Consulting giant McKinsey & Co recently published a report on the state of the blockchain industry, claiming that while crypto technology has potential, it has been unable to break away from the early “pioneer” phase with most use cases failing to take off.

The Report: ‘Blockchain’s Occam Problem’

The report is not entirely critical, stating that blockchain is viewed as a potential game-changer in many industries. It does, however, point out that a huge amount of money has been pumped into blockchain projects, adding the view that “little of substance has been achieved.”

The consulting firm states that blockchain is an infant teleology that is “unstable, expensive, and complex. It is also unregulated and selectively distrusted.” A chart is included in the report, illustrating the industry struggling to emerge from the first stage of a four-stage cycle moving from pioneering to growth, maturity, and decline.

The report goes on to detail emerging doubts regarding crypto technology, with the report title referring to Occam’s Razor, the concept that the simplest answer or solution is the best one. The implication here, of course, is that blockchain technology is not the simplest solution.

Crypto Firms Respond

Anyone reading the report could be forgiven for taking a rather dim view of the technology. While not an outright dismissal of blockchain tech, McKinsey’s report certainly aims to drastically temper the expectations of any blockchain enthusiasts who firmly support the technology as a potential solution for many cross-industry problems.

Blockchain firms have not remained silent in the face of the report, with multiple CEOs addressing and debunking various points made within.

CEO Angel Versetti of blockchain supply chain tracking company Ambrosus acknowledged that blockchain hype had clouded expectations, but firmly asserted that in its intended use case, blockchain is indeed the best solution by far:

“The report claims that competing emerging technologies are hindering the progress of blockchain, however, I think there is no technology that really competes with Blockchain in terms of its core value proposition: censorship-resistant, universally trusted ledger of transactions and contracts with no central point of failure,” said Versetti.

Blockchain will not solve all the problems of the world. But in the core value proposition of data integrity and immutability, blockchain is king.

Utopia Music CEO Brent Jaciow focused on solutions to the issue, pointing out that blockchain tech was still an emerging industry.

Developers must work hard to remove any roadblocks to firm’s harnessing its capabilities. This feat may be accomplished by creating API’s which integrate into existing solutions or developing a user experience that is simple and easy to use whilst integrating blockchain technology as the backend software.

Is Blockchain The Future?

The McKinsey report runs the gamut of regulatory, scaling, and security concerns which have of course featured heavily in all criticisms of blockchain technology.

Dale Sanders@drsanders

McKinsey report on Blockchain, Jan 4: “The bottom line is that despite billions of dollars of investment, and nearly as many headlines, evidence for a practical scalable use for blockchain is thin on the ground.” 311:16 PM – Jan 6, 2019Twitter Ads info and privacyBlockchain’s Occam problemBlockchain has yet to become the game-changer some expected. A key to finding the value is to apply the technology only when it is the simplest solution Dale Sanders’s other Tweets

Blockchain company responses to CCN seem to tackle these concerns with the suggestions of API development and the assertion that blockchain truly does outshine competing technologies when it comes to immutability and data protection, but it’s perhaps too soon to say whether the crypto industry is ready to break through to the second phase of the growth cycle outlined in the report.

However, the report reads more like a stern lecture from a well-meaning parent than it does a smear campaign from competing interests. While highly critical in some cases, even McKinsey agrees that blockchain is potentially revolutionary. Three guiding principles are cited:

  • Organizations must start with a problem.
  • There must be a clear business case and target ROI.
  • Companies must agree to a mandate and commit to a path to adoption.

The report states that industries are “downgrading expectations” regarding blockchain, but acknowledges that the technology has the potential to revolutionize processes in banking, healthcare, insurance, shipping, and more – but only if the above principles are observed. Companies are urged to “adapt their strategic playbooks, honestly review the advantages over more conventional solutions, and embrace a more hard-headed commercial approach.”

The consulting firm concludes an occasionally bleak report with a more hopeful outlook by saying:

If they can do all that, and be patient, blockchain may still emerge as Occam’s right answer.

This post credited to CCN. Image source: CCN

As blockchain technology hits the gaming industry, most game developers are only exploring subtle integrations. Meanwhile, a Seattle startup is making extensive use of the technology to completely reinvent how tabletop card games are played and distributed.

New Gaming Paradigm

CryptoSlate recently spoke with Seattle studio Cryptogogue about their unique crypto-backed trading card game and radical plan for distributing it. Having noticed that many companies are “trying to map existing paradigms to the blockchain”, Cryptogogue set out to take this concept to the next level and “gamify the blockchain” itself.

The result is Volition, a hybrid concept that combines a traditional printed trading card game with all of the features of crypto-collectibles. The game’s name, Volition, means “an act of making a choice or decision; the power of choosing or determining.”

“There are so many crypto projects out there that help facilitate a better physical to digital transformation,” says Ken Pilcher, “but not many that help bring it full circle and back to something tangible.”

The game is built on top of a new digital-to-physical distribution platform where the game’s content is published and sold to the community of miners running the network. Meanwhile, the game is actually played on a physical tabletop with real-world friends.

When it comes time to play, anyone who owns a card can print it out and use it in a game.

Changing Play and Trade

Thanks to blockchain technology, proof of ownership and authenticity can easily be verified by scanning a code on the card and checking it against the network. Cards may be checked casually by scanning them with an app on your phone, or systematically by judges and organizers during tournaments.

Because a blockchain is the distribution platform, it will be the community of users that keep the game going. Volition will run on an entirely custom blockchain platform with specialized mining nodes and wallets.

Related: How EOS, TRON and EthereumHave Impacted the Gambling Industry

New game assets are distributed algorithmically through miningpacks. Cards are released as virtual booster packs that need to be opened just like real packs. Miners can even configure their systems to mine for specific sets.

Then, these assets can be traded across built-in marketplace nodes. Users can create their own stores on the network to trade and sell cards with no fees using the currency built directly into the platform. Alternatively, cards can still be traded online or even in person, changing the dynamic of digital ownership.

Since game assets are stored digitally, Volition allows for the evolution of player cards; cards can level up, get combined, and unlock powers over time.

Since these assets are tracked on a blockchain, gamers can also see a card’s entire immutable history, including previous ownership. If a card was used by someone famous to win a tournament, then the next owner will have a record without a pen ever touching the card.

Tenacious Games and The Spoils

To understand how the team got to where they are today, we have to look more than a decade into the past.

In 2006, freshly minted gaming startup Tenacious Games released a clever trading card game called The Spoils. The Spoils was well received and quickly developed a dedicated cult following. The game offered a variety of innovations and was known for being the first trading card game to offer a free and open beta.

Victims of bad timing, Tenacious Games entered their series A financing just as the financial crash hit in early 2007. By 2009, struggling from undercapitalization, Tenacious Games sold the rights for The Spoils to Arcane Tinmen—who continued to support the game until it was finally shelved in December of 2016.

The Path to Volition

It was The Spoils that originally brought Cryptogogue’s two key founders together: technologist Patrick Meehan and game designer Ken Pilcher. Meehan was one of Tenacious Games’ original founders.

After selling the rights to The Spoils, Meehan left the hobby gaming scene altogether and returned to his core skill as a software developer working on anything from embedded mobile to virtual reality. Meanwhile, Ken Pilcher worked as a key designer on The Spoils until near the end of its lifespan.

Pilcher has a deep interest in tabletop gaming, with 25 years of experience playing games like Magic: The Gathering, running gaming events, and heavily collecting trading cards. With complementary talents, well-aligned interest, and shared experiences with The Spoils, the duo seemed destined to collaborate on another project.

In early 2017, drawing on their collective knowledge, Meehan and Pilcher began a collaborative exploration of blockchain-centric distribution models.

“Further into understanding the technology,” Meehan says they realized “we really ought to dust off our blockchain game publishing skillset.”

The duo soon became a trio with the addition of Meehan’s former colleague Scott Teal and by early 2018, they decided on a vision and announced to the world their intention to develop Volition. The team has been hard at work ever since.

Digital Cards for Traditional Gamers

Since nothing like Volition exists, many gamers are curious what gameplay will look like. While considered a spiritual successor to the gameplay model from The Spoils, Volition will be a distinctly unique game.

The team is creating something even leaner and cleaner than what they did in The Spoils. The team describes gameplay that is “accessible like Hearthstone,” yet more “skill-heavy, like The Spoils and Magic: The Gathering.”

Game designer Pilcher wants to be sure that players never feel stuck traveling down only one path of play. In our interview, Pilcher said:

“In many resource-based games where resources are in the deck, you have issues where if you don’t draw those resources, you can’t really do much until you do. With Volition, players are always able to continue building up a board or draw additional cards if they find themselves lacking specific cards they might need at that time.”

From distribution to play style, Volition is all about building and supporting the community. The official forums already host a modest, yet enthusiastic, core group of fans, many of them carried over from The Spoils. Community members provide ideas and feedback and engage directly with all three team members, and will be the playtesters for the first iterations of the game.

Physical Game Stores in the Digital World

While Cryptogogue intends to replace the gaming industry role of distribution, they are focused heavily on supporting retailers—especially dedicated game stores. Meehan believes that “gamers like to go to game stores; people like to see and touch a product.” Although a tabletop simulator could be made on top of the technology, the team is more focused on the physical, print-on-demand card gaming experience:

“As the world becomes more screens and wifi, I feel like digital experiences will become typical and people will crave face-to-face human contact.”

Retail shops will be offered a number of perks. Stores can have their own inventory that can either be sold using QR codes on a poster or as physical products printed and displayed with the transfer code on the back in a card sleeve. The founders have even thought about distributing a percentage of mined card packs directly to partner game stores.

Volition is just the first of many games to be distributed this way; The network that will distribute Volition will not be limited to a single game. Cryptogogue hopes to build an ecosystem that changes how games are played and distributed, aiming to help indie game developers bring all sorts of collectible card games to market over the network.

Determining the Future

Volition is expected to go live in Q1 of 2019. While the Volition blockchain will have an internal currency, Cryptogogue emphasized that it’s not looking to get listed in exchanges or get involved in the ICO. Instead of pushing their product on gamers, the team considers Volition a “conceptual project” intended to explore the possibilities of card gaming on the blockchain.

Blazing the same trail as Crypto KittiesRare Pepe, and MLB, Volition is venturing into uncharted territory. With Volition, the team is looking to determine the future of tabletop card gaming.

This post credited to Cryptoslate. Image source: Cryptoslate

CCN had a chance to talk to Arjun Mendhi of MTonomy. MTonomy is a NetflixGoogle Play, or Amazon Prime experience for Ethereum users. Based in Cambridge, MTonomy went live this week. Part of their team come from the MIT Media lab’s Digital Currency Initiative, which a number of famous Bitcoin developers have worked through, including Gavin Andresen.

They will be adding at least one new title every day this year.

MTonomy isn’t decentralized. It shouldn’t be.

We’re the only system out there that I’m familiar with that is able to provide enterprise-grade content delivery and security. […] It’s essentially the same technology that Netflix uses to secure its content. This is the first time that’s ever been available on the blockchain.

It does use Ethereum to process payments. Metadata is stored in smart contracts. To deliver a good experience, it uses the same enterprise-level servers that others use. It has encryption and Digital Rights Management protections. Content creators get the same level of protection they would elsewhere.

The real power is that this is available globally. So people across 170 countries can purchase content. Every single transaction is settled, as of today, in about 14 seconds worldwide. Additionally, people can also get content who are either unbanked or have issues with using a credit card and so on.

Netflix, Amazon Prime, and Google Play accounts are frequently hacked and trafficked on the dark web. This is not an issue with the MTonomy system. Thieves would also have to compromise the Ethereum wallets of the associated accounts.

Competing With Pirates

When this reporter brought up the issue of piracy, Mendhi opened up. Regions where piracy is rampant are a target market for his service. A native of India, he has a keen understanding of the dynamic. Users don’t have any other way to access content. They resort to piracy instead.

I grew up in India. I saw a lot of piracy out there. DVDs being sold on the streets and what not. Essentially, what people don’t realize is that there is a good deal of demand there. People are willing to purchase that content. But what really ends up happening is they don’t have access to the content.

Arjun Mendhi // YouTube

Access to Global Markets

When studios make agreements, they make a deal for an entire region. Services like Netflix, Google Play, or Amazon have limitations in this area. Some countries are worth a fraction of what Western markets are. The costs of collecting and processing funds are extreme. Operating in many places is a losing proposition.

I was sitting with executives at a major studio last month. We were talking to the international executives. They live in a very, very fragmented world. So in the US, when they do a deal, they do like a few hundred million dollars. Outside, even for such a big studio, a country like China, the entire country could be just like $5 million in revenue. And then it gets worse when you go to places like Thailand, Vietnam. It’s extremely granular. Extremely fragmented. Different languages. Different currencies. It becomes so much of an overhead with such little return that eventually all these major studios end up losing money.

Mendhi believes that his company is developing can remove this friction. It’ll enable people in these regions to get access to quality content. Using Ethereum, it removes the barriers and pinch points that drive up costs. It removes the necessity of the banking system or credit cards.

Transparency For Content Creators

Another aspect of streaming that Mendhi says his company is superior on is transparency. Streaming services are an opaque system. They trust that the service is being honest with them. By using smart contracts, creators know when their content is purchased.

Every piece of content has a smart contract. It’s best integrated with MetaMask. MetaMask is a popular browser wallet for Chrome/Firefox. The site doesn’t require much personal information beyond an e-mail address. They use accounts so it can recommend content like Netflix does.

As to the revenue share, it depends on the deal that is made with MTonomy. It’s not a YouTube-like scenario. People can’t just upload and sell content. The technology could be used for that, though.

A Potential Industry Transformation

MTonomy won’t be a single service, either.

They intend to license their technology. Others may have a need of it. For example, a movie studio might want to directly release content globally. This is something that can’t easily be done. Not even with services like Amazon Prime and Google Play. They can license the technology and tailor it to their needs. Mendhi says people will likely being using MTonomy without having any idea they are.

As MTonomy goes forward, it is also likely that other services and platforms will be developed where the user will not even be aware they’re using the blockchain. They’ll use some XYZ website but licensing technology, money movement technology, could very likely be powered by MTonomy.

It’s not only good for video content, either. Music and other types of content could use MTonomy with the same setup.

On the subject of using native Ether instead of creating their own token, Mendhi said:

Our goal is essentially to provide intellectual property licensing with the blockchain. It does not need a new token whatsoever.

He did say, however, that they eventually intend to “support all forms of cryptocurrency.”

MTonomy is now live.

This post credited to ccn Featured image from Shutterstock

The Reserve Bank of India has shelved its plan to launch a state-backed cryptocurrency amidst increased government pressure and concerns around money laundering.

Indian Government Still Cautious About Cryptocurrencies

It seems that regulatory clarity has evaded the crypto community in India, yet again. The country’s central bank announced it was looking at issuing its own digital currency back in April of 2018 and set up an interdepartmental group to conduct a feasibility study.

While the findings of the study were meant to be published by June 2018, the report has yet to see the light of day. An unnamed source told the Hindu Business Line that the government doesn’t want to implement a central bank digital currency (CBDC) anymore. The development might explain the lack of news on the topic.

Narendra Modi’s government is still refusing to provide any respite for investors or cryptocurrency exchanges. So far, Pon Radhakrishnan, the minister of state for finance, admitted that no deadline has been made to regulate the digital asset class.

The Country Still Not Ready for a CBDC

The Reserve Bank of India has echoed the parliament’s stance, refusing to ease pressure on the industry. The central bank has banned banks from servicing cryptocurrency exchanges, companies, and traders, effectively stifling the industry.

Related: India Stalls Cryptocurrency Regulations, Uncertainty Continues

The bank’s plan to launch its own central cryptocurrency was well received, with many thinking that the move could pave the way for other digital currencies to enter the market. The Reserve Bank planned on using the CBDC (Central Bank Digital Currency) to tackle money laundering.

Yet, the RBI still doesn’t have a formal unit in place that would track and format policies on cryptocurrencies or blockchain, which is indicative of a general lack of preparedness.

Praveen Kumar, the founder of cryptocurrency exchange and blockchain start-up Belfrics, told the Hindu Business Line that it’s is still too early for RBI to issue its own cryptocurrency and that delaying the process was the right decision.

Kunal Nadwani, the CEO of uTrade Solutions, was optimistic about the future of cryptocurrencies. That said, he also mentioned that central banks need time before making the transition as the economic effects of cryptocurrencies are “sizeable and largely unknown.”

This post credited to cryptoslate Image source: Cryptoslate

Plunging cryptocurrency values in 2018 and the collapse of the money-for-nothing white paper market in initial coin offerings (ICOs) took much of the focus last year for many people when it came to blockchain mindshare.

All of that marketplace drama, however, concealed an enormous amount of real progress for the technology that will, slowly but surely, lay the foundation for a robust revival of the blockchain markets in the future.

Over the last year, the market did provide lots of drama related to ICOs. Nearly a quarter of all the ICOs from 2017 lost most of their value, and the market as a whole declined by nearly two- thirds.

The first half of 2018 was no better. There were nearly 1,000 ICOs every month, but only 5% of them raised more than $1 million – with one, EOS, raising around $4 billion.

Not only did the bulk of the money raised go to a very small number of the ICOs, but nearly every aspect of the world of blockchain also became more consolidated and, dare I say, centralized, in 2018 – rather counterintuitive for blockchain, since decentralization is at its core.

Public blockchains consolidate

According to a study by EY that examined the ICOs’ progress and investment returns, ethereum, which is the dominant platform and shows the highest activity among developers and on social media, became even more dominant, with more than 95% of all ICOs and funds raised.

The market for exchanges consolidated rapidly as well, with 73% of daily trading volume in the first half of the year taken by the top 10 exchanges. Though the full-year numbers are yet to be updated, that trend seems set to continue.

The biggest exchanges are consolidating their positions in part by rapidly maturing their processes and approach to regulatory compliance. Know-your-customer procedures are being tightened and many of the big exchanges are, or soon will be, audited by some of the major financial services organizations (EY included). These same exchanges have been beefing up their security as well, with fewer large-scale thefts in 2018 than in 2017.

Another big trend last year in the world of public blockchains was the surge in popularity of stablecoins of all kinds, mostly based on fiat currencies. While stablecoins offer some advantages, including stability, they do raise the single most important question remaining for public blockchains: why are they useful?

Parking money in a stablecoin is beneficial if it’s between investments or purchases as a way to avoid volatility, but it’s not a very good investment in and of itself. The purpose of capital markets is to allocate capital to productive uses and, at least for the moment, that doesn’t seem to be happening. For public blockchains in 2019, this is the single most important question.

Private blockchains deliver

While public exchanges have been consolidating their hold on the market, private blockchains are getting to work by delivering real business value for enterprises. At EY, a number of systems entered production status, including our software licensing solution with Microsoft and a maritime insurance joint venture with Maersk and Guardtime.

Looking at the enterprise space, there are three key learnings from the work with blockchain in 2018.

First and foremost, the biggest rule in blockchain seems to be: “If it ain’t broke, don’t fix it.” Over and over again, when companies are working on projects where blockchain seemed to be an excellent fit, they did not move forward because they already found a solution to their problem. Despite the fact that blockchain in nearly every case would be better, that isn’t necessarily enough to justify replacing already existing processes, given the cost and risk.

Second, and very closely related to the first learning, is the primacy of solving real problems. While chief innovation officers sometimes love to do blockchain proofs of concept, the technology is far past that. It’s all about the focus on productizing and solving solutions for line-of-business executives — with real ROI. If one can, with confidence, point to an ROI from a solution, then there’s no need to worry about which blockchain platform or future comes to pass. There is a return from this investment, no matter what.

Finally, and perhaps most importantly, it is clear that companies are prioritizing operations before finance. While tracking products and assets as they move through the supply chain is useful, there are a lot of financial services that could add value, from the very simple approach “payment upon delivery,” to complex services like factoring receivables and trade finance.

However, in most cases, companies want to achieve confidence in their operational systems before closing the loop with payments and financial services, a challenge they will start to take up at the start of 2019.

This post credited to coindesk Image via Shutterstock

Digital assets platform Bakkt — created by the operator of the New York Stock Exchange (NYSE) — has announced the completion of its first funding round in a blog post today, Dec. 31.

The institutional investor-focused cryptocurrency platform from the Intercontinental Exchange (ICE) has officially raised $182.5 million from 12 partners and investors, according to the post.

The partners and investors reportedly include major names in both traditional finance and crypto-oriented investing, including ICE, Boston Consulting Group, Galaxy Digital, Goldfinch Partners, Alan Howard, Horizons Ventures, Microsoft’s venture capital arm and Pantera Capital.

Bakkt also noted in the announcement that the company is working with United States regulators — namely the  Commodity Futures Trading Commission (CFTC) — to obtain “regulatory approval for physically delivered and warehoused bitcoin,” adding:

“We have filed our applications and the timing for approval is now based on the regulatory review process.”

Also today, ICE separately announced in a notice that the firm “expects to provide an updated launch timeline in early 2019, for the trading, clearing and warehousing of the Bakkt Bitcoin (USD) Daily Futures Contract.” In late November, the long-awaited digital assets platform stated that it was targeting Jan. 24, 2019 as a launch date, pending CFTC approval.

ICE first announced plans to create a Microsoft cloud-powered “open and regulated, global ecosystem for digital assets” in August, as Cointelegraph reported at the time.

Multiple experts and commentators in the crypto and blockchain industry have pointed to Bakkt’s coming launch as a major factor that will help crypto markets rebound from this year’s ongoing bear market.

This post credited to cointelegraph Image source: Cointelegraph

The end of 2018 is not the end of a year. It is the end of a decade, a decade that changed the world of money and finance.

I do not mean the decade since the release of the Satoshi paper that CoinDesk properly celebrated a couple of months ago. With the typical egotism of young, brilliant innovators, the crypto community loves to think that this is the end of the first decade of the crypto-era. But the rest of the world has been celebrating quite a gloomy anniversary this autumn: the 10th anniversary from the beginning of the Great Financial Crisis.

With Lehman’s default, the world woke up and found out that banks were not the safest industry in the world. They could not borrow enormous amounts of money from the public and invest them in very uncertain financial markets without running any material risk of default.

2008 taught us that banks could run out of the cash and capital necessary to manage their risks, and that they could default or require taxpayer money to be saved and avoid a default on their deposit liabilities.

What happened in the next 10 years? Did banks disappear? Was commercial bank money replaced by a new global cryptocurrency? Did financial markets, that were the spark that lit the crisis flame, get replaced by a network of trustless smart contracts? No, banks survived, and so did financial markets.

And now that banks and financial institutions seem to have discovered that blockchain is not a magic software giving easily safety and efficiency to existing processes (neither is it the weapon of a overwhelming digital gold crushing all existing world money), they tend to disregard that this was also the decade that saw concepts like distributed systems, financial cryptography and consensus algorithms become part of a public debate.

Yet, 2019 could be the year when banks really understand what these concepts mean for finance. Remember, finance had to pay a price for surviving, as a review of financial markets over these 10 years clearly reveals.

It became clear that the role of banks in money creation through deposits made them systemically too important and fragile for allowing them to play freely their other roles of moving liquidity and value in space (through helping efficient trading), in time (through safe intermediation between investment and credit) and across different states of the future (through advanced derivative contracts).

They became over-regulated entities, their operational costs grew, their funding costs became much higher due to a new perception of their risk. Additionally, their dependence on centralized entities increased. Not only central banks, but also other institutions like CCPs or CSDs (where the first ‘C’ always stands for “central”) now crucially manage financial markets such as bond, equity or derivative markets. Centralization was seen by regulators as the only way to increase standardization, transparency and to mutualize the resources of the individual banks toward market risk management.

The concurrent single-point-of failure effect was considered an acceptable collateral damage. In the same years, the financial industry stopped being the darling of investors, and was replaced by internet companies, which now total a much higher capitalization than banks.

Crypto in Context

What has the crypto and blockchain decade to say about such “old finance” topics?

We have to go back to the roots of blockchain and forget both the temptation of considering it “just a software” and the opposite temptation to consider it “heaven on earth.” The Satoshi paper was probably not the beginning. In the days when we celebrate Timothy May, we have to recognize that some ideas being realized today started to grow 30 years ago.

In this way, bitcoin is not a magic creation of perfection. Satoshi spotted that the internet lacks some of the fundamental features needed to store and transfer value. It lacks an enforceable form of native identity, an unanimous way to order messages in the absence of an official time-stamp and some alternative to the client-server architecture to avoid value to be stored by a single entity for all users of a service.

No matter how early or limited, Satoshi made a feasible proposal to overcome the above issues. It was a mutation of the web in the value management environment, and it is thanks to mutations that systems evolve.

In the past, while banks were expanding their balance sheets by creating more money and taking up more risks, some thinkers introduced the concept of Narrow Banking. This alternative idea of the role of banks could have spared us some of the big financial issues of the last decade. Narrow banking means banks with a narrower role, more similar to the role they had in some moments in the past. Banks without enormous balance sheets of deposit liabilities, used by everyone as money, matched by corresponding risky investments.

Narrow banking would require a way to free banks, at least in part, from the role of creating electronic money in the form of deposits.

The crypto decade shows that forms of electronic money that do not take the form of a commercial bank deposit are possible, and can be managed outside commercial banks balance-sheets.

The application of this principle could free banks from part of their money creation role and allow them to go back to a role of real intermediaries, helping those with money to take up well managed risks, and providing services to real and digital economy, without enormous books of assets and liabilities.

A Convergence Ahead

Yes, you read it correctly. I said that blockchain technology could help banks to resume their role as intermediaries. You read so much about blockchain tech disintermediating banks that this may sound strange.

Yet, today the systemic risk posed by banks does not come out of their strict intermediation activity, but from their “technical” role in money creation. Technology alone cannot avoid crises, but when used to make narrow banking possible it can stop a crisis from spreading systemically. No need to bail banks out if we have reduced the link between financial markets and our deposits of money.

If a form of digital money based on cryptography and managed on a distributed network was available for financial players, it could be the layer upon which further reduction of systemic risk in financial markets becomes possible.

Today, systemic risk in markets like derivatives or securities is often associated to the technological centralization that built up over the past decades. As we recalled above, recourse to centralized infrastructures increased after the crisis, in order to manage collectively the guarantees provided by individual banks, in order to provide more transparency to financial markets, and to help standardization and coordinated risk management.

At the end of 2008 regulators thought that such goals could only be obtained via centralization, even if this could make financial markets less resilient to systemic risk.

After the crypto decade, regulators know there are alternatives. Decentralized networks also allow for transparency, standardization and collective management of resources provided by the network nodes, through appropriate use of smart contracts. They can allow for forms of risk management and risk reduction that are unthinkable in the traditional world.

They may not have yet the required features in terms of scalability or privacy, but their technological evolution has come a long way since the original mutation.

So, the coming years may be the years of awareness.

No, early cryptos and tokens are not a fast and easy solution for the future of finance. No, a light splash of blockchain tech over old business models is not a solution either.

Some hard work is ahead if we want to use the lessons learnt over the past decade, and see these two world, the world of finance and the crypto world, to eventually converge into a new, safer financial system.

This post credited to coindesk Image source: Unsplash

Last year, I ended my 2017 Year in Review piece with the following statement:

“Those who change the world don’t always set out to do so. All it takes is a decision to do something today, do it better tomorrow, and to not stop doing it…ever. One day, you’ll lean back, zoom out and realize the peaks and valleys that have consumed you were just the runway and the real lift-off has yet to occur.”

It seems fitting to start my review this year with the same statement and observe how its meaning kaleidoscopes in the new light of 2018.

For context, in December 2017, the price of bitcoin had just hit its all-time high of $19,783.06. The price of ether was about to hit its all-time high of $1,417.38. CryptoKitties were running rampant all over the ethereum network, thousands of ICOs had launched in 2017 and hundreds of dedicated crypto funds opened their doors.

Today, the environment is a bit different. Those crypto funds are starting to shut down. ICOs that raised capital in crypto in 2017 have seen their runways halved and halved again. The price of bitcoin hovers around $3,500 and the price of ether plummeted below $100. CryptoKitties has a meager 378 daily active users, down from over 15,000 daily active users this time last year. Ouch.

What I failed to mention with last year’s statement is that the runway isn’t always smooth and it isn’t going to be at a constant incline.

As Meltem Demirors so gracefully put it, “Tech that changes industries and markets doesn’t get built overnight. There are fits, starts, and failures.” Obviously, this market is throwing a fit. Furthermore, us builders should talk about it.

But Builders Don’t Talk About Price

For as long as I can remember, it’s been a significant taboo for builders in the space to talk about price. The market conditions shouldn’t affect our attitudes or how we build. We actively avoid getting caught in the hype on the way up and avoid falling into depression on the way down.

We transformed “HODL” into “BUIDL,” and there was also short-lived talk of “SHIPL.”

However, refusing to engage in “price talk” doesn’t mean we can, or should, ignore the swings of the market. This ecosystem is highly speculative and our roadmaps, runways and design choices are affected by larger macroeconomic conditions. Denying that the market conditions affect your work, company, financials, and culture is willful ignorance and is dangerous in the short and long term.

2017: Unprecedented Hype

As we saw in 2017, the bull market garnered previously-unseen hype, which led to new, inexperienced users entering the space en masse. Coinbase was adding hundreds of thousands of new users per day. Companies were hiring support teams by the dozens in an attempt to tread overflowing inboxes.

The things we did in 2017 were reactionary. Building for the short term was prioritized over the long term.

We didn’t have refined processes or roadmaps — we had fires that needed to be put out yesterday. We hired those who were willing to wear many hats and didn’t require much sleep. We put band-aids on the most glaring user experience issues as they cropped up, and we promised to iterate later. The market’s ambitious upswing wasn’t tied to the technology and experience being delivered.

2018: The Downward Spiral

2018 was a whole new world. The number of support tickets dropped as fewer new users entered the space. The types of questions we fielded about ICOs plummeted and more technical questions emerged once again.

The members of my team who were solely fueled by the adrenaline of 2017 had to evolve or move on to different projects. Some even left the crypto-space entirely. Our hiring and recruiting practices evolved, and the skills and personality traits we looked for became more refined.

The actions users are taking in 2018 have changed as well.

Whether it was taxes, the SEC, a more bearish market or the realization that the scope of blockchain use cases is still limited, people aren’t doing much these days. Even when we look beyond the trading and investment activity via DappRadar and, we can see just how little activity is happening.

The market is questioning how “decentralized” applies to a world beyond us cypherpunks and early adopters. It’s a valid question that us builders should ask too.

2019: Blood in the Streets?

To steal from Anthony Pompliano (who likely stole it from someone else), there is no “blood in the streets” yet. The blood is coming, but it isn’t only from the individuals who have portfolios that are down more than 100 percent.

It is from anyone and everyone who failed to anticipate just how long this revolution would take. It is from people who didn’t believe in the possibility of a market crash or a long winter. It is the ICOs that had all their holdings in crypto. It’s from those who measure growth and value in terms of months, not years or decades.

More robust companies can reduce the sizes of their teams and cease throwing extravagant parties to lengthen their runways.

Less seasoned companies will have no choice but to shut down. And the most important companies are likely the ones you haven’t yet heard of or are yet to be created.

2019 & Beyond

The coming years have the potential for people to create real, revolutionary value. This will not be the short-term capital creation that ICOs brought in 2017. It will be significantly deeper, take significantly longer and it will spawn from unlikely sources.

Reacting to new users and irrational exuberance is a different ball game than building products that break down the barriers of cryptocurrencies. In order to be relevant and stay relevant, you have to do more.

Those that will have a lasting impact and create the most value will be those who can build for both the bull market, the bear market and beyond the market. They will have the foresight to expect the unexpected, the hindsight to learn from the past and the insight to solve problems in unprecedented ways.

They will use their teams, tools, knowledge and communities to not only build for the next wave of users, but also help bring in the next wave of users. They will not build “on the blockchain” or “for the blockchain.” They will build better solutions that happen to utilize the blockchain.

It’s easier to build products for your existing environment and existing users, but it is shortsighted and will leave you straggling in the long term. Look outside this space for inspiration. Learn from traditional companies who have been around for decades or even centuries. Take the time to understand the motivations and needs of people around the globe. Don’t make product decisions based on the graveyard of activity today. Don’t create personas based on a Twitter poll you spun up yesterday.

Look to the future and anticipate. Your job is no longer to react to the current conditions. It’s to be a fortune teller of tomorrow’s landscape.

Sparking the Revolution

Many point to the dot-com bubble when analyzing the cryptocurrency markets in 2017.

Both saw 1,000 percent returns, rampant day-trading, fraud, capital flowing to any company with “.com” or “blockchain” in its name, and the creation of overnight millionaires even when those millionaires had neither delivered products nor profits. It’s an easy comparison. But it’s only one slice of history.

The repetition of history won’t manifest as a carbon copy of itself, so it’s hard to know exactly how this decentralized revolution will play out in totality. The revolution will be simultaneously subtle and profound. What we are building cannot be measured in months or judged by the hype cycles. We are aiming to transform nearly every industry that exists, starting with the financial industry.

The blockchain has come a long way since Satoshi’s white paper and it will take at least that long to disrupt life in a meaningful way.

We have to keep zooming out to keep our perspective wide. The dot-com bubble isn’t what transformed the internet, nor will the last two years be what transforms the blockchain. We need to look at the entire history of the internet and watch how it evolved over time. We need to examine how the Industrial Revolution managed to touch almost every aspect of daily life. We need to remember The Renaissance’s lasting influence on intellectual inquiry.

And, as we do, we should be intimidated by what we have yet to accomplish and inspired by the opportunity to forge the runway ahead. Remember, the real lift off has yet to occur.

This post credited to coindesk Image source: Shutterstock

An Australian blockchain-based peer-to-peer electricity trading startup is on the receiving end of criticism for rewarding bounty hunters who used unscrupulous means to drive interest in its crypto token.

According to the Financial Review, Power Ledger has been criticized for allocating free tokens to bounty hunters who made exaggerated or false claims regarding the startup with a view of increasing the uptake of the Australian crypto firm’s tokens.

Some of the exaggerated or misleading claims included stating that the startup had drawn the interest of the renowned clean energy advocate and billionaire founder of Tesla, Elon Musk, who was keen on revolutionizing the retail electricity sector.

Currently, Power Ledger’s token, POWR, is trading around 20% below the issue price and has a market cap of over US$30 million.

‘Not our Fault’

Power Ledger has defended itself, arguing that it only used the bounty hunters because the startup wanted to create “grassroots support for the currency sale.” According to Power Ledger, 1.5 million tokens were set aside for the bounty hunters.

Per Dr. Jemma Green, the chairman and co-founder of Power Ledger, the startup had no way of supervising the behavior of the bounty hunters:

Rewards were offered to community members to share our project with their own networks. The means by which they did so were outside of our control, and we made it clear that our core supporters who believed in the project and the future of renewable energy were the main audience for this program.

The criticisms that have been leveled against Power Ledger have, however, not dissuaded the P2P energy-trading startup from its mission. Earlier this month, a trial for trading solar power in the Australian coastal city of Fremantle on a blockchain-based platform provided by Power Ledger kicked off successfully.


Australia: Power Ledger’s Blockchain Energy Platform Goes Live in Fremantle 

Australia: Power Ledger’s Blockchain Energy Service is Live in Fremantle

Australia’s coastal city of Fremantle has kicked off a trial that will allow some residents to trade solar power on a blockchain-based platform provided by renewable energy-focused crypto startup…

88 people are talking about this

This enabled about 40 households in the coastal city to determine both the buying and selling price of renewable electricity generated on their rooftops.

A ‘World First’

At the time, the Minister for Finance, Energy and Aboriginal Affairs in the government of Western Australia, Ben Wyatt, dubbed the trial a “world first:”

The trial represents an innovative solution to virtual energy trading that may have implications for energy utilities working to balance energy supply and demand all over the world. These households are believed to be the first in the world to be taking part in an active, billed, peer-to-peer trading trial that allows them to effectively buy and sell solar energy generated by their rooftop system across the grid.

Across the Pacific, Power Ledger also inked a deal with energy supplier American PowerNet last month and this saw the Australian crypto startup deploy its blockchain-based electricity trading platform, xGrid, at the headquarters of the U.S. utility in Pennsylvania.

This post credited to ccn Featured Image from Shutterstock

We are at the end of another busy autumn conference season, and I have had the opportunity to speak at half a dozen events to focus on the intersection of capital markets and distributed ledger technology.

As we wind down for the holidays and plan for 2019, I wanted to reflect on the key themes and current trends in structured credit based on my interactions with leaders and innovators in the market.

This year, ABS East saw an encouraging level of DLT specialists from larger industry participants attend for the first time. The underlying technology is now a few years old, and senior leaders in the securitization industry have become increasingly familiar with the end-value state of cheaper and faster transactions with greater asset integrity.

There is now a growing consensus that the decentralized nature of DLT supports our sector’s broader digital transformation goals, and that it can help us move away from a siloed ecosystem that has not been able to realize the same common protocol benefits seen in other asset classes.

The ABS opportunity

Harmonized data standards, shared infrastructure and immutable records have the ability to transform how asset-backed securities participants interact in the ecosystem.

Everybody, myself included, is on a journey of discovery here. That journey started over three years ago with a recognition of immutable, better record-keeping. This was followed by understanding of the value of a shared system of record to ensure that all permissioned parties in a transaction to have access the same underlying loan information.

These autumn conferences focused on the next phase of on-chain digital assets. In discussing these digital assets I’ve often been asked, “Don’t we already have digital loans?”

Even within the minority of the asset-backed securities market, where the application and origination process has been digitized, a PDF of a loan document is very different from a digital asset in the efficiency and sophistication with which it can be transacted in the credit markets.

A loan as a digital asset on-chain can be transacted with the ease, speed and certainty of other digital assets like cryptocurrencies (AML/KYC permitting), while the PDF document is still dependent on the legacy model taking weeks and significant cost to execute transactions, with limited contextual asset information attached or ability to run smart contracts.

We are seeing the emergence of two paths here: asset-backed tokens (or loan-backed) and loans native to the blockchain. In the token model, the original authoritative copy of the loan document is securely locked down with an associated token representing ownership interest and core asset characteristics.

This facilitates more efficient transactions and introduces a chain of title and verification not seen before in the market. In the native model, the loan lives solely on the blockchain, cannot be copied, printed, double spent or misrepresented.

Given the majority of lending is still paper-based, we expect to see a domination of asset-backed tokens for a while. The transaction and management of both asset types in the capital markets we call Digital Structured Credit.

Current stage of adoption

It is fair to say that capital markets is over the “hype” phase of Gartner’s adoption model with DLT.

As with any new technology, many overestimate the speed of adoption, but the market underestimates equally the long-term impact. The credit market is slightly behind most electronically traded asset classes that saw low risk in applying DLT to settlement & clearing inefficiencies.

We are hearing less about new proof-of-concept projects as the marketing value of DLT subsides and the business cases demonstrate clear benefits. Building the right social constructs, standards and incentives for value to be realized across the asset-backed securities ecosystem is arguably more important than building the underlying technology.

One of the core pillars for all digital asset classes has been custody. This had been a gap for institutional players to participate, particularly with cryptocurrencies, but still applicable to all digital assets.

In 2018, we have seen significant progress with established players like Fidelity introducing market offerings that will help drive adoption. In asset-backed securities, I continue to see commercial demand for private keys to digital structured credit being held by an established, independent custodian to deliver seamless integration to the existing securities custody and value-added services that investors demand.

Most professionals are now comfortable with the scalability, security and permissioned vs public implementation options for DLT. While asset-backed securities have relatively low volumes of data and transactions in comparison to other electronically traded asset classes, we foresee the benefits of these efforts to allow greater capabilities and on-chain development for the market.

The leading capital markets projects represented at these conferences were utilizing permissioned blockchains, with the expected controls and security, and not looking to change the industry access paradigm.

Some of the most common discussions among panelists this autumn included looking back at the credit crisis and a look forward at whom will benefit from the efficiency gains.

Could DLT have prevented the credit crisis? As with any technology, it is only as good as how humans have chosen to deploy it! (Ignoring the AI debate). There were obviously many well documented factors here, but few would argue that the immutability, enhanced data integrity and, shared system of record in keeping track of assets, diligence and all economic interests would have helped reduce impact.

Who will realize the efficiency gains created by DLT in the asset-backed securities market?

The parties who control blockchain nodes, the management of assets and the ability to author smart contracts will have significant influence on how future value is distributed.

Time will tell which constituents will drive this transition.

This post credited to coindesk Image source: Shutterstock