin, for example, is to become a global currency, if it is to become a monetary standard accepted by people of vastly different backgrounds, it must be accessible and valuable for a full cross-section of those groups. And if distributed ledger technologies end up providing the data architecture in “smart cities” or enabling our health systems to manage privacy-protected data for fighting pandemics, we better make sure these platforms don’t discriminate against one group or another.

Diversifying the dev teams

The need for diversity in this industry was the central theme in a virtual symposium held last Friday by Cleve Mesidor, founder of the National Policy Network of Women of Color in Blockchain, which coincided with the Juneteenth emancipation holiday.

The panelists’ message, according to CoinDesk reporter Nathan DiCamillo, was that while crypto can help citizens opt out of “a racist financial system,” for that to happen “Black people and people of color must be part of the development of the technology.”

Calls for diversity like these are often met with retorts such as “bitcoin doesn’t care about the color of your skin” or “blockchains are based on math, not flawed human processes.” It’s a naive perspective.

The code for the protocols that dictate each blockchain’s rules, and for the smart contracts and apps built on top of them, are written by people, not by some universal law of nature. And, in the blockchain community even more so than in tech broadly, those people are predominantly white men. 

Source: Clay Banks/Unsplash

Don’t think, either, that blockchain technology is protected against bias by its preference for open-source development. A codebase can be fully accessible but if there isn’t a sufficiently wide group of skilled people reviewing and contributing to it, biases will persist. 

It’s true, this technology has the potential to help people overturn some of society’s ingrained, structural injustices. As investor and active #BlackLivesMatter supporter Mike Novogratz says, “Crypto is about systems change.” But a decentralized system is only as inclusive as the platform on which it is built. There’s nothing intrinsically fair about a blockchain. 

Action plans

A key problem is the digital divide. Impoverished communities of color worldwide have significantly reduced access to the information tools needed to participate in blockchain and crypto development.

Addressing these imbalances is vital for crypto adoption. While it’s exciting to see usage rates grow in places like Nigeria and Venezuela during the COVID-19 crisis, we must also recognize the painful circumstances leading these people to bitcoin and stablecoins: economic breakdown, severe dollar shortages and failed public health systems. And in the grand scheme of things, those newly increased numbers are a tiny proportion of the total developing world population.

We have a long way to go before we bridge the crypto divide.A natural starting point is education. While a number of interest groups have sprung up to support the expansion of blockchain knowledge among women and people of color, the industry must do more. Funds should be dedicated to high schools and colleges serving underprivileged students about the technology and the opportunities it poses.

Online courses and self-training programs should be designed for and delivered to minorities. And, of course, crypto companies should also be hiring from those communities. 

Equally important, media organizations like ours and people like me who work at them must learn to identify, address and fight against our own implicit biases. The stories we write are vital to how information is absorbed about this technology. We need many more of them to be for, about and by people of color and women. 

Like all media, crypto newsrooms and their management must confront this diversity imperative head on. CoinDesk is no exception. Only with a broad spectrum of voices across race, gender, geography and economic background can we properly expose the world to the opportunities and challenges posed by the technology we cover.

It’s all about the debt

What a difference two months of COVID-19 makes. This week, the International Monetary Fund made an interim update to the quarterly World Economic Outlook Report it originally released in April. The headline item: The IMF now expects a massive, unprecedented 4.9% decline in world economic output for 2020, versus the 3% shrinkage it previously predicted.

That’s an additional loss of $1.67 trillion from what the World Bank estimated as the size of the global economy in 2019. You have to go back to the Great Depression for economic malaise on this kind of scale. 

What’s just as striking, and arguably more worrying, was the accompanied forecasts for government debt as a result of this downturn. The IMF now expects net government borrowing in advanced countries to spike to 10.9% of GDP in 2020 from 3% in 2019 and that it will drop back to 5.4% in 2021.



Net government lending among advanced nations.Source: CoinDesk ResearchThe problem with governments’ ballooning debt levels is not the amount borrowed per se. It’s the interdependent nature of it and the geopolitical ramifications. 

Unlike a person or a company, a country cannot go bankrupt. It’s a permanent entity with exclusive taxation powers and mostly exclusive money-printing power. (The latter is why proponents of Modern Monetary Theory, like new author Stephanie Kelton, argue fiscal deficits should not be viewed as a problem.)

Indeed, governments right now have a compelling case – even an obligation – to borrow at low interest rates and fund the social distributions needed to keep their economy’s income levels afloat. Viewed in the isolation of one country and one government, this is one of those no-brainer moments when you focus on the problem at hand and worry about the cost later.

The problem that MMT proponents seem to gloss over is the financial system is globalized – and overly dependent on the U.S. dollar – while politics is domesticized. Governments are accountable to their citizens, not to the foreign entities that own much of their debt and that measure their wealth in a foreign currency. 

Governments will naturally choose the former over the latter, helping out domestic borrowers at the cost of foreign savers by debasing their currency. And if they’re the only government with such a problem, the fallout can be limited to those foreign entities. But what happens when every major government is in the same situation?

This is why some fear the nightmare of a global currency war and debt spiral, one that could seriously undermine the dollar, the currency upon which this international financial system is based. 

Some people see the need for a coordinated, global debt jubilee (or forgiveness). But getting everyone to agree on the terms is almost impossible to imagine.

Another outcome: The world gravitates to a new international currency system. The question is whether that happens in a controlled, top-down manner, with governments agreeing to a new framework, a la the 1944 Bretton Woods conference, or through a more unpredictable bottom-up, private-sector-led monetary revolution. The technology is coming into place for that revolution.

The Global Town Hall

ECHOES OF 2008. If there’s a reason to doubt the IMF’s forecast that advanced country debt-to-GDP levels will start normalizing in 2021, it’s that there’s another shoe to drop: private debt. Unlike the financial crisis of 2008, where the culprit was retail sector lending to homeowners, this time the private sector risk lies with mountains of corporate debt accumulated over the past, low-interest rate decade.

Now, as The Wall Street Journal detailed Thursday, that debt load is combining with the economic stress of COVID-19 to trigger a “wave of bankruptcies.” The structure of a lot of that debt is defined by something called a CLO, or collateralized loan obligation. Sound familiar? It’s very much like a CDO, a collateralized debt obligation, the financial instrument that sat at the heart of the prior financial crisis. It has many people worried about another systemic collapse.

If that happens, there’ll need to be another round of bailouts. And if that happens, governments will need to take on even more debt. 

ROME NO LONGER. For the past century, the center of global financial power lay not in Washington but to its north, in New York.

Because so much global trade and financial market activity has been denominated in dollars, international payments and capital flows inevitably must pass through correspondent banks located on Wall Street. That gives those banks, and the regulators who oversee them, great power as global gatekeepers.

With a say-so over what money goes where, New York state regulators wield this power to impose sanctions on countries deemed by U.S. intelligence to be rogue states and to determine what classes of activity are worthy of vital banking services. It’s why the New York Department of Financial Services is not just your average state regulator. Its influence extends beyond New York’s borders, not only into all other 49 states but overseas as well. 

But on the fifth anniversary of the NYDFS’ controversial “BitLicense,” it’s worth reflecting on the agency’s failure to extend its regulatory power over the cryptocurrency industry to a wider landscape. CoinDesk’s Danny Nelson did just that this week, noting how the then-NYDFS superintendent.

Benjamin Lawsky. had predicted in 2014 the BitLicense would become a standard that other states’ regulators would follow. This assumption, founded on the hubris of New York’s outsized global status, proved wrong.

Nelson reports that “Lawsky’s NYDFS had created what legislatures in other states now consider a case study in how not to regulate an industry whose complex technical details can quickly confound over-broad and ill-defined rules.” Crypto may be the first financial industry to subvert New York’s regulatory grip on global finance. Beginning of the end?

Source: Zbynek Burival/Unsplash

OIL’S CRYPTO-LIKE VOLATILITY. 

A tweet thread by Patrick Chovanec caught my attention. Boy, have oil prices been volatile over the past 12 years. Not quite crypto-level volatility, but pretty extreme for a commodity that’s a mainstay of the global economy. It’s all about the competing swings in demand and supply since 2008: the mix of financial crises, monetary policy-stoked speculation, the fracking revolution, Saudi Arabian political maneuvers within OPEC, and now a pandemic-fueled global economic shutdown.

Who knows where crude prices will go from here? But with so much resting on them – questions of environmental sustainability, for one, but also the stability of the Middle East – crypto watchers should monitor them closely. Here’s why: The dollar’s fate as the world’s dominant currency is not insignificantly tied to the direction of oil markets because crude contracts are priced and settled in greenbacks.

If oil-producing countries in sanctioned countries like Iran feel compelled by price movements to boost supply, a crypto solution that bypasses the dollar could help them do so. Alternatively, if locally sourced renewable energy usage starts to expand rapidly, the global trade in both oil and dollars will fall. The future of oil is one of many pieces in the puzzle driving a reimagining of money. 

THE POWER OF MANY VOICES. 

The results are in for CoinDesk’s #NYBWGIVES charity drive for COVID-19. The month-long campaign, conducted with our Blockchain Week partners Gitcoin, Ethereal Summit and the Giving Block, raised $110,000, most of it in crypto-denominated donations, for 12 different charities.

As promised at the campaign launch during our Consensus Distributed conference, CoinDesk is matching those donations with distributions totalling $50,000.

Half of those funds will be assigned according to Gitcoin’s capital-constrained liberal radicalism (CLR) methodology, which aims to democratize grant and subsidy distribution. It meant that although two big “bitcoin whale” donations turned the International Medical Corps into the runaway winner in terms of total funds raised, the No Kid Hungry charity received more than three times as much in matching funds even though it raised less than a third of International Medical Corps’ tally.

That’s because the latter’s intake came from twice as many contributors. This “power to the many” concept stems from Ethereum founder Vitalik Buterin and Microsoft Principal Researcher Glen Weyl’s work on “quadratic funding.” Read about it and watch the explainer video in our write-up of the charity drive.



How to place a value on bitcoin? Its data is unfamiliar territory for many investors. Nearly half of investors in a recent survey said a lack of fundamental information keeps them from participating.

In a 30-minute webinar July 7, CoinDesk Research will explore one of the first and oldest unique data points to be developed by crypto asset analysts: Bitcoin Days Destroyed.

We’ll be joined by Lucas Nuzzi, a veteran analyst and a network data expert at Coin Metrics. Lucas and CoinDesk Research will walk you through the structure of this unique financial metric and demonstrate some of its many applications. 

Sign up for the July 7 webinar “How to Value Bitcoin: Bitcoin Days Destroyed.”

A new survey of about 800 institutional investors in the U.S. and Europe shows strong cryptocurrency adoption, particularly bitcoin. About 80% of institutions said they find cryptocurrency appealing, and 60% believe cryptocurrencies have a place in their portfolios.

Crypto Appeals to 80% of Institutions Surveyed

Fidelity Digital Assets, the cryptocurrency arm of Fidelity Investments, announced Tuesday the results of a survey to better understand institutional interest and adoption of cryptocurrencies as well as key barriers to investing in them. It was conducted from November 2019 to March 2020.

Fidelity Digital Assets offers a full-service, enterprise-grade platform for securing, trading and supporting cryptocurrencies.A total of 774 institutional investors participated in the survey, 393 of which were in the U.S. while 381 were in Europe.

Respondents include financial advisors, family offices, pensions, crypto and traditional hedge funds, high net worth investors, endowments, and foundations. This is the second consecutive year Fidelity has surveyed U.S. institutions but it is the first time it surveyed European investors. According to the results:

Almost 80% of institutional investors find something appealing about digital assets.

Fidelity Digital Assets conducted a survey of 774 U.S. and European institutional investors and found that about 80% of them find cryptocurrency appealing in some way.

Breaking down the number, 74% of U.S. institutional investors find cryptocurrency appealing, while 82% of European investors do.

“A notable contrast is that 25% of European investors find the fact that certain digital assets are free from government intervention to be appealing, whereas only 10% of investors in the U.S. feel this way,” the report further reads.

Moreover, 36% of respondents — 27% in the U.S. and 45% in Europe — revealed that they are currently invested in digital assets. Bitcoin continues to be the cryptocurrency of choice with over a quarter of respondents holding BTC while 11% have exposure to ETH.

“Looking out five years, 91% of respondents who are open to exposure to digital assets in a portfolio expect to have at least 0.5% of their portfolio allocated to digital assets,” the report adds.


Three characteristics of cryptocurrencies are most compelling to both U.S. and European institutional investors. 36% of respondents said “uncorrelated to other asset classes,” 34% are compelled by innovative technology, and 33% by the high upside potential. The report notes:

The majority of institutional investors (6 in 10) feel digital assets have a place in their portfolio, though opinions vary on precisely where.

Despite growing interest among institutions, obstacles remain to cryptocurrency adoption. 53% of respondents cited price volatility as the main reason, 47% said market manipulation, and 45% said “lack of fundamentals to gauge appropriate value.

”Fidelity Digital Assets president Tom Jessop commented on the survey findings:

“These results confirm a trend we are seeing in the market towards greater interest in and acceptance of digital assets as a new investable asset class.

This is evident in the evolving composition of our client pipeline, which spans from crypto native funds to pensions.”What do you think about institutional interest in cryptocurrency? Let us know in the comments section below.

Due to the crisis caused by COVID-19, millions of people have lost all or part of their income. To support them, governments have been giving out money to victims. Is it possible to make this practice permanent? And if so, why will we need state digital currencies?

The COVID-19 pandemic has forced the United States, Canada, Japan, Russia and many other countries to print large budget reserves and to start helping people with direct cash payments.

Such measures have, again, led the world to talk about the idea of an unconditional or universal basic income, otherwise known as UBI, an idea that Thomas Moore put forward in his novel Utopia in 1516.

Its essence is that every citizen has the right to regularly receive a certain amount from the government without fulfilling any conditions and can spend this money at their discretion.

The introduction of UBI experiments began long before the coronavirus pandemic. One example is in Alaska, where a similar system, dubbed the “Permanent Fund Dividend,” has been operating since 1982.

Once a year, every resident of the state receives a certain part of the profit from the local oil industry. In 2019, it was $1,606 dollars, and in the most “profitable” year of 2015, it was $2,072.

Another example is in Namibia where about 1,000 residents of two villages received 100 Namibian dollars each month during 2008 to 2009. Also in Finland, a UBI system was tested from 2016 to 2017 in which 2,000 nonworking citizens received 560 euros each month.

Today, 71% of Europeans support the idea of UBI. Pope Francis has encouraged such payments. Andrew Yang, a former 2020 U.S. presidential candidate, made UBI the focus of his campaign and created the Humanity Forward fund. Recently, the organization received $5 million from Twitter founder Jack Dorsey to give out money in the form of 20,000 microgrants of $250 each.

However, many point to the imperfections of the UBI system and believe that in the world of traditional finance, it can bring more problems than benefits. That said, things might be different if you look at the situation from a different perspective.

The development of crypto technologies opens up new opportunities for introducing UBI, changing relations between the state and society and creating a more just world.

What is wrong with the idea of UBI?

One of the main arguments from opponents of UBI is that if the state distributes money to all citizens, people will work less, which will negatively affect the economy.

It may also lead to an increase in the consumption of alcohol and other harmful substances, especially among the poorest segments of the population. However, experiments that have been performed refute these stereotypes.

Researchers found that in Namibia, UBI recipients began to eat better, their children were more likely to attend schools and crime rates decreased. In developed countries — for example, Finland — UBI recipients are more satisfied with their lives, more positively perceive their economic situations and, at the same time, do not try to avoid employment.

Moreover, the reduction of anxiety about making money for food leads to the development of creative skills, which helps to find new areas of activity.In addition to stereotypes, there are other obstacles to the introduction of UBI.

To realize a fair distribution of funds in the world of traditional finance, we need a complex and expensive system of interaction between all participants, which must take into account many factors — from inflation and possible corruption to the characteristics of migration flows.

As a result, for a country with a population of 300 million people located in five different time zones, the cost of paying a UBI in the amount of $1,000 would be from $10 to $130 for each $1,000 paid.

Today, however, there is a technical solution that can help the state build an effective payment system for UBI with minimal costs: cryptocurrency. It’s not about Bitcoin (BTC), Ether (ETH) or other digital assets, but about state cryptocurrencies whose issuing will be controlled by the central bank as well as the issue of paper money, the development of which is already underway — if not the use of it.

How crypto technologies will help

Unlike the public cryptocurrency blockchain, where one of the conflicting features is the anonymity of asset owners, the treasury blockchain is absolutely transparent to the state. The distribution of UBI occurs inside a closed peer-to-peer information system, the participants of which will be:

The state: It carries out centralized cryptocurrency issuance, direct transfer of UBI payments to electronic wallets of citizens, control of cash flows within the system, and blocking of suspicious transactions, including the purchase of certain goods and services.

Citizens: They spend the money received.

Organizations: UBI payments are accepted for payment from citizens, then they use the accumulated cryptocurrency to pay taxes and/or convert to other currencies, which they then use for any traditional payments.

The blockchain will allow for the instant and reliable exchange of data necessary for calculating the value of a UBI payment, as well as to control its timely payment to each person. In order to avoid fraud and attempts to obtain a payment several times, user identification in the system can occur, for example, by entering insurance data and confirming identity (full-time or remote) or by using biometrics.

Thanks to the absolute transparency and automation of processes due to smart contracts, the technologies behind cryptocurrency can solve the main problems that today interfere with the technical implementation of the database technology.


Here are some examples:


1. Inflation. 

When calculating the value of UBI payments, it is important to constantly monitor the change in the purchasing power of money, taking into account the actual consumer basket. Today, data for calculating the consumer price index is manually collected; that is, workers go shopping and write out prices. It is slow and expensive.

Solution: Using a centralized cryptocurrency will make the collection of information almost instantaneous, increase the objectivity of the data and eliminate errors in the calculations. Blockchain also allows you to change the position of goods and services for monitoring based on actual consumption by the population.

2. Different living standards. 

The same goods and services may have different prices and different densities in the consumer basket. When using “ordinary” fiat money for UBI payments, the issue will be resolved using simple averaging, which can lead to significant distortions of the overall picture.

This problem is especially typical for nations with a large territory and a significant difference between urbanized and agricultural/fishing areas.

Solution: UBI, listed in cryptocurrency, allows not only to take into account changes in the cost of goods but also to create a “basket of subcurrencies.”

The cost of goods in each region can be considered separately and then reduced to a common denominator through conversion rather than averaging. As a result, people will be able to buy an identical amount of goods and services, regardless of the real standard of living in a particular region.

3. Corruption. 

In regions with a weak law enforcement system, the payment of UBI in traditional currency can lead to an increase in corruption.

Solution: All transactions will be recorded on the blockchain, and it will be possible to track the entire path of the cryptocurrency from the moment of issue. Such transparency of payments leaves no room for corruption.

4. Immigration. 

With the current level of globalization, people often move to countries with more developed economies.

If UBI is paid to all citizens, even those who do not reside in the territory of the donor state, this provokes even greater inequality:

Those who leave are twice winners. On the other hand, if UBI is not paid to visitors who are legally working in the territory of the donor state, the welfare gap between them and the citizens of the country widens. In both cases, UBI can provoke an increase in social tension and affect migration flows.

Solution: Cryptotechnologies make it possible to make UBI payments selectively — taking into account the main geolocation of the tax resident. For example, only to those who contribute to the creation of value added in the territory of the state or who have other legal grounds for receiving funds. For example, in the case of minors, pensioners, etc.

5. Costs. 

Within the framework of the traditional financial system, administering direct, regular, simultaneous settlements with millions of people is difficult and expensive. 

This requires the payment of many staff and the cost of operating an information technology banking infrastructure. It is also necessary to take into account additional costs during IT development and operation of systems:

They must have an excess supply of productivity, which is necessary at peak load times.

Solution: Blockchain technology automates all processes related to accounting, routing, cash charging, etc. The total transaction cost — from the issuer to the electronic wallet — in the case of the state blockchain, becomes much cheaper than in the traditional fiat payment infrastructure.

Custom wallets can be created through public application program interfaces, which will make them free for both the state and the public. In this case, the state will retain only the certification function of this software.

6. Relevance of statistics. 

Today, businesses are forced to prepare many reports for various departments, which then turn into summary data for industries, regions and the country as a whole.

Such a process requires a lot of labor, time and money, but its effectiveness is extremely low, as the final statistics are sent to the treasury a few months later when they could be, already irrelevant or at least outdated.

Solution: With cryptotechnologies, statistics will become instant, accurate and reliable. When a person pays with UBI funds from a cryptocurrency wallet, the information reflected in the cash receipt is sent to the state settlement centers in real time.

Accurate data on the dynamics of sales in the assortment context will make it possible to form informed plans for the production of goods and a price policy, and to make timely adjustments in the field of remuneration and social security.

Final thoughts

State cryptocurrencies can become an effective tool for the economic interaction of the state and citizens on the basis of other, more equitable relations. Three years ago, in a speech to Harvard graduates, Mark Zuckerberg called for the use of UBI to give people the opportunity to try new things, make mistakes and look for their callings.

And today, when there are so many restrictions in the world, we have technologies that can give each person more freedom and security.

This must be used, making UBI an ideal tool to empower the individual and help create a better world.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Alex Axelrod is the CEO and founder of Aximetria and Pay Reverse. He is also a serial entrepreneur with over a decade of experience in leading world-class technological roles within a large, number-one national mobile operator and leading financial organizations.

Prior to these roles, he was the director of big data at the research and development center of JSFC AFK Systems.

Executive summary

From art to buildings, the way we invest in assets could be about to fundamentally change with the arrival of tokenization. The act of tokenizing assets threatens to disrupt many industries, in particular the financial industry, and those who are not prepared risk being left behind.

Download the full Pdf Report Here:

https://www2.deloitte.com/content/dam/Deloitte/lu/Documents/financial-services/lu-tokenization-of-assets-disrupting-financial-industry.pdf

Big data is perhaps the most powerful asset we have in solving big problems these days. We need it to track and trace infection, manage healthcare talent and medical supply chains, and plan for our economic futures.

But how can we balance data and privacy? Legislation and regulation of big data such as the European Union’s General Data Protection Regulation (GDPR) and California’s Consumer Privacy Act are partial measures at best.

Regulators and pundits have focused so much on the demand side of the data equation — that is, on the use or sale of private citizens’ data in corporate applications like Facebook, Google, and Uber without the individuals’ awareness — that they’ve failed to look at the supply side of data: where data originates, who creates it, who really owns it, and who gets to capture it in the first place.

The answer is you do. All these data are a subset of your digital identity — the “virtual you,” created by your data contrail across the Internet. That’s how most corporations and institutions view you. As Carlos Moreira, CEO of WISeKey, said, “That identity is now yours, but the data that comes from its interaction in the world is owned by someone else.”

FURTHER READING


Coronavirus + Business: The Insights You Need from HBR


It’s time we started taking our personal data as seriously as the top tech firms do. We need to understand its real value to us in all aspects of our lives. Blockchain technology can help us do that, enabling us to use our data proactively and improve our well-being.

And while there are many areas where taking control of our data might improve our lives, there is one particularly promising place to start: healthcare data.

Why should we care about our health data?

“Imagine if General Motors did not pay for its steel, rubber, or glass — its inputs,” economist Robert J. Shapiro once said. “That’s what it’s like for the big Internet companies. It’s a sweet deal.” It’s also a real conundrum for business leaders who want as much data as they can get for their enterprise, yet truly value privacy and individual freedom. Consider the tradeoffs we’re making as individuals:

• We can’t use our own data to plan our lives and long-term healthcare: our treatment plans, the pharmaceuticals and medical supplies we use, our insurance or Medicare supplements, or how we use our health savings accounts. All these data about us reside in other people’s silos — in the separate databases of myriad healthcare providers, pharmacies, insurance companies, and local, state, and national agencies — which we can’t access but third parties like the American Medical Collection Agency (AMCA) can, and often without our knowledge.
• We enjoy none of the rewards of this data usage, yet bear most of the risk and responsibility for its clean up if it’s lost or abused. In 2019, AMCA was hacked, and the hackers made off with the personal data of some 5 million people whose lab tests were handled by AMCA’s clients Quest Diagnostics, LabCorp, BioReference Lab, and others. None of these clients have to deal with the tsunami of fraud alerts and bespoke phishing scams aimed at patients. Yet, unlike Alectra, Amazon, or Tesco, these parties aren’t using our data to improve our healthcare outcomes or cut our costs. To us, this is data malpractice.
• We can’t monetize or manage these data assets for ourselves, family, or heirs — think of Henrietta Lacks, whose cancer cells revolutionized the development of cancer treatment without her knowledge— resulting in a bifurcation of reputation, wealth, and all its discontents. Those who lack access to the Internet altogether may not have data profiles or privacy problems per se, but they often don’t have official identity cards, home addresses, or bank accounts either, and so they can’t participate in the global economy. These aren’t people without papers. These are people without data.
• Our privacy is at risk all the time, as is our family’s. The Chinese government used mass surveillance to gain some measure of control over the spread of Covid-19, tracking data about who specifically was infected, where they lived, when they were infected, when they recovered, how were they infected, whether they sheltered in place, what temperature they had when they went outside, and who else they contacted. Privacy is the foundation of freedom, and while sometimes — perhaps in a pandemic — we may choose to trade on this privacy for the social good, the trouble is that once the crisis is over, we have no way to reclaim or mask our data.
• We can’t develop or contribute to the proposed health policies of elected officials, we can’t effectively advocate for the changes our family needs, and we can’t collectively bargain with other patients or powers of attorney to lower costs or improve delivery — yet every other party in the system can do all these with our data, not just negotiating coverage and rates with governments but lobbying them for industry-favorable regulations. The Pharmaceutical Research and Manufacturers of America alone spent a record $27.5 million on lobbying in 2018, with individual companies supplementing these efforts to the tune of $194.3 million.

With wearables and the Internet of Things, we can increasingly capture our insulin levels, blood pressure, and the number of steps we take and stairs we climb in a day.

By owning our medical and other personal data, we could solve the five problems stated above: access, security, privacy, monetization, and advocacy. The key is to take advantage of existing technologies to manage our data according to our own terms of use.

How patient control over health records could expedite data for treatments

Pioneers like Canada’s University Health Network (UHN) have come up with a win-win solution using blockchain technology, a software that operates as a shared ledger distributed across computer devices connected to a communications network.

What sets this type of ledger apart from the interfaces to conventional databases or health record repositories is a) its decentralization, which means we can control transactions involving our data peer to peer, and b) its immutability, in that no one else can alter or undo those transactions behind the scenes or without a majority of the network’s approval.

In 2018, UHN launched a patient control-and-consent platform to enhance the patient experience and to facilitate clinical research using patient data.

Designed after workshops with different stakeholder groups and developed in partnership with IBM, the platform leverages blockchain not simply to secure and consolidate patient data across the network, but also to obtain and record patient consent before any information is shared with researchers.

When patients consent, the software automatically encrypts and records details of the consent transaction on the shared ledger. The platform also records which parties accessed the data, at what time, and for what purpose.

This kind of functionality can be expanded to uses such as contact tracing. Imagine a scenario where the UHN solution is interconnected to healthcare facilities across Canada, so that every Canadian patient had an opportunity to share personal data, including location over time.

With such “a platform for reporting, tracking, and notifying that is global in nature and respects privacy,” said Brian Magierski of the Care Chain collaboration, we can “identify new cases rapidly and verify those who have immunity.

” To that effect, the start-up Workwolf has invited the Canadian government to use its proprietary blockchain for tracking Covid-19 cases, immunity or resistance, and test results. And Vital Chain is turning clinically certified results into blockchain-based health and safety credentials for employees to prove their fitness for returning to work.

If we applied these capabilities at a global scale, we could capture a single, comprehensive account of global incidence rates and outcomes that was verified and secure.

That’s what the start-up Hacera is trying to do. With the support of IBM, Microsoft, Oracle, the Linux Foundation, and others, it launched MiPasa, an initiative to integrate, aggregate, and share information at a global scale from multiple verified sources — from the Center for Disease Control or the World Health Organization, but also hard-to-get data from local public health agencies, licensed private facilities, and even individuals — all without personal identifiers.

MiPasa onboards data providers through Hacera’s Unbounded network, a decentralized blockchain powered by Hyperledger Fabric, and then streams data using the IBM Blockchain platform and IBM Cloud. Hacera has developed a tutorial for coders to build applications on top of the platform.

This kind of value creation is the gigantic incentive needed to rally numerous institutions so that we can trace people’s exposure to infected individuals, reduce transmissions, save lives, and put more people back to work.

Finding a Covid-19 vaccine is a top priority. To accelerate discovery, the blockchain start-up Shivom is working on a global project to collect and share virus host data in response to a call for action from the European Union’s Innovative Medicines Initiative.

Shivom scientists formed a global Multi-Omics Data Hub Consortium comprised of universities, medical centers, and companies, many of which have expertise in AI and blockchain, all for combatting coronavirus infections. The consortium’s data hub is based on part of Shivom’s blockchain-based precision medicine platform.

Founded by Dr. Axel Schumacher, Shivom’s platform uses blockchain not only to manage patient consent dynamically but also to share genomic data and data analysis securely and privately with third parties anywhere, without providing access to raw genomic data. Dr. Schumacher said that researchers “can run algorithms over the data that provide summary statistics to the data sets.

No individual, de-identifying data can be obtained without the explicit consent of the patient.”

Transitioning to this self-sovereign future

To realize this future, we need to address the real problem: that you don’t own your virtual self. Each of us needs a self-sovereign and inalienable digital identity that is neither bestowed nor revocable by any central administrator and is enforceable in any context, in person and online, anywhere in the world. Until blockchain, we didn’t have the technological means to assert such sovereignty.

Now the technical groundwork has been laid. Organizations are looking at how to deploy it in public key infrastructure, how to separate identification and verification from transactions, and how to expand the use of smart contracts, zero-knowledge proofs, homomorphic encryption, and secure multiparty computation.Imagine having a digital identity that you stored in your digital wallet on a blockchain.

Your wallet collects and protects all your biological, financial, and geospatial data throughout the day, and you decide how you want to use it. Your medical records are central to this identity. Your body generates health data. You, not big companies or governments, have a heart rate and a body temperature.

When clinicians measure you or take tests of various kinds, they’re providing a service; the results are your asset, deriving from your body. You should control it.What we’re shooting for is a wholesale shift in how we define and assign ownership of data assets and how we establish, manage, and protect our identities in a digital world.

Change those rules, and we end up changing everything.If our free content helps you to contend with these challenges, please consider subscribing to HBR. A subscription purchase is the best way to support the creation of these resources.




Don Tapscott is the author of 16 books about the digital age, an adjunct professor at INSEAD, Chancellor Emeritus of Trent University, and a member of the Order of Canada. Last year he joined Harvard’s Michael Porter and the late Clay Christensen in the Thinkers50 Hall of Fame of the world’s most influential management thinkers of all time. With Alex Tapscott, he is co-founder of the Blockchain Research Institute. Follow him on Twitter @DTapscott.




Alex Tapscott is an advisor, venture capital investor, and financial executive focused on the impact of emerging technologies such as blockchain and cryptocurrencies on business, society, markets, and government. He is the editor and a co-author of the new book, Financial Services Revolution: How Blockchain is Transforming Money, Markets, and Banking.

With Don Tapscott, he co-authored Blockchain Revolution: How the Technology Behind Bitcoin and Other Cryptocurrencies Is Changing the World. Follow him on Twitter @AlexTapscott.

5G networks are beginning to roll out across the UK as well as around the world. One of the biggest promises of 5G is the ability to connect millions of IoT devices. And Blockchain networks have three services they can perform to drive adoption and add value.

IoT stands for the Internet of Things. More simply, IoT is a network of things/devices connected to the Internet. These devices include sensors to collect data, and other functions, allowing them to engage with the world around them.

Some examples of IoT devices would be a temperature sensor with a 5G radio built-in or an automated door lock in a hotel room connected via WiFi.

Together all of these devices make up the Internet of Things or IoTWith potentially millions of IoT devices coming online soon, there will be substantial demand for network bandwidth, hence the importance of 5G networks. But what does blockchain have to do with any of this?

Blockchain networks will play a vital role in three main areas: value Transfer, Identity and Data Collection.

As early as 2012 there have been IoT devices connected to the bitcoin blockchain. Specifically, there was an internet-connected vending machine which accepted bitcoin as payment. The first purchase was for a bag of popcorn.

The system was simple enough. When the right amount of bitcoin arrived in a specified wallet, the vending machine would spring into action. Of course, there were some problems along the way.

The bitcoin network can take up to an hour to process a transaction. With some tweaking, it can be nearly instantaneous. The problem with this is that it removes some of the safety mechanisms to reduce fraud. For substantial transactions on the bitcoin network (like purchasing a house) it is best to wait for up to an hour to ensure that the network accepts the transaction.

Today’s IoT systems need immediacy and may rely on blockchain protocols with significantly faster performance than available today.

Today’s IoT systems need immediacy and thus may rely on blockchain protocols and networks with significantly faster performance and assurance against fraud. 

Equally, today’s IoT systems will not rely on the transfer of cryptocurrency direction to a device. Instead, payments will be made using traditional fiat currencies across existing payment systems – and then receive blockchain-based notifications. 

For any of these systems to function, including peer-to-peer communication, there must be a decentralised identity framework. Every device is registered and identifiable across the network. Blockchain can provide this identity framework.

When implemented at an industry level, it allows for the identification of any IoT device, regardless of manufacturer, geographical location or purpose, to any other device.

An IoT Identity network can verify transactions as originating from authorised devices. Equally, the systems can ensure the sending of access transactions to the correct destination device.

An IoT Identity Blockchain is a hugely ambitious project…

An IoT Identity Blockchain is a hugely ambitious project, but one which has sufficient advantages to all stakeholders to put aside competitive objections and get on with the creation of the governance, protocols and systems of such a network.

Last week Vodafone and Energy Web announced a partnership that could provide identities for billions energy generating assets.The last piece in the puzzle is the ability to automate the entire network. Enter smart contracts.

Smart contracts are programs which run on the network and orchestrate the automated communications between devices and the associated transfers of value. Smart contracts do not run only in isolation; they need input from the outside world.

A smart contract needs to created, executed, to check conditions from the outside world and to cause actions in the outside world.Connections between the outside world and smart contracts are known as oracles and oracle services (not to be confused with Oracle Corporation).

Every IoT device or group of IoT devices can act as an oracle.  Smart contracts can check with an oracle service to determine the temperature outside or the arrival time of a cross-country train.

 An oracle service can unlock the door to a properly rented Airbnb flat – or serve a bag of popcorn from a vending machine.

And all of these transactions, automated or not, can be recorded in a blockchain. By registering every transaction, transfer and transformation, a permanent, immutable record exists for independent verification and audit. And with appropriate access, there will live a vast amount of data. 

Blockchain-based data records can prove useful for analysis but also for training machine learning and artificial intelligence models. Of course, these are not without their challenges.

Blockchain is not designed for storing vast amounts of data – whether in the number of transactions or data associated with single transactions. Equally, data stored on a blockchain must be masked in some way so as not to reveal personal, sensitive or competitively sensitive data inadvertently.

Masking or hiding data by maintaining a centralised database with appropriate access controls addresses this issue.Blockchain, IoT and 5G will provide an infrastructure allowing for extensive new business models and process automation opportunities.

It will require thousands of companies to agree to work together, and it will require an evolution of blockchain and other distributed ledger technologies. And it will require a keen focus on managing privacy and access to data that works for everyone. 





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@igetblockchainTroy Norcross, Co-Founder Blockchain RookiesTwitter: @troy_norcross