with algorithms and smart contracts. A further advantage is that there is no need to trust to hold your assets in custody or to rely on a third party to settle transactions.

One of the key factors for any market to be able to function and offer scale is liquidity. DeFi liquidity is provided by ‘yield farmers’, i.e. owners of  crypto assets who lend cryptos to decentralised anonymous organisations (DAO), The DAOs offer varrious financial services via DeFi applications (DApps) which are run using complex computer codes and executed via smart contracts. The DApps need liquidity and reward owners of cryptos assets by paying them interest/yield i.e. a return, in the form of tokens. Binance states, “Yield farming is a way to make more crypto with your crypto. It involves you lending funds to others through the magic of computer programs called smart contracts. In return for your service you earn fees in the form of crypto.” The amount of capital tied up has grown enormously since the beginning of July 2020 - $1.1 billion rising to, at one stage, over $9.2 billion.

Total value locked in DeFi

Source: DEFI Pulse.com

The way fees are generated for yield farmers is that DeFi exchanges offer the ability to lend, borrow or exchange tokens for a fee. In effect, yield farmers are being paid to provide the liquidity. More important is that the DeFi borrowing, lending and exchanging of tokens is only possible if there are lenders, borrowers and those who wish to exchange assets, meaning there is no reliance on a third party which may, or may not, have the liquidity required. In effect, DeFi has a created an autonomous, computer-based way in which to match buyers with sellers. 

But, as ever, DeFi is not a risk-free panacea and there are risks of which to be mindful:

• crypto volatility - to avoid undue turbulence in the event of the price of cryptos suddenly falling, there is often the necessity to place considerably more than you are able to borrow, i.e. if you wanted to borrow $100 you would need to deposit $200 (200% capitalisation ratio). However, some DeFi exchanges ask for 500% or even 750% capitalisation ratios to try and avoid a sudden fall e.g. flash crashes in the price of a crypto; 

• software bugs - while DeFi is not reliant on third party central clearing houses or financial institutions to settle a transaction it is vulnerable to errors in smart contracts, such as Yam Finance which lost $500,000 to $750,000;

•  systemic risk - as many of the DeFi projects look to exploit the best yields being offered, they generate compound returns by lending and borrowing from each other. So, one major collapse could have serious repercussions in DeFi market;

• stablecoins – these are often used by yield farmers, and Tether (which has grown to over $13 billion) is one of the more frequently used cryptos despite the fact that it is facing an investigation by the New York Attorney. Were a major stablecoin found not to have sufficient assets then its price could fall, impacting on the value of collateral and, in turn, the DeFi sector;

• Oracles reliance - the smart contracts which run DeFi protocls rely on Oracles such as ChainLink, UMA, Witnet for information (e.g. the price of different crypto currencies) since, if the price of a crypto that was being held as collatoral were to fall this could result in breaches  capitalisation ratios thus leading to the need to close a DeFi exposure. Were these Oracles to be hacked or provide erroneous data, it would undermine the DeFi sector;

• transaction costs - currently the DeFi sector is very reliant on the Ethereum blockchain and, due to the massive volume of transactions, this has resulted in the cost of processing transactions on Ethereum to sky-rocket from $116 on 17th March 2020, to over $475 on 1st September 2020.

IPOs Finance Significant Job Creation

Source: Venture Impact 2007, 2008, 2009 & 2010 by IHS Global Insight, IPO Task Force August 2011 CEO Survey

Certainly, there are signs that change is on the way as seen with the announcement that INX is about to float, having received regulatory permission from the SEC in the US. Indeed, INX will, itself, be the first Security Token Offer (STO) which can be sold to private investors in the US. Interestingly, the cost to INX for carrying out its IPO was only $6 million (i.e. just over 5%) compared to the average price of an IPO being 9% to 24% according to PWC. Clearly change needs to come given these massive IPO costs and the decline of IPOs. It is not just in the US that digital exchanges are being given permission to launch. In August 2020, the FCA in the UK granted approval to Archax and Gemini to offer regulated exchange services for Digital Assets. The ability to buy Digital Assets on a recognised exchange was one of the key parts of the regulatory infrastructure which has been missing for asset managers. Gemini is already trading in a variety of jurisdictions such as Canada, Hong Kong and Singapore, with Archax meanwhile claiming it has 35 assets that it wishes to start trading. As a result, Archax will enable these to be traded digitally and made available for external investors, which will potentially make the assets easier to invest into by third parties.

An alternative to an IPO is when a company carries out a ‘private placement’ and typically sells some of its equity, not via a public offering but through a private offering, to a small number of selected investors. This method of raising capital usually negates the need for an underwriter thus involving less costs but, even so, as the chart below indicates it is still potentially 40% more expensive than carrying out a STO.

The cost of a STO v traditional private placement over 5 years

Source: Survey of Entoro Capital, STO legal counsel, S&P and Pitchbook

One of the biggest cost savings claimed above is ‘Ownership Transfers.’ These refer to the costs required for a transfer agent who keeps a record of share transaction and dealing with shareholders i.e. issuing, cancelling, handling lost share certificates and investors mailings (such as sending copies of interim and annual accounts). This is a good example of how digitisation helps disintermediate traditional advisors, thus saving companies’ and, ultimately, shareholders’ money. Possibly it is of even greater significance, digitised securities allow exchanges and regulators to be able to monitor shareholder activity in real time. Therefore, in theory, using smart contracts regulators can identity suspicious activity and report directors dealing i.e. bring far greater transparency. Currently, if you wish to see who the owners of a publicly traded company on any stock exchange in the world are you are required to wait until the stock exchange (where the shares are traded) is closed, the share registrar updated and the records adjusted for any transactions having occurred during the day…… 

Advantages of STO v IPO

Source: Mark-network.com

There are several reasons why an STO is seen as being more favourable than an IPO, which include:

• reduction of issuance costs - STOs are launched using Blockchain technology, meaning Smart Contracts are used. This eliminates many of the traditional intermediary fees whilst improving the compliance controls and reducing risks, as many of the steps required to raise capital can be automated and inspected on a real- time basis;

• direct access to investors - STOs enable companies to deal directly with investors as opposed to being reliant on asset managers and investment banks, which not only reduces the costs of issuing fresh equity but disintermediates the process. STOs rely on Blockchain technology, which offers greater transparency and automated pre -investors certification, potentially enabling companies to target a wider range of investors as opposed to simply the high net worth and institutional clients; 

• access to international investors - investors into IPOs are usually targeted within the jurisdictions in which the business is based, thus ignoring other investors around the world. STOs can potentially resolve this by investors conceding to be treated as local persons or entities under the jurisdiction of issuance of the token. For example, if EU citizens wished to invest in EDSX, which is based in Switzerland, they would have to give consent to be treated as a local Swiss resident and undergo Swiss KYC checks;

• digital engagement - younger investors are much more digitally ‘savvy’ and would often rather transact remotely on a mobile device as opposed to dealing via traditional stockbrokers or wealth managers;

• ‘goodbye to trading hours, hello 24/7/365’ - STOs can trade 24/7/365, as they are designed to be digitised and automated. This means that many of the traditional paper-based administrative regulatory requirements usually carried out by the listed-company, financial analysts and brokers can be replaced using smart contracts which operate around the clock.

The activity of the IPO market in the US and Europe has been declining over the last few years while the emergence of STOs has been seen as a means of raising capital. As we witness greater institutional engagement (on the back of more digital exchanges and custody and banking services being launched), it will become easier for asset managers be more active and help increase liquidity, which will be vital for STOs to thrive.

There have been numerous consultation papers, reports and analyses written by various central banks and global financial institutions such as the International Monetary Fund (IMF), the European Central Bank (ECB) and the Bank of International Settlement (BIS). Indeed, the BIS cite that, as of July 2020, thirty-six central banks have carried out in-depth analysis into the ‘pros and cons’ of issuing a CBDC of their own. The BIS has reviewed summarised various reasons central banks cite for looking to issue a CBDC.

Motivations for issuing a CBDC

Source: CPMI survey of central banks; Boar et al (2020).

The BIS also examined three jurisdictions which have introduced a CBDC:

• China - reported to be using a mix of centralised and distributed ledger technology (DLT) designed be used alongside physical cash. The majority of Chinese citizens already pay via AliPay or WeChat pay, so these could be the competition not cash that the China’s CBDC needs to overcome. The Chinese have publicly stated their desire to have greater insight to the cash in circulation within their economy and to know ‘who, what where and when’ it is being spent. There it would seem that anonymity of who is spending what is to not be allowed!

• Sweden - given that many Swedish shops do not accept cash and Swedes use very little cash to pay for transactions, the Swedish Central Bank is using the company R2 Corda to carry out a proof of concept for a Swedish CBDC. The current intention is that the transaction will remain anonymous.

• Canada - this is interesting, as it has previously been written about in Digital Bytes that the Canadians claim they have no intention of issuing a CBDC. However, extensive trials are being carried out as a contingency in case the citizens wish to adopt one as the use of cash declines, or in response to private cryptos or stablecoins forcing them to respond. The Bank of Canada have also confirmed that it would not have access to digital retail transactions, so anonymity of who and what is being spent would remain

It was proposed in a paper written by the ECB that a CBDC could be seen as a third form of money, the first being overnight deposits lodged with the central bank, the second banknotes. A major constraint for CBDC is that it disintermediates many of the incumbent players so who are likely to resist change. The ECB report also high lights some potential advantages of introducing a CBDC

Overview of benefits that some have associated with CBDC, and related factors or requirements

Source: ECB. Eureop.eu

A working paper from the IMF - “A Survey of Research on Retail Central Bank Digital Currency” - was keen to highlight that given; “most of the major central banks and monetary authorities considering CBDC” this report had been written “not to advocate for retail CBDC issuance, but to take stock of recent research, central bank experiments, and ongoing discussions” This report believes the reason central banks are exploring CBDCs are primarily:

• to improve financial inclusion;

• to maintain the central bank’s relevance in the monetary system. 

Notwithstanding these reasons, there are other objectives such as the security required and  costs of physically handling cash, improving the efficiency of national and global payments, to assist in the battle against nefarious activities, the ability to issue “helicopter cash in a more targeted manner while also being able to introduce negative interest rates as a way to stimulate spending.

However, the IMF report does identify certain risks that central banks may wish to consider before they proceed

CBDC Risk Landscape

Source: IMF

While many central banks wring their hands and contemplate the ‘whys and wherefore’s’ of issuing a CBDC, the People’s Bank of China (PBC) has pressed ahead. China is currently testing its CBDC for small retail transactions in various regions such as Hong Kong, Macau, Shanghai and Beijing with a view to the new Chinese Digital Currency being available for all its citizens in the future. 

It is important to remember that only novel Blockchain ideas can be patented so, even if Blockchain technology is being used in an application/industry for the first time, unless it offers something unique or solves some tangible technical challenge, it is unlikely that a patent will be granted. As the World Intellectual Property Organisation has highlighted (due to the US court case Alice Corp v CLS Banking International - ‘Alice’) "software patents litigation has changed dramatically", since a claimed invention must be more than an abstract idea. A US judge testified before congress that, “the application of Alice has been excessively incoherent, inconsistent and chaotic”. Nevertheless, despite this, as of May 2020 there have already been 3,924 Blockchain patents filed of which 1,257 have been granted. Therefore, it is thought that the authorised Blockchain patents in 2020 will undoubtedly exceed the 1,799 granted in 2019.

Total number of blockchain patent applications filed globally as of April 2020, by leading company

Source: Statitica.com

In China, as reported by Forkast Insights, there were over 10,000 patents filed although only a handful have been granted. Up to April 2020, out of the 20 companies that filed the most Blockchain patent applications 13 were Chinese. It could be argued that, rather than having a Blockchain patent race, it would be better to follow the lead from the mobile phone industry and develop a range of global standards. This could have several advantages, such as:

• greater adoption - better clarity together with the ability to follow a standard encourages engagement as it reduces the risk of having to speculate when selecting one provider’s solution;  

• interoperability and compatibility - this enables one to move more easily between different Blockchains;

• better technology - sharing ideas and gaining multiple inputs ought to produce better results rather than relying on one organisation.

Notably, there are a number of organisations trying to develop standards such as the International Standards Organisation, the Institute of Electrical Engineers and the Blockchain in Transportation Alliance. There have also been examples in specific sectors where traditional arch-rivals and competitors are merging to solve common challenges within their industry in a far more collaborative manner. Examples of this include:

Tradelens - international shipping; Vakt - petrochemical industry; Aura - luxury brands.

However, there are fears we could see a situation where one country owns the patent on a Blockchain application and denies its use in another jurisdiction, as a form of trade sanction. This fear was raised recently in an article in a leading Indian newspaper with reference to China’s own huge investment in Blockchain technology. Although this concern has given interest to Blockchain technology and its potential ability to impact on many aspects of commerce, governments and society, is it such a good idea that a handful of organisations could own the patents on a technology with the potential to have such wide-reaching applications? If, however, there were to be a set of global Blockchain standards (and companies/nations could work collaboratively) then this could overcome these fears thus limiting the need and use for patents.

Total value of DeFi sector

Source:DeFi pulse

While cryptocurrencies have given the ability to store and transfer funds in order to create a decentralised financial system, there is also the need to be able to invest, lend, borrow and earn interest from assets. Subsequentially, the demand for these types of services has led to the creation of decentralised apps, more commonly known as ‘dapps.’

On Yavin, CEO of Cointelligence (who has recently written a book about DeFi), maintains, “DeFi has the potential to completely disrupt the financial system, on top of the disruption caused by cryptocurrency. Unlike today’s completely centralised financial institutions, DeFi could give individuals full control of their own funds”.  The Cointelligence book gives an explanation about the basics of Blockchain, tokens, DeFi as well as listing a range of additional reading and sites from where readers can get more information, including:

• defiprime.com  - “a media outlet and analytical services provider for the DeFi community, aiming to inform, educate, and connect the community as the definitive source of news dedicated to decentralized finance space”;

• DeFi Pulse - “a site where you can find the latest analytics and rankings of DeFi protocols. Our rankings track the total value locked into the smart contracts of popular DeFi applications and protocols”; 

• DeFi Telegram - where DeFi projects can be discussed. 

• loanscan.io - which offers more information on DeFi loans. 

DeFi has grown in just the last six weeks, from $1billion to $6 billion! With the ability to earn up to 11% p.a. by investing in US$ via a $Stablecoin (compared to earning practically 0% holding US$ in a bank), it is easy to see why this sector is attracting so much interest and capital.

However, there are plenty of obstacles in the way before we see mass adoption, and DeFi can undoubtedly make in-roads into the massive derivative market which is estimated to be $12+ trillion, compared to the Foreign exchange (FX) market at $6.6trillion. The main challenges facing DeFi are:

• moving assets between different Blockchains and, in any event, most assets (i.e. equities, property, commodities, bonds, currencies etc) are not even available in a digital format;

• ensuring that the code in-bedded in smart contracts is secure from hackers;

• a lack of international regulations and legislation as, indeed, smart contracts in some jurisdictions are not even recognised. Also, there is currently no global agreement relating to KYC/AML;

• the compatibility with traditional financial markets and engaging with DeFi and crypto assets (with their hot and cold wallets, private keys passwords etc) does not offer an easy user experience for those new to this market. However, Wedefi and anyswap.exchange are good examples of how this topic is being made more accessible and understandable.

Source: TeamBlockchain Ltd

Also, in this latest Cohort 6 is the highly-respected law firm, DLA Piper, which is proposing a RegTech platform that offers a rules-based methodology to digitally manage regulatory compliance with regards to the issuance of digital assets. Martin Bartlam, International Group Head of Finance & Projects and FinTech at DLA Piper, said recently, “ We are looking to create a much more efficient way for firms to navigate the complex rules and regulations around the issuing of digital assets, making it more structured for regulators and ultimately faster and cheaper for issuers”. Notably, DLA Piper is also involved in Project Pyctor as it looks to offer an institutional grade custody solution.

This unification of some of the world’s leading financial institutions offers more evidence that institutions are becoming more engaged with Blockchain technology and are considering ways to use both the technology and Digital Assets as more of their clients look to become involved in this asset class. However, it is not just commercial entities, but regulators too, who are looking to understand how and where these assets fit into the financial structure and how Blockchain technology may, indeed, be able to strengthen risk and compliance controls. Interestingly, much of this is happening in the world’s leading financial centre, London.

Another development showing endorsement of this sector is Komainu’s debut as a joint venture between Japanese bank, Nomura Holdings Inc, and cryptocurrency partners, Ledger and CoinShares. Komainu is proposing to offer custody services to other institutions for Digital Assets and cryptocurrencies, such as Bitcoin. Meanwhile, Korea’s largest bank, (Kookmin Bank) believes that the digital assets industry will continue evolving to include a wider range of digital assets, not only cryptocurrencies. Hence, it has teamed up with a couple of other firms to offer custody services, commenting that, “other traditional assets such as real estate, artwork, and other reified rights will be issued and traded on blockchain platforms.”

We are seeing institutions  giving Blockchain technology and Digital Assets the seal of approval, and VC and angel investors are also being attracted to opportunities around Blockchain technology and the creation of Digital Assets, such as SpiceVC. The early stage equity funding platform, Stakeholderz, has had, on its regulated platform, a steady increase in the number of companies using Blockchain technology and/or looking at tokenisation. Dermot Hill, CEO of Stakeholderz, recently stated, “We are seeing more interest in businesses that are looking for capital and the right mix of experience from people with a proven track record to help them not only invest but work with them to grow the company. One project is Invluencer, which uses tokens at the centre of their offering to compound investment intelligence”. To this end, on the 21st August at 10.30am, Stakeholderz is putting on a webinar entitled ‘Blockchain and Tokenisation: What investors need to know’.

It would appear that we have reached an inflection point for all sectors of the commercial world to embrace Blockchain technology and see how this technology can impact on their day to day activities. Almost daily there is an announcement from major global corporations, and indeed even governments, which are using Blockchain technology and/or Digital Assets in various innovative ways, thus offering greater transparency, improved efficiency and often helping to improve trust in the data on which we all so much rely.

Price of West Texas Crude oil

Source: Revinitiv

Essentially a crude oil TAS trade is where you agree, at a given point during the day, to buy or sell oil futures at that day’s closing price, plus or minus a cent or two. For example, at 09.30 you agree to sell oil at 14:30, at whatever the settlement price is at that time. If you agree up to sell oil futures at the still-unknown settlement price, there has to be a counter party agreeing to buy the oil futures you’re selling. Such counterparties could be hedge fund managers, market makers or prop desks at banks i.e. professional investors who are looking to trade almost anything at what they see as price anomalies. The counterparties’ motive is to trade, not to actually buy (in this case) oil futures at the close of the day’s trading, thus they will use the TAS mechanism, while selling the same number of futures at around the settlement time – 14.30. 

On 20th April Bloomberg reported, “that a number of Vega traders sold the May contract just before it settled at 2.30 p.m. New York time, netting massive gains”. Was Vega manipulating oil futures (otherwise called ‘banging the close’) or hedging i.e. selling futures given the brouhaha due to Covid-19 and the fear that the demand for oil would plummet? 

It is hard to hide making $500 million in a day and Vega has now come to the attention of regulators in the US and the UK. Furthermore, it is not difficult to see why the market is somewhat perplexed as to how one of the most liquid and most widely traded commodities in the world, oil, could possibly be priced at -$37.63?

There are regulations to prohibit trading that have the objective of deliberately impacting on prices, that is, manipulation. There have been a number of incidences where ‘banging the close’ aka allegations of manipulating market prices close to when a market price is fixed. Indeed, a former FX trader was teaching people the pitfalls for others to be aware of back in 2014.The challenge is proving that prices have been manipulated and someone has been ‘banging the close’. You need evidence, which is a difficult unless there is a whistle-blower or a trail of incriminating emails/text message etc. However, according to Bloomberg; “Now regulators at the U.S. Commodity Futures Trading Commission, the U.K.’s Financial Conduct Authority, and CME Group Inc., owner of the Nymex exchange where the trading took place, are examining whether Vega’s actions may have breached rules on trading around settlement periods and contributed to oil’s precipitous fall.” 

Technology could enable regulators to identify and detect ‘banging the trade’ much faster as a combination of machine learning and smart contracts could help alert regulators as trades are occurring. If all the trades were recorded on a Blockchain platform, which all parties could have access to in real time, Vega and its trades could easily be identified to regulators while retaining anonymity within the market. A small, all be it regulated, firm such as Vega probably would not conduct this degree of trading, so what it did could be alerted and questioned via smart contracts. Many of the old systems and platforms that financial markets rely on were derived in the days of paper-based analogue trading. However, the increased sophistication of traders, flash trading and an increasing digital economy means regulators need the tools and monitoring ability to keep up with practitioners. Thus, it is of no surprise that technologies such as Blockchain, AI and Machine Learning are seen as being able to help bring greater transparency and stronger compliance and risk controls, which in turn will hopefully engender greater confidence and trust.

The laws that originally established REITS were created in the US at the 14th September 1960 Congress and have now since been copied in 35 other countries. In the US REITS are valued at $3trillion and, in 2019, distributed $69billion of income to 87 million investors.

Average discount to NAV for US REITS

Source: S&P Global Market Intelligence June 2020

Therefore, faced with these statistics, how else can Blockchain be used in the real estate sector since fractional ownership (i.e. enabling smaller investors to get access to this illiquid asset) has apparently been already widely addressed? The Foundation for International Blockchain and Real Estate Expertise (FIBREE), originally established in Holland and now with members in 30 countries, has released its second global industry report -"Blockchain Real Estate". In this report, Jan Veuger, Professor at Saxion University in Holland believes, “Blockchain is the cement between artificial intelligence and the Internet of Things [IoT]. Convergence will play a major role in the field of information and communication technology. Different technologies and market players will converge and intertwine. I see that happening between blockchain, artificial intelligence and IoT.” Certainly a good example of this can be seen in Beijing’s newest airport which connects 5G technology with AI, Blockchain and IoT. The Blockchain technology is seen as a ‘skeleton’ from which other technologies can be connected.

The FIBREE report has also identified issues such as climate change and lack of trust are essentially the challenges facing the world. It accredits Blockchain as being the ideal technology within real estate to help monitor, effectively and inexpensively, both an individual building as well as the carbon footprint of different jurisdictions. Actions taken to help minimise the impact of climate change can be verified, recorded and monitored against those targets which have been set to achieve agreed environmental goals. FIBREE has identified that the use of Blockchain technology can be applied in the following ways:

• smart contract energy deployment;

• smoother international climate finance transfers;

• fraud-free emissions management;

• better green finance law enforcement. 

The use of Blockchain-powered technology and smart contract deployment enable recording, tracking, management and sharing solutions across a wide area of energy markets and climate change-related activities. It also offers the possibility of creating permanent records and an audit of transactions for any individual property giving reliable and secure data. Subsequentially, a unique property ID for a building can be created thus offering the ability for an investor to monitor the ‘green credentials of the property’ as well as helping local authorities and governments to build a clearer picture of the environmental impact of the real estate in their environs. Insurance premiums could be lowered while, at the same time, potentially increasing the value of individual properties. Equally importantly, ‘eco-friendly’ and sustainable real estate is likely to attract a premium going forward.

Global real estate projects offering tokenised access

Source: Fibree.org

Indeed, Florian Huber, Co-Chair of FIBREE in Vienna, has identified that the majority of real estate tokenisation projects have less than €200,000 of capital, so they could hardly be described as offerings from institutional asset managers. Back in 2018, research undertaken 

by Huber discovered that over 500 real estate tokenisation projects had been started across the world, yet less than half to date are still proceeding. 

‘Zoonotic’ diseases - 60%+ of all known human infectious diseases.

Source: Foodsource.com

COVID-19 is the first global pandemic arriving in an era when nearly the entire population can be tracked in real time, thanks to the ubiquity of smartphones and social media. Toronto-based start-up, Blue Dot (which uses an AI-enhanced surveillance system) seems to have been the first to detect COVID-19 outbreak several hours after its insurgence in Wuhan, but well ahead of the Chinese authorities and other international institutions and agencies. COVID-19 has decidedly manifested itself as a data problem and, according to the Blockchain Research Institute, the establishment of a self-sovereign identity system is integral to solving this problem. Undeniably, the question now facing non-authoritarian governments is how heavily to draw on the cache of private sector data in a bid to limit this deadly disease. 

Following the initial outbreak of COVID-19 in January, Chinese citizens had personal details leaked and published which, unsurprisingly, in turn led to personal harassment and reproach. The information circulated included names, photos, home and work addresses, mobile phone numbers and even ID numbers. Similarly, in South Korea, the government has published online the personal data of patients confirmed to have the disease. Its Health Ministry and regional governments have been disclosing not only patients’ movements, but also their personal information such as age, their admitting hospital, the approximate location of their residence and from where they are suspected to have contracted the disease. Equally, through text messages, citizens have been alerted in real-time when new cases are confirmed within the districts of their residence, with links to check the details of those known cases.

In Europe, governments and agencies have drawn location data from major mobile phone companies but, under European Union privacy rules protecting the confidentially of communication on telecom networks, location data can only be used by telecom operators when it is made anonymous, or with individuals’ consent. In view of this fact, on March 16th 

this year, the European Data Protection Board (the umbrella group of the EU’s data-protection authorities) stated that, “The public authorities should first aim for the processing of location data in an anonymous way” (i.e. processing data aggregated in a way that it cannot be reversed to personal data). Europe’s largest mobile operator, Vodafone, produced an aggregated and anonymous heat map for Italy’s Lombardy region (a global coronavirus hotspot), stating it was “willing to assist governments in developing insights based on large anonymized data” wherever it was “technically possible, and legally permissible.”  In Belgium, Proximus, Orange and Telenet all agreed to share part of their databases with a consultancy to help public authorities better fight the pandemic and in Germany, Deutsche Telekom disclosed anonymised customer mobile phone data to the Robert Koch Institute (a federal agency and research institute responsible for disease control and prevention) giving assurance that, “The tracking of individual citizens or infected people shouldn’t be possible”. However, Patrick Breyer, a privacy advocate and member of the European Parliament, concerned that the supposedly anonymous monitoring of movements within the entire population gives no actual protection from infection but simply allows for unprecedented mass surveillance, envisages that, “The authorities will start using the data for other reasons and this exposes people to investigations for not following the authorities’ orders.”

Translated to actual health care, the best prevention is surely early detection of possible pandemics and to arrest the impending transmission. Big data and Internet of Things (IoT)-derived data (if obtained with the highest standards of ethics and secured with the highest standards of security) can certainly assist in enabling infectious diseases to be better traced and controlled globally. Network analysis becomes a must, not only to better control zoonosis, but also to understand how, in a group of individuals (be it animals or humans) social interactions can shape the dynamics of a particular disease.

Essential principles in the control of infectious diseases. In the sequence, the important aspects to control transmission and improve control by preventive measures (vaccination and hygiene) are presented. The role of the AI ecosystem in this endeavour is central.

Source: Freepik from flaticon.com

Human studies have shown how social media data could be used to map those infectious diseases not yet identified by public health institutions. Interestingly, a team of researchers from Harvard has developed an algorithm analysing various kinds of data (such as tweets and Google searches) to forecast coronavirus outbreaks. Included in this are Google Trends statistics on what keywords people are browsing, doctors’ search queries on the ‘UpToDate’ medical knowledge platform, coronavirus-related tweets and anonymised smartphone 

mobility data. The Harvard researchers have determined that these data sources, when evaluated in aggregate, can potentially provide early insight into coronavirus outbreaks. Equally interesting, according to a JPMorgan study, credit spending appears to be correlated with outbreaks of COVID-19. Higher restaurant spending (the strongest predictor across all categories of card spending) appears to be linked to a faster spread of the coronavirus, as shown by data from 30 million Chase credit/debit cardholders and from Johns Hopkins University’s case tracker which calculated that increased restaurant spending in certain areas predicted a rise in new infections there three weeks later.

So, what are the chances of another pandemic?

The United Nations Environment Programme (UNEP) and International Livestock Research Institute (ILRI)) are urging governments to embrace an inter-sectoral and interdisciplinary approach, One Health, which encourages states to promote sustainable agriculture, strengthen food safety standards, monitor and help improve traditional food markets, invest in technology to track outbreaks and provide new job opportunities for people who trade in wildlife. 

Source: onehealthcommission.org

Parallel to this, the World Health Organization (WHO) has partnered with major technology companies and governments to launch MiPasa, a global-scale control and communication system powered by Blockchain technology, which enables early detection of COVID-19 carriers and infection hotspots through seamless and private information sharing between individuals, state authorities and health institutions. In addition, the COVID Credentials Initiative (CCI) has been launched to use digital identity to address the spread of COVID-19, with one of its aims to develop ‘immunity passports’. So far, at least 69 have signed up including individuals who are part of Evernym, ID2020, uPort, Dutch research organization TNO, Microsoft, ConsenSys Health and consultants Luxoft. 

• a transaction where money is invested

• an expectation to make a profit

• a common enterprise 

• profits being generated by a third party.

Let us look at each criterium in turn with respect to XRP and Ripple (the company which created the XRP cryptocurrency).

A transaction where money is invested: Yes, investors paid to buy XRP - unlike a loyalty scheme, they were not given XRP tokens for free. Ripple took payment from the investors who bought XRP to pay for its on-going development. Indeed, in Ripple Labs’ quarterly reports in Q2 2019, it stated that “another 3 billion XRPs were released …..some were used to develop uses cases for XRP including Xpring (the Ripple VC initiative) and RippleNet partnerships such as MoneyGram.”  

An expectation to make a profit: Why were individual investors buying XRP, since they were unlikely to be using the services on offer from Ripple/XRP as this was an institutional (i.e. a B2B) service. It has to be assumed that they bought XRP with the purpose of making a profit. In addition, Ripple has made several announcements that, when selling XRP tokens from its trust, it is trying not to impact on the market price of XRP (presumably as Ripple does not wish for its investors’ profits to be damaged). Again, Ripple’s quarterly report states, “Ripple’s programmatic XRP sale was conducted with the goal of minimising market impact”.

A common enterprise: In essence this means will an investor share from the profits and losses of others. Ripple Labs is constantly developing and working on XRP with capital from the sale of XRP tokens and the more successful Ripple is then the more XRP is used so presumably the higher the price XRP rises. In an effort to distance Ripple from XRP, Ripple’s CEO, Brad Garlinghouse, has told Yahoo finance, “If Ripple the company shut down tomorrow, the XRP ledger would continue to operate”.

Profit being generated by a third party. The buyers of XRP have no engagement with the development of the business. They rely on Ripple Labs to develop its use cases (as stated above) with its VC ‘arm’ and with partnerships, such as MoneyGRAM.

An alternative way to look at whether a Cryptocurrency (Crypto) qualifies as a security or not is to look at what happens with the proceeds from the Crypto. Take the simple example of an enterprise wishing to operate a theatre issuing a Crypto to help fund its endeavours. Assuming that there is already an existing theatre and a Crypto is issued to current and new theatre goers to have a selection of ‘perks’, such as entitling them to have access to advance booking, discounts on merchandise, free pop-corn, premium seating etc This Crypto can be seen to have a true utility function and is more akin to a loyalty program. If however, the Crypto is used to purchase a building to create a theatre (and renovate the premises) but still offer the aforementioned ‘perks’, then clearly some of the money raised from the Crypto is being invested in the fabric of the building, thus potentially creating capital value by a third party (i.e. not the holder of the Crypto). Therefore, it is more likely that this would be treated as a security.

With statements such as, “The sale of XRP is clearly a security offering” from specialised lawyers such as Dan Steinbeck. Should XRP have potentially broken SEC regulations (although it is, by no means, certain), this will surely offer hope to those looking to take class action against it. Although it is not all gloom and doom as recently Japan’s SBI Holdings has announced that is t is looking to launch a Crypto fund and 50% will be invested in XRP, having announced in May 2020 it was going to use Ripple’s payment network, thus underlining its commitment to the company. 

In September 2019, European Central Bank (ECB) board member, Benoit Coeure, was reported as saying, “The bank should ‘step up’ its thinking on a public digital currency”. This was then followed up in November 2019 when the bank, itself, added, “The ECB and other EU central banks could usefully explore the opportunities as well as challenges of issuing central bank digital currencies including by considering concrete steps to this effect.” One suspects that this statement was, in no small part, fuelled by concerns regarding the threat of a private organisation, such as Facebook, which could thus undermine the influence and control that the ECB has over Europe.

There would now appear to be several European countries jostling to launch some kind of Digital Euro. Indeed, in Germany, the Association of German Banks (a group of 200 private German banks) has been asking for regulators to issue a Digital Euro. Holland and France have both been asking for a while to see a Digital Euro and now the Italian Banking Association (ABI), comprised of 700 Italian banking institutions, has also urged for the process of introducing a Digital Euro to be sped up. A statement from the the ABI reported that, “A programmable digital money represents an innovation able to profoundly modify the way we conceive currency and exchange. This transformation can potentially deliver a great added value, in particular in terms of efficiency for both operational and support process. This is the reason why is so important to dedicate attention and energies to develop, quickly and in collaboration with the entire ecosystem, new instruments able to primarily support the development of the Euro area”.

It is not singular to Europe that Digital Currencies are being taken more seriously. According to the Bank of International Settlement (BIS) there are 44 central banks seriously contemplating CBDCs. As the World Economic Forum stated, “CBDC may be issued for general use (“retail” CBDC) for peer-to-peer payments and payments from consumers to merchants; or for use by commercial banks and clearing houses (“wholesale” CBDC) for more efficient interbank payments that occur outside traditional correspondent banking and other payment systems”. Indeed, it has just been announced that in Thailand the authorities are proceeding with the launch of a CBDC. This announcement follows on from both the Bank of Thailand and Hong Kong’s central banks revealing in January 2020 that they had moved a step closer to issuing digital currencies that could be used to make payments between the two countries far more efficient than at present.

Siam Commercial Bank (SCB) believes it needs to become digitally sophisticated in order to meet the potential challenges from multinational organisations such as Alibaba, Amazon or Samsung Electronics. SCB has also signed an agreement with the Bank of Thailand. SCB has been working with Digital Ventures (DV), a leading fintech venture capital firm, since 29018 using DV’s Blockchain-powered platform for to speed up procurement, invoice, and payment processes for companies. The platform reduces procurement processing time by 50% and reduces cost per transaction by 70%. As a result, over 4,500 business partners are on this platform within two years.

Unilever’s Marmite

Source: Digital Bytes

One of the most enduring aspects of Blockchain technology is its ability to engender trust, in offering greater transparency. This is paramount for an FMCG endeavouring to prove both the sustainability of its operations and the environmental credentials of its products. However, it is not simply convincing consumers that a multinational corporation is acting in a responsible manner, whereby encouraging the purchasing of its products, but legislation is now also playing a role particularly with the growing concern over climate change. Indeed, 93% of the world’s 250 biggest companies submit reports on sustainability. Notably, those FMCG companies which pride themselves as leaders in ‘sustainable supply chain management’ are Coca Cola, Nestle, L’Óreal, Proctor and Gamble, Unilever and Nike. Blockchain technology allows for greater transparency (and therefore trust) in what is manufactured and from where. As a result, it demystifies complex global supply chains, whereby giving governments and consumers alike greater clarity about both what they purchase, and the sustainability of these products.

A prime example of how an FMCG is embracing Blockchain technology is Unilever, which has recently announced it wishes to have net-zero carbon emissions by 2039 and is investing €1 billion in a Climate and Nature Fund over the next 10 years. The aim of this initiative is to reduce carbon emissions and deforestation by using Blockchain technology - 11 years ahead of the Paris International Climate Agreement of 2015, which looked to limit global warming to 1.5° degrees. Unilever has reported that, “The company said it will use satellite monitoring, geolocation tracking and blockchain among other digital technologies to increase traceability and transparency within its supply chain”.

It is not only bringing greater transparency to improve supply chains and help the environment that Blockchain technology is being used. FMCG firms are massive advertisers, such as Proctor and Gamble, which, itself, spent $3.4 billion in adverts last year and which is using Blockchain technology and smart contracts to monitor the effectiveness of its advertising. Indeed, Pepsi saw almost a 30% increase in efficiency during trial advertising harnessing Blockchain technology.

In the same way that people do not really dwell on the technology powering their mobile phones, or how a search engine such as Google or the social networking firms such as Twitter and Facebook work, Blockchain technology is increasingly being used in an unobtrusive manner helping to reduce costs, speed up processes and generally make systems and certain processes more efficient. However, it must be remembered that the technology is no panacea and is certainly not appropriate in all circumstances, albeit contrary to what some more evangelical Blockchain enthusiasts might purport! 

Therefore, in answer to the posed question - Why bother with Blockchain technology......? You may well find your competitors are already utilising it and, in any case, surely most businesses are continually seeking further ways to improve profit margins and develop products and services which are more efficient and appealing to their customers. In view of this, surely the question is not, ‘why bother?’, but ‘why not explore?’, whereby ultimately being in a stronger, more informed position?

The word lottery means, chance/fate and while lotteries are not new, they haven’t changed that much since their invention. Certainly, in recent years many have struggled to command attention as players are increasingly being attracted towards on-line betting and gambling sites. However, lotteries are still popular, and growing. According to Marketing Insight Reports, the global lottery market stands at $302 billion and is expected to increase to $380 billion by the end of 2025. Some of the bigger Lotteries include China Welfare Lottery, China Sports Lottery, Hong Kong Jockey Club, Francaise des Jeux and Camelot (which runs the UK lottery).

Some of the disadvantages for many of the lotteries include:

• lack of transparency in how the lottery provider actually operates;

• the need to physically buy a paper-based ticket tin order to participate (there have been many examples of tickets being lost, washed or even stolen);

• being restricted to national boarders, which results in lower prize money as fewer people participate.

Blockchain technology offers the ability to restore and maintain trust and transparency, not only in terms of how the lottery is run i.e. no potential manipulation of who wins, but also where the money is spent, by whom and on what. Blockchain technology also enables lotteries to be run digitally, thus removing the need for paper tickets (which can get lost) and the various other intermediaries. Another advantage of being digital is that lotteries using Blockchain technology can also be ‘boarder-less’ i.e. cross-national boundaries, so allowing citizens from more than one country to participate resulting in bigger prize money and hence encouraging more people to participate.

Blockchain technology additionally enables the use of Smart Contracts, enabling players to be assured of where the money spent on their lottery ticket is going. Furthermore, it can guarantee the monies are appropriately spent according the transaction, since all payments are automated. Blockchain-powered lottery platforms afford higher levels of security by removing the need to handle cash which, itself, incurs costly transaction fees being levied by banks. It also allows faster payments in Digital currencies, thus creating more flexibility and reaching people without any geographical restrictions.

Listed below are a variety of firms offering Blockchain-powered lotteries:

• Bit4Win is a new Blockchain lottery which has a referral proposition, offering unlimited rewards to people who make referrals via its “win-chains”. This allows those customers referring BitWin24 to earn a percentage of all prizes acquired by their ‘first-tier’ direct referrals (as well as anyone down the line) which can result in massive rewards accumulated passively. The purpose of this mechanism is to incentivise people to refer the lottery, which will overcome an obstacle that Blockchain projects have had previously.

• Nation Lottery, based in the Nordics, uses Ethereum Blockchain technology and Artificial Intelligence and allows family members, friends and/or work colleagues to be part of a ‘syndicate’.

• Fire Lotto also uses the Ethereum Blockchain along with smart contracts to automate the platform as much as possible. Additionally, it allows players to buy lottery tickets with crypto currencies and fiat.

After 500 years, it would appear that lotteries are to be party to some changes resultant from Blockchain technology bringing greater transparency and trust to a sector which has had its share of scandals (possibly helping to explain why many lotteries tend to be run by governments since they have the confidence of their citizens). Furthermore, it will be interesting to see if Blockchain technology can broaden the appeal of lotteries and bring those that participate into the digital economy.