On Thursday

Written by Jonny Fry
Writers linkdin: https://www.linkedin.com/in/jonnyfry/

Typically, local authorities spend money in five different areas - education, public welfare, health, roads and criminal justice - and the monies they have at their disposal are not insignificant. In the US, state and local governments spent $3.2 trillion on direct general government expenditures in 2018 and in the UK, local authorities spent £94.6 billion in 2019-20. Therefore, it ought to be of no surprise that government offices are looking for ways in which technologies such as Blockchain can help them deliver services to the local community in a more efficient and transparent manner - after all, they are spending our taxes.



One of the key attributes that using Blockchain technology has, is the ability to offer greater transparency and therefore trust. For example in the UK, this offers some real benefits for local authorities when complying with special educational needs and disabilities (SEND) for young people. Historically, the current systems of many local authorities have been dependent on bureaucratic analogue procedures which rely on paperwork and files. Such cumbersome and bureaucratic processes demonstrate their efficacy (or, conversely, inefficiency), yet struggle to retain or expand social capital, chiefly ‘trust’ - i.e. parental trust in one local authority. Local Educational Authorities (LEA) rely on partners to cooperate – parents trusting professionals in their assessments of their children. However, by creating a blockchain-powered platform where all relevant parties can have access to the same data it is possible (using smart contracts) to create a ‘trust-free’ database with far greater transparency. 

Although the use of Blockchain technology would enable LEAs to replace bureaucratic systems in a variety of ways, they would absolutely need to be cognisant of what data is held and who has access to this data in accordance with GDPR legislation. However, this ability to verify and share information about children and young people known to a local authority could resolve many issues LEAs face regarding SEND. Such a new digital blockchain-based system would help to make holistic assessment feasible, ensuring appropriate intervention by monitoring and reviewing a child on an on-going basis. Blockchain technology would remove the need to have to trust in a centralised data controller (typically the school the child attends) in order to accurately represent the child’s needs for support and provision. Since all this data would automatically be shared with the LEA and relevant professional carers, on-going intervention could also be automatically triggered using ‘trust free’ smart contracts. Once services have been delivered, the ability to establish and implement self-executing pay-on-delivery would improve the quality of the evidence submitted to tribunals (and potentially the decisions made by judges) by providing clear quantitative data on the exact cost of a child’s support.

Another way that Blockchain technology could be used is the automatic payments of benefits. Chainlink is a ‘decentralised oracle network’ providing reliable, tamper-proof inputs and outputs for complex smart contracts on any blockchain. For example, Chainlink can be used to monitor weather temperature and rainfall data. By using smart contracts, automatic payments could be made against a local authority’s insurance policy covering flooding, power outage or sustained abnormal temperature fluctuations.




Source: Chainlink

In Reno, Nevada, the mayor is optimistic about using Chainlink, saying in a tweet: “The time is now to work on great projects for Nevada. $LINK.” Since blockchain-powered platforms have the ability to hold and store data, this enables the historic spending and payments made by a local authority to be very transparent. Interestingly, local authorities in the US will be receiving substantial funds in the near future from the American Rescue Plan which allows Federal relief funds to be sent directly to state and local governments of all sizes....


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On Tuesday

Written by Jonny Fry
Writers linkdin: https://www.linkedin.com/in/jonnyfry/

It could be argued that, since 2008, banks have had a torrid time globally as they desperately tried to repair their balance sheets and rebuild their capital reserves. The cosy cartel that many banks enjoyed has been challenged as they faced real competition from FinTech firms, with governments in various jurisdictions actively encouraging ‘challenger banks’ and ‘neobanks’ (on-line digital banking).



The payments eco system



Source: Insider Inteligence

Whilst you will no doubt recognise some of the organisations above, many are unlikely to be familiar. With increasing competition from a variety of companies, this is the conundrum that many banks face. Some argue that with the growing interest in Decentralised Finance (DeFi) another wave of change and competitors are on the horizon. Biznewspost claims: “The coronavirus pandemic accelerated payments industry digitization by two to three years, as lockdowns, restrictions, and ongoing consumer health concerns upended daily life in ways that trickled into spending trends and consumer habits.” Habits such as, ‘Buy Now Pay later’, have offered stiff competition for traditional banks as companies including Klarna (Europe’s biggest Unicorn valued at over $1billion ), Affirm, Afterpay, and even Paypal (having just paid $2.7billion for Paidy, a Brazilian buy-now-pay-later firm), are making it easier for shoppers to obtain credit as they spread the cost of buying over a few months.. According to CB Insights: “E-commerce software companies that support online retail have seen surging investment in 2021, with $12.4B raised in the first half of the year — a 51% jump from all of 2020”.

European FinTech Unicorns - firms worth $1billion+



Source: Sifted

According to CB Insights, there has been a tremendous growth in FinTech firms, with Europe now accounting for 25% of all 120 FinTech unicorns globally. A number of these FinTechs, and certainly many of the Payment platforms such as Google Pay, ApplePay (with 383million users), PayPal, Visa and Mastercard, are all accepting Digital Assets as payment. 

Payment platforms are preparing themselves for the inevitable issuance of digital currencies from Europe, the US, the UK and Japan, to name just a few, with one of the most established payment cards, Mastercard, having recently acquired a US-based business crypto intelligence firm, CyberTrace. Meanwhile on the whole, banks have largely fought shy of Digital Assets. Indeed, it still is the case that, apart from Clear Bank in the UK, it is extremely difficult for those organisations engaged in cryptocurrencies to even obtain a bank account. This is also true in much of Europe. In Australia however, as reported by TechWire Asia: “Approximately 17% of Australians own a cumulative AU$7 billion worth of cryptocurrency.” Volt, a neobank, has teamed up with a crypto exchange to enable clients to trade cryptos and, more importantly, hold/store them in their Volt account. This potentially means that Volt will be the first bank globally to be able to offer clients the ability to store Digital Assets and be protected by a nation’s bank deposit insurance compensation scheme.

For a while the traditional banks have suffered from low Price Earnings with JP Morgan’s 2021 estimated PE 11.7; Europe’s largest bank, BNP Paribas, PE 8.8; Japan’s largest bank, MUFG, PE 6. If you compare this with some of the payment platforms’ PE - Visa 54.78, Mastercard 48.8 or Paypal 70 - you can see (in terms of which forms have the best prospects for future earnings growth) what investors are believing, as they are clearly rating the...


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Yesterday

Written by Jonny Fry
Writers linkdin: https://www.linkedin.com/in/jonnyfry/

One of the impacts of the COVID-19 pandemic is that many traditional jobs were at best suspended, and many have been lost. However, what was created was an ideal back drop for those with time on their hands and an internet connection to look for other ways to fill their days and earn money, whereby helping to explain the phenomenal rise in popularity of Play to Earn. Arguably, Axie Infinity has led the way, having risen in price from $4.47 on 7th June 2021, to over $74 now



Axie Infinity



Source: Axie Infinity.com

Axie Infinity describes itself as a "digital pet universe on the blockchain" where players look after their digital pets. However, in order to start playing, small digital animals called Axies need to be purchased. Ironically, the game (which was developed in Vietnam) has been dominated by people in the Philippines who make up 40% of the players. Now the Philippine government is also looking to profit as it seeks to levy tax on the gains its citizens are making. Due to the popularity of Axie, the price of Axies has risen immensely - meaning for those who cannot afford the initial purchase price, they are able to enrol for Axie scholarships at Axie Universities. A ‘scholarship’ in Axie Infinity is when an owner of Axies gives free Axies to someone, resulting in the original owner/donor earning a % of the players’ income. These types of scholarships are a helpful way for those people new to cryptos to learn how to use digital wallets and how to cash in the ‘Secret Love Points’ that one earns while playing Axie Infinity. Depending on the scholarship terms, the profit share can vary between having to pay away 30% to 40% of the income generated.

Another Play to Earn on-line game is Blankos Block Party, from Mithical games. Its developers also worked on highly successful video games including Call of Duty, World of Warcraft and Guitar Hero. When playing ‘Blankos, one can earn Non Fungible Tokens (NFTs) which can be traded on marketplaces. Rudy Koch, a co-founder of Blankos, has said: “What NFTs allow us to do is to bring the player into the economy so they can participate in the value that they bring to the game. Through the items that they earn, through the levels that they build, through the customizations that they make - they own the NFTs. They own the items, for the first time. And they can play with them, they can sell them.” Whilst the idea of buying and selling items you have won/earnt from playing on-line games is not new, the ownership and transparency that comes with Blockchain technology is. Burberry, the fashion designer and retailer has its Non-Fungible Token (NFT) collection on the Blankos Block Party. Rod Manley, chief marketing officer at Burberry, has stated: “That pushing boundaries through experimentation is at the heart of what the company does and it is excited to unlock genuine value for the gaming community by encouraging players to interact with the brand in an environment that celebrates art, design and exploration”.
Burberry’s collaboration with Block Party demonstrates how traditional global brands are engaging further with Digital Assets as a means in which to raise their profile among a new and growing audience which is paid to play.

For readers who are looking for more information about other pay to play games, including update of new games due to be launched, there is now an on-line publication called Play to Earn on-line.  But remember, these games afford no guarantees and players can lose as well...


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On Tuesday

Written by Jonny Fry
Writers linkdin: https://www.linkedin.com/in/jonnyfry/

There appears to be a growing realisation that, as a society, we will have no choice but to live with COVID-19 and its mutations. Many times we have witnessed the fact that, as soon as a country allows international travel, there is the potential for the virus to quickly enter its shores. Far-flung countries, such as Australia and New Zealand, initially evading the ravages of the virus last year and appearing to have been able to hold it at bay by strictly shutting down their borders, have now found themselves in prolonged lockdowns.


While there exist many who are ‘anti-vaxxers’, there are a growing number of countries and businesses insisting that you have to be able to prove you have recently been tested and/or you have had two vaccinations, before you can enter a particular jurisdiction, shop, restaurant or event.

The challenge is, how do consumers and travellers prove their vaccination status or their most recent test results? Whilst there is no definitive answer to this question, we are increasingly seeing a number of organisations turning to the use of Blockchain technology as the basis of a digital, transparent solution. Indeed, the World Economic Forum has proposed that for travellers to foreign countries “a ‘vaccine passport’ or ‘e-vaccination certification of compliance’ for border crossing regulations” could be required “to enable seamless border-crossing”. In Europe, the Digital Green Certificate, a digital certificate for travel available to cover anyone vaccinated against COVID-19 or those who have recently been tested and proved to be negative, is seen as a possible solution.

One of the first platforms to use Blockchain technology was by the International Chamber of Commerce and the world’s largest medical, security and travel repatriation firm, SOS. They launched AOK in May 2020, allowing users to keep control over their personal data whilst allowing them to share an authenticated digital copy of their COVID-19 compliance status certificate. IBM’s Digital Health Pass, using a Blockchain-powered platform, is now  integrated with Amadeus which, itself, is an airline booking system that is used by more than 450 carriers worldwide and means that your health and vaccination status can be securely stored and then shared when you book in at an airport. It seems that governments are pushing the responsibility for covid health and vaccination proof onto the airlines; in a similar way that it is the airline that checks to ensure you have the correct entry vias before you board a plane. Hong Kong University has teamed up with ConsenSys to build the Medoxie COVID-19 Digital Health Passport which will run on the Ethereum Blockchain. As reported on the website Business Blockchain, Karen Cohen, deputy chair for Blockchain Australia believes a blockchain-based COVID-19 certificate could pave the way for the protected circulation of health data worldwide, stating: “This would be a really wonderful test case as a globally secured way of sharing health data.”

However, the use of Blockchain technology is not without its challenges when it comes to using this technology to store and cryptographically share information, including issues such as:
speed of the blockchain 
cost to record data
security of data - personal information will need to be hashed/stored in a manner such that the data could not be subsequently removed at a future time. There is very much the need to be mindful or privacy laws and regulations such as the General Data Protection Regulation (GDPR)
close attention to the management of vaccine certifications and test results 
the success of immunity and vaccine certifications will be largely dependent on the trust in the public authority which, in many countries, cannot be taken for granted. 
vaccine passports...


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Last Thursday

There are reported to be over 480 exchanges which trade Digital Assets but, as with traditional stock exchanges, there are just a few exchanges which dominate the trading of Digital Assets.  


The six biggest digital exchanges (excluding derivatives)


Source: Coingecko.com

The six largest Digital Asset exchanges all usually enjoy daily turnovers - i.e., reported to be buying and selling billions of US$ worth of transaction in 24 hours - which is impressive when you consider the number of Digital Assets they list is, at most, only 335. In terms of valuation of these exchanges, Coinbase is the only publicly quoted firm (having listed earlier this year) and is currently valued at $54 billion. Coinbase’s valuation is greater than that of the NASDAQ stock exchange, which itself is valued at $31.5billion. NASDAQ is the world’s second largest stock exchange in terms of the value of the companies that are listed on its exchange. When it first listed, Coinbase's valuation was almost as valuable as Goldman Sachs, yet it only employs 4% of the number of staff compared to Goldman Sachs. Notably, Coinbase has recently announced some very impressive trading results which has enabled its cash reserves to swell to $4.36billion.

It is understood that the crypto exchange, Kraken, is also considering an IPO (having seen the success of Coinbase’s listing) and it is thought that Kraken will look to float for $20billion. Kraken has 6 million investors and its COE, Jesse Powell, has told CNBC: “The first quarter just completely blew away the entirety of last year. We beat last year’s numbers by the end of February. The whole market has really just exploded”. Binance is the biggest Digital Asset exchange with its Binance token being worth over $70billion (although it had previously been valued at $100billion in May 2021). Whilst Binance has recently had to face some regulatory challenges in various jurisdictions, its US subsidiary has expressed a desire to become listed and raise $100m. Binance is another example of a Digital Asset platform which has become very profitable and yet it, too, only employs a fraction compared to other long-standing financial institutions. For example, back in 2018, Binance made a profit of $54million more than Deutsche Bank, with just 200 staff at Binance compared to Deutsche’s 100,000 employees.
The world’s 18 largest stock exchanges



Source: Statista.com

There are other exchanges, whilst not as large, which are attracting impressive valuation such as Naga AG, based in Germany, which continues to trade on a lofty PE of 170 compared to NASDAQ’s PE of 27.9. NAGA’s copy trading turnover grew by over 360% in the first half of 2021 compared to the previous year. Meanwhile in Asia, Indonesia's first regulated cryptocurrency exchange, TokoCrypto, is looking to list as a publicly traded company in the next two to three years, having made $10 million in profits in the first half of 2021. According to the publication Nikkei Asia: “Tokocrypto launched its token offering (TKO) on the Binance platform in May 2021. Around 200,000 people participated in the offering and committed around $4.2 billion, Tokocrypto said it holds approximately $1 billion worth of TKO tokens and has 800,000 users; it claims to acquire a new user every five seconds”. Even in India,...


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Last Tuesday

Thomas Power, Alan Sugar’s first apprentice back in the 1980’s, often reminds me about the famous line “Show me the money” in the film Jerry Maguire or, as some say: “Put your money where your mouth is”. Well, global banks are certainly doing that when it comes to investing in companies which are engaged in blockchain and/or Digital Assets. The publication, Business Insider, has drawn up a list of 13 of the worlds’ global banks which have already invested in firms that are involved in a variety of different ways with Blockchain technology and/or Digital Assets:

Global banks investing in companies engaged with Blockchain technology


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Source: Blockdata


55% of the 100 biggest banks are increasingly being asked by their clients to offer services to allow them to become engaged with Digital Assets. One of the most common services is that of providing custody services i.e. the ability to securely look after clients’ Digital Assets, with 23 of the 100 biggest banks in the world (ranked by assets undermanagement) actively exploring crypto custody solutions. Standard Chartered is providing custody for ICAP, the world’s largest interdealer broker, as it launches a cryptocurrency trading platform in conjunction with Fidelity Investments. This will enable many of ICAPs and Standard Chartered’s clients to be able to access and trade cryptos.

Furthermore, payment platforms continue to embrace digital currencies, with Paypal (which has over 400million customers) recently announcing that it is to launch the facility for its UK clients to buy and sell crypto currencies. This comes on the heels of last week's announcement from Walmart (the world’s largest retailer with over $555billion of sales last year) that it is searching for an expert to head up crypto and digital payments - presumably to enable Walmart to transact using digital currencies? This job vacancy comes not long after Amazon, too, announced that it was searching for someone with a similar skill set.

 
Yet more evidence of how merchants and payment platforms are embracing Digital Assets - which they will have to do (as will the banks) if we are to see CBDCs being launched in Europe, Japan, Sweden, Korea, UK and USA...... For a quick way to see what different central banks are doing about launching CBDCs click here for the CBDC tracker map of the world.

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2 Weeks Ago

A recurring question we receive is: “I thought Blockchain technology was bad for the environment as it uses so much electricity”. So, we decided to analyse how this technology is helping to meet the challenges of climate change. A report from the World Economic Forum (WEF) has illustrated how ‘Blockchain technology can be used to help commodity mining companies reduce their emissions’. The WEF has also published its finding on ‘How blockchain and cryptocurrencies can help build a greener future’. 

Seven ways Blockchain can help the environment



Source: Future Thinkers

The website, Future Thinkers, cites seven ways in which Blockchain technology is able to help improve our environment, and we have also given examples of various organisations in each category:
Supply Chains - Provenance
Recycling - Plastic bank
Energy - Lo3nergy
Environmental Treaties - Dr. Mike Troilo talks about Blockchain Technology and Sustainable Development
Non-Profits - Charity digital
Carbon Tax - IBM Blockchain Labs
Changing Incentives - Smart key


Adelyn Zhou, from ChainLinks labs, recently wrote an article in an WEF publication explaining how smart contracts could help fight climate change and cope with its impact, giving three examples: 

i) Regenerative agriculture - incentivise communities around the world to reduce their carbon footprints through more sustainable land-use practices (usually a combination of planting trees and conservation) an example being, the Green World Campaign in collaboration with Cornell University’s Initiative for Cryptocurrencies and Contracts (IC3).

How smart contracts technology incentivises regenerative agricultural practices




Source: Chainlink Labs

ii) Conscious consumption - smart contracts can also empower environmentally conscious individuals and organisations. As an example, Blockchain-powered energy grids such as the Brooklyn Microgrid Project are using smart contracts to give consumers the ability to produce and trade solar electricity with their neighbours through an exchange which uses a blockchain as a coordination mechanism. 

iii) Hedging risk with crop insurance - farmers across the globe (the vast majority of whom are entirely uninsured) are especially vulnerable to changes in weather patterns, be it rainfall, drought, wind, and more. It is believed that 75% of agricultural risks remain uninsured, which has encouraged companies such as  Arbol and Etherisc to offer smart contract-powered crop insurance to farmers across the world.

It is not only the World Economic Forum that is supportive of Blockchain technology, but also the United Nations (UN): “The UN believes that blockchain, the technology lying behind these online currencies, could be of great benefit to those fighting the climate crisis, and help bring about a more sustainable global economy”. The UN has practical experience of working with blockchain projects, having been rolling out its Building Blocks in different countries. Building Blocks enables the UN to distribute money to refugees - directly, securely and quickly - without the need to go through a local bank. It has been successfully deployed in refugee camps in Jordan, enabling the UN to create an accurate on-line record of who has received what, and when. It is thought by the authors of a report commissioned by the UN environment agency, UNEP, that Blockchain technology could also improve the livelihoods of waste pickers, who eke out a living in the informal economy.

Looking back at 2017 and 2018, there was so much hope and promise as to how Blockchain technology could help the 1.8 billion unbanked globally as well as being a force for good to help improve our environment creating a cleaner, fairer economy by breaking down many of the existing ways of doing business. It is encouraging to see from some of the above examples it really would seem that the hopes and dreams of some of the early adopters and...


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Decentralised Exchanges (DeFi) continue to gain a growing number of users as the level of trading and wide selection of assets and services they offer expands. The total value of assets in DeFi is now over $84billion compared to only $1.8 billion in June 2021. So, what is driving this expansion of DeFi?



DeFi enables owners of cryptocurrencies to earn interest and allows one to borrow, lend and buy insurance, or just speculatively trade. In effect, DeFi aims to offer owners of cryptocurrencies a range of services in a decentralised manner - typically offered by traditional financial markets which rely on centralised exchanges and clearing houses. Gartner believes that DeFi has 2 to 5 years before it reaches a plateau of productivity i.e., when the technology starts to enjoy mainstream adoption which, in reality, is not very long for a technology that could shake the foundations of the financial services sector.

       Hype cycle for Blockchain - July 2021


Source: Gartner.com

Meanwhile, by using smart contracts DeFi is looking ‘strip out’ much of the friction costs that accumulate due to the necessity of dealing with multiple intermediaries together with the need for audits and checks, regulatory compliance monitoring, and associated fees and costs - all of which stifle many existing traditional financial services today. Notably, Harvard Business Review cites a comparison between Yield Farming versus Foreign Currency Carry Trading: “The search for passive returns on crypto assets - “yield farming” - is already taking shape on a number of new lending platforms. Compound Labs has launched one of the biggest DeFi lending platforms, where users can now borrow and lend any cryptocurrency on a short-term basis at algorithmically determined rates. A prototypical yield farmer moves assets around pools on Compound, constantly chasing the pool offering the highest annual percentage yield (APY). Practically, it echoes a strategy in traditional finance - a foreign currency carry trade - where a trader seeks to borrow the currency charging a lower interest rate and lend the one offering a higher return. Crypto yield farming, however, offers more incentives. For instance, by depositing stablecoins into a digital account, investors would be rewarded in at least two ways. First, they receive the APY on their deposits. Second, and more importantly, certain protocols offer an additional subsidy, in the form of a new token, on top of the yield that it charges the borrower and pays to the lender”.

Interest in using DeFi lending has certainly increased as more people access pools of borrowing facilities, whether they be holders of Digital Assets looking to generate a yield on the Digital Assets they own or borrowers wishing to increase their exposure to this asset class. Forbes has described DeFi lending as: “Unlike with a traditional bank, borrowers using DeFi apps cannot be held accountable with physical assets if unable to effectively pay back a loan. DeFi applications are similar to smartphone applications, but they built with smart contracts”. CoinmarketCap, which tracks cryptocurrency prices in real-time, lists a variety of other lenders and DeFis apps where yield farming returns vary from 0.2% p.a to over 40%.

The three largest DeFi app lenders - Aave, Compound and MakerDao



Source: Dune Analytics @hagaetc

In turn, Harvard Business Review has proposed that: “DeFi offers a less volatile and more accessible point of entry than other markets - and may just have enough appeal to bring...


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3 Weeks Ago

The term stablecoin, a digital currency backed by US$s, could be seen as somewhat misleading for American citizens since they will have witnessed the value of their $ fall in value over time. The lack of stability/buying power can be seen due to the impact of inflation. One US$ in 1695 would be worth 76.5 times than it is today or, to think of it another way, one US$ in 1935 is worth 20 times what it can purchase today. 



The decline in the value of the UD$



Source: Staitisa.com

The impact of inflation is not confined to the $. Since its launch, the Euro has fallen in value by almost 33%. Hence the need to ensure that you have your investments in the long term, protected from the ravages of inflation in real assets. Yet despite this, many of us keep money in a bank?
Fall in the purchasing power of the Euro



Source: in2013dollars.com

Notwithstanding the impact of inflation, would it not be more accurate to refer to a fiat-backed digital currency as a pegged coin (as opposed to a stablecoin) since surely stability is a relative and not an absolute description? Digital currencies, backed by a fiat currency, arguably fall into two categories - Central Bank Digital Currencies (CBDC) or stablecoins (typically issued by non-government organisations). Regardless of what you call a digital currency, backed by $, £, €, CHF or Yen etc, there are a number of advantages and disadvantages surely worthy of consideration for digital currencies. Stablecoins were once dismissed as a way to store ‘ill-gotten gains’ when ‘crypto whales’ wanted to reduce their exposure to crypto currencies, and neither could access $ in a bank account nor wanted to deal with a traditional financial institution. Ironically, going forward we could see regulators being supportive of digital currencies and possibly insisting that issuers of income producing assets (such as equites and bonds) change the frequency of income payments. A stablecoin would enable customers to be treated ‘more fairly’ since stablecoins could facilitate digital equities and digital bonds to make income payments more frequently, e.g., weekly. The income due to an investor could be calculated based on the number of days a security has been held, as opposed to waiting for monthly coupons from bonds or six-monthly dividend payments. 

Another advantage of a digital currency is that it reduces the costs and time taken to remit money, as well as reducing the cost of money spent by tourists when overseas. This is likely to impact many of our readers who travel overseas or indeed run their own businesses, especially if they are trading with overseas suppliers and/or customers.

 
Size of retail cross boarder payments



Source: Bank of International Settlements

Challenges to be addressed:
infrastructure - this is the technology behind digital currencies which is able to handle the volume of transactions
potential environmental impact of some Blockchain technologies
privacy of users
interoperability - how will digital currencies be able to interact with cash?
decentralised vs centralised technology - in a truly decentralised environment, if there is a problem, who is held to account: ‘Mr and Mrs Bitcoin’?
those who prefer, or are only able to use cash - according the Bank of England, “Today, there are currently 1.2 million unbanked people in the UK, who by and large rely on cash and cannot access digital payments or can access them only at disproportionate cost”
loss making - given current interest rates, stablecoins cost, not make, money.

 
Central Bank Digital Currency status



Source: CDBC Tracker

For an update on what different countries and their central banks...


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The interest in Digital Assets continues to rise and, according to Crypto.com which carried out research on 24 of the largest crypto exchanges, now over 221 million people globally claim to own some form of Digital Asset. The other trend identified by Crypto.com is that the dominance of Bitcoin and Ethereum is reducing, from 67% at the beginning of 2021 to 51% by the end of 6th July 2021, as investors are now buying other cryptos. There are reported to be over 504 digital exchanges with Coingecko having a list of over 489, of which 310 are showing that some form of trading has taken place in the last 24hrs.




Number crypto currency holders globally



Source: Crypto.com

Therefore, the number of people holding Digital Assets could be far higher, and this ignores the daily raft of Non-Fungible Tokens (NFTs) being issued. For example, Reuters has reported that Open Seas (one of the most popular NFT exchanges) has seen the volume of NFTs traded on its exchange exceed $2billion in the first half of 2021. In June 2021 alone, Open Seas handled over $18 billion NFT trades valued at over $1billion. The types of assets being ‘wrapped’ in NFTs is very varied, as the chart below shows. 

 
of NFTs sold in various categories Jan -June 2021, on the Ethereum Blockchain 



Source: Non Fungible.com

We have highlighted this issue before, but could liquidity in the crypto markets prove to be too irresistible for institutions? Small and medium sized companies (small caps) which are quoted on stock markets around the world have typically been shunned by institutions and been mainly traded by specialist fund managers. Many larger institutions and wealth managers tend not to buy small cap shares directly but gain exposure to this asset class through specialist small cap funds. The reason often cited is the lack of liquidity of small caps therefore making it difficult to invest large sums into a small cap or, worse, not being able to sell small cap shares without substantially moving the price of the underlying shares.

However, there is growing evidence that even cryptocurrencies, which have a relatively small capitalisation, enjoy deep levels of liquidity. For example, it was reported last week that one of the world’s most famous footballers, Lionel Messi, is transferring from Barcelona to Paris St Germain and, as part of his renumeration, Messi is to be paid in PSG Fan Tokens. At the time Messi joined the French football club PSG Fan Tokens were valued at $24.37 with a market cap of $44,815,247. Following the official announcement of Messi’s transfer, the PSG Fan Tokens price climbed to a high of $61.23 increasing the tokens capitalisation to $56million, and the number of tokens traded exploded to almost $630million. Even in the last 24 hours, PSG Fan Tokens are trading at $32.87 and the volume of tokens traded in the last 24 hrs was $49million. With these levels of trading activity, it ought to provide sufficient liquidity for most institutions to buy and sell without adversely affecting the price. A word of caution though, as one needs to be careful about crypto trading volume data since those exchanges which report volumes are not regulated, and occasionally crypto trading can look higher than it really is due to wash trading. But more on this another time….

Another statistic worth keeping an eye on is the value of funds which are held in various Digital Asset Exchange traded products and mutual funds, as these are more accessible to private investors. Coinshares claims that such products now have almost $50 billion of assets undermanagement.

 
Digital Assets Exchange traded Products and Mutual funds net new assets ($million)



Source Coinshares.com

Coinshares has also reported that in 2021 to...


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4 Weeks Ago

Venture Capital (VC) funds invested a record $8.8 billion into blockchain and Digital Assets in the first half of 2021, hitting an all-time high . One of the most active VC firms, Tiger Global, had invested most of the $6.7 billion fund it raised in March by June. In Tiger’s recent update to investors, it reported that it had “consistently underestimated the market for private tech companies. Six months earlier, data suggested a $3tn market opportunity. It was now closer to $5tn”. Indeed, Tiger Global has been one of the most active investors in companies engaged in Digital Assets, such as Amber, Coinbase, Babel and Coinswitch Kuber, to name just a few.

Unsurprisingly, it is difficult for asset managers to ignore earnings that have exploded by more than 16 times in July compared to June, which is exactly what the Axie Infinity token (Axie) did in July, generating $190 million in revenue. In June, Axie, with its Non-Fungible Token ‘pet’, demonstrated the opportunities which gaming firms offer by enabling gamers to earn as they play. The company’s game went viral in the Philippines where 60% of its gamers come from. Earning $110 a day playing Axie is a considerable sum in a country where the average income in a month is only $250.  Axie’s token price has risen from $3.6billion on 27th June 2021 to over $49billion on 27th July 2021. Performances such as this are difficult to ignore, especially when the turnover for Axie has ranged between $120million to $7.5 billion a day, according to Coingecko - phenomenal liquidity for such a new organisation offering institutional buyers the ability to trade reasonable positions.

Historically, investors had simply bought a crypto such as Bitcoin or Ethereum, possibly because they were the two largest and most actively traded cryptocurrencies. However, as evidence mounts that such a narrow ‘buy and hold’ strategy has underperformed other investment strategies, asset managers’ attention is turning elsewhere.

Crypto asset performance



Source: Aaro Capital

As pointed out in a recent article by London-based Digital Assets manager, Aaro Capital: “The above chart shows the compounded returns of the average cryptoasset fund against a buy-and-hold investment in BTC and ETH or a value-weighted portfolio based on the top 100 assets by market capitalisation. The left panel shows the compounded returns for the whole sample from March 2015 to June 2021. The red vertical line indicates February 2020, i.e., the initial stage of the COVID-19 outbreak. The right panel shows compounded returns for the sample starting in February 2020, that is, assuming the initial investment is made right before the outbreak of the COVID-19 pandemic”. 

A recent survey by Goldman Sachs found that 46% of family offices are interested in cryptos and, interestingly, it cites reasons including concerns about potential higher inflation rates in the future. Nadine Chakar at State Street would appear to sum up the current sentiment and explains a possible reason for the ongoing interest in cryptos “We are at a tipping point now where this is moving fast. We are getting calls from endowments and foundations that are getting donations in crypto and saying, what do we do with this? We are seeing companies that are thinking of adding crypto to their balance sheets. The growth in popularity of digital assets is showing no signs of a slowdown and State Street Digital is committed to continuing to build out the necessary infrastructure to further develop our digital assets servicing models to help meet our clients’ growing demands.” State Street is the US’s second oldest bank, with $3 trillion of assets under management and one of the world’s largest custodians globally. In the same vein, Sean Taor, head of European debt capital markets at Royal Bank...


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The importance of a good night’s sleep cannot be overestimated and how many people do you know personally who say: “I am a dreadful sleeper; I just wish I could sleep like I used to as a teenager”? A study of 470,000 individuals looked at the potential correlation between sleep duration and cardiovascular disease, with short sleep being identified as between 5 - 6 hours per night and long sleep as greater than 8 - 9 hours. Lack of sleep is not only potentially dangerous for your health, but it can also lead to a loss of productivity and economic activity.

A study in Australia estimated the economic cost of poor sleep to be as much as  $45.2 billion p.a. Another study, organised by RAND Corp, discovered that the cost of lack of sleep across five OECD countries (Canada, USA, UK, Germany and Japan) exceeded $600 billion a year.

Ways to monitor your sleep


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Source: Nature.com


There are a variety of ways for someone’s sleep to be assessed. Wearable devices such as smartwatches and activity bands monitor the amount of sleep by using a combination of movement signals (accelerometry), heart rate and heart rate variability. The number of hours of sleep can then be downloaded, as well as the number of times the wearer has woken up each night. Furthermore, now included in the bedding market is a range of ‘smart beds’ from companies such as Sleep Number, Mattress Firm, Tempur-Pedic and Casper which have sensing features and/or temperature control. However, all well and good as regards monitoring one’s sleep patterns, but once personal data begins to be shared remotely with a third party this is where some real challenges around personal data security, GDPR etc, begin and, in theory, where Blockchain-powered platforms can help. Since 2012, Estonia has been a pioneering jurisdiction when it comes to using the power of blockchain technology to handle healthcare data. Currently, its entire healthcare billing, 95% of health data, and 99% of prescription information is digitally maintained via a Blockchain-powered platform.

What is surprising is, that for a condition such as insomnia which (according to SleepCogni) affects one in three people across the world, there appears to be few examples of how Blockchain technology is currently being used to track and monitor sleep. However, if you are aware of information to the contrary, please let us know. Meanwhile, whilst having nothing to do with Blockchain technology, here is a list of 12 actions thought to help you get a better night’s sleep. 

Sweet dreams!


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A Month Ago

Once again we see evidence of how  payment platforms are embracing digital assets. Mastercard’s Start Path program, implemented in 2014 to help businesses gain traction and scale, is a good example. Since then, Mastercard has announced a new global initiative involving 7 fintech start-ups, all of which are focused on developing crypto services. Mastercard has reported: “We believe we can play a key role in digital assets, helping to shape the industry and provide consumer protection and security. Part of our role is to forge the future of cryptocurrency, and we’re doing that by bridging mainstream financial principles with digital assets innovations.” Meanwhile, hot on Mastercard’s heals is Visa, having written a blog post titled: “Advancing our approach to digital currency”. Included in the blog was: “We’re reshaping how money moves across the globe, and that means pursuing a broad array of technologies and partnerships. In that regard, digital currencies offer an exciting avenue for us to continue doing what we do best: expanding our network-of-networks to support new forms of commerce. Fiat-backed digital currencies, commonly referred to as “stablecoins,” have emerged as a promising new payment innovation, combining the benefits of digital currencies with the stability of existing currencies like the US dollar. It’s a concept that is gaining traction beyond fintechs, and now includes financial institutions and central banks.”



Furthermore, PayPal’s CEO, Dan Schulman, has been very optimistic about PayPal’s involvement with cryptocurrencies. In a recent presentation to investors discussing PayPal’s latest earnings Schulman expanded on the features his company was introducing. He did also spend some considerable time expanding on Central Bank Digital Currencies (CBDCs), remarking that: “We are working with regulatory agencies, central banks across the world. The number of countries that are looking at CBDCs, central bank issued digital currencies is increasing rapidly. You’re like at 40 countries six months, a year ago. You’re almost up to 100 countries looking at it right now.” Added to this, ApplePay (with its 500 million customers) would also appear to be looking to embrace cryptos; it has a recent job posting advertising that it is looking for staff with: “5+ years’ experience working in or with alternative payment providers, such as digital wallets, BNPL, Fast Payments, cryptocurrency and etc.” UnionPay, the world’s biggest payment platform, although not that particularly well known outside of Asia, has 5 billion UnionPay payment cards in issue. UnionPay has an estimated 270 million internet shoppers as clients and it is worth remembering that in China, alone, on-line shopping is expected to be in excess of $2.3 trillion in 2021. Whilst there have been few recent new developments from UnionPay regarding its crypto plans it did announce at the end of 2020 that it was launching a payment card with the Korean payments firm, Danal, to offer its Paycoin cryptocurrency as an option.

One thing all the payment platforms will need to consider is the forthcoming new money laundering regulations. The EU’s Sixth Anti-Money Laundering Directive (6AMLD) has proposals to include a crypto currency sector. Therefore, those firms involved with handling cryptos will be required to verify the identity of those sending and receiving transactions. Following BREXIT, the UK will not implementing 6AMLD but HM Treasury has published a consultation and is potentially looking to implement Financial Action Task Force (FATF’s ) “Travel Rule” for crypto assets. In view of this, firms handling crypto assets will need to be able to track and transfer the ownership of crypto assets for their clients and be able to pass this information to other organisations.


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Blockchain technology and the digital assets it can create were once shunned and treated with suspicion but, then again, people are often reluctant to accept change. However, now we see highly respected multinational corporations and even governments beginning to figure out and start using blockchains (and digital assets) as they realise the transformational opportunities this technology offers. Greg Medcraft, who was the chairman of the Australian Securities and Investments Commission and has been in Paris at the Organisation for Economic Co-operation and Development (OECD) for three years, is very candid about the outlook for banks and what regulators need to do in reference to Blockchain technology:



“Regulators need to prepare for disruption by blockchain”.  Blockchain business models can reduce costs and make markets more transparent, but, as OECD's extensive policy work on blockchain shows, many new challenges will arise. Decentralised Finance" (DeFi) will emerge over the next decade, creating a parallel financial system operating on the internet. DeFi is revolutionary. It is the next frontier, definitely. The arrival of mainstream central financial institution digital currencies (CBDCs), which is able to allow DeFi, are maybe 5 years away With DeFi, there isn’t a friction.  You’re looking at replicating numerous current elements of banking it is inevitable that governments will have digital variations of paper cash, which can sit alongside non-public “stablecoins” (digital foreign money whose worth is pinned to an underlying fiat foreign money), to allow funds to settle reliably in actual time on blockchains”. 

This is not the first time that Medcraft has been outspoken and supportive of Blockchain technology. When he joined the OECD in 2018, he stated in the podcast The Blockchain revolution and power of positive distruption: “I see blockchain’s potential coming from its 3 key use cases: 
1. Secure transfer of value; 
2. Secure transfer of data; 
3. Cyber-security and privacy, provided by its distributed nature of nodes. 

Blockchain’s benefits for businesses include:
Reducing the number of intermediaries needed for any type of transaction. 
Improving the transparency and traceability of goods in the supply chain.
Speeding up payments and reducing costs. 
Increasing security and privacy of data and assets. 
Improving access to markets and financing, particularly for SMEs. 

To this end, policymakers’ efforts should be guided by three objectives: 
i) To be pro-active and forward looking. This will help us avoid regulatory knee-jerk reactions and resist the temptation to jump in before we properly understand developments.
ii) To ensure regulators and policymakers keep up to date with the rapid changes brought about by new distributed ledger applications, and the need to build up their capacity to understand and deal with these innovations. 
iii) To ensure a coordinated approach on two fronts: First, working collaboratively with key stakeholders, including industry, academic and consumer groups. Second, internationally. The global nature and inter-connectedness of markets call for international co-operation to avoid regulatory fragmentation, curb incentives for regulatory arbitrage, and spread best practice.”

The importance and transformational impact that Blockchain technology is likely to have, and the importance that the OECD attaches to it, can been seen with three out of the four topics for the OECD 2021 Symposium on Digitalisation and Finance in Asia this autumn which are focused on the use of the technology:

24th September 2021
SESSION 1: Central Bank Digital Currencies (CBDC): latest developments and design considerations. SESSION 2: Artificial Intelligence (AI) in Finance.
1st October 2021
SESSION 3: Decentralised Finance. SESSION 4: Asset tokenisation: latest trends in policymaking.


Meanwhile in Australia, the government is clearly taking note of the potential disruption that Blockchain technology offers. The Digital Finance Co-operative Research Centre (which is comprised of over 20 members from the finance industry in Australia) has been selected to receive AU$60million from the Australian government in order to examine the digitisation of real-world assets such as equities,...


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Bitcoin mining requires considerable computer power, and therefore electricity, so naturally the major Bitcoin miners have located parts of the world where the price of electricity is the lowest.

The electricity cost to mine a Bitcoin



Source: Changelly.com
There is a widely held perception that Bitcoin mining has to be detrimental to the world’s environment because it uses more power than individual countries, although many do not realise that the tech sector alone accounts for 2-3 percent of all global carbon emissions according to the UN. Interestingly, while there have been concerns about the amount of electricity that cryptocurrencies such as Bitcoin use, we are now increasingly seeing alternative headlines such as: “Why Energy Concerns Around Blockchain May Be a Misconception”.

 
The electricity Bitcoin mining uses compared to other countries



Source: U.S. Energy Information Administration, Country Data, 2019 est. (or most recent available year)
Recently, US Federal Reserve Chairman, Jerome Powell, referred to Bitcoin as ‘essentially a substitute for gold rather than for the dollar’. If this becomes the case, we could see a significant increase in investors in Bitcoin and, as the chart below indicates, Bitcoin mining does actually use less energy than gold mining!

The amount of electricity used to mine Bitcoin v Gold in a year



Source: Cambridge University

Of importance is that the price of generating electricity from renewable sources is now often less than using fossil fuels. According to the International Renewables Energy Agency: “In the last ten years, the cost of electricity from utility-scale solar PV fell by 85 per cent, onshore wind by 56 per cent and 48 per cent for offshore wind”. However, the problem is that often renewable energy is generated in remote locations away from where any power is consumed; it is also being generated 24hrs a day including at night when electricity demand is usually at its lowest.

 
The cost of renewable energy is falling


Source: irena.com
This is where Bitcoin mining is able to help since, provided you have an internet connection, any surplus power can be utilised instead of being transported around a national grid or stored in still relatively inefficient batteries. Bitcoin mining offers an opportunity to wean the world off its fossil fuel dependency and transition over to using renewable energy sources by acting as a complementary technology for clean energy production and storage. An added benefit is that the more renewable energy plants there are, the lower the unit costs become due to economies of scale, whereby encouraging more investment into renewable energy projects and potentially bringing the marginal cost of producing electricity from renewable sources close to zero.

Contrary to popular belief, much of the energy required for Bitcoin mining comes from renewable energy sources such as wind, solar or hydroelectricity power plants. Because renewable energy projects can use surplus energy, they create at off peak demand to mine cryptocurrencies such as Bitcoin. This can then enhance the investment returns for a renewable energy project so encouraging further investment into other renewable energy projects. Bitcoin mining can act as a source of income for countries such as Iceland, Georgia, Russia, Venezuela because these countries have Bitcoin miners located in these jurisdictions 

Value of Bitcoins mined per day



Source: Ycharts.com

Historically, China has accounted for up to 60% of...


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There appears to be a scramble for staff in the Blockchain sector on Linkedin. Currently, the professional network platform has over 1,700 vacancies - click here and see for yourself.  On cryptojobslist.com over 3,100 vacancies are being advertised. Meanwhile, on an Indian website, Naukri.com, over 48,800 jobs are on its advertisement page.

It seems that many traditional firms are also searching for staff. The US’s largest bank, JP Morgan (with assets of $3.2 trillion), is looking to hire staff in its Blockchain subsidiary, Onyx, which was launched back in October 2020. According to posts on LinkedIn, JP Morgan is looking for people in its auditing, marketing and engineering departments. It was not even a year ago that JP Morgan sold off its Blockchain busines, Quorum, to ConsenSys. This was followed, in April 2021, with JP Morgan along with Mastercard, UBS and other investors being part of a $65million fund raiser for Consensys. Visa recently reported that it had increased the number of “crypto partnerships” by 43% in these last four months to date as interest in cryptos continues to grow. Off the back of this, Visa is also looking to recruit more staff. Amazon is presently looking for a head of crypto payments on its website: “ You will leverage your domain expertise in Blockchain, Distributed Ledger, Central Bank Digital Currencies and Cryptocurrency to develop the case for the capabilities which should be developed, drive overall vision and product strategy, and gain leadership buy-in and investment for new capabilities”. Does this mean Amazon, as a company, is looking to invest in cryptocurrencies or start accepting cryptos as payment for goods? Binance has been searching for 350 staff globally with Zhao, its CEO, reporting to Bloomberg that: "We are hiring aggressively. We see the industry growing exponentially on a year-to-year basis, and we need to scale our team to cope with it." Furthermore, in the legal world it would seem that Tech Crunch’s headline, “the NFT craze will be a boon for lawyers”, appears to have been spot on. Specialist NFT lawyers have been inundated with new business enquiries from companies looking for regulatory and legal advice as they search how best to monetise their IP with NFTs. Charlie Kerrigan, partner at the law firm CMS, has recently commented: “NFTs are unusual because there has been such a strong uptake in a short time. We work with crypto firms and with sports, entertainment and other media firms and the level of interest and ingenuity were seeing is mindboggling. The projects are a good example of the skills modern lawyers require since they mix technical issues of regulation, IP and data alongside commercial advice, negotiation and project management. We have to listen well and be on our toes!” 
Many people in the past have complained that Blockchain and the digital assets it creates was simply ‘smoke and mirrors’ - in fact, the reality is totally different. Certainly, the above examples all clearly demonstrate a demand for those employees who can help firms ‘build-out’ their Blockchain plans. The cyberpunks who aspired to help the world’s 1.7 billion unbanked and by-pass the banks, regulators and stock markets have given way to quoted global multinationals and governments. Often well-known brands and long-established firms have realised that whilst they are not keen on crypto trading, the technology which underlines these digital assets (i.e., Blockchain) is able to address the real...


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How many times people have asked the question: “Is now the time to buy or sell?” The answer is - no one honestly knows. Therefore, given the very volatile nature of crypto currencies, there is considerable logic in ‘drip feeding’ money into this asset class as opposed to trying to guess and suddenly find that the price of the cryptos you have acquired have suddenly fallen like a stone.



Putting money away on a regular basis is sometimes called ‘pound cost averaging’ and works on the principle that when the price of an asset is low (i.e., it has fallen) you buy more, and when it is high you buy less each month. This strategy helps to smooth out the volatility so is ideal for investors who make regular savings. Had you done this and invested $50 per month over the last three years, you would have saved $1,800. Assuming no costs and you had invested in the US Stock Market (Dow Jones Index), your money would be worth $2,239. Yet compared to this further, by putting your $50 per month into Bitcoin it would now be worth $6,925!

Effect of saving $50 per month for three years


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Source: dtca


The other golden rule of investing is diversification - e.g., not having all your ‘eggs in one basket’ - which is why many investors will have exposure to different investments such as equities, property, bonds, commodities. One digital asset to catch the eye is from Damien Hirst and he has enrolled, no less, the ex-Governor of the Bank of England, Mark Carney, to help promote his latest Non-Fungible Token (NFT) collection. Hirst has created 10,000 physical unique works on A4 sheets of paper called “The Currency”, with each being available to be bought as an NFT and having gone on sale on the 14th July for $2,000 each. Therefore, if Hirst sells all 10,000 he will raise $20million on top of the $22million he made from selling 7,481 prints earlier this year. 


The Currency - Damien Hirst


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Source: FT


There is a twist, though, with Hirst’s latest NFTs in his press release: “Two months after the NFTs are allocated, collectors will be presented with a choice: to keep the NFT or exchange it for the physical artwork. They will have one year, until 3pm BST on 27th July 2022 to decide to keep either the digital NFT or the physical artwork. If they have not exchanged their NFT in that period, the physical artwork will be destroyed. Similarly, if they have exchanged it in that period, the NFT will be destroyed” 


As an aside, does Carney’s engagement in helping promote Hirst’s ‘The Currency’ portend the ex-Governor of the Bank of England’s as a supporter of Digital Currencies, in particular CBDCs? 


(NB: Readers are recommended to seek professional advice before taking any action based on any of the links and information above. TeamBlockchain Ltd does not accept responsibility for any action that may or may not be taken, loss or gain. Please remember that the value of investments (particularly Bitcoin) and illiquid ones (such as NFT)s can rise and fall dramatically.)


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We have had a great deal of feedback from readers asking for more tangible evidence of how Non-Fungible Tokens (NFTs) are being used in different ways, having highlighted last week that NFTs are being used to help raise capital for films. Well, the creative juices of those engaged with NFTs certainly seem on the rise, with several pulling off the dust sheets in their attics and local museums. The world famous Hermitage Museum in St Petersburg is looking at selling NFTs of some of its works of art to help raise much needed cash. 

Michelangelo's Doni Tondo (1505-06).



Source: Artnet.com

The Uffizi Gallery in Florence has also turned to issuing NFTs as a way to help raise money, given the dramatic loss of income caused by a lack of visitors due to COVID-19. The first NFT the Uffizi Gallery has teamed up with is Cinello, an Italian company which has patented a method to make a digital replications of paintings and has sold a Michelangelo painting, Doni Tondo, for €140,000. The entrance fee to visit the Uffizi is €27.50, so Michelangelo’s NFT has generated the same amount of income as would have over 5,000 visitors. Meanwhile in Uganda, one of Africa’s oldest museums, the Uganda National Museum, has teamed up with an IT firm called Murcom to sell NFTs based on some of the artifacts owned by the Ugandan museum. The selling of NFTs by museums does potentially raise the question of who is entitled to the proceeds, since many artifacts have been given to museums by wealthy benefactors. Although museums are permitted to display the art, are they able to keep the initial and, indeed, the potential on-going income that NFTs can generate. 
 
It is not only museums which have been active with NFTs - the major auction houses have joined the NFT craze. Sotheby’s held an auction at the beginning of June 2021 comprising only of NFTs, called ‘Natively Digital: A Curated NFT Sale’. The Sotheby auction raised over $17million, with one NFT, ‘CyberPunk, being sold for over $11million whereby indicating the clear interest regarding this new digital art. However, as yet, the most paid for an NFT was at a Christie’s auction where a digital collage of 5,000 images created by an artist known as Beeple sold for $69m. On LinkedIn, Carl Kirchoff recently commented on a post that: “Knowing a bit about blockchain and collectibles, NFT can make you a lot of money when you run an exchange (same as crypto). The artists though - as always - will not be able to monetize their content as they still depend on other platforms. But I am certain, whenever there is a goldrush, people with shovels are near”. However, the situation this time may be different as NFTs are allowing the owners of IP i.e., photographers, musicians, artists, museums, galleries etc, to, in effect, sell a digital version of the items they own and/or have created. Interestingly, they can earn an income, almost like a royalty, every time the NFT is resold again and again and again, thanks to the exchanges. 

This new interest in digital art in the form of NFTs has certainly sparked renewed interest in the art world at large, and there would appear to be genuine enthusiasm for collecting and engaging with art in digital spaces. This has led to the creation of digital galleries such as LIKELIKE and the Virtual Online Museum of Art (VOMA). NFTs also offer the opportunity for museums to digitally display more of their rare collections which are usually locked away in vaults. According to the New York Times, as...


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Undoubtedly, there is growing interest in crypto currencies. In the UK, an FCA survey found that there has been a 20% increase in the number of people who now hold crypto assets. In its press release, the FCA reported: “Enthusiasm for cryptoassets is growing with over half of crypto users saying they have had a positive experience so far and are likely to buy more (rising from 41% to 53%). Fewer people also regret having bought cryptocurrencies, down from 15% to 11%”. It is not only in the UK. In a recent survey by SelfWealth, which is listed on the ASX and is one of Australia’s biggest on-line brokers with over 95,000 investors, it was found that “30% invest in crypto”. 



According to CryptoFund Research, there are over 830 different funds investing in various forms of crypto assets. A PwC report looking at crypto funds established that “assets undermanagement had grown in 2021 to over $3.8 billion and the most common location for crypto hedge fund managers is the United States (43%), followed by the United Kingdom (19%) and Hong Kong (11%)”. Whilst the assets that many crypto funds invest in to are unregulated asset managers that are based in the UK that wish to manage crypto funds need to be regulated or be an appointed representative of a FCA regulated firm. As with traditional funds, there are key service providers that a crypto fund needs to have which, unfortunately, add to the total expense ratio (the true annual management fee) when running a crypto fund.


Growth of crypto funds



Source: Crypto Fund Research

A crypto fund will need a custodian who is, in effect, responsible for ensuring that the assets in the fund are kept secure. Institutional investors pay close attention to the calibre of the custodian and look to them to ensure the capital they invest is safely held, and subject to strict procedures as to who is able to get access to the money in the fund. A selection of some organisations which offer crypto custody include:

Anchorage
Bitgo  
Coinbase Custody
Copper
Gemini
Kingdom Trust 
Monsas
Fidelity
PrimeTrust
Fireblocks
Selection of crypto custodians



Source: Bitcoin Market Journal


The role of a custodian may now potentially be challenged due to the fact that Blockchain technology has brought about the development of Multi-Party Computation (MPC) which, itself, enables assets to be stored in multiple locations by a variety parties. This means that those custody firms which use MPC never have complete control of the assets and therefore do not need to be regulated and subject to the costs of insurance etc. As well as a custodian, crypto funds will usually use third party fund administrators who are responsible for calculating a fund’s value and will prepare investment reports for investors to monitor the activity of the fund in terms of performance and the assets that have been traded. Furthermore, the fund administrator is the one who prepares the fund’s financial statements. Here is a selection of crypto fund administrators:
 
AKJ
Copper
MG Stover
Northern Trust
NAV Consulting 
Theorem

As regards funds, there are two types for which asset managers can offer their services. A fund can be ‘open ended’ i.e., the size of the fund will increase or decrease depending on the number of investors who wish to buy or sell a fund. With this type, the fund manager calculates the net asset value (NAV) of the fund and then divides this by the number of units/shares/tokens in the fund. If someone wishes to buy into the fund, then more units will be issued at the price of the units based on the most up-to-date NAV. Alternatively, a fund may be ‘closed’. In this case, the fund manager initially raises a sum of capital and the monies are invested. If there are new investors who wish to gain exposure to the fund, then the...


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The global film and video industry, worth over $244billion, has not ‘Gone with the Wind’ but Blockchain technology is certainly blowing the winds of change through the offices of writers, producers, and even actors. For example, MovieCoin was established as a test case to ascertain whether it was possible to finance a film by issuing tokens. This was followed during 2020 with the Litecoin Foundation producing a Johnny Knoxville horror film, whereby demonstrating the ability to finance films using Blockchain technology.





Source: Blockchain news

Looking further ahead, Anthony Hopkins is due to star in a film called Zero Contact which is to be distributed as an NFT, thus allowing viewers to own their copy of the film whilst also preventing those who do not own the NFT from watching it. NFTs are being used as a way to prevent film piracy, which is a major problem in the film industry. Each NFT is to be, in effect, a digital asset with a unique serial number that will be encrypted and stored on a Blockchain. 

Filmio. Inc., in San Diego, uses a Blockchain-based platform which enables film creators to upload their projects and market them to an audience which can vote on what they like, as well as allowing investors to check fan engagement and, hence, decide if they would like to finance the film or not. The ability for creators, investors, and the audience, to be on the same platform means it is possible to create a transparent way in which to nurture new talent and content and to distribute films and shows, all the while retrieving feedback in real time. It also offers the potential to raise funds from a new range of potential backers, as opposed to the current system which, historically, has relied heavily on a handful of studios and media moguls.

Blockchain technology seems to be disrupting many different industries and the film and entertainment industry looks set to be impacted, too. Indeed, the US bank, JP Morgan, believes that Blockchain technology is likely to effect the media and entertainment sector in fours ways, these being:

i)micropayments for content - as we see an increase in media behind subscription-based paywalls, there are likely to be consumers who will not pay a monthly subscription but would pay to view specific events or films. A Blockchain-powered platform, with the ability to keep a transparent record of its data, could allow for more accurate tracking of when and how copyrighted content is watched. A micropayment pricing model would normally be inefficient to implement, but its execution could be fully automated and cost-effective with blockchain, possibly using digital payments to cut out banking fees etc.

ii) the elimination of content aggregation - Blockchain technology could enable artists, such as musicians or writers, to distribute their work directly to consumers. The ability to bypass and disintermediate agents, managers etc, would therefore allow for a greater % of the revenue spent by consumers to be received by the creators themselves. This could impact everyone, from large media houses to independent bloggers, whereby helping artists form a direct relationship with consumers.

iii) royalty distribution - one of the most powerful features that blockchain platforms can offer is greater transparency, undoubtedly assisting in the collection and distribution of royalty payments in the music business which have only become more complex and opaquer with the growth of music streaming services such as Spotify, Apple Music, SoundCloud and Tidal. The top ten music streaming platforms alone have more than 250 million monthly customers. For instance,...


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2 Months Ago

Arguably, the first signs of automation in the banking sector were the introduction of what we call in the UK ‘cash point machines’ or, as the Americans say, automatic teller machines (ATMs). The first ATM to be installed in the UK was in 1967 and a couple of years later, in 1969, an ATM was opened at the Rockefeller Centre in New York City. So, it is rather ironic that, while cash dispensing ushered-in banking automation, we are now witnessing the decline in the use of cash and the rise of digital currencies and the closure of bank branches.



Decline in number of bank branches in Europe and America



           Source: Payments cards and mobile.com                                           Source: Visual Capitalist.com                    

However, the pace of change in banking had arguably been given a major boost due to the impact of open banking initiatives which, again, began first in the UK in 2018 and is now being adopted worldwide. The Open Banking Organisation defines open banking as “a secure way to give providers access to your financial information. It opens the way to new products and services that could help customers and small to medium-sized businesses get a better deal. It could also give you a more detailed understanding of your accounts, and help you find new ways to make the most of your money”. So, potentially open banking could be seen to be emerging as a huge disruptor for banks since it offers customers access to a greater choice of financial products and services; this also helps to explain the rise of so many fintech firms.

Accenture has recently highlighted in a report on open banking that: 
“ the global open banking waters are relatively calm right now, but beyond the horizon a wave of change is building.
banks will soon need to choose between catching this wave or riding it out and hoping for minimal damage - up to $416 billion in revenue is at stake.
open banking will arrive at different times in different markets but when it takes off, growth will likely be rapid - sceptics may be left behind.
tomorrow’s open banking leaders will prioritise data custodianship, analytics mastery, agile partnerships, and trusted security.”

There exists a very wide selection of open banking platforms and some have become extremely successful. For example, Klarna is thought to be Europe’s most valuable start up and worth over €31billion. It is interesting to see recently that it was the payments platform, Visa, not a bank, which acquired the Swedish firm, Tink, for €1.8 billion. Visa had been disallowed by the Justice Department to acquire US-based Plaid in January 2021 for $5.3 billion . At the time it was thought that Plaid would pursue a public listing. Plaid is now estimated to be valued at $13+billion, therefore will we see a bank attempt to acquire Plaid before it lists or will a bank make a bid before it is purchased by another fintech?

Achieve open banking platform rankings 2021


Source: Achieve Consulting.com

Furthermore, as the publication the Entreprenuer has highlighted, banks face a number of challenges including:
legacy systems - designed over a decade ago and unable to adapt to today’s connected digital environment
deep silos - banks have long been siloed organisations, driven by design and regulations
customer evolution - fast-changing behaviour of today’s socially connected, digital, next-gen consumer
compliance demands - growing compliance and costs spurred by many post-recession regulatory mandates.

Interestingly, Blockchain technology offers open banking platforms and banks some potential solutions and a foundation...


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Environmental Social and Corporate Governance (ESG) is receiving more and more attention from investors and therefore boards of companies. However, as reported by Reuters, the fact that “PwC is planning to hire 100,000 over five years in major ESG push” serves to illustrate how important it believes ESG to be, and the work that needs to be carried out by PwC’s clients. PwC is looking to invest $12 billion in the next five years and recruit 100,000 new jobs. The focus for these new staff is to help clients deal with climate and diversity reporting, and also artificial intelligence, as part of PwC’s new global strategy. Unsurprisingly, behavioural science, such as nudge economics, has been used by businesses as well as governments. In 2008, the book Nudge, by Richard Thaler and Cass Sunstein, was published and certainly proceeded to influence governments. In the UK, the Behavioural Insights Team (BIT) was created to apply ‘nudge insights’ with the aim to improve government policy and services. There are three basic ideas that define a ‘nudge’:



i) Nudges never force people to make certain decisions - a core principle is that, while ‘nudges’ may lead people in a certain direction, they never limit or eliminate options. The ultimate choice still lies with the person and in this way a ‘nudge’ is different from a rule or a law. 
ii) Nudges leverage behavioural science insights about how we make decisions - ‘nudges’ are effective because they draw on mental shortcuts and cognitive and emotional biases which impact our behaviour. For example, ‘Save More Tomorrow’ works because it asks people to make a savings commitment in the future, i.e., when they get a pay rise in the future. 
iii) Nudges are meant to be used for good - ‘nudges’ are meant to help us move from intent to action, rather than convincing or persuading us to do something that we had no intention of doing.

Swiss Re’s Behavioural Research Unit, based on more than 500 client engagements, has identified five main areas for behavioural economics to create value along the insurance value chain. Swiss Re saw a 20% increase in sales, 3% rise in underwriting disclosure, up to 10% reduction in ‘claim padding’ and 3% reduction in cancellations. 
Top 5 areas behavioural economics is creating value for insurance

Source: Daily Fintech
Earlier this year, an academic paper published by Cornell University in the US, “Tokenising behaviour change: optimising blockchain technology for sustainable transport interventions” looked at how Blockchain technology and tokens could be used to influence behaviour and be a tool to help firms and society to be more ESG-compliant. The research paper examined four projects which use Blockchain technology to try and increase individuals’ adoption of sustainable transport by encouraging people to cycle and walk more.

Projects designed to increase the number of walking journeys and or cycling



Source:  Tokenising behaviour change: optimising blockchain technology for sustainable transport interventions
This research paper concluded: “Blockchain technology can provide a technical infrastructure capable of facilitating different designs and implementations of tokenised economies to support conversion of journeys to sustainable travel behaviour. However, blockchain technology is just a part of the technical solution, which is reliant on evidence from external sources such as smartphone apps and supporting services that are capable of making informed and accurate judgements on distances users have travelled, whilst balancing motives of data gathering and protection of user privacy. New possibilities brought about by blockchain technology, from autonomous, and individually tailored, programmatic actions of smart contracts and the potential of DeFi to bring liquidity to token economies, offer a tantalising future for delivering engaging programmes to aid travellers in make sustainable choices”.

The above illustrates how cities are beginning to introduce Blockchain-powered initiatives so as to improve the ESG credentials of urban dwelling. In Vienna, the City Council has brought in the Kultur Token which tracks users’ movements and types of transport in order to calculate CO2 savings compared to if the users were driving a car. The more carbon emissions its inhabitants spare, the more points they generate - i.e, the more Kultur Tokens they are...


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It would seem, on the face of it, that many so-called sophisticated Western economies and their central bankers are juxtaposed to the way in which China is approaching digital currencies. The Chinese are continuing to roll out their own version of a Central Bank Digital Currency (CBDC) to cover a total of 10 cities, spanning 100 million people. According to Coinidol:Over 200 vendors employed to hold the 2022 games began enabling digital payments conducted with the help of e-CNY. Among other items, the Chinese will be able to buy the Olympic tickets using the CBDC at least at some venues. Beijing and Shanghai are planning to distribute a total of more than 550k digital red envelopes each having about $31.5 USD of e-CNY to people around the two cities.” As Reuters reported back in April 2021, China has proposed new rules for CBDC, quoting:




“Interoperability should be enabled between CBDC systems of different jurisdictions and exchange;
Information flow and fund flows should be synchronised so as to facilitate regulators to monitor the transactions for compliance;
A scalable and overseen foreign exchange platform supported by DLT (distributed ledger technology like blockchain) or other technologies.”

China’s use of mobile payments leads the world



Source: Statista.com

It may or may not be related, but the Chinese Banking and Insurance Regulatory Commission has introduced new regulations on the $1.15 trillion cash management products in China. Will the next overture for China be to ask for a % of these massive savings to be transferred to its new CBDC?

Meanwhile, the Guardian newspaper has reported: “The Basel Committee on Banking Supervision, which consists of regulators from the world’s leading financial centres, is proposing a “new conservative prudential treatment” for crypto-assets that would force banks to put aside enough capital to cover 100% of potential losses.”. Stablecoins, pegged to a country’s official currency, would not be subject to the same strict rules as they are deemed to be more akin to traditional assets such as bonds, loans, deposits, equities or commodities. As reported in the Herald of Scotland , Britain continues a relentless march for using less and less cash with the number of cash payments dropping by 35% in a year - only 20% of payments now involve notes or coins, as opposed to 50%+ ten years ago.

The Fed, the ECB and the Bank of England have all declared that they are investigating the potential of CBDC, but one cannot help wondering what powerful lobbying is occurring behind the scenes by those banks desperate to maintain the status quo which has served them so well to date. Bizarrely, many Western governments and their regulators seem fixated that Digital Assets will continue to offer money launderers a panacea to enable them to make payments, whereby ‘oiling the wheels’ of illicit activities. This recent argument by a Dutch official, as reported in Cointelegraph, is such an example: “Ban Bitcoin because it doesn’t meet any of the three functions of money and is handy for criminals”. Such concerns are understandable given the rise in cyber attacks and ransom demands, often with the ultimatum for payment to be in cryptos e.g., the Colonial Pipeline which resulted in a payment of $4.4million Bitcoin. However, there could well be signs that demanding cryptos as a form of payment may not be such a panacea for criminals. In the US, the Fed has succeeded in retrieving $2.3 million of the Bitcoins paid by the owners of the Colonial Pipeline, thus sending a warning shot across the bows of the perpetrators of ransom that they may be better off reverting to demanding suitcases of cash, diamonds or gold as they have done in the past!  Then again, the banks and those who regulate them know a thing or two about deficient Anti Money Laundering (AML) procedures and checks as, in the first quarter of 2021 alone, banks where fined over $1.25 billion for AML...


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Blockchain technology has the potential to transform health care, placing the patient at the center of the health care ecosystem and increasing the security, privacy, and interoperability of health data. This technology could provide a new model for health information exchanges (HIE) by making electronic medical records more efficient, disintermediated, and secure. While it is not a panacea, this new, rapidly evolving field provides fertile ground for experimentation, investment, and proof-of-concept testing”.​

Wow, what an optimistic quote from Deloitte - but what is the reality? Is Blockchain simply another ‘buzz’ word being brandished about by technology lovers and consultants? Without a doubt, one of the most powerful benefits of Blockchain technology that we have written about on numerous occasions in Digital Bytes is that Blockchain-powered platforms bring greater transparency to processes and organisations. For example, Blockchain technology is now being implemented within the healthcare sector in a variety of ways including the management of patient data and medical records, in supply chains for pharmaceutical drugs, for research into new drugs and health research, handling insurance claims, and even being used as part of nudge economics to encourage patient behaviour. 
Here is just a small selection of different companies offering Blockchain-powered solutions within the healthcare sector:

Blockpharma, based in France, offers a Blockchain-powered platform to address challenges in the supply chain for pharmaceuticals to bring greater transparency, thus enabling drugs firms to help tackle the relentless counterfeiting that is so prevalent in the pharmaceutical industry. By scanning the supply chain and confirming all points of shipping, the Blockpharma’s app has the ability to track and trace drugs from point of manufacture to dispensing, so helping medical prescribers and patients to identify counterfeit medication. According to Blockpharma, 800,000 deaths occur every year due to counterfeit medicines, and there has been a 300% increase in counterfeit medicine trafficking between 2007 and 2010. Out of all the medication in circulation at the moment, 15% is counterfeit.

BloodFlow is a Canadian-based firm using Blockchain technology to offer the 36 blood donation agencies globally a combination of rewards/tokens together with a more efficient way for these agencies to digitally engage with blood doners, including information about what their donated blood was used for. For example, the blood you donated was used to help a child who was involved in a traffic accident, or your donated blood was used to help someone who has had hip replacement surgery. This enhanced engagement encourages blood donors to return to give blood - of paramount importance since many of the world blood donation agencies are desperate for more donors and also wish to reduce the % of donors who do not attend to give blood even though they have made an appointment. Did you realise that while donors are offered cup of tea following donation of a unit of their blood, the blood agencies then sell that unit of blood for $200-$300 in the US and in the UK, the NHS pays £145.22 per unit of blood? 

Coral Healthcare, based in Canada, is using Blockchain technology with smart contracts to improve the efficiency of healthcare, whilst automating many of the current paper-based, administrative healthcare systems. This is enabling doctors, scientists, lab technicians and public health authorities to access one common data base, so reducing duplication and errors.
 
Medicalchain, based in the UK, is using Blockchain technology to hold patient records securely. Doctors, hospitals and laboratories can all request patient information which has a record of origin and...


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