On Thursday

The profits of arbitraging an asset have been exploited by highly sophisticated investors, such as hedge fund managers, for years. These arbitrage profits can arise when an asset such as an equity, commodity, and now a crypto currency, can be bought on one exchange for less than the price it can be sold for on another exchange. Arguably, in theory this is a risk-free trade since you buy Bitcoin in one place and sell it for a higher price elsewhere.

Firms which are deeply engaged with crypto currencies such as Bitcoin, BitGo, BlockFi, Galaxy Digital and Genesis are increasingly targeting hedge fund managers, acting as lenders or, as some call them, shadow bankers. The hedge fund managers are exploiting pricing anomalies on Bitcoin between spot prices (the price offered on digital exchanges) and the futures price of Bitcoin, and executing trades that can generate annualised returns of 20%-40%. Meanwhile, many traditional banks are reluctant to engage with crypto currencies. Indeed, it can still be extraordinary difficult to even open a bank account in some jurisdictions if your company is involved in crypto currencies (although this is slowly changing). "The people with all the money - the banks, the brokerages - they're not in this space yet,” as has been reported by Jeff Dorman, chief investment officer for Arca Capital Management which specialises in digital assets. "Everyone wants to borrow dollars, but there's not enough dollars in the space. There is a huge cash shortage." Another indication of the lack of cash in this market is that most loans of stablecoins, which are typically backed by traditional currency reserves or a basket of other digital assets, also earn high yields. This is because stablecoins such as Tether and USD Coin are used, just like cash, to buy other crypto currencies.
So, how, in our so-called interconnected and sophisticated global financial services markets, can such pricing arbitrage opportunities occur? Well, it starts with the price difference between the spot price for Bitcoin and the value of a derivatives contract in a few months in the future. For example, on 30th March 2021 the Bitcoin spot price was US$56,925 while the July future’s price contract on an exchange in the US – CME - was at US$60,205. A hedge fund could buy Bitcoin at that spot price and sell the July futures, meaning the derivatives would gain value if Bitcoin were to fall. By doing so, a hedge fund could lock in a 4.9% spread between the cash and futures price and, annualising that between 30th March and July 30th (when the futures contract expires), could offer a profit of 19.6%. Therefore, hedge fund managers must have a means by which borrow from somewhere and, in theory, provided the cost of debt is less than the profit to be made, they will do these types of trades all day. 
But, you may say, what are the risks? The risk is shown in the above example that CME Group, quoting the futures price, goes out of business - which, if that happened, the hedge fund manager and the entire financial system would face more problems than a Bitcoin trade going wrong. Yes, it is possible (be it a remote one) that CME Group crashes, given how it is regulated it is. Meanwhile, the problem of banks not willing to engage with the crypto sector is well-known, in part due to a lack of regulatory and legal clarity over these assets and not helped by the perception...


On Tuesday

There is noticeably a trend regarding posts on Linkedin. Digital Bytes has been commenting on and posting various articles about how global financial institutions are building the required infrastructure to enable the safe custody, management, trading, and expansion of digital assets including stablecoins, DeFi, NFTs and Cryptos. The common thread we have identified are the names of the organisations viewing the posts, together with the very global nature in terms of the cities and countries of the people who are viewing the posts.

Last week Digital Bytes this post which highlighted Visa’s announcement of its plans to have USDC and U$-pegged stablecoins on its platform, and concluded that this announcement ought to give the $63billion stablecoin sector even more awareness and interest. Indeed, stablecoins are a very liquid asset class and in the last month have turned over $100billion on average a day. The table below gives a snapshot of the 2,000+ viewers in the first few days following the previously mentioned Linkedin post and, as can be seen by the names of the financial organisations and locations of those viewing it, the range is truly international with viewers working for some of the best-known regulated financial services organisations globally.

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Source: TeamBlockchain/Linkedin

So far, in 2021, the pace of change and newsflow around cryptocurrencies has been very active. Last week, PayPal also jumped on the crypto bandwagon with its new ‘Checkout with Crypto’ (“PayPal converts users' crypto holdings to fiat currency at checkout, with no additional transaction fees”), allowing its US clients the facility of being able to pay for goods at 24 million online merchants around the world using a range of crypto currencies. 

The amount of stablecoins being held in exchange wallets

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This interest in stablecoins is undoubtedly expanding. French company, Coinhouse, has recently launched a Euro-backed stablecoin, with PwC France and Maghreb providing monthly attestations of the backing. Of real significance is the biggest stablecoin, Tether (with over $41billion of assets), having finally given the market comfort that it is, indeed, backed by reserves. Expect to see other payment platforms such as ApplePay, GooglePay, Mastercard, PayPal Square and SamsungPay all follow Visa's lead and start incorporating stablecoins too. It would seem that stablecoins are, in effect, preparing the way for government issued CBDCs…..


On Thursday

The success of a mutual fund has, historically, relied on three facets - good performance, confidence/trust in the asset management firm, and strong and effective distribution -because, even if you are best fund manager in the world, if no one has heard of you then it is tough to attract assets to manage. Performance takes time and can be very fickle, as can be seen by the fact that active funds typically underperform the indices that they are supposed to beat. Furthermore, in the past, large banks and insurance companies have had a captive investor- base or have been able to afford to pay to advertise nationally and, in some cases, globally, which has helped them funnel assets into their funds. However, confidence and trust need to be earnt as, after all, why would investors give their savings to an organisation which they did not trust? The regulators recognise this, and one of their main objectives is to ensure that confidence in the financial system is maintained with only honest and trustworthy individuals and organisations being permitted to be regulated and sell financial products. Unsurprisingly, this is why there is a prodigious amount of attention being paid to Neil Woodford, the UK-based disgraced fund manager who is alleged to have ‘broken the rules’ and invested too much into unquoted equities. The fallout of Woodford’s actions continues since one of the UK’s biggest financial advisors and ‘darling’ of many of the UK’s national press, Hargreaves Lansdown, is now being sued.

The Woodford fiasco could have been averted had his fund been subject to the rigor and controls required for being on a Blockchain-powered platform, whereby making the fund’s holdings transparent for all to see. Smart contracts could have been employed to automatically inform the regulator, administrator, auditors, custodians, financial advisors, fund analysist and, most important of all, the investors. These parties could have been informed in real time that Woodford had continued to ignore the fund’s stated strategy and was holding too big a % of the fund in potentially illiquid, non-quoted equities. For a while PwC has been saying that Blockchain technology can help mutual funds improve the efficiency of the way that the back-office settlement processes are handled by:
reducing costs - fewer reconciliation errors
speeding up settlement - faster validation 
increasing resilience - no single point of failure
improving transparency - easier to monitor

There is arguably now a fourth criteria to determine the success in terms of the size of a mutual fund - Environmental Social corporate Governance (ESG). The ESG credential of a fund is a key criterion adopted by more and more investors when making investment decisions, whether it be the fund managers in their selection of assets, or by advisors (or investors) when purchasing a mutual fund. This helps to explain why companies that offer fund analysis for financial advisors such as RSMR, are seeing increased demand from investors for this type of information. Again, a report from PwC claims that 77% of institutional investors plan to stop purchasing non-ESG products and in this same report PwC states further that: “ESG fund assets will account for more than 50% of total European mutual fund assets by 2025 at an annual growth rate of 28.8%.” The added transparency that Blockchain technology offers can enable fund managers to assess the ESG credentials of an equity or a bond and, in turn, blockchains can be used to show investors’ ESG credentials for a fund and how these ESG scores have worsened or improved over time. As the Institutional Asset Manager publication pointed recently reported: “Capco says that new technologies could improve ESG ratings, noting the growing use of “impact tokens” on blockchain as a way of offering proof that a positive impact has been delivered and attributing it to a particular investment.”

When looking at mutual funds, Blockchain technology can help asset managers, regulators and investors bring greater transparency to what has been a complex investment surrounded by acronyms and technical language which many private investors struggle to understand (assuming the small print has been read). Possibly, and more importantly, the use of Blockchain technology can greatly assist in the on-going regulatory monitoring, thus helping investors decide whether to keep the fund or not. The use of smart contracts can identify anomalies and raise attention in real time meaning compliance managers are able to spend their time on managing risks and potential breaches, as opposed to checking data and records which may be days or weeks out of date. Blockchain technology also...


On Tuesday

The Danish Red Cross has turned to using a Blockchain-based solution for its recently sponsored $3million Catastrophe Bond (CAT bond) which will provide aid in the event of a volcanic eruption. Replexus, the Guernsey-based firm that issued the bond, claims that its Blockchain-powered platform can reduce the cost for each bond issue by up to $400,000

Source: Scitechdaily

Should it happen, the bond has an automatic pay out once the plume of volcanic ashes reaches a certain height. Cedric Edmonds, CEO of Replexus, announced that, “the volcano CAT bond will be placed on an insurance-linked securities blockchain, making the transaction particularly cost-effective for the aid agency and enabling secondary market trading among ILS investors. Additional benefits of the blockchain structure include allowing investors to hold their own securities on their own computer server rather than using a custody bank, and therefore saving five to 10 basis points per annum on the value of the securities they hold.”

Meanwhile, worldwide leader in data protection, Thales, has identified six ways that Blockchain technology can potentially be used in the insurance sector:
by eliminating the need for centralised control and the additional costs
to allow for trust to be distributed between blockchain members
to allow for transactions to be digitally signed using an asset owner public/private key pair
once recorded, data in a block cannot be altered retroactively
for providing open, distributed ledgers to record transactions between two parties efficiently, in a verifiable and permanent way
transactions do not have to only be data - they can also be code or smart contracts
Indeed, according to Munichre, it “envisions a future state where new life insurance applications are submitted using blockchain…Another potential use of blockchain would be the transmission of any type of digital evidence for underwriting, including the use of electronic health records (EHR). When digital evidence is easier to incorporate into underwriting, we can expect future changes into other areas of pricing and product development. The combination of the Internet of Things (IoT) and Artificial Intelligence (AI) will lead to automation of insurance processes that will make our industry look very different in the near future”.
How Blockchain technology can be used in the insurance sector

Source: Digital Insurer
It is not simply the use of Blockchain technology to help create back office efficiencies or, in some cases, new types of products, as there are a growing number of brokers such as Paragon Brokers in London and underwriters such as Peninsula Underwriters (based in Gibraltar) that offer specialist insurance cover. Furthermore, there is an increasing demand for insurance from companies which are offering Blockchain-powered solutions and/or digital assets and are searching for professional indemnity or director and offices policies.
One of the key tools that the insurance sector needs in order to see greater adoption of Blockchain technology is a way to be able to collect premiums and pay claims using a digital currency. This need is being addressed, however, as a number of stablecoins (each backed by a variety of fiat currencies) have been, and are, in the process of being launched. The adoption of a Central Bank Digital Currency (CBDC) in the insurance sector is another use case for governments to be mindful of as a means of driving down costs and improving the efficiency in the insurance industry which, itself, is still largely ran on analogue-based systems. Nevertheless, it is an industry which is looking to embrace...


Last Thursday

One of the key challenges which has faced governments and organisations (such as the World Health Organisation - WHO) as they fight to control the spread of a pandemic such as COVID-19 is gathering and understanding the colossal amount of data being collected. A number of governments, such as the Brazilians and the Cezchs to name just two, have turned to use Cross Industry Standard Process for Data Mining (CRISP-DM). CRISP was developed in 1996 as a European Union and was led by five firms - Daimler AG, Integral Solutions Ltd, NCR Corporation, OHRA and Teradata. It offered a methodology to analyse data and consisted of 6 steps:

Business Understanding 
Data Understanding 
Data Preparation
Data mining life cycle

Source: IBM
In recent times, analysis of data and use of AI has been used to help diagnose cases of COVID-19 when using Computed Tomography (CT) scans, reducing the time from about 5 minutes to 20 seconds. AI is also being employed to speed up the development of new drugs with one the current pandemic vaccines reaching human clinical trials already in an incredibly short time, as opposed to the usual process which typically takes years.  Likewise, the use of AI has shown to accurately predict which of those patients newly diagnosed with COVID-19 would progress further to develop severe respiratory disease and equally has shown that for some racial minorities certain vaccines are proving to be less effective. Interestingly, a New York University (NYU) study combined Chinese and American research revealed symptoms usually associated with COVID-19, such as certain patterns in lung images, fever and strong immune responses, were not on their own useful in predicting which patients with initial mild symptoms would actually go on to develop severe lung disease.

As a digital record, Blockchain technology is being widely used to fight COVID-19 by creating secure, trusted, and immutable databases, all the while detaching single point of failure in the network by offering greater transparency. For example, as reported by Reuters, UK hospitals have used Blockchain-powered platforms to help track COVID-19 vaccines whereby reducing mistakes that could have occurred had traditional manual systems been used. Blockchain technology is also seen a way to improve global supply chains; we have all witnessed how COVID-19 demonstrated the lack of resilience in the supply of PPE equipment and drugs for the healthcare sector, as was cited by the British Medical Journal. Aligned with this, the World Economic Forum reported: “COVID-19 has highlighted critical gaps and weaknesses in global supply chains. Blockchain technology may offer opportunities to increase trust & transparency - but it's not a silver bullet. Rather, it is part of a broader digitization strategy that must be evaluated and deployed responsibly and holistically”. Another example of the use of Blockchain technology has been in fight against fake COVID-19 vaccinations in Asia. In China, Hyperchain uses Blockchain technology to track donation as well as how the donations are used helping bring greater transparency process.  

According to a report from PwC, about 84% of institutions it surveyed are actively involved in using and researching the use of Blockchain technology as, after all, governments and WHO have encouraged people to use digital payment means, including cryptocurrencies, instead of cash to reduce the spread of COVID-19. This may help explain why, according to data by Statista, the number of digital/crypto wallets has risen from a handful in November 2019, before COVID-19, to 68.24 million on February 22, 2021.
As we have said before, Blockchain technology can be seen as ‘skeleton’ off which other data-hungry technology can hang. Increasingly, we are seeing Blockchain-powered platforms being integrated with AI, Big Data, IoT and Machine Learning whereby driving greater efficiencies and accessibility to data in the...


2 Weeks Ago

We’ve had several readers respond to an article written in Digital Bytes on the 3rd of March 2021 about the fact that a number of the world’s largest debit card providers are now accepting cryptocurrencies on their payment platforms. Furthermore, whilst presenting at a recent on-line event, it was interesting to note that many of the attendees were surprised to learn that PayPal ($282billion) is more than twice the size of IBM ($115Billion) and Goldman Sachs ($119billion) in terms of its stock market valuation. So, we decided to look further into PayPal, a now global business which was established in 1998 just outside San Francisco. The table below offers a snapshot of some of the statistics regarding PayPal compared to Mastercard, Square and Visa. 

Payment platforms which accept fiat and crypto
PE Ratio
Revenue Growth (YoY)*
Net Margin*
Number of users
No. merchants 
2million (as at 2019)

*Source: SeekingAlpha.com

In March 2000, PayPal, or Coinfinity as it was then known, merged with X.com (an Elon Musk business) with the combined group being renamed as PayPal. With over 1million customers and being focused on making digital payments easier, PayPal was then bought by eBay for $1.5billion in October 2002. By February 2006, PayPal had over 100million users and in July 2014 the veteran corporate provocateur and financier, Carl Ichan, along with other large shareholders forced eBay to ‘spin off’ PayPal separately. PayPal’s first day’s trading, after its demerger from eBay, resulted in a rise of 50%, to be subsequently valued at $48billion.

Fast forward to 2019, when PayPal made its largest acquisition  and acquired Honey Science Inc (a Los Angeles-based firm) for $4 billion. Honey is a consumer shopping app which offers discount coupons and is free for users, whereas retailers are required to pay a fee. This enables PayPal to offer new services to its merchants as an excuse for them to use PayPal over other payment platforms. Additionally, PayPal has offered the ability to ‘tap into’ the fast growing rewards industry, which is expected to more than double in size and be worth $15.5 globally by 2025. Loyalty schemes are expected to be significantly disrupted by Blockchain-powered platforms since they provide the potential to be able to integrate loyalty schemes whereby making the rewards for users more tangible. How many of you reading this article have little or no idea as to the rewards you have with the various loyalty schemes with which you have membership? 

The average US citizen is a member of as many as 29 different loyalty programmes. Furthermore, some of the loyalty schemes have become more valuable than the corporations issuing the rewards points in the first place. Of note, America’s three largest airlines (American Airlines, Delta and United) have actually used their frequent-flyer rewards schemes as collateral to borrow capital as they struggle in the aftermath of COVID-19. Indeed, some analysts claim that “Frequent flyer miles are literally the only reason United and American haven’t filed for bankruptcy.” The largest bank in the US, JP Morgan, claims that loyalty programs could be an alternative asset class for investors to consider. Therefore, in view of Paypal’s involvement in the loyalty sector and ability to handle digital payments, together with the fact that it accepts cryptos, this could prove to be a real winner. As affirmation of this, the US publication, Barrons, has reported that PayPal’s integration of crypto currencies could add more than $1 billion to PayPal’s annual revenues by 2022. PayPal, along with other payments platforms such as Mastercard, Square and Visa, has the potential to give a huge boost to the adoption of cryptos as a form of day-to-day payment. As Barrons has highlighted: “A consumer could buy and store Bitcoin on the PayPal app and use it to make a purchase at a store or online retailer. The merchant would get paid...

As the world increasingly transitions from the constraints of national borders, and therefore becomes potentially less reliant on specific national legislation and regulations, this presents a real challenge for creators’ intellectual property (IP) as we continue to see the evolution of promoting their creative talents. Given the global reach of the internet and the ability to post and stream content on social media sites (such as Instagram and TickTok), there is a real challenge as to how to protect the creator’s IP.

The rewards for posting and having a ‘following’ on TickTock are highly appealing, especially for younger viewers who no doubt aspire to be able to repeat the success of some of TickTock’s highest earners, such as the 19-year-old Addison Rea (who is alleged to have  earnt $5million in a year). Instagram, too, offers riches to those who have millions of followers; the American actor, Dwayne Johnson, is reported to be being paid over $1million per post. However, to attract sufficient followers you need to post content, and there lies the problem. How do you protect your IP i.e., your pictures, videos, songs, etc from being copied and used by others? There have been a number of cases where a brand has actually used images from someone’s social media post without paying for the images. But unless you have registered your IP, how do you protect it?

The challenge of IP and being able to prove provenance is likely to become an increasing challenge for the new asset class which is grabbing headlines and attention - Non-Fungible Tokens (NFTs). Christies auction house in London recently sold an NFT of a picture from an artist, Mike Winkelman (otherwise known as Beeple), whose digital art ‘The first 5,000 Days’ had bidding begin at $1,000, eventually selling for $69 million and which The New York Times reported as “a JPG file was bought using a cryptocurrency”. In doing so it made Beeple the third most expensive living artist to sell work at an auction! As you can see from this YouTube clip, Beeple was completely amazed, too!  

In simple terms, an NFT can be described as a digital file typically stored on a Blockchain, being created by uploading the file. This could be digital art, such as Beeple’s, or music such as the Kings of Leon have recently done generating $2million from their NFT sale of an album, or even a video clip such as the basketball player LeBron NFT which sold for $200,000 on an NFT auction site. NFT auction sites such as Foundation, Nifty Gateway and SuperRare are enabling artists and creators of IP to ‘cut out’ the middlemen, agents, brokers, managers etc and simply upload their work (all at the click of a mouse) and watch the bidding commence. 

So, what is the solution? How do wannabe NFT sellers protect their creations in order to prove they wrote the script, the song, took the photo/video etc? Well, look to Andy Rosen, a Brit living in Los Angeles who has been dealing with artists since the late 1970’s when he was a ‘snapper’(photographer) for iconic bands such as The Jam, the Sex Pistols, Boy George, Bruce Springsteen. Rosen has built FileProtected, a Blockchain-powered platform to enable people to register their own creative works and so generate an immutable record of their IP. Furthermore, Rosen has had considerable personal experience seeing artists losing control over their IP which is what inspired him to build FileProtected. Whilst it was not developed specifically for NFTs, FileProtected could well prove...


3 Weeks Ago

In order to stimulate local and national economies, authorities need to engender greater confidence in the fact that it is, indeed, safe for people to return to their offices, shops, restaurants, entertainment venues and travel (particularly on public transport). We have seen initiatives in cities such as Girona, in Spain, where the Catalan De Blockchain has worked with city officials and technology providers to launch an app which their local football stadium is looking to use to encourage the safe return of fans. Called ‘Obrir Girona’, it is hoped that the Blockchain-powered app will enable the city’s local residents to gather at public events by using this ‘covid-free’ digital passes.

Undoubtedly, public authorities all over the world are vast employees of people. In the UK there are 5.5 million people (16.7% of the work force), in USA 24million (15% of the work force) and in China, back in 1978, it was an incredible 100% of the labour force who were employed by government-run organisations!

Number of people working in Chinese state-owned enterprises

Source: Statista

In view of this, it ought to be of no surprise that there are a number of Blockchain-based apps that are being used to help improve the efficiency in the manner in which human resource departments are run. Listed below is a selection from different jurisdictions around the world:

the BeSure Network - when working in dangerous/hazardous environments, information can be securely accessed by managers, employees and regulatory bodies 
Blockeducate - stores and shares educational qualifications
eXo Platform - used by the University of California and HSBC for staff rewards and recognition, since “47% of staff do not feel recognized for what they do 
Job.com - uses AI and Blockchain to match job seekers with the right company. Rather than the standard 20% commission, employers pay only 7% of a candidate’s annual salary when they sign up on Job.com. Additionally, 5% of this is immediately sent to the candidate as a signing reward
Oracle - helps new staff induction processes
Peoplewave - assists candidate sourcing, selection and screening
TiiQu - offers a Blockchain-powered platform to create a digital passport to be used as proof of a candidate’s professional trustworthiness, identity and qualifications
Vault Platform - used to make harassment reporting more transparent:
Zinc - allows users to upload their skills and experience data, empowering them to decide with whom they share this data, and when. Ensures CVs are always up to date and accessible anywhere in real-time. 
Furthermore, Deloitte believes that Blockchain technology is able to support local authorities and governments in a variety of ways in order to make them more efficient as well as improve the effectiveness of the services which they deliver. For example:
as an official registry for government-owned assets or intellectual property owned by businesses and individuals i.e., offices, homes, vehicles, patents
to help with the way voting and elections are conducted
to streamline tendering of goods and services
to reduce fraud and error by bringing greater transparency and automation of current labour-intensive processes

Unsurprisingly, there are many challenges government bodies face as often they are run in a very bureaucratic fashion and lack the funds to implement change. Often their procurement processes make it extremely difficult for new tech disruptors to even tender. Another factor holding back innovation is education, i.e., those working in government-run organisations often lack the time to undertake the research required to find the so-needed solutions due to cutbacks. In the UK, organisations such as CPRAS are actively engaged with government bodies to help drive through change and bring about more efficient practices. When recently asked, Richard Hallewell at CPRAS responded: “Procurement and education challenges go hand-in-hand and, together, are applying a handbrake to the adoption of tech solutions in the public sector. We...


According the FT, which is tracking the roll out of COVID-19 vaccinations globally, the total number of COVID-19 vaccinations which have been administered as at 9th March 2021, is over 305 million. Click here for the latest data. 

12 countries which have given the most COVID-19 vaccinations per 100 residents


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Source: FT

As reported by Centre Blockchain de Catalunya , the 17th of March 2021 is the day the European Commission has reported it will be issuing an update on the ‘Digital Green Pass’. This is a certificate to prove if one has recently been tested for COVID-19 and whether the holder of the Green Pass has been vaccinated. According to Euronews, in an announcement from Ursula von der Leyen, President of the European Commission, she stated, "The Digital Green Pass should facilitate Europeans’ lives," adding, "The aim is to gradually enable them to move safely in the European Union or abroad - for work or tourism." However, it is believed that it will take another three months of technical work, so the Digital Green Pass is unlikely to be available until July 2021.

Source: Twitter

Nevertheless, this has not prevented the rollout of the AOKpass, a Blockchain- powered solution which has been developed by the three organisation International Chamber of Commerce, Societe Generale of Surveillance and SOS International. The AOKpass is already being used in the Catalan city of Girona and so, by virtue, is helping the city to regain a degree of normality in the aftermath of the ravages of COVID-19. AOKpass is not the only Blockchain-powered app to prove if you have been vaccinated since the World Health Organisation (WHO) has been piloting a program with VaccineGuard, which has been developed by an Estonian-based company called Guardtime. As ever, Blockchain technology is not a silver bullet and there are other possible solutions, as Dr Stephen Castell, who recently wrote in Digital Bytes, pointed out: “There is an App called Zykme that transfers personal data P2P, securely and privately, using a unique patentable one-time transfer code protocol, i.e. simply from the data subject to another person with whom, and only with whom, that data subject wishes to share his/her personal data; and without that data being held centrally/remotely (so definitely NO blockchain!). Thus personal, Covid Vaccination Evidence Data is stored only in the Zykme.net App, on the personal smartphone etc device, totally under that person's individual control. There is no reason why Zykme could not include personal Authorized Covid Vaccination Evidence Data right now”.

While many countries are yet to fully support some form of vaccination passport it is difficult to see how airlines will even allow passengers on a plane without doing all they can to protect the safety of fellow passengers. Even in the US, the new Biden administration talks of “assessing the feasibility” of linking COVID-19 vaccinations to international vaccination certificates and producing electronic versions of them (page 181 of its 200-page national pandemic strategy with seven goals aimed for ending the COVID-19 pandemic). At one level it is difficult to see what the real objection is - after all, for many years travel has been prohibited to much of Africa and South America without certificated proof of having been vaccinated against yellow fever! On this subject too, WHO is also in discussions with Estonia to develop a ‘smart yellow card’ - a digital...


4 Weeks Ago

The Mesopotamian shekel is believed to have been the first known form of currency and is thought to have been used nearly 5,000 years ago. However, due to the ‘scare nature’ of the precious metals used to make a currency, there began a search to try and turn basic metals that were abundant into precious metals via alchemy. Although the word alchemy dates from Egyptian times, around 300 BC an alchemist known as Zosimos of Panopolis wrote about the concept of a philosopher’s stone’, a legendary material that supposedly was able cure all ills, grant eternal life and turn metals into gold. It was believed by some to have been given to Adam by God. However, in more recent times it is Harry Potter who has made ‘the philosopher’s stone’ famous again but unfortunately the alchemists, even famous ones such as Sir Issac Newton, were unsuccessful in creating money out of thin air.

We had to wait until the Medici family from Florence opened its first bank in 1397 to find a way in which to create money and interestingly, in the same way that Blockchain technology offers greater transparency and trust, the Medicis traded on the fact that people trusted them together with their banks. Arguably, the Medici family pioneered many of the financial concepts that we still use today in our banks - double entry bookkeeping (e.g., assets = liabilities + equity, and also ‘letters of credit’) as way to get around the religiously frowned-upon act of usury (lending of money) which existed at the time.  
The Medici family

Source: News of the new age.com
In essence, rather than merchants travelling around with sacks of cash they could receive 40 pence for a Florin in London, 90 days after a merchant had deposited money in Florence. The London bank then offered 36 pence for a Florin, again payable in 90 days for someone who wished to send goods to Florence thus generating a 4 Florin profit for the Medicis, i.e. 22% p.a. However, although it was essential that the transaction/letter of credit lasted for 90 days, before long the Medici family had secured branches in Milan, Venice, Rome, London, Geneva, Lyon, Avignon, Barcelona, and Bruges so expanding the use of their letters of credit, the holding of deposits and the making of loans. A fortune was made from the letters of credit which, themselves, became a method of exchange/payment based on a promise to pay, since merchants trusted they would be paid simply by presenting their letter of credit. 

The ability to create money ‘out of thin air’ really took a massive leap forward with the development of fractional banking, which is when a bank holds only a portion of the money deposited with it as reserves and then offer loans to other parties and, in doing so, charges interest on these loans. Arguably, this concept was honed by goldsmiths realising that not everyone needed their gold or silver, all at the same time. Therefore, when customers deposited their gold and silver at a goldsmith they were, in turn, given a promissory note. These notes were used as a form of ‘exchange/money’ with the goldsmiths using these gold and silver deposits to issue paper certificates/loans, and again they then charged their borrowers. In the 17th century, goldsmiths therefore transitioned from being guardians of valuables to interest-paying and interest-earning banks. The goldsmiths in London developed these services as, prior to such activities, they were mainly to be found in Italy, Germany and Holland. In part, this led to the first central bank which was in 1668 in Sweden.
But why is this relevant to Bitcoin? Well, many argue that Bitcoin is a form of money but, rather than being backed by promise from a bank or backed by gold, it is limited by design to only being able to create 21 million Bitcoins and is backed digitally by code and algorithms. It has been designed specifically to eliminate...


A Month Ago

The process of being a publicly listed company on the NASADAQ stock exchange has been  initiated in the USA by Coinbase, not via an IPO but as a direct listing whereby saving both  hours of management time carrying out a road show and $millions of fees. Interestingly,  Coinbase is not actually looking to raise capital since it is already sitting on $1billion of cash  and $350 of crypto currencies. Wall Street may look back on the event of this digital  currency exchange becoming publicly quoted as a precursor for a change in the way the  financial services sector is operated. The floatation of Coinbase will bring greater  transparency and trust into how money is being made from digital assets with some of the  brightest analysts pouring over Coinbase’s financials. Furthermore, it is inevitable that  similar firms operating in the digital assets sector will now be sure to follow Coinbase and  become publicly traded too. 

Coinbase refers to future the in its prospectus: Tokenise new assets.” The section goes on:  “We will invest in infrastructure and regulatory clarity to pave a path for the digitization of  more traditional financial assets to help pave the path for new assets to be represented as  crypto assets.” This is a clear indication that Coinbase is likely to use its equity to continue  
its buying spree of acquisitions (having already executed 16 acquisitions) and, as a public  company, it will no doubt use its paper, not cash reserves. Who knows, maybe Coinbase will  even acquire traditional asset managers, or a bank, and thus further blur the lines between  the traditional finance sector and decentralised finance (DeFif)? 
Once Coinbase is publicly traded on a recognised exchange it offers institutional investors a  way to gain exposure to the crypto currency market in a manner that, to date, has simply  not been possible. Also, given the dominance of Bitcoin (accounting for over 60% of the  capitalisation of the crypto market) one could make an argument that the buying of shares  in Coinbase could be seen to be a proxy for gaining exposure to Bitcoin, which is currently  not a permitted asset for UK pension funds. It is of no surprise therefore that as the price of  Bitcoin rises so does the volume of trading in the entire crypto currency market, thus  boosting Coinbase’s profits (although Coinbase is far more than just a way to get exposure  to Bitcoin!

Coinbase’s clients continue to grow 

Source: Coinbase 
As a crypto currency platform Coinbase states, it has: “Approximately 43 million verified  users, 7,000 institutions, and 115,000 ecosystem partners in over 100 countries”. Meanwhile  in its prospectus, Coinbase claims it generated $1.1 billion of trading income on the $193 billion of crypto trading, (page 107). This indicates that Coinbase generates a margin of  approximately 0.57%, with Bloomberg noting “the traditional U.S. stock exchanges - which  collectively trade more volume in a day than Coinbase does in a year - collect on the order of  0.01% of volume in exchange fees, conservatively. Running a crypto exchange is at least 60  times more lucrative than running a stock exchange”. Indeed, the entire payments world is  changing as increasingly clients are using digital wallets. As ARK Investment Management's analysis has pointed out:” PayPal’s Venmo and Square’s Cash App have amassed roughly  60 million users organically in the last 10 and 7 years, respectively, a milestone that took  J.P. Morgan more than 30 years and five acquisitions to reach.” If ARK is correct in stating  that “a digital wallet is worth conservatively $3650, (the average valuation per US bank  customer at year-end 2019)” this alone means that, with 42 million customers, Coinbase  could command a valuation of $150+billion!
Growth of traditional bank accounts v digital wallets 

Source: ARK Investments

However, trading and private clients are not the only way that Coinbase is generating  profits. Coinbase charges 0.5% to offer custody for the digital assets it stores for  institutional clients. According to Forbes, in December 2020 Coinbase had $20...

There has been a string of announcements in which the leading payment processing  businesses worldwide are enabling their customers to use cryptocurrencies. In doing so, and  as these firms alter their back-office processes and procedures, are they potentially  preparing themselves to have the ability to process and handle Central Bank Digital  Currencies (CBDC)? 

Bitpay, the largest provider of crypto payments globally, has teamed up with Apple Pay  whereby enabling its debit card Mastercard clients to use Apple Pay. The cryptos that BitPay will initially allow its users to hold include Bitcoin, Bitcoin Cash, BUSD, Ether, PAX, USDC and GUSD. In addition to Apple, Samsung Pay has also announced an agreement with BitPay and  confirmed that the cost to process transactions will be 1%, whereas some cards that use  cash charge up to 3%. Even Google Pay has joined in on signing up Bitpay so its customers,  too, will be able to buy and store crypto as well as make online payments. All three of these  firms will use BitPay’s app so they can convert fiat currencies into crypto currencies and vis  versa. Given Apple, Google and Samsung now offer their clients the opportunity to spend  crypto is further evidence of how easy it is to use the likes of Bitcoin and Ethereum, which have been subject to criticism in the past. Indeed, Visa has 32 cards which offer the ability to  use crypto on a Visa-powered debit card at any of the 40 million merchants worldwide that  accept Visa. In a statement from Visa at the beginning of February, Jack Forestell, its chief  product officer announced: “We set out to make Visa the bridge between digital currencies  and our global network of 70 million merchants and today we are the leading network for  crypto wallets with 35 crypto platforms choosing to issue with Visa. With this pilot program,  we want to extend the value of Visa to our neobank and financial institution clients by  providing an easy bridge to crypto assets and blockchain networks.”  
Mastercard has seven firms which allow crypto/fiat services and, not wishing to be left  behind (according to Reuters), has said it will support a select number of cryptos - thus  enabling its merchants to accept certain digital assets as a form of payment. It would appear  that the race is on since PayPal as well has recently announced it will be offering UK clients  the ability to access cryptos. PayPal, with 26 million merchants globally, has informed investors of its plans to create a division to be focused on digital currencies. Its CEO, Dan  Schulman, has been quoted as saying:” There’s no question that digital currencies and  underlying technology have the potential to drive the next wave in financial services and I  think those technologies can help solve some of the fundamental problems of the system.” 
How people rate the trustworthiness of digital currencies 
Source: The Economist Intelligence Unit 
Facebook’s ‘Diem’ digital currency is still waiting for approval from the Swiss regulatory  authorities and arguably it was Facebook’s proposal that initially stirred central bankers into  taking digital currencies seriously. However, given research from The Economist Intelligence  Unit, which has reported that 65% of the people it surveyed would rate a digital currency from a large international technology firm as balanced and trustworthy, one cannot help  wondering how long it will be before...

Fungible assets are items that we use and typically can exchange for other assets e.g., cash, land, shares etc, whereas a non-fungible asset is unique, rare and non-divisible, a good example being a ticket for a concert or a ticket to fly to Hong Kong first class. The Non-Fungible Tokens (NFT) Report (a copy of which you can get here) has been released by L’Atelier, a subsidiary of BNP Paribas. The report reveals that the NFT market grew to over $250million in 2020, a four-fold increase compared to the previous year.

However, what is more noteworthy is the posting on Twitter from Nadya Ivanova, COO of L’Atelier:

Ivanova then proceeded to state, “People that we see currently are actually truly profiting from non-fungible tokens…the sector represents a unique and emerging opportunity for banking products in the long-term, say in the next 10-15 years.” Clearly NFTs are beginning to attract more and more attention, and while individual prices of some NFTs are rising it is very difficult to know the exact size of the total NFT market. The reason for this is every NFT is a unique Digital Asset, so essentially each NFT has its own market and there is no centralised exchange which holds data about all the NFTs being traded. An NFT is created using Blockchain technology and links the token to a unique Digital Asset. The asset could be a piece of digital art, such as the one Christies is selling (see below) or some virtual land in a virtual universe (Decentraland) or the rewards you have earnt playing digital game, or a physical asset such as wine, a pair of Nike sneakers, a Louis Vuitton handbag etc. There are almost limitless possibilities which can be used to link to an NFT, but each NFT is unique. Therefore, since there is only ever one NFT, each token is essentially its own market, so it is hard to be sure of the actual size of the NFT market (although it is possible to see the turnover and price appreciation on websites such as Coingeko, Coinmarketcap or NonFungible.com).
The six largest NFTs

Source: Coinmarketcap.com
For the first time, Christies auction house in New York is selling a pure digital piece of artwork from an artist, Mike Wicklemann (otherwise known as Beeple), who has over 1.8 million followers on Instagram and has worked with singers including Ariana Grande, Justin Bieber and Kate Perry, and also global brands such as Nike and luxury goods firm, Louis Vuitton. Beeple has sold over $9 million of art including ‘Tom Hanks Beats the Shit out of Coronavirus’ which sold for £107,000. 

Tom Hanks Beats the Shit out of Coronavirus

Source: Beeple-crap.com
Furthermore, the person who will bid the most at the Christies auction for a pure digital form of artwork called ‘The First 5,000 days of 2022’ (described by Christies in its promotional material as, “…the first purely digital artwork (NFT) to be offered at a traditional auction house, with its authenticity assured thanks to blockchain technology”) will receive a NFT certificate.

As mentioned earlier, NFTs for its enthusiastic supporters offer the ability to digitise the ownership of tangible and intangible assets. As we see data from individuals, cars, buildings etc being monetised for the personal benefit of the general public (as opposed to being used by corporate giants such as Alibaba, Amazon, Facebook, Google, Tencent, NFTs could enable this to happen faster using the infrastructure that some of the various digital exchanges have created. However, there are reasons to be cautious - almost all NFTs are recorded on the Ethereum and the cost...


There continues to be great speculation as to how much higher the prices of crypto assets, in particular Bitcoin, can rise. There exists a growing number of people concerned about the current economic back drop and some argue that this has helped drive crypto prices higher. Bitcoin, by some, is referred to as ‘Digital Gold’ and JP Morgan, the biggest bank in the world outside of China, claims that the price of Bitcoin could reach $146,000. In part, Bitcoin’s recent price increase has been fuelled by institutions buying cryptos in the belief that the decline in the US$ will continue as America gears up to pump another $1.5 trillion into its COVID-19-ravaged economy. 

Comparison of household savings 2014 - 2020

Source: OECD Database (2013-2017) and OECD Economic Outlook, Volume 2020 Issue 2 (2018-2020)

Consultancy Oxford Economics calculates “that over the course of the crisis, U.S. households saved $1.6 trillion more than they would have done. HSBC estimates that households in the eurozone and U.K. saved €470 billion (3.9% of GDP) and £170 billion (7.7% of GDP) more in 2020 than they did in 2019, setting up each region for a major spending boom once the virus is suppressed” - undoubtedly resultant from those working during the last year who have been unable to shop, eat out or go on vacation.

The prices of crude oil and copper keep rising

                               Source: Macrotrends                                                       Source: Macrotrends
Seemingly, commodity markets are expecting a sharp rebound in consumer spending and economic activity if copper prices are anything to go by as they have risen by 65% in the last year. Furthermore, there is the potential for trillions of $, £ Yen and € worth of consumer spending given many people have been saving due to not being able to go out due to COVID-19 restrictions. This together with the ongoing massive fiscal stimulus from governments in 2021.Will this result in an upswing of asset prices, not only for commodities, but also rising inflation economies in general? If this is the case (and it leads to rising interest rates), this could be a disaster for those holding ‘so-called’ low risk bonds and could well trigger the end of a 10 year + bull market equities?

Another cause for concern is in Europe where, at the end of 2020, Germany’s Bundesbank was owed €1,136 Billion (an increase of 26% in just 12 months) by the European Central Bank (ECB). Given the perilous state of Portugal, Italy, Greece and Spain’s (PIGS) economies, for how much longer will the prudent Germans allow the southern PIGS to simply continue printing money? The combined debt of the PIGS is $1.18 billion, which makes one wonder if we are to return to the possibility of a hard Euro for the north European countries and a soft Euro for the rest of those countries that use the Euro? Indeed, cracks in the Euro are already apparent. In May 2020, German courts ruled that Germany’s Bundesbank would only support the EBC provided the ECB only no more than 33% of any one member’s debt. The Germans have insisted that asset purchases be allocated according to a member state’s shares in the ECB. The three biggest contributors are Italy 13% and France 16%, with Germany being the largest at 21%. The last thing the ECB relishes are rising interest rates as this would wreak havoc on its huge bonding holdings as the ECB has over €4.1 trillion of debt.

The spectre of economic uncertainty and potential for higher inflation (given the massive fiscal stimulus that many economies have...


Invesco DB US Dollar Index Bullish Fund

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Source: etfdb.com

In reality, Stablecoins are a relative description especially when pegged/backed/linked to a fiat currency. Those who have their assets in order to earn money or have expenses to pay in Yen, € or £ would hardly consider the US$ as ‘stable’. Indeed, a chart we have shown several times in Digital Bytes is the value of the US$ against a basket of other global currencies, and clearly demonstrates the downward trend of the US$. Nevertheless, stablecoins continue to attract investors’ attention and are being seen to further grow in value. Moreover, there is an even greater choice of stablecoins which are linked to other currencies and not just the US$, with examples in the last few months being: in the UK, London Block Exchange’s £-backed stablecoin; in Switzerland, Sygnum’s CHF stablecoin; in Japan, GOMO’s Yen stablecoin and in Germany, Bankhaus von der Heydt’s (one of the oldest banks in Europe) € stablecoin. According to Cryposlate, the value of stablecoins now stands at $153billion, the largest one notably still being Tether having seen its growth increase from $4.2 billion to over $31billion in the last year. While Ethereum remains the predominate Blockchain used for stablecoins there are other Blockchains being employed including Binance Chain, EOS Omni, Qtum, Stellar, Tron and Waves, to name a few.

Source: Crypotslate.com
The growth of stablecoins has arguably been fuelled by a progressive interest in crypto currencies, themselves now valued at over $1.4 trillion. There are notably specific drivers stimulating this growth of stablecoins, such as the advancement of the DeFi sector together with more stablecoin crypto pairs, especially involving USDT (otherwise known as Tether). Increasingly, digital exchanges are now offering crypto pairs in USDT rather than Bitcoin. But Tether, despite offering assurances that its tokens are 100% backed by US$, has never offered evidence. Back in April 2019, the New York Attorney General alleged that iFinex, the parent company operating both Bitfinex and Tether, possibly defrauded cryptocurrency investors by engaging "in a cover-up to hide the apparent loss of $850 million dollars of co-mingled client and corporate funds.”

Whilst stablecoins clearly continue to attract investors it is difficult to see how they make money themselves given the current global almost zero interest rates. So why do so many different organisations offer them? Well, stablecoins have created lots of trading/ transactions for digital exchanges, as investors are able to switch from other cryptos into stablecoins rather than selling their cryptos for cash. To date, much of the focus and use cases for stablecoins has been to view them as a payment mechanism, as a way to avoid using banks and in particular avoid the high transaction fees often associated with international remittances. 

However, stablecoins can be seen to be part of the infrastructure required as we witness the ongoing digitisation of other assets and services. By observing more jurisdictions (such as Switzerland, German and Luxembourg) which have now all passed legislation to enable the issuance of securities (equities and bonds) in a digital format i.e. not using paper based systems, these new...

The asset management industry has undergone massive changes in the last few years, becoming more sophisticated in terms of the products and services that it offers as fund managers seek out new assets to manage and new ways of managing existing assets. As the wealth of many individuals has grown over the last 70 years so has the responsibility to provide for your own pensions arrangements as opposed to relying on the state - both of which have fuelled the growth in savings and the fund management industry.

Historically, individuals gained exposure to equity markets by investing directly into equities and it was not until 1774 that a Dutch man named Abraham van Ketwich created the first ‘mutual’ fund. This was called Eendragt Maakt Magt, meaning "unity creates strength,” and was comprised of a selection of government bonds and plantation loans in the West Indies. Foreign and Colonial Government Trust was launched in London in 1868 as an investment trust i.e. a closed-end fund, which is still traded on the London Stock Exchange. It was not until 1929 that the Wellington fund (now part of Vanguard) was launched, becoming the first mutual fund to own stocks and bonds. Indeed, it was Jack Bogle at Vanguard who invented the first ‘Index Fund’ in 1975, which was the start of the tussle to attract funds under management between passive and active fund managers.

Distribution of open-end funds globally between 2011-2020 by trading strategy

Source: Statitsia.com

The demand for index funds from investors has grown steadily as more capital has been allocated to exchange traded funds (ETFs) and passively managed funds (PMFs) globally (which now accounts for 31% funds according to data from Statista). Index funds, with their lower management fees and not being reliant on individual fund managers, are now becoming more popular for those also looking to gain exposure to cryptocurrencies. Recently, German-based MV Index solutions (MVI) and CryptoCompare announced they have over $1billion in assets with fund managers who are using their various crypto indices. MVI claims, “The demand for index services has been global with products launching in markets across America, Europe and Asia”. Also in Europe, Swiss crypto investment manager FiCAS AG launched its cryptocurrency exchange-traded product (ETP) in June 2020 and has now received permission to market its ETP (similar to an ETF) on a pan-European basis.

Interestingly, the Asian Times claims that the total assets in crypto assets to be $6billion by the end of 2020 and, given the stella returns in the crypto asset class in recent months and the almost zero interest rates on bank deposits, it is understandable why cryptos have been attracting investors’ attention.

Digital Assets which trade 24/7 are ideally suited to funds that use mathematical algorithmic models, with trading being executed by computers automatically. It is almost impossible for humans to keep up to date and efficiently trade across what is believed to be over 1,100 digital asset exchanges globally. We have even seen Vanguard using Blockchain technology to improve benchmark tracking and reduce the cost of managing some of its index funds which Vanguard.

But as well as Crypto funds there is a growing range of DeFi tokens which have very similar features to funds such as the DeFi Pulse Index token, with over $62 million of assets offering exposure to range of DeFi tokens. These DeFi tokens are a new way for investors to access asset managers and styles of trading, which historically had been the preserve of only the very wealthy. DeFi tokens trade 24/7 and are accessible on-line directly, without the...

There are a number of countries, according the Library of Congress in the US, which have banned cryptocurrencies, together with a number of jurisdictions where cryptos face an ‘implicit ban’. 

Legal Status of Crypto currencies globally

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Source: Library of congress

It is somewhat ironic that there is a proposal to ban cryptocurrencies in India, yet at the same time the government is actively engaged in exploring how to launch its own Central Bank Digital Currency (CDBC). It would be a shame if the government were to ban cryptos since we are seeing considerable innovation in India in the FinTech/ DeFi sectors. If we are to see closer economic trading terms between the UK and India, due to Brexit (given India’s strong FinTech sector expertise and London’s position as a financial centre), it could be very beneficial for both countries. All that is needed is clear guidance and regulation to ensure innovation is able to flourish whilst protecting the public’s interests.

But then the Indians are not alone as, according the Library of Congress, as the Chinese have an implicit ban on crypto currencies, they are in the process of rolling out their own CBDC. It is known that at the end of January 2021 China announced further trials of its CBDC, giving away $5million to residents in Suzhou. Once again, whilst money has been given away there have been ‘strings attached,’ since it can only be spent in outlets defined by the government and, again, beneficiaries are required to ‘use it or lose it’ as the digital money is only valid over the Chinese New Year, 10th Feb - 26th Feb. For years governments worldwide have tried to restrict trade and ban certain goods so whilst, in theory, this ought to be achievable for physical goods such as guns, drugs and alcohol, banning goods clearly have proved to be very difficult to implement. 

Dark net sales of illegal drugs has grown 

Source: UNODC

According to data from the UN, the world trade of those buying illegal drugs over the ‘dark net’ has been expanding. In some countries, such as Russia, over 85% of those surveyed in 2020 claimed they had used the dark net to source drugs. Therefore, how, in our increasingly digital economy, will governments fair in a battle to ban cryptocurrencies which are not constrained by geographic boarders. Indeed, we are already seeing signs of this as regulators, such as the SEC, actively pursue firms and individuals which have allegedly broken security regulations in the US via Initial Coin Offerings (ICOs). Given that the SEC is now not simply targeting firms but the directors (such as the case with Ripple Labs), this is leading to others establishing enterprises in a more clandestine manner. Is the threat of regulation and arbitrary sanctions forcing people to be less transparent? The following statement from Before CoinMarket Cap (BCMC) is not the type of assertion that a regulator or government would be happy to see: "We have assembled a team of professionals who are always glad to help you. Unfortunately, the government of our country has not yet decided on its attitude towards crypto currencies and ICOs, so we cannot declare ourselves in open forum, but this does not prevent us from working in real time....


On the face of it, Bitcoin and Ethereum continue to go from strength to strength. In January 2021, the number of Bitcoin addresses that received or sent this cryptocurrency reached an all-time high and was over 22.3 million. During January, the price of Bitcoin hit a high of over $41,000 as demand from institutions drove the price higher, resultant from hedge fund managers (and even quoted companies) disclosing they had or intended to invest into Bitcoin. Indeed, during this first month of the year, Larry Fink, CEO of Blackrock (the world’s biggest fund manager with in excess of $8 trillion of assets), endorsed Bitcoin by saying Bitcoin: “had caught the attention and could largely replace gold but warned of its growing popularity that has a real impact on the US dollar”. Interestingly, according some reports, nearly 10.7 million Bitcoins (which equates to almost 60% of all Bitcoins created to date) did not move last year. 

Performance of Ethereum


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Source: Coingecko.com

Ethereum’s price has also been driven higher, having risen by over 670% in the last year alone, and the number of individual Ethereum wallets has grown from 34million at the beginning of 2020 to over 51million at the end of 2020. So, ostensibly Bitcoin and Ethereum’s success and adoption is growing. However, there is a significant problem faced by both these Blockchains which could well prove to be their Achilles heel - not only are these Blockchains slow to process and record transactions but the cost to process a transaction comes at a high price.


Cost to process a transaction on the Bitcoin Blockchain


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Source: ycharts.com

In the last year, the cost to process a transaction on the Bitcoin Blockchain has risen from an average Bitcoin transaction fee (BAFT) of 0.85 to over 18.9 BAFT . This means that for low value items potentially the cost to record an entry could be greater than the value of the transaction. Meanwhile, the cost to process a transaction on the Ethereum Blockchain has also risen from 11 to over 233 although, in June 2020, ‘gas fees’ hit a massive 709!

Average Ethereum Gas price

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Source: ycharts.com

In order to process a transaction on the Ethereum Blockchain one has to pay ‘gas fees’ which are, in effect, the payment made to the miners for getting them to cover the computing of the transaction and have it added to the Ethereum Blockchain. The amount of money being spent on Gas fees is significant - just look at the fees as of 10th February 2020 in the last 24 hours just the top 5 biggest accounts and they generated over $11.7 million of fees on the Ethereum Blockchain 


Top largest users of ETH gas fees in 24 hours

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Source: Etherscan.com

However, whilst this is good, if you own ETH gas and you have seen the price increase significantly again (such as Bitcoin), it means that it is expensive to post a transaction on the Ethereum Blockchain. As an example, to buy a $500 of a DeFi token only in this last week, the cost to execute this one transaction was $107 i.e., over 20% of the value.

Aside from this, there are alternative Blockchains that can be used and it would appear these alternatives are gaining in popularity since they have all seen their prices appreciate strongly in the last month. Here is a small selection of firms which run their own Blockchain with the % representing the amount their tokens have increased in value  from 11th January to 10th  February 2021: Chainlink (72%), Near Protocol (111%), Polkadot (162%), Stratx (105%) and Waves (57%).


2 Months Ago

The size of global trade of goods and services is estimated to be $19 trillion. Commodities  account for approximately $4.4 trillion of this trade comprising of 40% energy (oil, gas), 30%  base and industrial metals (gold, silver, steel) and 30% agricultural and soft commodities  (i.e. items that are grown - coffee, corn, livestock). The size and complex nature of global  trade means there are many challenges and inefficiencies that occur when moving  commodities around the world. A lack of transparency and the reliance often on paper based, analogue procedures that were developed years ago are increasingly being  challenged as the world economy digitises. 

A combination of technology is enabling new data to be created and shared in a way that, only a few years ago, was almost confined to science fiction. For example, Internet of Things  (IoT), AI, Cloud computing and Blockchain technology are now facilitating the tracking of  ships, planes, trucks (and the commodities they carry) in real-time. This greater  transparency and the capacity to be able to offer provenance for the end user  subsequentially can lead to more ESG-compliant business practices. For instance, cobalt is a  key commodity needed to make electric car batteries, with Ford and IBM now using a Blockchain-powered platform to ensure that child labour is not being used in the production  of cobalt. Another example of how Blockchain technology is being used in the commodity  sector exists in Africa where the Nigerian commodities exchange AFEX has created an app,  Warehouse Receipt Checks. AFEX is looking to reduce fraudulent receipts being created in warehouses by encrypting the data and storing it on a Blockchain-powered platform, enabling banks and other lenders to verify if a warehouse receipt has been previously  financed. This process ought to mean it will be easier, especially for smaller farmers to be  granted loans and access credit since there is greater transparency (and thus more trust) as  to what commodity is where, at any one time.  
However, AFEX is no stranger to engaging with Blockchain technology as, in 2018, Sterling  Bank and a company called Binkabi, an Africa-focused blockchain start-up, also launched a  Blockchain-powered commodity finance service. Furthermore, in the Caribbean, Blockchain  technology has been harnessed by Agriledger to increase by 750% the amount of money  farmers in Haiti receives for their mangos. To further and guarantee the market viability and  access of the Fresh Fruit Value Chain in Haiti, the government has opened a tender for  Mobile Units that can be used for all the processing. The units will be owned by the farmers  and create greater opportunities for commerce.  
Likewise, producers of other soft commodities such as sugar, coffee and wheat, to name  just a few, are also using Blockchain technology to weed out inefficient practices. Without  doubt this news is encouraging since, according to the publication, Packaging News, “food  waste is evident across the entire supply chain with 1.6 billion tonnes of food being lost or  wasted worth a staggering $1.2 trillion”. Therefore, with the use of Blockchain technology, once produce can be tracked along its supply chains inefficiencies can be more easily  identified and action taken to cut waste.. 
However, Blockchain technology is not only being adopted for soft commodities. Vakt is an  organisation which has investors such as ARAMCO, BP, Chevron, Shell and Total and Vakt and has been used successfully in the North Sea to improve the logistics, financing and  trading of oil. The creation of one data base with the ability to be shared by those parties using the Vakt platform (whilst maintaining privacy of each transaction) has allowed the removal of a central data base, whereby reducing the risk...


The accepted stance taken by many regulators is that they do not regulate technology but  regulate those who use technology and the outcomes and actions that result from it. However, Nick Cook, Director of Innovation at the FCA in the UK, has raised the question:  “Should we talk solely in terms of ‘outcomes’ while remaining ‘agnostic’, or can we show a  preference for certain technologies? Can we remain ‘technology-neutral’ in a world where  technology is so embedded in the delivery of financial services and so fundamental a driver  of consumer outcomes?”. Interestingly, Cook also continued in the same speech to say, “It  seems untenable for regulators and central banks to not have an opinion on technology  given it is so embedded in the markets we regulate”. 

It is not simply within financial services that regulating tech is being discussed. In Europe there has been considerable discussion about how to regulate Artificial Intelligence (AI) as  the Europeans look to take a lead on regulating this wide-ranging branch of computer  science and address the challenges around protection, liability and discrimination.  Unsurprisingly, this inevitably leads to the question of ‘algorithmic accountability’ - i.e should companies which operate AI platforms be held liable for the results of their  algorithms? Furthermore, another challenge arising is that even some of the brightest  ‘techies’ cannot foresee the potential consequences of what they have created. A prime example of this occurred when Facebook was required to shut down its project AI on its  smart speakers when its internet bots (computer software applications) were discovered to  be ‘talking to each other’ in a language not understood by the programmers. Interestingly, Musk, who is a massive fan of new technology and innovation is very circumspect about AI, claiming: “AI is a rare case where we need to be proactive in regulation instead of reactive  because if we’re reactive in AI regulation it’s too late,” adding that, ‘AI is the biggest risk we  face as a civilisation”. 
When it comes to Blockchain and Digital Assets there are clearly some challenges and  questions that have emerged which will need addressing, such as: 
• Data security and access 
A public Blockchain, such as Bitcoin: once a record has been created it is not possible  to amend or delete that data, therefore potentially directly contravening the General  Data Protection Regulations (GDPR) which became law across Europe on 25th May  2018. GDPR states that one has a “right to be forgotten”, but how can your  information be removed from a Blockchain that is immutable? 
• DeFi 
Software developers, such as Andre Cronje, are creating products and services that  are available on DeFi platforms, and then accessible globally. Only in December 2020  Cronje released his ‘yCredit’ protocol, having already created various other DeFi  applications - Deriswap, Keep3r Network, StableCredit, and yInsure.Finance. These  various software tools have been released but the users will have no redress to Cronje as he is not regulated. Often the buyers of these DeFi tokens will reside in jurisdictions far away from wherever Cronje inhabits.  
• Cryptos - unregulated assets 
To date, many cryptocurrencies have not been regulated so how do you regulate the  likes of Bitcoin which, allegedly, was invented by someone called Satoshi Nakamoto  whose whereabouts is unknown. But how long Bitcoin will remain unregulated is up  
for debate as the head of the European Bank, Christine Lagarde, is now “calling for  Bitcoin’s ‘funny business’ to be regulated”? 
The need for regulations in other areas that are likely to use this Blockchain technology will also need to be considered - such as driverless cars. A ‘heady cocktail’ of technology including AI, Big Data, Blockchain, Internet of Things (IoT), Machine Learning, to name  just a few, are likely to be the backbone of driverless cars. Indeed, Google’s driverless  vehicles have already covered over 20 million miles...


One of the ways regulators try and protect ‘less sophisticated investors’ is to only allow High Net Worth (HNW) or professional investors to access certain types of funds. The use of options and futures (derivatives) by an asset manager to reduce a fund’s exposure to the stock market or a particular equity (under the guise of ‘efficient portfolio management’ practices) has been permitted by fund managers for years.

Historically, very few retail funds have used derivatives, leaving these more exotic financial tools to the ‘Hedgees’ i.e., hedge fund managers. They use futures and options for gaining exposure across a wide variety of assets to hedge their funds from market volatility, as a means to get exposure to an asset in a cheaper format or to gear/leverage their fund. However, most jurisdictions believe that if you have lots of money (i.e., an HNW investor) you can invest in the alternative funds such as hedge funds. Not only can an HNW investors afford the high minimum initial investment for these funds, but HNW investors are presumed to be more sophisticated, or have better access for obtaining appropriate professional advice before investing. 

Meanwhile, the DeFi sector would appear to be disbanding the arbitrary restrictions that regulators have historically imposed, enabling investors to allocate relatively small sums of capital to investment strategies - which may be the same, or very similar, to a hedge fund manager. An example of this is
ByteTree which has built a sophisticated range of trading algorithms to manage its’ Bitcoin and general fund (focused on trading Bitcoin) and has a minimum investment of $100,000. Alternatively, it is possible via TokenSets to invest a much smaller sum and gain exposure to ByteTree’s trading. To invest, all that is required is a phone number, an Ethereum wallet and an email - no KYC and no AML so extremely easy, but also potentially open to abuse.

TokenSet’s ByteTree performance v Bitcoin

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Source: TokensSet (the vertical lines on the chart above indicate when BTYE token was rebalanced)

Whilst the TokenSet’s fund is not exactly the same as the ByteTree’s fund, it is a way to access the latter’s fund managers. Given the performance against Bitcoin, it is easy to see why Byetree’s fund management skills are gaining so much interest. However, when investing via TokenSets there is no requirement to complete KYC or AML procedures, so ‘super easy’, but also potentially open to abuse.

But caution is required, as a $500 investment would incur a ‘listing fee’ of $107, i.e., 20%. When asked about the listing fee, TokenSets stated that it is the cost of accessing the Ethereum network. The listing fee so is high due to the current demand to use the Ethereum Blockchain. Such a high fixed fee will no doubt act as a deterrent for smaller investors - so will this potentially give comfort to regulators?


One of the most common questions we get asked when giving presentations is ‘Are companies really using Blockchain technology?’. To be honest, this was one of the reasons that Digital Bytes came to be in March 2018, as back then most of the engagement with Blockchain technology (apart from cryptocurrencies) was about exploring proof of works - thus how this technology could be used. However, as we have commented before, the driving force for greater adoption of Blockchain technology is no longer the ’cyberpunks and techy geeks’ but is now very much being driven by governments and global corporations. Here are just a few examples:

Alibaba - one of the largest holders of Blockchain technology patents globally, using this technology in supply chain logistics, financial services and the fight against counterfeit food.

Ernst & Young - is actively involved in the development of the Baseline Protocol, which uses the Ethereum Blockchain to record business data. Baseline Protocol is being used to share business data among multiple stakeholders and by companies such as Coke One North America and SAP.

IBM - Hyperledger Fabric is one of the keyways in which ‘Big Blues’ is rolling out Blockchain technology to its clients. IBM’s Food Trust network is used by household names such as such as Nestlé, Dole, Walmart and olive oil giant, CHO. IBM has also been very active in the shipping sector, working closely with Maersk’s TradeLens platform to digitise the movement of global shipping logistics and supply chains. 

Hedera Hashgraph - developed in 2016 and designed to offer secure applications in real-time. Hedera Hashgraph has an impressive range of global corporations that own and govern  the organisation have just announced that U.S-based AVC Global subsidiary Medical Value Chain will be offering a track-and-trace platform for global pharmaceutical supplies to Bahrain. 

The Hedera Governing Council

Source: Hedera Hashgraph.com

IconLoop - South Korea is very active in the use and development of Blockchain technology. IconLoop has applications using Blockchain-powered platforms in banking, healthcare and government sectors as well as using the technology for driving licenses, which it is currently developing.

JPMorgan - the biggest bank in the United States has gone on to create the JPM Coin, despite its CEO being verbally disinterested in Bitcoin. JPMorgan is a member of a blockchain consortium comprising of 130+ banks called the Interbank Information Network, using technology to improve compliance monitoring and controls whilst reducing the time it takes to process payments. 

Oracle and Microsoft - these two global-technology ‘titans’ both sell cloud computing services offering blockchain-as-a-service attracting companies such as GE Aviation, Singapore Airlines, Indian Oil, Nigeria Customs, Starbucks, JP Morgan.

PayPal - as one of the largest online payments systems, it has accepted Bitcoin for years and now offers a service to institutions enabling them to hold cryptocurrencies as part of their treasury reserves. PayPal has recently stated that “it was looking for a way to understand how to leverage blockchain to better serve merchants and users.”

Salesforce - Salesforce Blockchain offers an additional facility to Salesforce’s customer relationship management system (CRM) which already has 150,000+ clients. Lamborghini is using the Salesforce Blockchain-powered platform to prove the heritage of its cars. This proof of provenance can substantially increase the value of a Lamborghini.

Visa - five years ago, Visa invested in a blockchain start-up called Chain, then proceeded to develop ‘Visa B2B Connect’ with Chain as a fast and secure way to 

process business-to-business payments around the world. Visa also offers a number of crypto debit cards such as Binance, Coinbase, Baanx and Revolut.

World Economic Forum - of all the supernational organisations, the World Economic Forum is one of the most active and has established the Global Blockchain Council, helping with the adoption of Blockchain technology for...


Blockchain technology, as many people know, offers the ability to create a highly secure data base whereby information can be shared on a permissioned basis. This means it is possible to share information with whom you wish, and for how long. For example, at a doctor’s appointment where access to your medical records is needed or at an interview for a new job, you could authorise the involved parties access to the relevant information for as long as they required it. Such a solution could prove to be a judicious way of preserving confidentiality of your data as well as helping to comply with GDPR regulations since your personal information could be retrieved by you, when you wished; and being digital, would be ideal for our increasing on-line lifestyles.

Furthermore, Blockchain technology is being used by governments as a means to do away with paper records. In Australia, the government is looking to remove the requirement for cheques, paper signatures and the need to place notices in newspapers, as outlined in its recent Treasury consultation paper, thus opening a way to use Blockchain technology instead. After all, the practice of posting a notification in the London Gazette, which dates back to 1665, as there are various Laws, Acts, Rules, Orders and Government decisions that require to be published. At least the Gazette is now published on-line; so, if you have the urge to check to see if you are in the New Year’s Honours List, you know where to go! Meanwhile in Germany, there will no longer be the requirement to issue securities in a paper-based format with the German’s authorities now allowing certain debt instruments to be issued digitally on a Blockchain-based register. This is also due to be the case in Switzerland as the Swiss have legislation coming into force on 1st Feb 2021 enabling shares, bonds and other securities to be issued electronically, thus  removing the need for paper-based documentation.
Post this last year’s global pandemic, a digital solution to your identity (combined with your COVID-19 vaccination details) may well be the only way for permitted travel to certain countries in 2021, such as Australia. The International Air Transport Association (IATA), the lobby group of the world’s airlines, stated it would launch a digital health travel pass early next year 2021 which would include a passenger’s COVID-19 vaccination data. The World Economic Forum has developed an app called CommonPass, not using Blockchain technology but relying, instead, on Amazon Web Services. Another solution called AOKpass is being built by SOS, (the??) world's largest medical and travel security services firm, based in Singapore. SOS has partnered with the International Chamber of Commerce which, itself, is using Blockchain technology.  

How AOKpass works


Notably, another coalition involving Microsoft, Oracle and Salesforce is working on a digital COVID-19 vaccination passport that will encrypt data regarding an individual’s vaccination history, the proposal being that it will be downloadable onto a mobile phone. Those without a mobile phone can print off a QR code to prove they have been inoculated. As yet, it is unclear whether this cohort is using Blockchain technology but, in December 2020,  Salesforce was reported to have been working with IBM in creating a digital passport that did use a Blockchain-powered platform. It is hoped that these digital proofs of vaccination will enable people to travel, attend international sports events and concerts etc with less concern. However, will we see people being banned/deported if they do not have their data available?

One wonders that if corporations such as those mentioned above are able to gain access to government records such as health records, then why not passport details or driving licences so doing away with more paper-based documents? One of the irritations when dealing with any official/regulated entity is the requirement to prove who you...

This is a key theme in Digital Bytes frequently being asked about by readers. Digital currencies have the potential to offer governments a new tool with which to control their economies, help to engage with the unbanked/financially excluded as well as offering the ability of faster and cheaper payments for corporations and individuals.

The Chinese are continuing to roll out their own Central Bank Digital Currency (CBDC). They are once again giving away money, but it can only be spent in those shops determined by the government and with the stipulation to be used by a certain date i.e. not saved - unlike in the UK where on one hand governments have been handing out cash only for UK households to pay down their debts. During the first COVID-19 pandemic lockdown, UK consumers paid off £7.4 billion of debts  The Chinese are also trying to reduce their reliance, together with many of world’s other economies, on the US$. Qian Jun, the chief economist of China’s ICBC International Bank, believes that if we were to see the launch of Facebook’s Libra (now called Diem) or a digital US$ it would further increase dependence on the $. “If Digital Currency Electronic Payment, (DCEP) can seize this historical opportunity and combine it with the ‘Belt and Road’ construction and global value chain reconstruction, it will promote the internationalization of the RMB and the ‘network effect’”. Said Qian Jun.
Meanwhile a subsidiary of Alibaba (which along with Tencent dominates the on-line payments landscape in China) has carried out tests on its mobile app with the Chinese CBDC in Shanghai so, seemingly, it will not be long before China’s CBDC will be launched nationwide.

An estimation by the International Monetary Fund (IMF) is that over 1.7 billion people globally are unbanked. Even in the US, it is calculated that over 8.4 million households do not have a bank account. Within the Hispanic community there are as many as 17% of households un-banked, which makes it complicated and time consuming to give these citizens the financial support they need as a result of COVID-19. A digital currency signifies that money can be distributed and, more importantly for the finances of a country, taxes can be collected digitally since people are increasingly using their mobile devices to pay for goods and services. In terms of saving money, the Diem Association claims it costs 7% to make international payments, taking up to five working days. Compare this to a digital currency where payments are almost instant, and the costs are measured in cents and pence.

The market capitalisation of Tether

Source: Coingecko.com

The amount of money being invested in stablecoins continues to increase with the largest stablecoin, Tether (which is pegged to the US$), now being capitalised at over $24 billion. Worldwide, other governments apart from China are waking up to the potential offered by digital currencies. In the UK, we have seen Her Majesty’s Treasury (HMT) issue a consultative paper looking at crypto assets and stablecoins. HMT is considering the introduction of a new category of regulated tokens to be known as ‘stable tokens’, i.e. tokens backed by a fiat currency. The Treasury is also looking at introducing regulation for those organisations involved in the creation and managing of this type of asset. Indeed, according to Christiane Lagarde, former Managing Director of the IMF and now head...