On Tuesday

Chinese President Xi Jinping believes corruption to be its government’s biggest threat

The informal/black economy means it is difficult for the Chinese government to collect the correct taxes due, it also creates inequality in society, and is thought to be one of the ways that Chinese citizens take money out of the country. "The major business for most underground banks is now contra payments, leading to huge capital outflows and great damage to society. It's the major target of our crackdown," according to a recent notice issued by China's Supreme People's Procuratorate and reported in the South China Morning Post. The black economy arguably is responsible for China being such a huge producer of counterfeit products (reportedly accounting for over 50% of all counterfeit goods manufactured globally), which often rely on cash transactions, so once again avoiding the collection of taxes.
The above illustration is calculated by Transparancy.Org (a not-for-profit organisation located in Berlin), which studies 180 countries to create the “Corruption Perception” scale. Based on the latest data, from 2017, China is ranked 77th. One of the reasons that this type of analysis is important is that foreign investors are less likely to invest in a country that has high levels of corruption. Less foreign investment leads to fewer jobs being created and slower economic growth.
In the past, while the Chinese economy was growing at 8% to 10% a year, it seemed that China turned a ‘blind eye’ to its black economy. However, as the economy slows and China’s once-massive trade surplus potentially turns to a negative, Chinese authorities are looking at ways that it can better control money in its economy.
China’s central bank, the People’s Bank of China (PBOC), has the dual mandate of maintaining price stability while promoting growth, using a selection of monetary policies. One of the ways that the PBOC is hoping it can assert greater control over its economy is by launching its Digital Currency.
China's current-account surplus has been shrinking rapidly, to less than $50 billion in 2018 from more than $300 billion in 2015, and this trend is expected to continue. After rising to nearly $60 billion in 2019, it will fall to about $20 billion in 2021, according to forecasts by the International Monetary Fund. The trade war between China and the USA shows no signs of ending. In 2018, China exported $539.5 billion worth of goods to the U.S., 4.5 times more than the U.S.’s $120.3 billion worth of shipments to China. However, China’s goods trade surplus is around $400 billion p.a., while its trade deficit in services continues to grow. Once you then add in the impact of “shopping sprees”, the United Nations World Tourism Organisation calculates that Chinese tourists overseas spent $277.3bn in 2018, compared to Americans, who only spent $144 billion!  It is not difficult to see where the money is going.
In the light of the huge amounts of cash that is “sloshing around” the Chinese economy, the PBOC believes that by issuing a Digital Currency, it can hopefully take control back. The crux of the proposal is to initially replace...


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There has been a lot written about the $100 trillion bond market and the $65 trillion equity market being “tokenized”, not to mention $8.4 trillion of global Real Estate, commodities, art, cars, Intellectual Property, etc. 

Indeed, Stephen McKeon who is an Associate Professor of Finance at the University of Oregon believes that tokenisation will transform capital markets, and has identified in his Security Token Thesis, eight reasons why.
·         24/7 Markets: Traditional bond and equity markets are not open 24/7 and some commodity markets, like copper, only trade 5 hours a day 5 days a week. Trading Security Tokens 24/7/365 is possible.
·         Fractionalization: The fractional ownership of particularly illiquid assets, such as cars, art, property, etc will allow retail investors access to these asset classes. As we see more of the smaller investors buying and selling, this ought to increase the liquidity and save investors’ money when they need to sell their investments in a hurry.
·         Rapid settlement: Traditional exchanges can execute trades in microseconds. However, the settlement can take days. Blockchain technology can potentially offer “real-time” settlement.
·         Cost reduction throughout the life-cycle of security: Blockchain technology uses one database/ledger, so offers the opportunity to reduce the number of intermediaries that need to be involved in buying and selling of Security Tokens.
·         Increased liquidity and market depth: The majority of private assets are illiquid, which means the ownership interests are costly and difficult to trade. Secondary markets, however, enable security tokens to “lock in the capital without locking in the investors”, as explained by Harbor CEO Josh Stein.
·         Automated compliance: Security Tokens can have compliance controls built-in. This means that regulatory compliance can be pre-programmed and algorithmically enforced before a Security Token trading. This ought to lead to lower compliance costs, minimal reliance on human interaction, less likelihood of regulated firms being fined and therefore, lower professional indemnity insurance premiums.
·         Asset interoperability: Nowadays, most asset ownerships are already represented digitally. The real problem is that the data is not “structured”, and so it is hard for existing systems to be able to monitor and control the data. Structured data on a Blockchain, in conjunction with other technologies - like Artificial Intelligence (AI), Smart Contracts, Internet of things (IoT), etc - overcomes many of these challenges. It will enable the ability to compliantly trade assets with different systems, therefore allowing them to operate in an interoperable manner.
·         Expansion of the design space for security contracts: Security tokens allow us to build in contractual features that have previously been unfeasible, thus enabling the economic concept of complete contracts.
 
The use of Blockchain technology to create Security Tokens oughts to enable the buying and selling of many types of assets, those becoming more efficient, compliant, cheaper, faster and secure. It also ought to make capital markets easier to trade, be more inclusive and democratic, as well as be more relevant for tomorrow’s investors – millennials. Such investors are increasingly demanding to be able to trade using mobile devices 24/7, and not to have to use financial advisors, broker-dealers, who they often see as unnecessary commission-hungry intermediaries.
For the digitisation of assets and the widespread adoption of Security Tokens, there are still some key infrastructure issues that will need to be addressed,...


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Last Friday

University College of London (UCL), which was one of the beneficiaries of Ripple’s $50 million University Blockchain Research Initiative scheme last year, recently held a conference looking at how Blockchain technology is likely to impact the construction industry.

At the event, a leading barrister Jeremy Barnett spoke about how he believed Blockchain technology can add tremendous value for the owners of Real Estate.” Take as an example a new shopping centre. If all the critical information about the project was held on a Blockchain, the landlord would know at every stage during the construction of the building who had done what and why. This would create a time-stamped and immutable record which could be used for a variety of requirements -insurance, bank financing, paying contractors and even potential litigation if this were to occur at a future date. This data could even be used to help in the fractionalization/tokenization of outlets within the shopping centre, to identify who is to receive an ongoing rental income. Therefore, having “Structured data”, one can add value to an asset such as a property”.
 
The suitability and safety of a building is an important issue, especially in the UK, where there are potentially corporate manslaughter charges that could be bought against company directors. Company directors are potentially personally liable in the event of an accident and are at even greater risk if an employee’s life is lost while at work e.g. shop or office workers, or potentially tenants (in the case of a property company).
 
If data on a building is held in a structured and digitised manner, it would be possible for Smart Contracts to be used to identify when maintenance checks need to be carried out -automatically notifying when health and safety checks are required i.e. inspections on lifts, fire extinguishers, etc.

On a more sober note, the barrister Barnett said that “If such a system had been used in Grenfell Tower, we would not only know who had made critical decisions about design and materials but also it would be possible to automate many of the processes that take place, such as monitoring of fire alarms and sprinklers, to make the buildings safer. Using such a system, all those who design, build, operate and own new buildings will be able to comply with the onerous rules that will be introduced by the new Fire Safety Regulator.”

In a recent report from Harvard Business Review, which looked at How Blockchain Will Change Construction, it cited several examples of how the technology is being applied in the property sector. According to Propulsion Consulting founder Marc Minnee, who is advising on a large project in Amsterdam, “Blockchain provides a platform for clearly cascading work products down the chain and holding everyone accountable for completing key tasks,”. Meanwhile, the risk consultants at Aon, believe that 95% of building construction data currently gets lost on handover to the first owner.

Briq, a California-based Blockchain firm, is using a Blockchain-powered platform to create a “living ledger” of everything about a building - from the initial sod of earth being dug to the latest safety inspections and those potentially minimising risks for those who own and insure the property.
 
It is possible, in conjunction with Artificial Intelligence (AI) and Internet of Things...


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2 Weeks Ago

Bitcoin continues to dominate the Cryptocurrency market, accounting for over 63% of the entire capitalization of this Asset Class.



This figure is potentially underestimating the significance of Bitcoin, as many of the 5,200 tokens that have been created from ICOs were funded by Bitcoin and Ethereum. Therefore, if you excluded the value of Bitcoin from those tokens that were initially funded using Bitcoin and rise and fall on its “coattails”, the real impact and importance of Bitcoin would be revealed. However, as we see more Security tokens being issued, which will be backed by real assets such as property, equities, commodities and bonds, the dominance of Bitcoin is likely to lessen. 

The European Central Bank (ECB) published a report, entitled ‘Understanding the crypto-asset phenomenon’. The report outlines the ECB's plan to develop a monitoring framework of the cryptocurrency market. 

Will we see statistical reporting and analysis by organizations, like the ECB, dividing their reporting on Cryptocurrencies between the current largely unregulated digital assets, that were mainly created as a result of an Initial Coin Offerings (ICOs), and the new regulated Security Token Offerings (STOs).

Source: Cryptocompare and ECB calculations

 

We continue to see trading volumes grow, as illustrated above, and greater institutional involvement as Facebook, Walmart, JP Morgan, etc announce the potential launch of their Cryptocurrencies. There is going to be a need for higher quality analysis and reliable data for regulators, investors and institutions alike.

 

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3 Weeks Ago

Consumer brands and retailers are under continued pressure from many different sides concurrently.

Consumer brands are experiencing increased competition from Asian manufacturers and, at the same time, they are often suffering because of information asymmetry with ever-larger distribution and retail partners. Large organisations, like Amazon and, online German fashion retailer,  Zalando, collect and control the data regarding customer behaviour, pricing and product preferences.

The high street is also battling the online retailers, which often have an advantage in terms of operating costs, range of products and potentially most important of all - “data”. Meanwhile, online retailers are in a “race to the bottom”, with price comparison services making it difficult to price products above the lowest price, while service levels and reputation goes largely unnoticed by the consumers. Furthermore, online retailers are also struggling with distribution costs, especially due to the high rates of returns which, for fashion retailers, can be as high as 40%. Online business is growing fast and in the USA it now accounts for over 30% of sales for retailers like Nordstrom and Macy’s.
In response to these challenges, consumer brands are increasingly looking to expand their geographical market reach, to raise their brand’s profile and to collect more data from consumers directly.
Blockchain technology can help consumer brands to accomplish some of these goals. For instance, by incentivizing consumers to scan tags on products, consumer brands can accomplish several things at once:
Provide more information about the product such as provenance data and exclusive content, with the intent to increase the brand value
Collect data directly from the end user e.g. through surveys and quizzes
 Reward brand loyalty e.g. through loyalty programs or cashback.
 Incentivize consumers to refer the brand and products to their friends
Create cross-selling opportunities e.g. selling insurance or service agreements
Blockchain technology can ensure that reliable data is provided, e.g. regarding provenance, and makes these reward-based marketing solutions cost-efficient, even when “rolling them out” on a global basis. No more need to deal with multiple local currencies and no need to run a complex system to manage the loyalty program balances and transactions. All data is securely stored on a Blockchain, and interoperability between the various systems is possible. For example, Loylogic, which was established in 2005, has a global network of more than 500 retailers and 2,000 online stores offering millions of products and services linked to various loyalty reward schemes.
Retailers can benefit from Blockchain technology in much the same way. They can use similar reward-based marketing techniques to improve customer engagement and data collection. High street retailers can incentivize consumers to visit their stores, not by giving discounts, but by providing more value in terms of rewards, more exclusive products and those controlling access to a more exclusive experience. 
For instance, a football shirt sold in a store using Near Field Communication (NFC) can offer exclusive video content from the player, or an exclusive item for an “Esports game”, whereas the same shirt bought online does not come with these value-added features. So, if you want to be Ronaldo in FIFA 20 on your PlayStation, then you have to go to the...


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The number of Digital wallets continues to grow, with Coinbase recently announcing that it now has over 30 million users on its platform - a growth of 5 million in just the last ten months!

The independent statistical research company, Statitsica, claims there are only 40 million Digital wallets in existence globally. Can Coinbase really have 75% of all wallets?


Source: www.Statitsica.com


According to the website Blockchain.com, as at 22/07/2019, there were just over 40.6 million Bitcoin wallets so it would appear that potentially Statitsica’s stats may be a little out of date. 


One has to be careful when looking at statistics, as according to Finder.com, 97% of Brits are yet to buy a cryptocurrency and 31% have not bought because they believe it’s too high a risk. However, the figures Finder.com is quoting in its June 2019 article were taken from a survey carried out in 2018!


Nevertheless, Digital Assets continue to be a niche asset class although, with Facebook’s announcement wanting to launch its own Digital Currency, Libra will potentially massively increase the number of digital wallets.

 

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Repsol, the Spanish energy company, has recently invested in FinBoot, which is a business with offices in London and Barcelona.

FinBoot has been developing a Blockchain-powered platform to improve the efficiency of tracking the multitude of samples that energy companies need to continuously create. Repsol typically has over 60,000 samples it has to create, as refining and transporting petrochemicals requires products to be sampled and checked in order to meet Repsol’s clients’ requirements. “Currently, there is a lot of rework involved in these types of processes where we handle a large number of samples due to labelling errors, information losses, or incorrect connections between information” explains Tomas Malango, at Repsol, adding “it allows us to identify the samples correctly throughout their whole life cycle.” The existing system is largely manual and paper-based, and therefore subject to human error and mislabelling so is time-consuming, as paper records often go missing.
Repsol believes that it could save up to €400,000 p.a. using this new Blockchain platform and FinBoot is now looking at how similar technology could be used to help other industries, such as the fashion sector where it needs to trace the provenance of the materials used in making clothes.
Meanwhile, the co-founder of Apple, Jo Wozniak, has invested in a firm that uses Blockchain technology called ENFORCE project. Wozniak reportedly said “ENFORCE aims to bring money savings on energy, but it also helps the environment”, a factor he said was important to him. He further added, “Blockchain will bring improvements to energy use and reduce consumption without consumers needing to change their habits”.
Where Blockchain technology is being used in the energy sector.

Source: https://www.indigoadvisorygroup.com/blockchain
 
Indigo Advisory Group, in the chart above, keeps record of various ways globally that Blockchain technology is being used for different purposes, which is updated as it discovers new initiatives. 
Blockchain technology is increasingly been used in the energy sector as it potentially provides solutions across the energy trilemma: 1) it reduces costs by optimising energy processes, 2) it improves energy security in terms of cybersecurity, but also acts as a supporting technology that could improve security of supply, and 3) it promotes more renewable energy generation and low-carbon solutions.
In a survey of 140 Blockchain research projects, Science Direct has identified many ways that Blockchain technology could help the energy sector:

 Billing: Blockchains, smart contracts and smart-metering can offer automated billing for consumers and generators. Utility companies could benefit from energy micro-payments, pay-as-you-go solutions or payment platforms for pre-paid meters.

Sales and marketing: Sales practices could change according to consumers' energy profile, individual preferences and environmental concerns. Blockchains, in combination with artificial (AI) techniques, could identify consumer energy patterns and therefore enable tailored and value-added energy products provision.

Trading and markets: Blockchain-enabled distributed trading platforms could disrupt market operations, such as wholesale market management, commodity trading transactions and risk management. Blockchain systems are currently being developed also for green certificates trading.

Automation: Blockchains could improve control of decentralised energy systems and microgrids. Adoption of local energy marketplaces, enabled by localised P2P energy trading or distributed platforms, could significantly increase energy self-production and self-consumption, also known as behind the meter activities, which could potentially affect revenues...


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