Pay-to-play was the first model involving gamers having to pay to play games without any earning opportunity. The second model involves free-to-play (self-explanatory), whilst the third and latest model is the play-to-earn (P2E) ecosystem. 

The play-to-earn (P2E), or sometimes called play-to-pay, business model (a recent innovation in the gaming industry) offers gamers ownership over in-game assets and thus allows them to increase their value by actively playing the game. It provides users with the opportunity to not only add value, but exchange and/ or sell the assets they have earnt/played for to other gamers. Players are creating value for other players and the developers by participating in the in-game economy and, in turn, they are rewarded with in-game assets. These assets may be anything - NFTs, cryptocurrencies or in-game resources that are tokenised on a blockchain. Most P2E games have native tokens for in-game purchases and trading between players and they derive value through the use of their tokens. Axie Infinity, a leading example of P2E games, counts on players making a hefty upfront investment in Axies (the game-specific NFTs).The in-game assets earned from playing can then be traded at an appreciated price with other gamers. 

Whether or not you earn from playing, or the amount that you earn, depends on the length of time you invest in the game, the game's popularity, and the demand for the in-game assets or tokens from other gamers.

How the play-to-earn model stands out

• asset ownership - play-to-earn gaming platforms, unlike the traditional game, use NFTs which are owned by the users. Gamers can mint and customise NFTs. They can also be transferred to NFT marketplaces for sale or converted to cryptocurrencies or fiat currency. NFTs, used in navigating through the game, can come in the form of avatars, land, pets, etc.

• decentralisation - play-to-earn ecosystems typically operate under a decentralised governance framework, allowing their users to participate in crucial decision-making processes.

• earning opportunities - aside from offering players interesting gameplay, play-to-earn gaming platforms make earning opportunities available for players. Gamers can collect in-game assets whilst they carry out different tasks, depending on the gameplay.

Is the business model sustainable?

The sustainability of the business model depends on many factors. Indeed, problems linked with this concept exist since the appeal of earning money could dilute the gaming experience. One of the identified risks is a game's ability to continue growing the economy it intends to build. According to Adrian Kolody, a DeFi startup founder, the only way a play-to-earn model can be sustainable is by making sure the game's users are of high quality. This may not be true for all cases. For instance, Axie Infinity was recently reported to be going through a difficult time - Axie is tied to crypto markets and players get Smooth Love Potion (SLP) tokens for each game they win and, in larger tournaments, can earn another cryptocurrency, Axie Infinity Shards (AXS). The company, as of October 2021, had raised more than $160 million from investors and Sky Mavis reported that Axie Infinity crossed 2 million daily users that same month. However, in March 2022, Axie was said to be in deep crisis and had lost about 40% of its daily users; AXS price had dropped to $56 from $165 whilst SLP (which had earlier traded as high as 40¢), was at 1.8¢. 

Sources: Coinbase, Sky Mavis

Unsurprisingly with the crash, players lost their money. Although Axie announced its plan to reimburse the victims and repair its infrastructure, it is yet to do so. Microsoft, which paid over $68billion for Activision Blizzard, was looking to start offering play-to-earn assets as a way in which to recoup some of the capital it had spent acquiring the business. Activision Blizzard had polled gamers to assess interest in NFTs, despite the Game Developers Conference’s State of the Game Industry Report declaring that the majority of the 2700 game developers surveyed having said they had no interest in NFTs. So, the jury is very much out as to whether Microsoft, or indeed other on-line game developers, will expand their play2play business models.

Although the play-to-earn model may seem too good to be true, it actually is. Whilst some players have only eked out small winnings or have never won, many gamers have already made significant money. However, as to be expected, some unscrupulous providers are in the business for personal gains and to postpone payoffs by preventing you from reaching your payout target. It is advisable to be prudent and do your research so as not end up wasting your time, or at worst, losing your money.

This week, Bitcoin fell below $21,000 for the first time in over 12 months. The cryptocurrency is down more than 68% from its all-time high, close to $68,990, back in November 2021. Likewise, Ethereum is down 63% from the historic highs set in the same month. In both cases, over 50% of the decline occurred this year. Experts have warned that things could continue to deteriorate, although the current situation doesn’t yet match the severity of the 2018 crash (in which Bitcoin lost 80% of its value). Nonetheless, investors are at a crossroads. Many, following the old investment adage ‘buy the dip’, are looking for a piece of the volatile crypto market in the hope that this is a temporary downturn rather than a long-term bear market. Furthermore, some investors, in a bid to be careful, have asked the critical question: “Should I buy the dip?"

Is it time to buy the dip?

So, back in November 2021, Bitcoin was trading at around $69,000 but, suddenly, it slipped to around $55,000. It was called 'dip' and, unsurprisingly, many investors jumped to 'buy the dip'. A month or so later and Bitcoin fell to around $45,000. Here was another chance to buy the dip, and many investors took that chance. Again it dipped, this time to around $33,000, and once again the hopefuls bought the dip. Currently, Bitcoin is trading at around $23,000. The principle of buying the dip is based on an assumption that these price drops are temporary aberrations, correcting themselves over time. The buyers hope to exploit these dips by buying at a relative discount and reaping the rewards when prices rise again. It has happened many times before and it can happen again. However, cryptocurrency markets are notoriously volatile; hence buying crypto at any price - dip or no dip - is risky. Although prices could return to previous levels, on the other hand, they could leave your investment underwater by falling even further. 

Total market cap: from over $3trillion to $1trillion

Source: Coingecko

If the past is prologue, then the current crypto crash could bounce back as it did last year when prices fell to similar levels before returning to pre-dip levels. But of course, there is a possibility that they might not. Worthy of note is, that every kind of investment has past performance which is no guarantee of future results. Whether or not to buy the dip cannot be answered in one word. You may have to ask yourself questions before taking either step. What amount of money can I afford to lose, since any investment has its inherent risk? How long am I prepared to wait if the price does not rebound in the short term? Do I set a stop loss - i.e. if the price falls by another 25%, do I stay invested or leave an order with an exchange to sell?

Why is crypto crashing?

The specific reason for the current dip is yet to be agreed on. There are, however, speculations. The decline has been attributed to comments made by Bill Gates on Reddit, whereby he shared his thoughts and displeasure about how the value of crypto is based on what one person decides. Tesla also made a U-turn on accepting Bitcoin as payment for its products. China, in the latest wave of restrictions on cryptocurrencies, ordered Bitcoin mining in its Sichuan province to shut down completely and told banks to stop supporting crypto transactions. All these are thought to have had an impact on the global crypto market. The crypto crash has also been linked to a massive sell-off by investors amid heightened inflation fears, the crash of Terra stablecoin and the pausing of withdrawals by the crypto-lending service, Celsius. Investors are also staying away from riskier assets, consequently being reflected in the stock markets as well. 

Crypto price correlation with tech stocks

One of the limitations of Bitcoin is its dependence on economic policies that so often cause ups and downs in equities. In the current market state of rising interest rates and increased inflation, most assets have been hit hard, Bitcoin included. Amid this downturn, questions have been raised as to whether Bitcoin is correlated or uncorrelated to stocks. According to CoinDesk, for most of 2021 Bitcoin remained within a range of -0.2 to 0.2 when compared to the S&P 500, gold, the U.S. dollar and bonds. This value indicates that Bitcoin is were largely uncorrelated to other assets. Blockchain Center, which monitors cryptocurrency price movements, has conducted further research which proves that Bitcoin was uncorrelated to the S&P 500 even further back, for a stretch of nearly two years from 2019 to 2021. However, times have changed and market conditions are becoming less focused on growth. Both the CoinDesk report and data from Blockchain Center reveal that Bitcoin initially became correlated to the S&P 500 in the last quarter of 2021. The 90-day correlation between S&P 500, gold, the U.S. dollar and bonds increased with Bitcoin from 0.2 (no significant correlation) to about 0.6 (fairly strong correlation).

What to do? 

Experts suggest refraining from buying large amounts of cryptocurrency at any one time when investing. A price drop after investing large amounts could be catastrophic. Whether the price goes up or down, it is advised to buy a small amount every month (pound cost averaging) as opposed to investing 100% at once.

• 1972 - 1974: UK 74%

• 1987 Black Monday: DOW Jones 22% in a day

• 2000 - 2002: NASDAQ 75%

• 2007 - 2009: NASDAQ 56.8%

The reasons for falling asset prices often have their roots in what the ex-chairman of the US fed, Alan Greenspan, called “irrational exuberance.” Interestingly, if we look at what Greenspan said in his speech back in December 1996, it may well help to offer some guidance for the current predicament crypto and equity investors now find themselves in - that is, “erratic money, (i.e., wide variations in the quantity of money relative to the demand for money), distorts market price signals and the allocation of resources. Rational economic calculations, especially those affecting investment decisions, become more difficult when the future value of money is uncertain. Inflation and deflation that follow from erratic money undermine both economic and social order”. Well, we have certainly witnessed a lot of money being created, and arguably this has propped up asset prices as interest rates were crushed and companies and individuals went on a credit binge and asset prices inflated. According to the Federal Reserve Bank of St. Louis, 35%+ of all US$ ever printed by the U.S. government was printed in 10 months in 2020. 

Source: Fred.StLouis.org

The US was not alone as we saw the world’s central bankers enter into aggressive monetary easing (create cash and buy bonds so reduce interest rates) which had actually started before COVID-19 gripped the world with fear. With all this cash ‘sloshing’ and uber-low interest rates around, it is no surprise that equities, bonds, property and crypto prices increased in value as ‘erratic money’ fuelled an attitude of ‘risk on’ i.e., investors looked for higher risk opportunities which helps to also explain some of the heady valuations of tech stock and cryptocurrencies. The trouble is, is that asset prices are driven also by something incredibly intangible, i.e. sentiment, and once this fickle driver turns it is very hard to regain it in the short term. Having said this, a recent Bank of America survey has found: “Ninety-one percent of 1,013 people the bank surveyed in early June said they expect to buy crypto in the next six months. That is the same percentage as those who actually bought in the past six months.”

Furthermore, one of the challenges cryptocurrencies face is that many of them cannot be assessed using traditional valuations methods. Most of the organisations which have created and issued cryptos generate little income, let alone are profitable, but hold a promise that they will gain mass adoption and one day will be profitable. The crypto market has indeed seen some very large price increases and Bitcoin (still today at over $20,000) has been a staggering investment for those who have held it for 5 years, let alone 10 years. But there are many holders of cryptocurrencies which will be substantially worth less due to their ICO or DeFi or NFT holdings. However, there is an expression - ‘reversion to mean’ - and, given the almost parabolic rise in some crypto prices, it was inevitable that we would see prices fall as reality struck! Nothing ever ‘goes up’ for ever, but a combination of fears over inflation, rising interest rates and the on-going impact of COVID-19 resulting in supply chain challenges, has caused US equities to fall more than 20% from their peak, triggering a bear market. This is on top of the challenges for the so-called stablecoin, Terra, which has fallen in value by over $18billion in a matter of weeks and unnerved investors of volatile high-risk cryptocurrencies. 

The market capitalisation of cryptocurrencies ($880 billion compared to its high of over $3trillion) has undoubtably shaken investors. However, cryptocurrencies have helped the financial services sector to embrace digitalisation and challenged the norms. But, in order for cryptocurrencies themselves to thrive and prosper, they need to be able to demonstrate that they, too, offer real financial value to gain greater adoption. The technology (blockchain) that drives cryptocurrencies and the way in which it is able to digitally wrap (i.e., tokenise) real assets such as equities, bonds, mutual funds, real estate, commodities and even fiat currencies in the form of stablecoins and CBDCs, is here to stay. This is due to digital assets being able to i) generate stronger, more effective compliant markets thus treating investors more fairly (a key driver for regulators globally), ii) give greater efficiency and transparency, and iii) remove intermediaries and enable traditional financial markets to be more inclusive. One of the largest banks globally, JP Morgan Chase and Co, recently announced it was to work with the Singapore Central Bank on project ‘Guardian’, with the intention to digitise some of its funds and potentially create $trillions of digital assets. This could “massively increase the assets in the DeFi sector” according to  Tyrone Lobban at JP Morgan: "The overall goal is to bring these trillions of dollars of assets into DeFi, so that we can use these new mechanisms for trading, borrowing [and] lending, but with the scale of institutional assets.”

The Terra protocol creates stablecoins pegged to each other and consists of two cryptocurrency tokens - Terra and Luna - which can be exchanged for each other. This is the burn and mint equilibrium. Algorithmic stablecoin, Luna, is a cryptocurrency and rather than use a dollar to back its stablecoin, Terra used its native coin, UST, which was meant to be stable, whilst Luna was meant to absorb its volatility.

So, how does Terra’s algorithm work? 

More Luna is generated to purchase as much UST needed to keep it at a 1$ value. If the price of Luna goes back to normal (i.e., $1) the excess Luna is burnt. In essence, an algorithm is needed to manage the underlying token. The algorithm is constantly buying or selling to maintain the balance and so keep Terra at $1. Luna was designed to absorb the price volatility of UST, since more selling pressure for UST decreases the price of Luna.

Image credit: Bitnovo

What happened, it is believed, is that the Terra project grew too fast. This could be attributed to the high annual percentage yield (APY) of 20% , the return being offered to those who wanted to Yield Farm (where the owner of a crypto agrees to lend or borrow crypto on a DeFi platform and is paid/pays a APY based on the value of the crypto lent/borrowed). This was one of the highest in the space, and many people rushed in to take advantage of the high APY. The protocol also allowed for instant withdrawal, unlike some yield farming protocols which require lenders to lock up their crypto holdings for a set period of time. Sam Bankman-Fried, the CEO of FTX, said: “Terra was a case of “mass enthusiasm” and “excitement” with bad marketing.”

The trouble is, that whilst Terra wasn’t a Ponzi scheme it turnouts it had several loopholes that arbitragers and investors were quick to exploit. But Terra was not shrouded in anonymity as most Ponzi projects are. Furthermore, arbitragers usually take advantage of the native coin being above a dollar to make a profit - for instance, if Luna is $1.05, they could buy $100 worth which becomes $105 Luna, then sell 100 Luna for 100 UST, whereby making a $5 profit. This is a low-risk investment for most arbitragers and can also be done on the flipside. All the while they are doing this, the algorithm keeps trying to make it a stablecoin. So, what happens when many arbitragers start exploiting the market to make gains? Well, it looks like a Ponzi….. 

The second moving part is the Anchor protocol, the primary lending/protocol for the Terra ecosystem. Roughly 70% of UST in circulation is sitting in Anchor and this makes Anchor a significant stakeholder. But Anchor gave anchor tokens to borrowers as an incentive, and the amounts they get can be more than what they pay in interest. Both Anchor and Luna noticed the slack and moved to nullify them. Anchor topped up its yield reserve to $450 million. Luna upped its daily swap limit from $20 million to $100 million. This was to prevent whales from manipulating the system, but arbitragers could take advantage of high volatility if the limit was too low. Luna also raised $1 billion worth of bitcoin as a reserve for defending the UST. 

But the reserves were sold, and the Terra blockchain frozen on May 12th, all without the permission of the community. This also contributed to the death spiral of Terra.

Source: Coin98 

Luna had a vast ecosystem surrounding it; unlike most cryptocurrencies, Luna had utility.

But what, or who, caused the death spiral?

Some hedge funds are being labelled as the players that accumulated $1 billion UST and borrowed $3 billion-worth of bitcoin that brought TerraForm Labs down. Blackrock, Citadel, and Gemini securities have all denied having any involvement in the crash. The crash has intensified discussions around regulation by stakeholders; treasury secretary, Janet Yellen, has urged Congress to pass a law on stablecoins following the crash of Terra. Japan has already passed a new law to cover stablecoins whilst the UK equally has a new regulation on the way following Terra’s crash. South Korea, the birthplace of Do Kwon, is not left behind as his legal troubles are just beginning, and a digital asset committee is being launched in Korea. Recently, the US Securities and Exchange Commission is currently investigating whether the marketing of Terra violated investor protection regulations. However, Terra employees have allegedly confirmed to the SEC that Do Kwon withdrew $80 million, months before the Terra’s crash - but why did Kwon know something that others did not? Unsurprisingly, for this the SEC is investigating Do Kwon for money laundering.

The market capitalisation of five stablecoins in $billions

Source: Coingecko

Since the fall of Terra, Tether (another stablecoin) has fallen by almost $11billion. Yet Tether, even though it is not 100% $ backed, has not collapsed. Could the same be true if a commercial bank saw its deposit base fall by almost 10% in a few days? Of all cryptocurrencies, fiat-pegged stablecoins are the least risky but the challenge is that not all stablecoins are backed 100% by fiat, as was the case of the algorithmic UST. Not all cryptocurrencies are decentralised as some aspects get centralised with time and usage. If a stablecoin is to be stable, should it not backed to stable reserves? In any event, promoted not as stable but pegged to the assets it is purporting to represent? At one time, hedge fund manager, George Soros, broke the Bank of England by short-selling the British pound, making $1billion on 16th September, 1992. An event now known as Black Wednesday, the UK pound slumped so much that the government began spending £ billions in an attempt to contain the short selling - only for the UK to go into a recession afterwards. 

At the very least, algorithmic coins surely ought to have stronger risk warnings attached to them. Whilst the crypto industry has come under heavy scrutiny over the past few days, it is important to note that something similar has happened to traditional banks multiple times. Without government bail outs and support, not all would be here today and some such as Lehman brothers, indeed, did not survive. For now, whilst it has fallen in value, at least the crypto market continues to trade 24/7 allowing investors to sell as well as buy. Furthermore, we have not seen long queues of people trying to cash-in their holdings as we certainly saw in 2008 when some banks seemed to have run out of cash! When we compare the centuries old bank and the young crypto market, the crypto market has done well. Indeed, it has been sorely tested.

The applications of the metaverse are already being seen in several fields such as the gaming sector, entertainment, socialising, work, commerce, the healthcare system, and many more. The global value of the education sector is expected to be over $10trillion by 2030 and the EdTech market size alone is thought to be likely worth $318billion by 2030. Therefore, it comes as no surprise that those developing the metaverse are exploring a manner of ways in which it can be used in the education sector as a new way to teach people on a global basis. 

Global education and training sector

Source:holoniq.com

What is the metaverse? 

A more comprehensive description considers the metaverse as the next generation mobile-computing platform which will take advantage of artificial intelligence (AI), augmented reality (AR), virtual reality (VR), and an ever-increasing connectivity to create online environments which are more immersive, experiential and interactive than what currently exists.

The metaverse as an educational tool 

When it comes to education, learning and training, there is more need for innovation. Schools and education centres do more than simply training; they actively shape and prepare young people for the future - something which goes beyond the workplace, lecture theatres, classrooms, and colleges. The metaverse has many established uses in the digital age but when it comes to education, there are speculations as to how the metaverse will significantly improve the sector, offering a new more immersive way of teaching and sharing knowledge using a wide range of one’s senses in a more memorable manner.

How can the metaverse change education? 

Among the 4 existing types of metaverse - augmented reality, lifelogging, mirror world and virtual reality - virtual reality is the most diverse and actively used technology for educational purposes. Regardless of their real-life geographic locations, teachers and students can meet up in a virtual space through a virtual reality headset. Using the metaverse in this manner presents endless possibilities and a remarkable potential impact on education - for example, a group of students scattered around the world (but with a common interest in learning history) and a teacher based in Nigeria who travels the world looking at and researching historical places. Although this sounds like an impossible classroom, with metaverse the teacher could ‘virtually’ meet with the students - irrespective of the different locations - and show them around ruins and castles. A more interesting feature of the metaverse is its ability to create a highly immersive 3D environment. This exciting feature helps not only in teaching but it improves assimilation, since it provides a serene and virtual academic environment creating the impression as if you were actually in a different place.

Although teaching and learning via the metaverse seem like an impracticable concept, it is already in use. Roblox is a Singapore-based firm using the metaverse to help make education global, interactive and memorable. It allows people to build and share their virtual worlds akin to Minecraft and Fortnite. This concept was originally for creation purposes for the firm’s 40 million users; however, the feature has been expanded upon to include Roblox classrooms (the classrooms may be virtual or not). The Roblox virtual classrooms allow students and teachers to log-in from wherever they are in the world. The lessons may be based on different things - for example, physics simulation to teach the student about the subject in a safe virtual environment, or role-playing simulation of historical events. Asides from eliminating the geographic barriers to learning, more than Roblox, the metaverse creates a therapeutic, immersive form of learning environment which improves both concentration and assimilation. A further example is STEMuli, which uses the metaverse to create the first hybrid school and lessons in Dallas in the US. Meanwhile, the metaverse is already being used by firms such as Accenture, as the publication, Forbes, has described: “Accenture built a corporate metaverse, the Nth Floor, so employees and new hires could have a new way to connect and collaborate.”

Benefits of using the metaverse as an educational tool 

Unlike Roblox, Minecraft and Fortnite, which have cartoonish visual aspects and can distract students from learning, a metaverse environment can be designed to look realistic, and captivate students. The metaverse environment also can replicate real-life locations. In the real world, more often than not teachers are unable oversee everything happening in a classroom. However, a metaverse educator has complete control over students' interactions and can even limit bullying or, by changing some permissions in the virtual space, separate students for disciplinary purposes. On the 14th April, 2014, 276 schoolgirls were abducted in Chibok, Borno State, Nigeria. Since the 15th of April 2022, a total of over 1500 pupils have been kidnapped in Nigeria. Certainly keeping children in their homes rather than grouped in one area together with learning via a digital environment could have prevented disastrous incidents such as this, as well as school shootings. 

Disadvantages of using the metaverse as an educational tool 

The metaverse can present us with an entirely different learning experience from traditional schooling. A disabled child with a speech, hearing or visual impairment may indeed need bespoke support since it might not be understood or realised that the child needs help when interacting. Also, logging dozens of hours per week in a digital world for education and entertainment might result in the child neglecting his life in the real world and impair his real-life relationships, or even health and well-being. As yet, we do not know what the long-term effects of hours in the metaverse could result in. For anyone ever having worn a VRT headset, you may have experienced the initial disorientation of wearing it, or even the dizziness when you take the headset off. When it comes to virtual reality, there is also a case of accessibility and affordability. It will be difficult to adopt a means of education that currently is not widely available and cannot be afforded by the majority. 

However, the rise of the metaverse has brought infinite possibilities and shown its potential to revolutionise sectors and occupations, such as entertainment, gaming, socialising, work and commerce. The education sector is certainly not excluded since the metaverse has the potential to upgrade many aspects of learning. Going forward, this new concept is undoubtedly expected to contribute to improving teaching, learning, and comprehension.

A Hollywood film, called Zero Contact, starring Anthony Hopkins, has turned to NFTs to help raise the finance to create the film. 

Source: YouTube

Also in the entertainment sector musicians have used NFTs such as the band the  Kings of Leon who sold three different tokens: 

• one with their new album, 

• one for live show perks such as front row tickets for life, 

• third contains exclusive audio visual art.

NFTs have been used by other owners of intellectual property (IP) to raise capital by creating digital versions of their IP. However, it is not just works of art but it could also include an organisation’s brand/ image rights as seen by the UK Premier Football league which is looking to sell over £430million of NFTs. 

Diamonds NFTs

Source: Icecap.diamonds

Even jewellery gemstones are being packaged and sold as NFTs. This potentially makes the ownership of diamonds and other precious gems more available globally, and as the metaverse grows in popularity no doubt some avatars will we to ‘show off their bling’ as they wander around virtual lands. There is then no reason why people will not want to trade these digital NFTs in the same way people trade physical gems. 

This new model of raising capital using NFTs is beneficial to both the business and owners of IP as well as investors. For the seller of NFTs, it gives them the opportunity to raise capital without potentially relinquishing equity in their company. For NFT buyers it enables them to own a unique digital representation of an asset which may appreciate in value and or can be sold at a future date as well as potentially giving the buyer other benefits such as access to see a movie, concert, football match etc.

There is also another benefit for the creators of NFTs and that is to create an ongoing stream of income, similar to the royalty revenues enjoyed by musicians and the film industry. If the NFT is constructed in the right way every time the NFT is traded the original issuer of the NFT can earn a percentage of all future sales. Unlike selling a picture or a gemstone at an auction or to a dealer where the seller receives a one-off amount of money an NFT can be programmed to generate income on every subsequent sale of the NFT.

As with many investments, the financial success of an NFT depends on the confidence of buyers and their belief they have that they are able to sell the NFT for a higher price at a later date. Thus, the success of an NFT project dramatically improves if there is an active community/fan club as there are likely to be buyers in the secondary market. Building a vibrant community usually starts with defining who the target audience is, this is important to building value for a project. Then a vision can be shared with the community explaining what the project is and how they stand to benefit from it. Social media platforms are usually the preferred way to communicate and inform potential community members about a forthcoming NFT. Discord Telegram, Twitter and Reddit are the main platforms that NFT issuers use, although You Tube, TikTock and Instagram also can be useful platforms to raise awareness and interest. Pitching to potential buyers is not easy and increasingly we are seeing influencers even Artificial Intelligence influencers are being engaged to promote NFTs. It is important that even after the NFTs have been issued to maintain a vibrant community and keep them updated and assured that the project has longevity. 

At present, the limitations of blockchain in agriculture are considerable. Of all the necessities of life, food is arguably the most important and safeguarding this is the food industry - an amalgam of government and private players. The use of blockchain technology in the agriculture market globally is expected to grow from $128.87 million in 2020 to $886.18 million in 2025, at a CAGR of 47.1%. Blockchain-powered platforms are being implemented in agriculture so as to improve efficiency and transparency and bring benefits for customers, suppliers and retailers alike.

Information being asked about the food supply chain 

Source: Consumer Preferences for Traceable Food

The technology is being further utilised in a variety of ways so as to help meet the challenges around food wastage, which the UN estimates to be as much as “14% of food [is] wasted p.a. from harvest to retailer” with complex and often international supply chains - and fraud. Of the many ways that blockchain technology is being used in the agriculture sector, here are just a few examples.

• agricultural insurance - (Blockchain Climate Risk Crop Insurance). Smart contracts can help assess agricultural insurance claims, making the claim process simpler, fairer and quicker. Insurance frauds and false claims will also be alleviated with the use of smart contracts as they are immutable; no party will be able to change the policies to their advantage. It is estimated that claims can be paid in a week, as opposed to months, and the cost of insurance could be reduced by as much as 30%.

• agricultural supply chains and sustainability - (SAP and Unilever Green Tokens). The transparency blockchain can bring to agriculture is unparalleled, bringing greater clarity and trust in what can be complex global supply chains. Because there is greater transparency and knowledge, retailers and consumers can have access to where goods come from and the sustainability of supply. Environmental sustainability is an increasing demand from retailers and consumers and having transparency and  greater clarity as to foods sustainability could well enable farmers that use a blockchain the ability to charge higher prices, so increase their profit margins

• food safety - (IBM’s Food Trust). By digitising information about transactions regarding food growers, processors, shippers, retailers, regulators and consumers, all are able to access one database and have greater confidence in the food supply. This is vital in the event of an issue when food needs to be withdrawn due to a potential health/infection concern. 

• provenance - (Agriledger in Hati). If a blockchain is implemented with Internet of Things (IoT) in agriculture, it hugely increases the traceability problem presently pervading the industry. Due to the current framework in the industry, fake agricultural products enter the system and, because they are untraceable, put consumers at risk. Over 40% of people claim: “where their food comes from will be an important issue for them”. Historically, food producers have been remote from the consumer and often earnt a relatively small percentage of the final selling price paid by the end consumer. However, by using blockchain technology food producers can enjoy a higher price for the goods they produce.

Meanwhile, it is well known that food waste is also a real challenge in the agriculture sector (as the chart below shows). Globally, the numbers are massive in terms of wasted resources such as water and fertilizers, not to mention the carbon emissions.

The impact of food waste

Source: TraceX

The use cases confirm that blockchain technology is neither a silver bullet nor a solution to every problem in the agriculture sector since blockchain does not come without its challenges. The initial substantial costs to establish a fully operational blockchain-powered platform and allocation of who pays what (i.e., the farmer, transportation, retailer etc.) is an ongoing challenge. Furthermore, as there is the cost of hiring technical experts, is this something the average farmer is able to afford? Interoperability is yet another limitation blockchain technology faces, as different blockchain networks cannot easily communicate with each other. This creates a potential digital island problem. There are also regulatory and privacy laws that may hinder how data is handled in different countries. EU -GDPR (General Data Protection Regulation) with its “right to be forgotten” or CCPA (California Consumer Privacy Act) directly contradicts blockchain’s immutability quality so care needs to be taken as to what data is being held and where. 

For blockchain technology to be viable in the agriculture industry, it needs to be utilised in conjunction with other industries. Santander has recently partnered with Agrotoken to allow farmers the opportunity to take out loans backed by Agrotoken’s tokens. Santander include soybeans, corn, and wheat, all of which are, in effect, types of stablecoins since they are pegged to values of these different grains - with each token being worth one ton of grain. The tokens allow farmers and other parties in the agribusiness industry to access this new financing system. Santander is investing $225 million in the project and it is to be tested initially in Argentina. Farmers can tokenise their grains online and have the tokens in their digital wallets. The tons are validated by a Proof of Grain (PoGR) network which has a multichain infrastructure. Interestingly, the PoGR network is able to operate using the Ethereum, Polygon, or Algorand blockchains. 

So, the use of blockchain technology within agriculture is certainly set to change the traditional agricultural sector. Having access to more information (potentially in real time) and also to different forms of finance, and being able to enjoy cheaper insurance and reach out to the unbanked farmers, are just a few of the advantages. The solutions should ideally be designed in ways where they can be accessible by an everyday farmer. Without doubt there are challenges, but we are already seeing more widespread adoption of blockchain technology and indeed the use of digital assets in the agriculture sector around the world.

Source: Academy.moralis

There are, however, inevitable challenges the charity sector needs to address, such as donors being asked to settle with a subscription-type model. Also, the lack of accountability. Whilst some charities only spend 5% of donations on administration and overheads, other charities take as much as 40%  The lack of transparency and, in many cases, poor accountability can be a veritable barrier and reason why more money and/or time is not given to charities. The recent information regarding that a $6million house in Malibu California by the charity Black Lives Matter has raised questions as to the use of the charity’s funds. Questions concerning the accountability of charities and their movements are starting to take the centre stage. If unanswered, the patronage enjoyed by the industry will run the risk of diminishing since people rightly want to ensure their donations are used for the right purposes. 

Unlike many traditional methods, NFTs offer the potential to make transactions can happen with almost immediate effect and at a lower cost (even on a global basis). This is particularly relevant when charities are raising money in the event of global natural disasters or in war-torn zones, which are often thousands of miles from the donors themselves. Given that blockchain transactions can be available for all participants to see on the blockchain, the cost of keeping participants updated is practically inexistent. By using smart contracts, it is possible to ensure that donations are released once pre agreed targets/objectives have been achieved. All transactions and funds are both visible and traceable when using NFTs, whereby helping donors and stakeholders to renew their trust in charities. 

However, challenges do exist when using blockchain technology. One of these is, that certain blockchains have high transaction fees whilst others can utilise a large amount of energy to process transactions due to the way they operate; damaging for the environment since they have a high carbon footprint. These climate change issues are demanding for those wishing to support good causes but are unable to due to the lofty prices of some of the transaction fees. Although different blockchains are striving to address these issues, they remain a potential barrier to using certain blockchains. According to Citigroup: “The global value of philanthropy (i.e., donated time and money) is $2.3trillion p.a., or just under 3% of global GDP”. Without doubt NFTs can help the industry and, given the size of the philanthropic sector, the impact could be significant to those arguably most in need, even if used by only a small number of charities. Already, there are a number of firms developing solutions using blockchain technology, such as Charity Token. Charity Token has a DeFi platform which helps charities and individuals raise investment capital and new revenue streams. Those organisations on Charity Token’s platform have the details of their received donation available for the general public to see. They can also incentivise donations by tying them to NFTs, thereby making the auctioning of the NFTs to a global audience through OpenSea.

Source: CharityToken

ChaT, the token assigned for the Charity token, is a multipurpose governance token and allows for owners to govern the platform. ChaT is to be housed on the Polygon network to reduce the energy load, allow for serious transactions, low-cost transactions and its accessibility to OpenSea. Charity token has, in more ways than one, paved the way for others to follow. DoinGud is another such project offering an NFT marketplace enabling creators, curators, collectors and charities to support worthy causes. Every sale on the DoinGud NFT platform donates 5% of the value of each sale to the giving economy.

Source: Platinumcryptoacademy

It is certainly encouraging to see the charity sector embrace new ways, use different technologies to help raise awareness and position themselves to be more relevant (especially to younger donors). It will be interesting to witness how the use of NFTs in the charity sector evolves, since at the moment the small number of philanthropists who have delved into NFTs have a certain exclusivity. Meanwhile, time and resources will be required to educate the donors, as well as those charities looking to both raise capital and improve their accountability and transparency. The use of NFTs in the charity sector surely offers a set of new digital tools……

Digital wallets

How, where and why are blockchain technology and digital assets being used in Africa?

Of the 51 countries to have banned cryptocurrencies and digital assets in their regions, as published by the Library of Congress, 23 are in Africa. Africa itself is a continent with 56 countries, so for there to be 23 this is a sizable amount. The future for digital assets might look bleak, but that is not the reality on the ground since the blockchain industry in Africa has been expanding. A report from Swiss venture capital firm, VC CV, (in partnership with Standard Bank) found $millions are starting to be allocated to Africa in the form of blockchain financing. Within the report, it stated: “Companies raised $91 million in Q1 of 2022, a staggering 1,668% YoY increase from Q1 of the previous year.”

Where blockchain technology is being used in Africa

Source: Blockchain projects in Africa by sector, according to PositiveBlockchain.io

Meanwhile, according to Quartz Africa: “Africa now accounts for 70% of the world’s $1 trillion mobile money value. The value of Africa’s mobile money transactions edged up 39% to $701.4 billion in 2021 from $495 billion in 2020, highlighting the future of African banking is mobile.” These growth rates also indicate that Africans are not afraid of change, making it is easier to understand why there has been so much interest in digital wallets and digital assets across the continent. Of note, a report from Chainalysis found that, between July 2020 and June 2021, Africans received $105.6 billion of cryptocurrency payments - a rise of 1200% compared to the previous year. Furthermore, Chainalysis established that Kenya, Nigeria and South Africa made it into the world’s top ten in terms of crypto users and, despite 65% of adults in sub-Haran Africa being unbanked, they are also embracing digital payments. Yet financial services are not the only sector in Africa to be embracing blockchain technology. It is being used in other sectors too, as follows:

• Agriculture - in Tanzania, World Mobile has installed a solar-powered wireless internet connection for a remote fishing village. This has enabled the farmers to begin exporting their catches of crab to Europe and sell fresh fish to hotels and restaurants, as opposed to selling dried fish which is what they had mainly done before. As a result, it has allowed fisherman to increase the income they receive as it has given them access to new markets where they can see the true worth of their catch.

• Identity - in Sierra Leone, the Hyperledger blockchain is being used to help address the challenges around personal identity by using a national identity number and a thumb print. This helps reduce fraud and corruption, making transactions more efficient for all parties involved.

• Education - a partnership between Cardano and the Ethiopian government has created a blockchain-based national student and teacher ID and attainment recording system. The platform allows for the verification of grades and remote monitoring of school performance, with the intention to boost education and employment across the country. The partnership hopes to reduce the amount of fraudulent university and job applications by making sure the students have blockchain-verified digital qualifications. It also enables employers to authenticate employee credentials faster and in a more efficient manner. 

• Wi-Fi - the Zanzibar government is working with the blockchain firm, World Mobile, to create a free metered Wi-Fi internet access for those government institutions which are engaged directly with its citizens - such as local government offices, bus stops, the airport, shipping ports, fish markets, municipal offices, municipal or state housing estates and hospitals and clinics.. This is the first blockchain mobile-powered and run by World Mobile Token ($WMT) owners. 

• Logistics documents - in April 2021, the government of Egypt announced it had partnered with blockchain start-up, CargoX, using the Ethereum blockchain to create National Single Window for Foreign Trade Facilitation (NAFEZA). The blockchain-powered platform is designed to streamline the sharing of maritime and transportation documents which is accessible by all participants in the trade. This way traders and businesses can forward all required documents to customs, control and port authorities. 

In the Philippines, a large number of people play in the GameFi industry (especially Axie Infinity) and in Africa, the most used digital asset is Bitcoin because of its widespread adoption in other parts of the world thus enabling Africans have access to the goods and services that historically they have been unable to access easily. Much of Africa has suffered in the past from poor infrastructure in terms of fixed telephone lines and power supplies, as well as a lack of trust due to high levels of fraud and corruption. Blockchain technology is known to be able to bring greater transparency and trust. Furthermore, having the ability to be operated using solar power and wirelessly, this technology offers the potential to radically transform the lives of millions of Africans. This is not merely beneficial for Africa but also for other countries looking to export goods and services to Africa, thus helping to boost the global GDP. Although many may believe “Africa needs blockchain technology”, the continent has the youngest population in the world, and also the most unbanked population globally, so is it actually the case that, “Blockchain and digital assets need Africa”? Could wide-scale adoption of blockchain technology and digital assets in Africa further demonstrates commercial opportunities and roles in society and business, and potentially teach other jurisdictions a lesson or two…….?

Blockchain technology is helping to improve ESG credentials, in part given its ability to maintain a decentralised database of records which are tamper-resistant in nature. Therefore, it works as an assurance of accuracy and transparency of information. In effect, blockchain-powered platforms can act as a skeleton, interacting with other technologies, such as Internet of Things (IoT), so as to transfer the data of smart infrastructure or devices to the blockchain network, satisfying both transparency and privacy. Furthermore, via the use of smart contracts, it becomes possible to verify the consistency between the final ESG report and the raw data that has been used to create the report. As mandatory corporate and sustainability reporting becomes more commonplace, accurate and verified documentation to support transparency becomes crucial. Therefore, blockchain technology can help with compliance of ESG standards in two major areas: reporting of data and supply chain transparency.

Reporting of data

Access to accurate, standardised information is key. Blockchain-enabled reporting tools give companies a chance to collect verifiable data and produce trustworthy reports that demonstrate their ESG credentials. Blockchain enables data standardisation, whilst also providing the platform needed to support data transparency. The automation of data collection from IoT allows various devices to communicate with each other and therefore share data and information without the need for human intervention. Utilising blockchain technology offers assurance that all the data transferred between devices is genuine and properly encrypted to prevent any alteration without authorisation. An example of this would be the use of a blockchain-powered platform to monitor the carbon footprint of a global group of independent organisations. According to a report from the EU: “Blockchain technologies can transform individual efforts of companies into a networked effort. And it can clearly pinpoint the contributions individual actors make to reduce their carbon footprint. The spirit of competition and market-based incentives create a win-win situation for all. Clean technology start-ups play a critical role in this process. They develop blockchain-enabled platforms that bring together all stakeholders, including companies, government and citizens”.

Supply chain transparency

An essential part of achieving viable goals is by improving supply chain sustainability. Blockchain technology offers the potential to transform supply chain management. Using distributed ledger technology, it provides a digital system and database to record the transactions along the supply chain, whereby bringing transparency, efficiency, traceability and reliability to supply chain management. Blockchain platforms, using IoT, can automate data collection across different points of a company’s supply chain. The relevant data does not have to be checked from potentially error-prone suppliers so companies can therefore have greater knowledge and potentially control over their environmental impact. This automation and real-time availability of information can help companies detect issues faster and also reliably trace the problem back to the source. Blockchains can play a role in terms of responsible and ethical sourcing. The transparency it offers is crucial in tracking the materials and goods from source to end-use and helps ensure security for all participants by allowing them to access the records of transactions at any time. An example of this has been the deployment of a blockchain-powered platform being used by Coca Cola, which aims to promote “supply chain due diligence and working conditions”.

Drawbacks to using blockchain and digital assets to enhance ESG credentials

There has been much negative press regarding the vast amount of energy being used to power the Bitcoin Blockchain. When Elon Musk ceased accepting Bitcoin as payment for the Tesla Range, he stated that “Tesla would stop accepting the cryptocurrency as payment because the so-called mining of the coins used too much fossil fuel-generated electricity.” Even with the current dip in the cryptocurrency market, a single Bitcoin is worth around $30,000. There has, however, been widespread awareness of the impact that investments in these can have on the environment. Given these environmental concerns surrounding cryptocurrency and the increasing importance of ESG, an appropriate question to ask is whether these two developments are compatible. 

Source: Sustainanalytics

As reported by the University of Cambridge Centre for Alternative Finance, Bitcoin mining consumes more energy than the UAE or the Netherlands. It consumes about 0.4% of global energy and up to 150 TWh of electricity per year. This immense energy usage has generated considerable concern, especially as the focus on climatic change increases. In defence, however, there are other blockchains using much less energy than the Bitcoin blockchain, and many blockchains actually use renewable energy as their power source. In addition to this, another consideration is the social plan; blockchain and ESG conflict in their social plan. The social component of ESG includes human rights, diversity, financial inclusion and consumer protection. However, although blockchain protects the vulnerable from oppressive governments and allows anybody with an internet connection to purchase cryptocurrencies (thereby promoting financial inclusion), it may also promote illegal conduct, such as evasion of exchange regulations and tax fraud. The exchanges on which cryptocurrency transactions are made can often be poorly regulated and leverage can be provided by shadow banks that may not be regulated, both potentially violating consumer protection. Due to their loose regulatory and enforcement structure, cryptocurrencies are appealing to those people who wish to boycott the network of regulations and fines that control traditional financial markets. Furthermore, unfortunately the decentralised nature and pseudo-anonymous structure of blockchains make them a useful tool to avoid financial sanctions. 

Blockchain technology has far-reaching possibilities, not least of which is being able to increase transparency and handle and share date securely. Although there are certain incompatibilities and challenges, there is the potential for blockchain technology to assist in a green transition for addressing ESG concerns, which is one of the many various impacts the increasing interest and popularity this technology has brought to light. 

Source: Allied Market Research

At the heart of every thriving business are loyal consumers. Those businesses which have mastered how to preserve the loyalty of their customers have the potential to stand head and shoulders above their competition. Blockchain technology has helped many businesses retain many more customers by creating more transparent and engaging loyalty programs. Historically, retailers have often rewarded their customers based on the value of their purchase. These rewards usually require the customer to use the rewards within certain time periods (‘use it or lose it’). Invariably the rewards are restricted and can therefore only be used with the retailer which is tied to their businesses. Interestingly, Deloitte is working on an interoperable loyalty reward program aimed at addressing these challenges. 

Some blockchain start-ups are already changing what retailing means on the basis of the technology, including:

• GAMB

• Ecoinmerce

• Bleexy

• Soma

• OpenBazaar

Furthermore, there are many popular companies already embracing blockchain applications in their global supply chain, such as Alibaba, Walmart, Nestle and Carrefour and, as the image below shows, a number of other larger retailers in various jurisdictions are also using blockchain technology.

Examples of how Blockchain technology is being used in the retail sector

Source: 101 Blockchain.com

Meanwhile, the re-sale market of second-hand goods is huge with eBay generating $10bn in the last year. One of the problems faced by this section of the retail industry includes actors looking to take advantage of unsuspecting customers. Blockchain-powered platforms can address this through immutability of ownership and proof of original supply/material source. The sale of tickets for shows and concerts often results in fans over-paying or even buying fraudulent tickets from touts. An example though, when using smart contracts built on the Ethereum blockchain is Aventus Protocol, which allows rights holders to define rules of sales across the supply chain. The use of blockchain technology ensures these rules are followed by all those engaged in the re-selling of tickets. As a result, no one can excessively inflate the prices of tickets, and a ticket’s provenance is much simpler to track and trace.

It is important to note that the global economy loses about $5.38 trillion annually to fraud. With blockchain’s immutable ledger, fraud cases can actually be reduced. In order to avoid purchasing fraudulent goods, companies using blockchain-powered platforms can ensure the authenticity of products. Tracr, a blockchain solution by diamond company, De Beers, creates a digital asset (similar to an NFT) for every mined diamond owned by the company. From their source the diamonds can be tracked throughout the supply chain, and trade of conflicts (very common in the trade) can be avoided between a company and its buyers. The overall implementation of blockchain technology has benefited retail supply chains by dramatically improving transparency and trust in what can be very complex global supply chains. A report from DLA Piper and FTI Consulting has explored how the use of blockchain technology “is already being used to make significant improvements to supply chain management”. Indeed, the cost associated with administrative tasks can certainly be reduced with the use of blockchains - that is, repetitive and data-focused tasks can be delegated to digital/blockchain tools. 

As with many other sectors, the harnessing of blockchain technology is improving and transforming the holiday and travel industry. Blockchains are being used to build decentralised platforms which help solve some of the holiday industry’s challenges and provide alternative processes and procedures to using traditional travel agencies. As blockchain-powered platforms become more accepted and widely adopted, blockchains are set to alter the way holidays are booked and the way in which holiday rentals are managed. As with so many other industries, blockchain technology can bring greater transparency and security in the travel industry by storing data in a decentralised form. This means data is held using cryptographic security protocols and can enable those booking travel and/or those offering accommodation (as well as agents, airlines, car rental firms etc.) access to travel bookings and plans 24/7. This short YouTube offers an array of different ways blockchain technology can be used in this industry.  

Source: YouTube

When booking a holiday, more often than not personal and confidential information about a traveller - such as passports details, credit card numbers, etc - are passed between various companies. Blockchain technology enables such data to be accessible more securely on a permissioned basis. Blockchains can utilise smart contracts to ensure payments are made using digital currencies in a fast, secure and most cost-effective manner in pre-agreed time, thereby improving the level of trust amongst the various parties.

Different ways blockchain technology is being used in the travel sector

Source: Researchgate

Uses of blockchain 

• tracking luggage - over the course of the journey, travellers' luggage may change hands multiple times. Using a decentralised database makes sharing and tracking data between companies easier. Blockchain technology can bring transparency to track and trace the movement of luggage.

• payments - there is a demand for new forms of payments and alternative ways to purchase travel. Being able to use cryptocurrencies is surely advantageous; they make simple, fast, secure and traceable payments possible. Also, they have lower processing fees than traditional currencies - especially for international payments. 

• identification services - checking in at airports and ports consumes both time and energy. With the great advancement in technology over the last few years, it would be expected that such conventional but important processes to have improved - yet we still have to wait in-line to have our IDs checked and scanned. Identification services are fundamental for the travel industry, and a way to ensure it is problem-free is by adopting blockchains to store information. Blockchain technology can drastically reduce both check-in times and queues in airports (as well as those long delays when renting a car) by replacing the need to share paper-based documents such as ID cards, passports and driving licenses with something digital - such as fingerprint or retina scanning - whereby making it securer, easier and faster. 

• improving loyalty schemes - to strengthen the interest and commitment of customers most travel companies run customer loyalty schemes. Blockchains can help to simplify loyalty programs, thereby allowing customers to access information more easily as regards their loyalty points. Tokens serve as rewards, given and distributed by the schemes, and blockchains can help in this process by helping to eliminate fraud in the processes.

Blockchain-enabled holiday rentals

There are various holiday rental booking sites using blockchain technology, such as  

LockChain, BeeToken/Beenest, Winding Tree, TUI Bed-Swap, Webjet, Sandblock and TravelChain. Companies such as LockTrip and Travala have also developed blockchain-powered booking platforms, allowing guests to book rooms directly from accommodation providers.

So, blockchain is a powerful, technological force that promises to change the travel industry’s status quo and the holiday experience. It has many use cases and advantages which make it easily accepted in the industry. However, its adoption and use are still in the early stages but, given the size of the industry and the number of people this sector employs, many more applications are unsurprisingly being trialled and developed.

‘Atomic swaps’ (a Peer2 Peer transaction) can present a challenge since they make the traditional centralised markets and exchanges redundant because, by using digital assets, we can trade Peer2Peer. An owner of a digital asset (NFT) can bypass traditional exchanges and, in effect, deal direct. For example, you send me a text: “Can I buy your digital painting if I send you 2 Ethereum tokens?”. You transfer the NFT in question (using a blockchain) to my nominated digital wallet whilst, in return, I transfer the 2 Ethereum tokens. All this can take place in a few seconds and, because it is entirely digital, it creates a fingerprint that can be used to prove the authenticity of the transaction having taken place and that it has also been stored on a blockchain to prove who owns what. 

Thus, it is easy to see how such digital transfers of rights and digital assets are able to happen 24/7 and makes national boundaries potentially less relevant as buyers and sellers can truly trade globally. However, the lack of centralisation is juxtaposed to the current centralised (almost command and control) structures that we have historically developed in many financial markets and other industries. Typically, regulators and governments prefer to have the ability to hold an entity responsible or accountable in the event that there is a failure or a problem (should one party in a transaction wish to seek redress - for example, compensation). If a transaction has been made via a centralised - typically regulated - marketplace which, in turn, only allows members/regulated entities to trade on it, then a regulator of the marketplace is in theory able to:

• protect investors 

• maintain confidence in the marketplace. 

These two fundamental reasons are why many financial regulators have been established. But if digital assets are to be traded in a decentralised manner this can present real challenges for regulators. Or does it? Afterall, if every transaction creates a digital footprint and is recorded on a blockchain it is possible that regulators could employ smart contracts to monitor decentralised transactions and have access to the monitoring of transactions (which is typically required in the event there is a problem). 

The popularity of NFTs (whilst not as intense as it was in the summer of 2021) is still considerable and is being driven by global brands such as the UK Premier Football League, which has announced it will be offering NFTs to its global fan base. As the table below indicates, the interest grew substantially last year and we are now seeing a very active market in terms of people trading NFTs in the secondary markets.

The growth of the NFT market over the last year

Source: NonFungible.com

A return to self-regulation?

As ever, history is a powerful teacher. Or, as Marie-Antoinette (ex-queen of France) once said: “Nothing is new but what has been forgotten." It was only back in 1986 that we witnessed centuries of self-regulation being swept aside, with the UK creating the Securities and Investment Board (SIB) and the establishment of self-regulating organisations (SROs). As the FT advisor reminds us: “Banks did not need to be licensed until the Banking Act of 1979, insurance companies did not need prior authorisation until the Companies Act 1967”. Therefore, could we see a return to de facto self-regulation where bad actors are identified and then, in effect, banned or excluded? Afterall, such a system has already been employed by organisations such as eBay and Airbnb where users are rated and then made available to all, whereby giving a new prospective trader or provider of accommodation the opportunity to decline conducting business with someone who has a less than savoury track record.

Fractionalisation and the challenges of regulation

Potentially, the use of NFTs and tokenisation creates a whole new way in which physical/tangible assets can be traded. In essence, breaking up the ownership of assets such as equities, real estate, commodities, a picture, etc is possible using NFTs, and this can enable smaller investors to gain exposure to assets that typically they were previously unable to do. Real estate, classic cars, paintings by Michelangelo, etc are all examples, but the challenge is that as soon as you begin to offer any form of collective investment scheme or are seen to be trading in securities (equities and bonds) then the financial regulators’ attention is raised. And such activities mean that regulation is required. Currently, NFTs are typically not regulated or banned in many jurisdictions around the world - even in China where the trading of cryptocurrencies is not allowed but NFTs can be bought and sold. For how long this regulatory position will continue is another question, but then so is how regulators monitor and have oversight of digital assets being traded in the ether as well - unless regulators are given access to the blockchain-powered platforms where these digital assets are being traded. There are proposed regulations in jurisdictions such as Europe’s MiCAR and certainly in the US, the SEC is monitoring the situation to ensure that NFTs are not being used to, in effect, offer securities. Meanwhile, other jurisdictions would appear to be actively embracing NFTs. In the UAE, a law was passed on 22/2/2022 to regulate virtual assets, including NFTs, and Australia has announced that it intends to embrace and regulate digital assets by 2025. The key request by those advising organisations and institutions that are, in particular, looking at being more active in the digital assets sector is proper legal and regulatory guidance so as to avoid being fined/disciplined by regulatory authorities at a later date.

Non-financial assets

NFTs are being actively used in a wide variety of other industries outside of financial services which arguably is where they were first used. On-line games have effectively used NFTs for users to be paid to play, a market segment that is growing rapidly and arguably led by the Vietnamese game developer, Sky Mavis (which created Axie infinity). There now exist Axie scholarships where you are taught how to play and then pay up to 50% of your earnings and, with over 2.5 million active daily players, Axie dominates the NFT pay to play sector. The potential, though, is even greater since the biggest online game is PlayerUnknown’s Battlegrounds (PUBG) with 3,257,248 players. It is thought that one of the ways that Microsoft will be able to recoup some of the $68.7+billion it has paid for the gaming developer, Activission Blizzard, will be by selling NFTs to some of its users. It has already started to poll users as to whether they want NFTs.

In essence, could NFTs be the lotteries of the metaverse? It is predicted that, by 2026, over $433billion will be spent each year on lotteries around the world, yet at least with NFTs you would be given some digital art, even if you lose. Luxury goods manufacturers and global brands are already active in the metaverse with firms such as Bulgari, Cartier, Hublot, Louis Vuitton, and Prada already engaged with NFTs and the metaverse, which is where they are commercialising their endeavours. Global brands such as RayBan, Addidas and Burberry are also all offering NFTs. The global luxury fashion market is expected to reach $352billion by 2027 so the potential market for NFTs is massive, just in the luxury sector let alone high street fashion market.

NFTs are being used to help finance films, are being sold by firms such as Sotheby’s to sell art industry to sell  carbon offset credits, being used to transfer patents and to help improve supply chains and logistics. NFTs are also being used to help offer digital identity, undoubtedly a growing need as more people start to use the metaverse and strive to avoid giving their data away for free, such as they have done to the web internet search engines in the past. It is even possible to register your Web3 username on the Ethereum blockchain using an NFT. Ethereum Name Services creates a bespoke digital identity that corresponds to a digital wallet, and these ‘.eth’ domains are represented by an NFT which can be acquired/rented in a similar way that website addresses are. Over 825,000 such addresses have already been generated. It seems that the use of NFTs is limitless, and this presents a real conundrum for regulators. It is understandable why regulators think they need to control those NFTs involved in raising capital (similar to selling an equity), but why do regulators need or want to be involved in museums selling a digital version of a painting, or even your digital identity? NFTs are transforming the way in which we hold and potentially transfer digital assets, both in the physical world and in the growing virtual world of the metaverse. It would seem we have already passed the point of NFTs simply being a fad since without doubt they are set to enter mainstream adoption in a wide variety of industries.

• in drug trials;

• manufacturing of fake drugs and the use of poor quality or the wrong ingredients;

• allowing unqualified staff to perform procedures and examinations; 

• invoicing medically unnecessary services; 

• billing for services not performed; 

• charging for branded drugs and using simple generic medication instead;

• charging for more drugs than were used.

Source: Science Direct

According to the Fortune Business Insights publication: “The global fraud detection and prevention market is exhibited to grow from USD 30.65 billion in 2022 to USD 129.17 billion in 2029, exhibiting a CAGR of 22.8%”. Such levels of fraud lead to a lack of trust in the healthcare industry and are often a result of an absence of transparency. And this is what the use of blockchain-powered platforms is able to alleviate. Alongside being a catalyst for the utmost accountability, the use of Blockchain technology can ensure that data is more secure, accurate, and tamper-resistant in nature whereby making it almost impossible to mimic, falsify or manipulate data.

Application of blockchain in the medical industry

The uses of Blockchain technology in the medical sector are many and varied and it uses to tackle fraud is just but one. Other such examples are:

• safety and transparency - ensuring a simple and easy exchange of data among providers of medical solutions can contribute to diagnostic precision, productive therapies and cost-effective ecosystems. Blockchain enables different health organisations to connect and exchange information on a commonly distributed ledger for better safety and transparency whilst still maintaining integrity and confidentiality. 

• health record keeping - in most cases, patients’ data exists in silos that are not connected. For instance, your primary care physician has access to some of your medical data but not to data that specialists such as an endocrinologist, general surgeon or obstetrician can access, and vice versa. This hinders treatment and can impede the care management of a patient. Blockchain technology could solve this problem by making available an application that enables connecting to existing medical record (EMR) systems from different healthcare providers. Whenever a piece of new information is lodged into any of the EMRs, the blockchain would receive encrypted data regarding the information. This unifies all details and provides the patient and health providers with historical access, thereby making it easy and possible for healthcare providers to obtain a complete view of the patient's health status at any point in time.

• digital identity - it is claimed that: “Stolen health information is 20 to 50 times more valuable on the black market than financial data. This stolen data is used for medical identity theft, an insidious crime that can lead to devastating consequences for individuals and billions of dollars lost industry-wide”. Blockchains can enable a transparent, auditable means for individuals (using their peculiar credentials and encryption key) to allow other parties to access their personal health data. This includes granting authority for health professionals, service providers and other relevant actors to access their medical records and other information for direct health care delivery, or to permit statistical, research or other secondary uses of their data. This means that no one has access to your data without your consent.

• clinical trials - the use of Blockchain technology can help to strengthen trust in clinical trials by addressing the problems of false results and data disintegration that do not match the purposes and objectives of the research. Providing more clarity and identification of false content brings credibility to clinical trials.

• display information – given that it is properly used, Blockchain technology provides better protection than ever for sensitive data. For example, it will display information about the origins of a medication to ensure high quality and also confirm details about that manufacturer supplying the approved medicine.

• monitoring of patients - Blockchain technology can be used in conjunction with other technologies to help monitor patients, store information about an individual patient, analyse the effects of a particular procedure, validate transactions, create research initiatives, maintain financial statements in hospitals and minimise data transformation time and cost. 

How blockchain technology can be used in the medical sector.

Source: Science Direct

In 2021, US healthcare spending was over $4trillion, i.e. almost 20% of the county’s GDP, whereby attracting a number of companies such as Akiri, BurstIQ, Factom, Chronicled, Embleema, RoboMed and Curisium to develop and promote a wide range of blockchain-powered solutions. However, although change in the medical sector is understandably not going to happen immediately, there have potentially been valuable lessons to be learnt from the way in which medical treatments and drugs were developed to address the COVID-19 pandemic. Indeed, in the report ‘Blockchain applications in health care for COVID-19 and beyond’, by The Lancet, was included that: “Blockchain technology has numerous potential COVID-19-related and non-COVID-19-related applications in health care”.

Challenges of using blockchain in the medical industry

Being a new concept, challenges have been plaguing the adoption and use of blockchain in the medical industry, and the adoption of Blockchain technology in healthcare has been slow for many reasons - the fear of litigation, the perception of blockchain as new technology and often a lack of funds to implement new processes, procedures and the technology itself. Some healthcare organisations are concerned about the scalability of blockchain, with the fear that blockchain-powered platforms systems will be unable to scale to support their needs. 

Well, they perform in the same way as credit card companies, but without the interests and commitments. Because of the problems they tackle, BNPL platforms have a younger demographic (Gen Z and younger millennials) as their audience. However, this is not to say BNPL platforms do not enjoy patronage from the older demography. In a survey by The Ascent, over 37% of Americans had used BNPL at one point in time. 2021 drove that number to almost 56%. In another report by Accenture, the number of BNPL platforms was found to have reached 45 million people. Furthermore, a survey by Ascent found that 62% of users think BNPL could replace credit cards. According to Insider Intelligence, in 2025 the BNPL offering will account for an impressive $680 billion in transaction volume worldwide. This projected growth will occur as a result of the expanding number of e-commerce platforms and increasing adoption of BNPL services to meet the needs of other markets.

There are a number of firms which use Blockchain technology and digital assets that use this technology with the best known being PayPal (now offering BNPL in over 600,000 stores globally). XRPayNet, built on the XRP ledger, is another company which uses cryptocurrencies and launched its app in January 2022 offering a BNPL option. XRPayNet works at capturing and overcoming the current needs of real-life and on-demand crypto payment systems required by people and businesses all over the world. XRPayNet’s approach aims to address cryptocurrency problems that could let users trade cryptocurrencies from their savings accounts. 

BNPL firms in the DeFi sector

Source: BNPL.io

@Pay is a DeFi platform with a different approach to implementing BNPL in the blockchain industry. It is a Defi protocol, integrating Blockchain technology with its cryptocurrency to power its BNPL approach. The platform also offers significant cost savings to its users by utilising smart contracts and Blockchain technology. This is very helpful when offering DeFi e-commerce and other solutions to buyers and sellers. Another firm in the DeFi sector is Uquid which has teamed up with Binance to offer its ‘Pay in 3’ feature - spreading crypto payments on everyday purchases across three instalments. The increasing number of e-commerce and FinTech firms are driving the BNPL-crypto innovations forward because e-commerce stores are partnering with BNPL stores to meet the demand from the growing number of digital assets and crypto owners - many of whom are also their customers. One of the perks of the competitiveness of the e-commerce space is that it drives e-commerce platforms to implement innovations that are stress free for their customers. In addition, the increasing number of crypto wallet owners is prompting e-commerce platforms to optimise their checkout experience to remain relevant and competitive.

Many other companies are likely to join in building and strengthening these innovations, given the success these pioneering companies are set to enjoy. This is not to say there will not be challenges on the way in order to achieve these solutions. The most notable of these challenges is that of regulators scrutinising BNPL plans, labelling them loans since customers could become debtors from using them. This is somewhat technical because loans have interests attached to them and BNPL plans do not. However, when they apply the service, BNPL users typically have to pay back in four instalments - late payments attract extra payments. In a survey conducted in 2021, Credit Karma (a financial services company and indeed the largest Fintech firm in Europe) found that a third of the users of BNPL platforms reported defaulting on their payments. This has become a source of concern in some jurisdictions and a bone of contention with BNPL companies. BNPL firms are usually not regulated although they are in some countries heeding warnings from regulators to alter their terms and conditions with their clients ,such as in the UK. Some companies have been required to refund their BNPL customers while others  are putting mechanisms in place to make debts on their platforms almost impossible. One such company, Afterpay, intends to resolve the debt issue by allowing the maximum charge of $8 in late fees payment with the cost being capped at 25% of the individual order amount. Afterpay customers are banned from using the platform when they default on their payments until they pay their debts. 

Innovative BNPL FinTech platforms will create challenges and potential problems which require modern solutions, but do they need to be regulated? These FinTech providers are presenting stiff competition for the credit card providers and banks which have traditionally offered consumer credit services and by using a range of digital applications are doing so potentially cheaper, and faster.

Certain blockchains permit participants in a network to transact directly with each other securely, cutting out third-party intermediaries and enabling peer-to-peer transactions. However, the capability of this technology extends beyond merely the financial sector as it can also be harnessed to transform the renewable energy industry. 

Blockchain-powered platforms are set to reshape the renewable energy industry, for example: 

• from certifying the source of green energy by allocating generation assets to a specific point of consumption, 

• by helping to make the energy grid more accessible through data-sharing in real-time, 

• through enabling transactions between two parties. 

The establishment of the provenance of electricity supplies by enabling tracked, verifiable, and secure transactions between the parties is a key challenge Blockchain technology can establish. Furthermore, this enables the bypassing of intermediaries (and their associated fees and inefficiencies) to transfer goods and information between buyers and sellers. Blockchain technology empowers people to become prosumers, i.e., producing and selling power and therefore resulting in a far greater decentralised and distributed energy sharing system. 

                                     Sources of UK national grid electricity generation * This is updated very 30 mins

Source: Grid.iamkate.com

The benefit of blockchain in the energy industry

Our reliance on electricity seems to grow and grow and the energy industry has been consistently catalysed by innovations such as electric vehicles, smart metering and rooftop solar, amongst others. With the potential to transform the energy industry, Blockchain technology arises as the next emerging technology to stimulate growth in the energy sector through its smart contracts and systems interoperability. The interest in Blockchain technology is furthermore being fuelled by concerns about climate change and the desire for organisations to improve their Environmental Social corporate Governance (ESG) credentials. One very tangible way to help the world is to use more renewable energy (such as solar), but one needs to be sure of how the electricity consumed was generated in the first place.

Blockchain technology use cases are very varied and indeed there are many identified benefits of using blockchains in the energy industry, all whilst helping the environment. These include a new business model for energy markets, real-time data management and moving carbon credits or renewable energy certificates onto blockchain-powered platforms. Blockchain technology has the potential to improve efficiencies for utility providers by tracking the chain of custody over power grids. Aside from this, it offers unique solutions for renewable energy distribution. Legacy energy suppliers in the petroleum sector suffer from a complex network of participants and supply chains which often lead to inefficiencies. There are a number of initiatives including, Komgo, Vakt and dltledgers that have been developed to help improve the way petrochemical firms using Blockchain technology operate. For other examples of how Blockchain technology is being used in the energy sector, Consenys has highlighted a range of other case studies. 

Application of Blockchain technology in the energy sector

There are a few challenges that plague the popularising renewable energy usage. Two of these are the difficulty in handling renewable energy and the cost associated with proving that the energy comes from a renewable source - an overhead not required by other power generators. Blockchain technology may help solve these challenges. Without a doubt, as a promising technology, blockchains can be utilised in the energy sector for recording and facilitating transactions between generators and consumers of energy. Included in this used are:

• peer-to-peer (P2P) electricity trading: many P2P platforms have been developed and several additional projects are underway. Part of the aims of these platforms is to sell excess renewable energy to other network participants through automated smart contracts.

• the management of renewable energy certificates, grid management, electric vehicle charging and sharing are also part of the application of Blockchain technology in the renewable energy sector.

• the Integrated Demand Response has shown, beyond doubt, to be effective in improving the operating flexibility of the system and energy utilisation efficiency via optimisation of the operations of flexible loads, energy conversion and storage equipment on the demand side.

Would you invest if this were all you knew about the founder?

Source: Upsplash

This is not the total sum of anonymity in the industry since many crypto projects, too, have anonymous investors/shareholders and developers. An example of such a crypto project has been Wonderland, where investors gave money to pseudonymous developers and suffered a calamitous setback. The project’s treasury manager, who went by the name, oxSifu, turned out to be Michael Patryn - a man who had served 18 months in federal prison for fraud. This information came as a considerable shock to members of frog nation (the community’s investors) with the repercussions resulting in a 50/50 vote on the future of the project - either to continue or terminate. 

Furthermore, anonymous investors and founders have been discovered to be easily engineering ‘rug pulls’- scams where a crypto developer promotes a new project to unsuspecting investors and then disappears with their cash. A recent example of this can be seen in AnubisDAO; its anonymous founders and board members raised almost $60 million in 2021 before they disappeared with the funds. Unsurprisingly, this serves only to make people averse to anonymity around stakeholders, founders or project personnel. The actual individual who uncovered Wonderland’s oxSifu has also recently stated that an additional anonymous leader at another crypto project had once been charged by the Securities and Exchange Commission. Amazingly, the said person reveals all this with an anonymous account on Twitter. And therein lies the dilemma of the situation….

However, one of the reasons why people prefer to remain anonymous and undercover from hackers is that founders and owners of strongly performing tokens are an ideal target for the unscrupulous. Hence, fear of doxxing undoubtedly exists i.e., making the directors’/founders’/advisors’ personal details public exposes them as targets for hacks. So, how can one balance the desire to keep one’s personal information secure but offer confidence and insight to those potential investors whom the start-up directors are trying to attract? A potential solution to this conundrum is self-sovereign identity (SSI) using firms such as cheqd, a company tackling this problem with its incentivised, decentralised identity network for digital credentials. SSI also enables new business models for a verifiable credential by rewarding everyone in the ecosystem. SSI offers a solution through which digital data belonging to people and organisations is securely exchanged in an orderly manner. This way, people are still in charge of their data.

However, if you are concerned about doxxing and wish to know more about how you can protect yourself, either this article from Slate.com may prove to be a good 5-minute read, otherwise this article from NordVPN also offers some helpful tips. The crypto industry still has a long way to go if it is to achieve mass adoption. People need to feel comfortable revealing their personal details especially if they holding cryptocurrencies as they may attract the attention of hackers. Cryptocurrencies are a new form of value transfer for all shareholders, and project participants certainly need to be rest assured their investments are safe.

These social media platforms claim they want to transfer the decision making and control from a centralised structure to more of a distributed organisation. However, what do these social media platforms offer currently, aside from their platforms? Nothing. The majority of content on social media platforms is created by the users, but who earns from all the posts and activities? Centralised companies that own and control these platforms take the lion’s share of any income since, after all, they are owned by shareholders looking to maximise profits. Typically, decentralised social media platforms aim to share the revenue and distribute it into the hands of platform users, although there are signs that some centralised social media platforms are changing. For example in September 2021, LinkedIn announced a $25million fund to pay users for content.

Decentralised social media platforms mostly use open-source software and crypto-economic incentives to build their platforms and user-base. Several blockchain start-ups are creating alternative social media platforms such as:

• OpenStream World (OSW)               

• LBRY

• D.Tube

• Dlive

• BitChute

• THETA

• Verasity

• LivePeer

Source: Back linko

Decentralised social media platforms are also looking to address some of the challenges that the traditional social media platforms such as YouTube and others face, these being: 

Data privacy

Now, more than ever, we are connected to  and members of a range of different apps and social media platforms which all want to capture our data. The average social media users have over 8 different accounts. The data captured is typically resold to advertisers (of Facebook’s revenue almost 98% was generated by advertising) and this then can used to manipulate the behaviour of the users social media platforms. Mark Zuckerberg (Facebook’s CEO) has been summoned before the US Congress on concerns over the misuse and data-related issues on a number of occasions. Meanwhile, according to The Sun newspaper: “YOUTUBE has been accused of allowing its platform to be "weaponized" leading to viewers being "manipulated and exploited".

Data property

At the heart of every data issue, privacy of whose property the data belongs to is a particular question.  Over the years, ‘Netizens’ have voiced their complaints about how their data is being used. 

Freedom of speech and freedom of association

Many argue that freedom of speech and freedom of association are the essentials for a free, democratic society. The challenge is that ‘one person’s terrorist is another’s freedom fighter’. YouTube has been caught in just this as one party argues the importance of allowing the public access to videos whilst another party disagrees. The New York Times has claimed: “Facebook Has Been a Disaster for the World. How much longer are we going to allow its platform to foment hatred and undermine democracy?” But people should be free to see what they want without big tech companies deciding for them - or should they?

Decentralised social media platforms are designed so the control of the platform is vested in the users but this is not to say decentralised social media platforms are paradise. As much as there are pros, cons follow.

Pros

Retardation of the monitoring and illegal use of consumer data: it has been reported that, for the first time since 2004, there are more autocratic states than democracies around the world. So, having control over social media can be a valuable and powerful tool. Meanwhile, many citizens are drawn to decentralised social media platforms as a way to promote transparency and suppress what some call, ‘fake news’. The use of Blockchain technology and smart contracts which hold data cryptographically, enables decentralised social media platforms to offer user access to data practically, in real time, by anyone globally.

Cons

Decentralised social media platforms have no central authority so anything can be posted, meaning hate groups also have the freedom to launch their own social media sites. Thus, what can be considered socially unacceptable content can prove to be difficult to police and have removed. This can encourage nefarious actors to establish create accounts without having to link to real-world identities, such as email addresses or phone numbers. In terms of privacy, some decentralised platforms do not encrypt data, meaning private messages may potentially be accessible to administrators. However, possibly the greatest challenge in terms of the operation of decentralised platforms is the reliance on decision-making by committees. Another drawback is the need for users to have a certain level of sophistication and knowledge in order to effectively engage in governance decisions.

Overall, there would appear to be a general desire to have greater decentralisation and also for users to have more control over their data - hence the rise in self-sovereign identity. Notably, Facebook renaming itself ‘Meta’ and focusing funds and resources on the development of its space in the metaverse is a pointer to the fact that the importance of decentralisation is being understood. There are many who hope that, as we see more people spending less time on social media platforms and more on the metaverse, there will be less centralisation and a decrease in the dominance of the current social media tech giants. 

Decline in the value of the US$

Source: Libertas Wealth

As we increasingly see our lives becoming more digitised, national geographic boundaries seem to matter less. So, will a digital currency replace the US$? Notably, one of the recurring reasons that organisations cite for using Blockchain technology is the transparency that it offers, and transparency helps to build trust. Any new currency will certainly need to be trusted. The global economy has been faltering along under a mountain of debt and the levels of global debt have reached, what some believe to be, unsustainable levels. Global debt issued by governments is now over $71trillion - this ‘binge’ on borrowings having been fuelled by weak economic growth as a result of the COVID-19 pandemic. Governments have forced interest rates down, potentially breaking their own laws by engaging in ‘monetary financing’. In fact, this practice is illegal in many parts of the world, such as Japan and Europe, and occurs when a central bank creates money to buy government bonds, in effect, enabling those governments to spend without limits. Back in 2014, it was prohibited for the European Central Bank (ECB) to do this. Indeed, its quantitative easing programme is already in question by the German Constitutional Court, which has threatened to no longer provide the ECB with further financial support. Germany’s Constitutional Court reached a verdict back in May 2020 determining that the ECB had potentially acted illegally in buying €2trillion of government bonds. Moreover, Germany is owed over $2trillion and the recent Russian-Ukraine conflict will only escalate inflation rates globally, whereby further intensifying pressure for interest rates to be increased. Given that France, Germany and Italy are Europe’s biggest buyers of Russian gas and finding alternative energy suppliers will certainly not be possible - quickly or cheaply – this will undoubtedly put add further inflationary pressures across the EU. Could this subsequently mean the beginning of the end for the euro? 

Meanwhile, the US government debt has increased to 98% GDP (at $30+ trillion) as of April 2022, and the Chinese have over $10.5trillion of government debt equating to 60% of GDP. In the US, corporate share buybacks continue which has resulted in only 3 companies in the S&P 500 having no debt - these being Abiomed, Intuitive Surgical and Monster Beverage. The US$ itself has been the reserve currency for 99 years, so has the time come for it to be replaced? After all, America’s currency replaced Britain’s, which replaced France’s, which replaced Holland’s, which replaced Spain’s, which had replaced Portugal’s currency back in the 15th century! So over 540 years of history seems to indicate that the average tenure for a world currency is 94 years yet the US$ has already exceeded this.

The world reserve currencies historically

Source: JPM / Hong Kong Monetary Authority

Unremittingly, there is no doubt that a growing debt burden becomes a big problem for everyone. According to the World Bank, the ‘tipping point’ is reached when a country’s debt-to-GDP ratio approaches/exceeds 77%. Well, the US is well beyond that at 98%! The COVID-19 pandemic certainly exposed the fragility of complex international supply chains and the Russian invasion of Ukraine has highlighted how the world is potentially at the mercy of what may well be unreliable suppliers of commodities, such as petrochemicals and/or grains. Will this lead to growing nationalisation and an end of the era of hyper-globalisation - being mindful that the US and Australia both remain in a trade war with China? As people focus more on corporations’ Environmental Social corporate Governance (ESG) credentials and a demand for more equality in society, is the US’s ‘free-wheeling capitalist style’ genuinely what the world aspires to, going forward? 

So, in view of all this, what could replace the US$ as the world reserve currency? The US will certainly not relish seeing the once-mighty greenback (aka US$) displaced, so how long before we see a new currency knock the dollar off its perch? Evidence exists of more and more jurisdictions trading oil, gas and other commodities, as well as settling in other currencies as opposed to the US$. The Saudis have been rumoured to be willing to accept the Chinese Yuan instead of the US$, meaning could this be a sign of the beginning of the end for the petrodollar and subsequently the end of a US$ world reserve currency? Rather than a national currency replacing the US$, could a digital currency supplant it? A digital currency backed by a real, tangible asset such as a basket of equities, bonds, commodities etc……

The ‘knee-jerk’ answer would probably be a digital currency, one of which has recently been launched by the world’s second biggest economy - China. To gain international usage, will the Chinese insist that its digital currency become the method of payment at the airports, railways, roads, bridges and harbours that China has paid for and constructed as part of its Belt and Road Initiative (BRI) - of which over 146 countries have now joined? Indeed, both the IMF and Bank of International Settlement have been advocating digital currencies for a while and, notably, there are many nations presently researching digital currencies for their own countries. Alternatively, could we see a new global currency secured against global real estate - an asset class which Savills claims is worth over $326 trillion globally? To put this in perspective, the value of cash circulating around the world i.e., physical cash (coins, notes) and virtual electronic bank accounts is $40 trillion. Regardless of this though is that one of the major challenges digital currencies run on a blockchain-powered platform have had to address is the number of transactions a blockchain can process a second. But, according to Analytics Insight, this issue could now potentially be solved since “TechPay Coin’s Performance proved to be 43,000 times faster than Bitcoin, 20,000 times faster than Ethereum, and even 4.5 times faster than Solana, Making it the quickest infinitely scalable Blockchain to date”.

So, consider just for a moment, when was the last time that you used cash? Indeed, do you even have cash on your person or do you rely on debit cards, credit cards or your mobile phone to pay for goods and services? We have seen an explosion in the use of challenger/neo banks and payment platforms, many of whom are now able to accept and process digital currencies. Therefore, arguably, the infrastructure is in place for a digital currency to replace the US$ as the world currency. The question is - are you ready, and how would it impact your business and family finances?

Covid also presented JP Morgan with an opportunity to buy the world’s biggest third-party credit card loyalty operator and, in doing so, gave it access to 70 million people who were members of loyalty programs globally. Indeed, loyalty programs are very valuable. Inc.com reported last year that American Airlines generated $6.5billion of “proforma cash sales” in 2019. American Airlines, with a capitalisation of $15billion, was issuing a debt instrument valued at $7billion backed by its loyalty program - AAdvantage. Loyalty programs are both a huge and global business with the market set to expand at a Compound Annual Growth Rate (CAGR) of 13.0% between 2019-2024.

Loyalty management market growth rate by region (2019-2024)

Source: ModorIntelligence.com

The loyalty industry is an ever-growing one given that, in a survey by Smallbizgenius, 75% of consumers said they preferred those companies which offer rewards. Of note, 87% of Americans don’t mind their data being tracked due to the rewards they get from loyalty programs, notably at a point in time when the public is actually wary and critical of how its data is being used. Furthermore, in a study by Bond, 95% of loyalty program members also wished to engage with their brand’s program through new and emerging technologies. This intersection is where loyalty programs can implement Blockchain technology, in the form of NFTs, to help their programs. The role of Blockchain technology and digital assets for loyalty programs is just beginning to unfold. NFTs, powered by Blockchain technology, will undoubtedly change the loyalty industry and already we have seen a number of global brands embracing NFTs as part of their loyalty programs. Three examples include Burger King, Clinique and Marriott Hotels. Unsurprisingly though, there are both merits and challenges that come with the inculcation of NFTs into loyalty programs: 

Merits

• publicity - NFTs have amassed a cult-like following from people all over the world (in part attracted

by FOMO) as prices of some NTFs have risen dramatically, also offering owners of intellectual property (IP) a new way to commercialise their IP. There is no such thing as bad press in marketing; businesses which imbibe Blockchain technology into their loyalty programs should have no time gaining a high number of loyal customers. What’s a loyalty program without loyal customers?

• easy to create - the democratisation of NFTs is one of the features that made it mainstream and this is due to the ease with which NFTs can be created. Companies can then focus time on planning for the longevity of the programs, securing maximum customer engagement whilst ensuring the loyalty programs match their brand identity.

• exclusivity - NFTs, by nature, are unique and scarce and this feature alone will make most participate in loyalty programs. These NFTs are not exclusive for the sake of rarity or merely to create urgency. In the loyalty program, the rarer the NFT, the more the benefits and rewards are attached to them.

• innovative - as stated here, customers wish to have experience with new technologies, and NFTs will make the desire of many come to life. From the monetary and social value of NFTs, they will deliver new experiences within communities of loyalists. This innovation allows brands build loyal communities, and work with other brands whilst primarily rewarding their consumers.

Challenges 

• user-friendliness - Blockchain technology remains a technology which is not fully understood. Often, there is often a lack of awareness and experience in how best to use this technology, let alone NFTs, and this can affect the rate of adoption in the loyalty industry. For this to be overcome, brands need to make their NFTs more user-friendly. This is a problem many new technologies face but, over time, the technology will gain better understanding and corporations will know how best to use it to help achieve their goals. 

• the unpredictability of the market - the average person always hears news of the volatility of NFTs and cryptocurrencies and this poses a large problem for brands hoping to use NFTs (which are, in effect, a subset of the crypto market). To overcome this problem, brands hoping to inculcate the technology should focus on the engagement and community-building side of it. A good example of this is the way in which Louis Vuitton is using NFTs to raise awareness about the technology.

• implementation - for a project to be appreciated, it must be valued by its consumers. Before brands launch their NFTs, they need to dedicate resources so as to ensure their customers see value in what the brands are doing. If not, their project could fail and thus backfire on the image, whereby having a negative impact on the brand’s value. For example, the use of blockchain and the amount of energy it requires to operate could be seen as detrimental to a firm’s Environmental Social Governance (ESG) credentials. Blockchain technology is still evolving and problems are certainly being tackled. For instance, Ethereum 2.0 promises to handle the challenges it has faced over the cost and speed of carrying out transactions on this particular blockchain. Furthermore, environmentalists have voiced concerns about this, proposing that Bitcoin gets rid of its ‘Proof of Work’ in order to handle its energy problem. 

NFTs are already being used by a number of global brands as part of their loyalty programs and the use of smart contracts enables NFTs to be programmable. This means they can operate in a similar fashion to a loyalty program, offering customers access to those exclusive events, special discounts or purchases needing to be used within a specific time limit. Income from initial or secondary NFT sales (similar to royalty revenue from music or films) can then be programmed to be paid automatically to the brand and used to fund additional rewards, thus supporting consumers and enhancing a loyalty program. This offers companies the opportunity to create loyalty programs with a new and more direct method of thanking customers for their loyalty. It also creates an opportunity to build a highly engaged community.

It has disintermediated many of the usual agents, brokers and other intermediaries which are so prevalent in existing financial services. In theory, this means that the public can get the best deals on financial products without having to trade with a third party. In many jurisdictions, governments have actively encouraged ‘open banking’ and the establishment of neo-banks/challenger banks, but DeFi offers the promise of even greater competition for established financial institutions and thus greater choice for buyers of financial products and services.

Source: Twitter

DeFi is a financial application built using blockchain-powered platforms and designed to disrupt the traditional finance world. It is a financial application on open, programmable blockchains and covers activities such as saving, lending, sending money, trading, investing and more. Rather than relying on third parties, DeFi encourages open-source cooperation whilst maintaining security. These DeFi applications are built using cryptographic data bases not relying on having the information stored or maintained at one location or fileserver, which means that they have in-built disaster recovery. Another feature is that by using Blockchain technology, DeFi offers greater transparency for the buyers, sellers and regulators and therefore it ought to, if designed correctly, engender enhanced levels of trust. With adaptation of traditional financial tools to the DeFi world, it is advancing at a fast rate. There is an expectation that other industries will follow suit in the near future.

What DeFi offers 

DeFi products and services are available to anyone who has a digital wallet and an internet connection, no matter where they are in the world. Users can trade and/or move their assets wherever they want, without having to wait for bank transfers or pay traditional bank fees which can sometimes be subject to delays and are very often restricted to standard 09.00 to 17.00 working hours, five days a week. DeFi markets trade 24/7 and are helping to democratise banking and finance by making financial services easily accessible to anyone.

Transactions are public

The Ethereum blockchain is responsible for typically more than 90% of all DeFi transactions, which means every transaction is broadcast to and checked by multiple users. This means that anyone can see what transactions are happening in a very transparent manner. DeFi applications can be a game-changer since they give investors more information than they typically would have had access to. DeFi can also help to ensure that people have access to market leading products and services. 

DeFi is secure

With no central authorities, users do not have to worry about the safety of their money because users are always in charge of their capital at all times. However, as with any new technology, there are risks associated with DeFi platforms particularly if smart contracts (which power many DeFi platforms) have not been fully stress-tested against heist and hackers. In 2021, DeFi platforms saw over $10billion being stolen so clearly more needs to be done to address this in order to protect investors in this sector.

DeFi’s uniqueness

DeFi loans are one of the popular applications. DeFi platforms link borrowers with lenders, hence eliminating the credit check process and making the process both more efficient and not subject to intermediaries taking fees or incurring mistakes. The use of Blockchain technology offers the promise of lower counterparty risk, so providing cheaper and faster loans without geographical limitations. Indeed, DeFi is potentially helping to make less relevant those national boundaries which present major challenges for regulators looking to protect their citizens. It is highly likely that there will be users of DeFi applications in one jurisdiction executing transactions but not knowing where the DeFi platform is actually based, which makes it more than a challenge in the event of a claim or problem. 

This inability to know where to go to (and to whom) in the event of a DeFi default problem is juxtaposed to the current regulatory framework which has been built around accountability and senior management responsibilities. Whilst we are all only too familiar with Know Your Client (KYC) in the event when users wish to make a claim, they may well find the DeFi platform is not regulated - nor does it have any insurance. However, in order for DeFi applications to be utilised by institutions, it will be necessary for DeFi platforms to be licensed in order to pass those due diligence checks that traditional financial services forms require. Already there are companies such as Swarm Markets, which is licensed by the German regulator BaFin, making it easier for institutions to use and so trail DeFi applications.

Play-to-earn

The on-line gaming industry has also been quick to embrace decentralised technologies and it has been predicted that GameFi will grow to be worth over $317billion by 2027. GameFi is where players are rewarded for their in-game skills with DeFi coins, having the opportunity to be paid while they play.

Yield farming

Liquidity mining (or yield farming) involves locking up digital resources to generate income (i.e., a yield) which are normally delivered automatically by smart contracts. During the last few years, the DeFi space has grown considerably. According to Finance Monthly: “(DeFi) is booming, with the total value locked – the overall value of assets deposited in transactions – having risen from $700 million in December 2019 to over $200 billion at the beginning of 2022, equivalent to Greece’s 2017 GDP”.

Yet DeFi, is barely three years old, with many of its services becoming mainstream for the crypto community in the ‘2021 DeFi summer’. Lending platforms such as Aave and Compound, together with decentralised exchanges such as Curve and Uniswap, cemented their positions as the market-leading protocols with the first-mover advantage. Some argue that the penetration of DeFi has only just started, and with the resources and talent flowing into this sector it is likely to grow 100x in the next 5 years as it transforms conventional financial services. Arguably, DeFi could foster greater application of Blockchain technology in the financial services sector with the value benefits of immutability, transparency and decentralisation. However, DeFi still fosters challenges it needs to address (such as scalability) and regulation needs to be given the opportunity to catch up with the technology and the decentralised cross- border nature of DeFi.

Bitcoin

This was the first cryptocurrency that really grabbed people’s attention and, no wonder, since at one stage it rose in value from a few cents to each Bitcoin being valued at over $64,000! Bitcoin has dominated not only media attention but also, with a market capitalisation of $800,000, it accounts for approximately 40% of the crypto market value. Ever since its adoption in 2008, Bitcoin has seen numerous ups and downs but its adoption continues to grow, with countries now accepting Bitcoin as legal tender.

Source: David Shares on Unsplash

Altcoins (alternative coins)

The success of Bitcoin prompted many other blockchain enthusiasts to create their own cryptocurrencies, all in a bid to gain control of parts of the growing crypto market. The cryptocurrencies created were alternatives to Bitcoin. Although they shared certain features with Bitcoin, they were still all different in varying ways. Some altcoins differentiate themselves from Bitcoin by offering new features such as reduced volatility or smart contracts. Others distinguish themselves by adopting a dissimilar consensus mechanism to authenticate transactions and produce blocks. As of March 2022, there were over 18,000 cryptocurrencies (Bitcoin and Ethereum being responsible for almost 60% of the market), with altcoins accounting for the remaining percentage. As it stands, the growth of most altcoins is tied to Bitcoin. With time and development in the cryptocurrency network, the expansion of altcoins will soon be independent of Bitcoin - after all, every other coin aside from Bitcoin is an altcoin. Some examples of altcoins are Solana, Binance Coin, Ether, Dogecoin, Filecoin, Shiba Inu and Wakanda Inu. However, for now, there does appear to be a degree of systemic risk in the sense that much of the crypto market follows the rise and fall of Bitcoin’s price.

Stablecoins

Stablecoins are a class of cryptocurrencies that have attempted to solve the price volatility problems of Bitcoin and other cryptocurrencies which use different types of assets to peg/link their value. There are four types of stablecoins:

• fiat-backed

• crypto-backed

• commodity-backed

• algorithmic 

Stablecoins have enjoyed support and adoption, even with those organisations and people who have taunted Bitcoin as being problematic. Stablecoins serve as the bridge between fiat currencies and cryptocurrencies. They can offer the instant processing, privacy and security characteristics of cryptocurrencies as well as the stable nature of fiat currencies. Fiat-collateralised stablecoins are coins that are pegged to fiat currencies such as the US$, £, Yen etc. The biggest fiat-backed stablecoin is USDC with Grant Thornton carrying out a monthly attestation to confirm that the tokens are backed by the equivalent number of US$.

Source: Bermix Studio on Unsplash

However, the biggest stablecoin in terms of value, Tether (USDT), is not 100% backed by US$. Crypto-collateralised stablecoins are coins that use other cryptocurrencies as collateral such as Dai. MakerDAO created the Dai which uses smart contracts and runs on the Ethereum blockchain and is designed to track the value of US$. Commodity-backed stablecoins are pegged to gold, silver, nickel etc which use these commodities as collateral to back these cryptocurrencies. An example is the Nire token, backed by nickel wire known as Nichrome which is a Nickel alloy. Safi Qurashi founder of Nire tech when asked do we need the Nire token: “The Nire tokens offer one the ability to have easy a low cost and simple exposure nickel which is a key commodity used in gas turbine blades, rocket engines, electric car batteries and many different alloys that we are increasingly using as a society. The Nire token is 100% backed by physical Nicrom held in a secure storage facility in Germany.” 

Algorithmic stablecoins (sometimes referred to as non-collateralised stablecoins) are designed to create a token whose value is typically linked to a fiat currency e.g., US$. They are designed to be truly decentralised and rely on smart contracts. They can be seen as similar to the way many central banks operate - increasing (minting) the number of stablecoins when the price rises and reducing (burning) the number of stablecoins when the price goes down.

Shitcoins

Shitcoins are cryptocurrencies with little or non-existent value. They usually occur, or increase, as a result of the influence of popular individuals or groups e.g. Dogecoin (which has seen a 150% increase in its price in the last few days) and Shiba Inu to Elon Musk and Wakanda Inu to a group of top leading cryptocurrency experts in countries in Africa. This coin type mostly enjoys a short term run and increase due to the clout and hype built around it on online spaces. Coins such as the Wakanda Inu are a passion project, hence the benefits and rise they enjoy. Most cryptocurrencies become shitcoins when they have little applied use, because the use of cryptos by the general public has not yet happened.

Metacoins

Metacoins are those cryptocurrencies being implemented across the metaverse. Metacoins are slowly beginning to increase in value because they are being adopted as means of exchange in the metaverse. Examples of Metacoins are Metahero, Alice, MANA, SAND and DOME.

Utility Tokens

Utility tokens, whilst not a coin type, per se, fall into the definition of a cryptocurrency. A utility token is used to pay for services in a network. Utility tokens do not pay out bonuses or rights such as votes, unlike security tokens.

Security Tokens

Security tokens are pegged to assets such as equities, debt instruments, real estate, mutual funds, derivatives etc. They are comparable to traditional securities, giving their owners the same rights as if they held the physical security. Arguably, security tokens (or as some call them, digital assets) could well become the largest type of cryptocurrency as institutions wrap existing assets they own and trade into digital assets.

Some of the initial ways that the metaverse is being proposed to have an impact include:

• on-line games

• real estate

• social interaction/ experiences

Meta’s metaverse

Source: Meta

The origins of the concept of the metaverse date back to the early 21st century whereby using virtual reality headsets and interacting in an almost ‘video game-like digital world’ was the theory of the metaverse first introduced by Neal Stephenson in his 1992 novel, “Snow Crash”. As this demonstrates, it is not a newly invented notion - it has been around for a while and is most certainly still evolving. Until recently, in October 2021, the CEO of Facebook, Mark Zuckerberg, announced Facebook was to change its name to Meta. It is not only Facebook that believes the metaverse is here to stay. Microsoft has recently announced the largest acquisition it has ever made to acquire Blizzard Activision (paying a massive $68.7billion), and is looking to integrate its Teams platform into Meta’s Workplace platform.

One of the benefits which metaverse has the potential to address is that of remote work environments. According to Akash Takyar, CEO of Leeway Hertz, (which has helped build over 100 tech platforms for a variety of companies), the metaverse can help “the employer to resolve problems like productivity time theft and goldbrick at the workplace by keeping track of team productivity through their unique avatars”. Working remotely has been forced onto many due to COVID-19, and it has had its drawbacks - probably the most identifiable is that of being distracted and not working when you are expected to. To assist with this issue, the metaverse enables managers to effectively communicate with their employees, including reading body language and in-person interaction. Essentially, by more interactive monitoring this will hopefully encourage employees to be more productive, even at home, and offer a more engaging experience in which to communicate. Furthermore, metaverse allows organisations to create a virtual office and/or classrooms at home. Globally, the COVID-19 pandemic has resulted in a heavy toll on all levels of the education sector. School and university students have been required to learn remotely, undoubtedly producing many challenges. Whilst platforms such as Zoom allow students to interact with teachers, professors and each other, there remains the physical barrier that cannot be overcome with such technologies. The metaverse aims to provide a ‘joined-up’ online experience in which a single avatar can move between spaces - such as from a lecture hall to a science laboratory. Since there is complete control over what students see inside the metaverse, visual learning makes it easier to communicate ideas and concepts.

Another exciting use for the metaverse is that it offers organisations the facility to carry out market research whilst giving consumers the ability to use digital products and services before they purchase physical ones. This experience allows the users to gain first-hand experiences about the feel of the products and how they will bring value into their lives. Every retail vendor will have the ability to engage with audiences all around the world and will be able to present their products without any restrictions. This concept has not been lost on global brands such as Adidas and Nike as they begin to unveil their initial forays into NFTs and the metaverse. Meanwhile, journeys to other planets or to other countries, or even visiting an underwater city, is possible in a metaverse. Although worldwide travelling is adventurous, not everyone can experience this and with the geopolitical uncertainty and higher airline tickets prices there could, indeed, be greater interest in what the metaverse offers to intrepid globetrotters through virtual travel. As the publication, Luxury Travel Magazine reports, travel “is already beginning to embrace the metaverse exploring new forms of marketing and new ways to offer better experiences, and travelers are beginning to reap the benefits”. By using the combined power of metaverse, AR and VR, an advanced virtual world is being developed which offers a 'first-person' experience to the users with a much-desired smaller carbon footprint and, equally importantly, is available for those both with or without a disability. The size of the metaverse market is undoubtedly predicted to grow with this technology, attracting social networks, online game makers and other technology leaders. It has been suggested that the global metaverse revenue opportunity could approach $800 billion in 2024 - a huge rise from the $500 billion in 2020 - representing a compound annual growth rate of 131.1%.

Metaverse market growth outlook

Source: Bloomberg