On Sept. 23, auction-house giant Christie’s announced plans to sell its first nonfungible token, or NFT, at an auction. This was just one week after the record-setting $100,000 sale at auction of a digital art piece that also used a blockchain-based token to vest the collector’s new ownership rights.

Meanwhile, Anthony Pompliano, Morgan Creek Digital co-founder and partner, wrote on Sept. 21: "I personally believe that the digital art market cap will grow to become larger than the physical art market cap. This may sound ridiculous today.

” Clearly, the digital art market is heating up. Duncan Cock Foster, co-founder at digital gallery Nifty Gateway, told Cointelegraph: “The digital art movement is growing at an incredibly rapid pace. The amount of growth we are seeing has surprised everyone involved I think.

” Much of this can probably be attributed to the coronavirus pandemic that has curtailed travel and shut down art museums.

“Digital art allows people to engage with art from their homes, on their computers, on their phones, and send images/videos back and forth easily, which makes digital art especially suited to this time in history,” Blake Finucane, co-author of a position paper on NFT-based art titled “Crypto art: A decentralized view,” told Cointelegraph.

But something else may be going on. One of the historic issues with digital art has been that it is “essentially impossible to monetize,” said Finucane, adding:

“If something exists only in digital form — i.e. a gif, a meme, a digital image, a digital video — it is easy to simply screen shot, copy or paste it, or replicate it. A digital artwork’s value is diminished when it comes to selling it commercially because it is so easy to copy — and difficult to track what is, in fact, the original artwork.”

But on the other hand, if a digital artwork is tokenized, the original can always be traced back via token, “making it much easier to garner commercial value because someone can actually ‘own’ the original,” she said.

“It is extremely important for digital art,” Giovanni Colavizza, assistant professor of digital humanities at the University of Amsterdam, told Cointelegraph, adding that tokenization “allows us to exchange and create value from forms of art which previously were problematic.

”On Sept. 18, NonFungible.com, a website that tracks NFT sales data, reported a record high in art-related NFT volume ($162,385), and that was followed on Sept. 22 by the second-highest daily total ever achieved ($123,205). The uptick since June in U.S.-dollar sales of blockchain-based digital art has been notable.

Digital art + blockchain = crypto art

Digital art has been around for decades. Artists began experimenting with computers back in the 1950s and 1960s, but it’s only recently that digital art has been tokenized on a blockchain platform.

For instance, Ethereum’s nonfungible token, ERC-721 — which is used by many digital galleries — wasn’t developed and rolled out until early 2018.

The traditional art world often dismisses electronic art, asking: Why bring out digital art when copies can be made from it? — explained Vladislav Ginzburg, CEO at Blockparty. However, "I can use [NFT] technology to prove that I have the original digital asset.

" Ginzburg compared digital art to eBooks, which, like digital art, existed for decades without much interest until reading devices such as the Kindle and iPad emerged.

"Digital art is having its Kindle and iPad moment right now," he said while speaking at art festival CADAF Online.

“The art world has been craving a way to collect digital art and NFTs are a picture perfect solution to this problem,” said Cock Foster, adding that everyone should distinguish between digital art and crypto art, the latter being the tokenized or blockchain-enabled version of the former.

According to the aforementioned “Crypto art” position paper, which Colavizza also co-authored, the theory goes something like this:

“When a digital asset made by an artist is added to a digital gallery, a token is generated by a smart contract and deposited in the artist’s wallet. The token is permanently linked to the artwork, and is a unique, one-of-a-kind asset that represents ownership and authenticity of the underlying artwork. Once created, the artwork starts its life on the given blockchain, where a fan or collector can purchase it, and where it can be subsequently exchanged, traded or held by collectors like any other rare artifact.”

Will artists embrace the cryptoverse?

Surely enough, obstacles remain. Persuading mainstream artists to use NFTs, an esoteric technology, could be a challenge, arguably. Cock Foster opined: “We had a lot more trouble recruiting mainstream artists to the space six months ago. It is not that difficult anymore.

” Meanwhile, artists see a market that seems to be bubbling over — like with the $100,000 paid for “Right Place & Right Time,” a digital art piece based on Bitcoin’s (BTC) fluctuating price action, or the $55,555 paid on Nifty Gateway in July for artist Trevor Jones’ digital artwork “Picasso’s Bull.

”Moreover, “NFTs are an incredible new creative medium,” said Cock Foster. “Artists are able to do things in the NFT medium that are unable to do with physical art. This is the primary reason that they are interested.

”Secondary sales are an enticement, too. If a collector purchases a digital artwork on Asynchronous Art, the artist is paid a commission on that sale (e.g., 10%). But if the collector sells the artwork two years later, the artist also earns a 20% commission for that secondary sale.

This happens automatically — it is written into the software — and is one of the “revolutionary” aspects of blockchain-enabled digital art, Conlan Rios, founder and CEO of Async Art, told Cointelegraph.

Such sales were “impossible before blockchain technology came along,” confirmed Finucane.Another novelty with digital art is the sale of layers, said Rios, whereby collectors can separately purchase “layers” — derivative works made from the masterwork that often offer an owner programming options such as changing the artwork’s colors, rotation or even its “state.

” This represents an entirely new revenue stream.

A counterintuitive concept 

“The biggest barrier to growth is that people have difficulty understanding what an NFT is,” Cock Foster told Cointelegraph. It’s a counterintuitive concept that people have trouble getting their minds around, but “Once people understand what an NFT is and why the concept is so powerful, they quickly become obsessed.

”Still, Rios told Cointelegraph that “You can’t just plug in your credit card” when you purchase a tokenized artwork. You first must create a digital wallet to hold the NFT, and you should know something about gas fees and the like: “That’s probably the biggest hurdle.” Colavizza agreed: “You need to put a lot of time and effort into knowing how to navigate crypto art.

This creates a barrier to entry.”“Many people are still intimidated by blockchain technology,” said Finucane, telling Cointelegraph that the main challenges center “around the authentication/validation of works before they are entered on to the blockchain.” She added:

“NFTs are particularly useful for artists working in purely digital form, many artists may not be sure how it fits into their practice if they are working in physical mediums like painting, sculpture, etc.” 

Elena Zavelev, founder and CEO of CADAF and New Art Academy, told Cointelegraph that “The global digitization that happened during COVID created opportunities for the digital artists that weren’t available before.”

Moreover, the popularity of blockchain technology has brought hope that once it becomes more widely accepted within the traditional art community, it will increase monetizing opportunities for digital art. But so far:

“Its adoption remains anecdotal. I wouldn’t be surprised if, in some time, new technology will be easier to utilize than blockchain for the mainstream art community and replace it as a better tool.”

Crypto art still needs to develop an ecosystem more like that found in traditional art, too, with museums, exhibitions, curators, auction houses and fairs, added Colavizza.

“The social mechanics which create recognition, prestige and thus value are not there yet, which is both an opportunity and a challenge for collectors and artists.

”Then there’s the question of scalability: Can blockchains really handle all that data flowing their way? Rios runs the gallery business on Ethereum now, using ERC-721 tokens, but he is “blockchain agnostic.” Ethereum is “durable, but expensive and slow,” he told Cointelegraph.

The platform’s shortcomings, like high gas prices, might be justifiable for artists creating works for the ages — the platform will be around for decades, presumably — but newer artists might prefer to try out nonfungible tokens on less-expensive platforms that work passably well. 

As big as physical art?

Could blockchain-enabled digital art surpass physical art in market value one day, as Pompliano suggested? Not many are prepared to go that far — yet.

Finucane told Cointelegraph: “I wouldn’t say that it will ever ‘be as big’ as traditional art but I believe it will have a prominent place in art galleries and art history classes alongside traditional art.” Cock Foster added: “I don’t see this eating into physical art sales in the short term.

” Art is not a zero-sum game. “NFTs are growing by increasing the amount of art sold in the world, not by stealing buyers from the physical art world,” he said, adding:

“The biggest beneficiaries of this are digital artists who could never sell their artwork prior to the invention of NFT technology. One of the artists on our platform just bought a house using the proceeds from his Nifty Gateway sales. Blockchain technology is allowing more artists than ever the chance to live through their art.”

Pompliano, too, noted that there are things that can be done with digital art that can’t be achieved in the physical art realm: “Each piece can incorporate complex movement and motion. [...] A single screen on a wall can periodically cycle through different pieces of art at the predetermined direction of the homeowner or art collector.

” Digital art is also immune to physical damage because it lives in the ether. Expensive art-insurance coverage may become a thing of the past. 

Colavizza told Cointelegraph that digital art interest is surely accelerating in 2020, but this may just be the beginning.

“As soon as the Tate [museum] or a similar venue holds an exhibition of digital/crypto art — something that could happen quite soon — things will really happen.”In brief, digital art generally, and blockchain-based art specifically, have surely gained traction in the time of COVID.

Museums are closed — how else can one view art? But for digital art to burst forth over the long term, it has to find a way to reward artists, gallerists and others. They need to make money from their toil.

This is where blockchain technology and NFTs change the game: They furnish enduring proof of an artwork’s uniqueness, enabling it to be sold and resold again and again. And each time that happens, the artist profits. It’s written in the code.

It is clear today, and certainly more so than even just six months ago, that organizations need to grasp the generational urgency of digitization.

The playing field for commercial success has shifted and entities need to exploit new digital models to create value; commercial entities must adopt digital business strategies to survive and to have the opportunity to compete. 

Ecommerce is arguably the most disruptive digital transformation that we have seen in history.

While the digitization of retail was previously on the executive agenda, implementation has been uneven across sectors, entities, and geographies; and it is very apparent now that those who were leading are now exponentially ahead, dominating the market and defining the landscape. 

The Digital Asset sector is at a similar juncture; entities that capture the opportunity today will define the rules for tomorrow.

A Meta-Model for Digital Assets

The potential to effectively tokenize real-world assets on a digital system and to efficiently transact is creating new asset classes and entirely new markets for hitherto illiquid assets; and it is reducing risk and cost in clearing, settlement, custody, collateralization and more.

Tokens can represent any asset or agreement across multiple parties, and in any sector or industry. 

With the broad diversity in the nature and type of tokens, a repeatable design approach, and notably one that leads to predictable results, needs to be anchored on a “meta-model”, an ontology that defines an underlying standards-based language for digital assets.

For context, the Periodic Table serves as the meta-model for Chemistry.

The Token Taxonomy Framework is one such meta-model for digital assets. It and serves to define a common set of concepts and terms that may be used by commercial and regulatory participants to enable compliance and governance; and to generate precise specifications for developers to follow, for tools to generate from, and for standards organizations to validate.

A Taxonomy for Tokens: Creating, Classifying and Reusing Digital Assets

A standards-based taxonomy for tokens is crucial for world markets and for global policymakers because a token class or type determines its attributes and behaviors i.e. securities rules, issuance facilities etc.

With the growth in the number and types of digital assets, there is an increase in the demand from regulators and from investors to consistently classify and categorize token types.

In addition to enabling the core meta-model, the Token Taxonomy Framework (TTF) also facilitates a platform to enable the creation, classification, and the reuse of token definitions.

A token definition is a template to create and instantiate a specific tokenized asset.

In the TTF for instance, three atomic elements together comprise a token template: the Base Type (e.g. fungible), Behaviors i.e. capabilities that are present (e.g. transferable), and Properties i.e. values that may be queried and/or updated (e.g. SKU). The Taxonomy classified token types using five capabilities that they possess: 

• Token Type: fungible or non-fungible
• Token Unit: fractional, whole or singleton, indicating whether a token can be divided into smaller fractions, or if there can be a quantity greater than 1
• Value Type: intrinsic or reference, indicating whether the token itself is a value, like a cryptocurrency, or if it references a value elsewhere, like a property title
• Representation Type: common or unique, indicating whether a token has its own identity and properties
• Supply: fixed, capped, variable, gated or infinite, indicating how many token instances a digital asset can have during its lifetime, and 
• Template Type: single or hybrid, indicating the existence of parent/child relationships or dependencies across tokens.

Whilst demands from regulators, policymakers and the global markets are a powerful motive for categorization, classification metadata is powerful for visualization; tools built using this metadata accelerate the learning about and the re-use of existing token templates.

Re-use ensures the long-term sustainability of the underlying repository and the asset community at large.In practical terms, the TTF is a composition framework that breaks token definitions down into basic reusable components – base token types, behaviors, and properties.

These reusable components are then categorized by type and support grouping and classification. Composing these reusable entities together generates newer token definitions, and so forth. 

A Design Approach: Where to Start

The taxonomy serves to establish the definition and the categories and is complemented by proven industry practices, that lead to predictable business results. Looking across sectors, industries and geographies, three activities are key:

• Business Case and Economic Model for the digital assets: The economic model serves to analyze the economic structures and elements that participate in the creation of value across the ecosystem. The business case delineates the economic forces that catalyze the starting-up and continued viability of the participants in the system, and beyond.
• Business specification of the targeted digital asset(s): A business specification of the digital asset, including a comprehensive illustration of the lifecycle of the asset, involved parties, and relevant multi-party transactions. The business specification should use language that serves the needs of regulatory and compliance bodies.
• Technical definition of the token: A technical specification of the token, including the base token type(s), behaviors, and properties. The meta-model provides the language (“token formulae”) to precisely describe the token in language that is both implementation-neutral and developer-friendly. The taxonomy also serves to help compare and contrast with other existing token definitions and to classify the new token. 

The meta-model, taxonomy, and the approach are all implementation-neutral, and platform(chain)-agnostic, and the resulting token definitions may then be input to one or more code-generation tools to instantiate the token definition onto a blockchain or even to a centralized database, as appropriate.In summary, a structured designed approach for digital asset definition needs to be based on an underlying meta-model (i.e. a language)for digital assets; and this meta-model needs to enable an ontology (i.e. a taxonomy) for the creation, classification and re-use of asset definitions and templates.

The rest is implementation detail, as they say.John deVadoss is a founding Director of the InterWork Alliance and co-chairs the Token Taxonomy Framework Working Group. He leads NGD Enterprise, based in Seattle, Washington, building developer tools for Neo. Previously, he built and successfully exited two machine learning start-ups.

Earlier in his career at Microsoft, John incubated and built Microsoft Digital from zero to $0.5B in revenue; he led architecture, product, and developer experience for the .NET platform v1 and v2; and he was instrumental in creating Microsoft’s Enterprise Strategy.

Despite displaying a lack of experience in investing and trading, most retail investors prefer allocating funds in different cryptocurrencies as their entry point.

The popular digital asset exchange Huobi Group has compiled a study exploring the investment profiles of cryptocurrency traders in emerging markets.

It concluded that digital assets such as Bitcoin and Ethereum have become “the first point of entry to financial management for many individuals.”The majority of the survey’s participants came from Europe, Asia, Africa, and South America.

The study concluded that most of them are relatively new to investing.78% answered that their investment experience is less than a year, while only 17% said they had been actively trading or investing for five or more years.



Entering crypto via BTC and ETH. Image by CryptoPotato 

“considering 73% of respondents were of prime working age (26-50 years old), age was not a major contributor to the low levels of prior investing experience.” According to the report.

Furthermore, most participants reaffirmed that cryptocurrencies are their preferable investment instruments with a sizeable difference compared to other markets. Equity trading is next with 30%, while other traditional products such as bonds, real estate, investment funds, and forex received less than a quarter of the answers.

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Longer-Term Holders Stick With Bitcoin And Ethereum

The research revealed that most investors maintain short-term views on cryptocurrencies. 55% indicated that their horizon is less than a year. Only 13% aim for a more extended period (more than four years).

However, when it comes down to specific digital assets, the situation was somewhat different. Bitcoin and Ethereum investors appeared “much more likely to hold” their coins for at least three years.Interestingly, while most retail investors had answered that their annual income is relatively modest, their investment allocations in cryptocurrencies seemed quite significant.

“A majority (54%) report having an annual income of $10,000 or lower, and very few (13%) earn more than $50,000 per annum. Nearly half (49%) of the respondents plan to invest between 10 – 30% of their annual income in digital assets, and almost 25% plans to allocate more than 30% of their income in crypto.”

Vice President of Global Business at Huobi Group, Ciara Sun, commented that these findings:

“aren’t surprising. They do solidify our belief that digital assets will continue playing a significant role in the future borderless economy and help drive global financial inclusion. As crypto becomes more accessible, it will become a gateway to other financial products and services, helping set a path to financial wellbeing.”

Unlike traditional custodians who take care of safekeeping physical assets, the role of digital custodians is basically to allow financial institutions to use blockchain, which is a digital book of records, and integrate digital assets into their business operations in a highly secured, scalable and compliant solution.

It used to be that banks and financial institutions ignored or did not invest in digital assets for various reasons but mainly because of their high-risk and unregulated nature.

But the financial world is changing and digital assets are increasingly becoming important as a means of diversification and generating returns. It is estimated that the digital assets market could reach US$10 trillion by 2023 and when this happens it is expected to result in a big shift in the overall structure of financial markets.

Banks and other financial intermediaries will soon be forced to devise and implement new digital asset strategies.

Because digital assets are different from physical assets, the role of digital custodians is becoming more important. “We believe there are three critical responsibilities for digital asset custodians, namely safekeeping, connectivity and compliance.

Digital custodians are the foundation of a successful digital asset solution. The role of digital custodians will be a critical building block for the new financial markets infrastructure and will be necessary for the widespread adoption of digital assets,” says Alessio Quaglini, chief executive officer of Hex Trust.

Unlike other fintech practitioners who come directly from a digital background, Quaglini was a telecommunications engineer who also worked at the Italian Securities and Exchange Commission, Insider Trading Office, as well as BBVA and the First Abu Dhabi Bank, before co-founding Hex Trust in January 2018.

As such he is in a unique position to see asset servicing from the perspective of banks, regulators, and investors, in addition to its financial technology aspect.

For Quaglini, safekeeping means securely custodizing digital assets to protect the private keys (basically a code that grants ownership of digital assets), and developing secure workflows to support transactions in and out of custody, mainly deposits and withdrawals.

In addition to storage of the private keys, custodians must build their technology architectures to manage cybersecurity risks when interfacing with a public blockchain to facilitate transfers of these assets.

“As the blockchain market becomes institutional, the current wallet (a digital code that allows storage of digital assets) implementations will not be scalable enough to cater to the requirements of financial intermediaries.

A new approach will be required to offer custody solutions which can scale and process thousands of transactions per second with the necessary levels of security,” Quaglini says.

In terms of connectivity, the key responsibility of digital asset custodians lies in simplifying the underlying complexities of blockchain technologies and creating a standard access layer to connect capital and service providers across the ecosystem.

“This is a critical building block to extract the maximum value that blockchain networks can offer to its users and an opportunity to design a new financial market structure fundamentally different from the current one,” Quaglini says.

Hex Trust is licensed under the Hong Kong Trust Ordinance and, holding a Trust or Company Service Provider (TCSP) license under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance, is now offering an end-to-end digital asset servicing solution.

In Germany, Hex Trust has a provisional license from Bafin (Federal Supervisory Authority) for crypto custody and in Singapore it is applying for two licenses under the Monetary Authority of Singapore.

Hex Trust is also affiliated the SIA Group, the largest software fintech in Europe, which opens the doors for it as a digital asset service provider for EU banks.

Although based in Hong Kong, Hex Trust has for its clients the Bank of Singapore and Mason Bank, a European private bank formerly known as the Raiffeisen Privatbank Liechtenstein that was acquired by Mason Group (a corporate group listed on the Hong Kong stock exchange) in 2019.

The University of Cambridge and the school’s Centre for Alternative Finance has published the third “Global Cryptocurrency Benchmarking Study.” The 71-page in-depth study examines the current growth of the crypto industry, mining, offchain activity, crypto asset user profiling, regulation, and security.

The September 2020 third edition of the Global Cryptoasset Benchmarking Study concentrates on four market segments which include mining, payments, custody, and exchange.

A great number of participants from the cryptocurrency industry took part in the University of Cambridge (UC) study including wallet providers, exchanges, miners, cloud mining providers, crypto custodians, and more.

The 71-page UC report says it leveraged two surveys from March and May 2020 to get a number of report’s metrics.

Employment Figures and Growth of the Crypto Industry

The UC report first delves into the crypto asset ecosystem’s employment figures and notes that even though the industry provides opportunity, there’s been a decline since 2017.

“Respondents across all market segments, reported year-on-year growth of 21% in 2019, down from 57% in 2018,” the UC authors detail.Furthermore, the mining sector was hit the hardest as it’s aggregated employment level saw a 37 point decline. Asia-Pacific (APAC) respondents recorded the highest share of high-growth enterprises in 2019 according to the data.





High growth is primarily younger firms that are 3-4 years old, and this represents 49% of the share of respondents. A few service providers polled detailed they saw an increase in profits in 2019 compared to years prior.

“Industry-wide, the growth in FTE employment declined by 36 percentage points between 2017 and 2019, whereas the median firm reported a 75-percentage point downward change in employment growth,” the UC benchmarking study notes.

Hashers and Global Mining Operations

The UC study then discusses the cryptocurrency mining ecosystem and the report highlights that mining is steadily reaching an “industrial scale.” The findings detail the criteria miners (hashers) leverage in order to choose which coin the operation should mine is entirely based on profit scaling.






The utility cost for the average miner is roughly 79% of the aggregate operational expenditures.

The benchmark report notes that bitcoin (BTC) is the most popular coin with 89% of respondents mining the crypto asset. BTC is followed by ethereum (ETH – 35%) and bitcoin cash (BCH – 30%) respectively. Certain regions have different miner popularity ratings depending on the region and demographic.

“For instance, ethereum mining appears to be particularly popular among Latin American hashers, whereas bitcoin cash is more popular in APAC and North America,” the authors detail.

“The mining of privacy coins in Western regions also differs from the global average: 28% and 19% of European and North American hashers report mining zcash, and as many North American hashers also engaged in monero mining.”

Crypto Mining Operational Expenditures and Renewable Energy

Moreover, the UC findings show that the utility cost for the average miner is roughly 79% of the aggregate operational expenditures. But there are differences that arise at the regional level, the study’s authors note.

“For instance, since the introduction of new tariffs on Chinese imports, US hashers have to pay 28% tariffs on ASICs shipped to the USA,” the report says.





While discussing electricity costs one takeaway from the study suggests the median Asian and North American miner pays roughly the same amount for electricity.

The mining section also examines Proof-of-Work’s (PoW) energy consumption, in general, and the subsidies or tax exemptions stemming from governments. Government benefits have entered the fray, but only “28% of the surveyed hashers report receiving support from governments.”





Additionally, the renewable energy estimate is much lower than prior reports concerning renewable energy and bitcoin mining. “39% of miners’ total energy consumption comes from renewables,” the UC study highlights. However, 76% of the survey respondents leverage a “mix” of traditional fuels like coal and renewables like hydropower.





“Hydropower is listed as the number one source of energy, with 62% of surveyed hashers indicating that their mining operations are powered by hydroelectric energy,” the UC study details.


“Other types of clean energies (e.g. wind and solar) rank further down, behind coal and natural gas, which respectively account for 38% and 36% of respondents’ power sources.”

The Digital Asset Landscape and Crypto User Profiling

As far as the growing crypto asset landscape is concerned, bitcoin (BTC) is still the most popular cryptocurrency by representation on custodial services, payment processors, exchanges, and wallet providers. “Support has declined slightly over time from 98% of service providers in 2017 to 90% in 2020,” the UC authors mention.



Ethereum (ETH) is the second most commonly leveraged coin and the crypto asset is widely supported, while LTC, BCH, and XRP are available on at least 50% of 2020’s crypto service providers.Moreover, despite the negative news and delistings, “zcash and monero are still becoming increasingly more available, and are supported at 24% and 17% of service providers respectively

” Since the second UC benchmark report, identity-verified crypto asset users have increased significantly.The UC crypto study states:

In 2018, the 2nd Global Cryptoasset Benchmarking Study estimated the number of identity-verified crypto asset users at about 35 million globally. Applying the same methodology, an update of this estimate indicates a total of up to 101 million unique crypto asset users across 191 million accounts opened at service providers in Q3 2020. This 189% increase in users may be explained by both a rise in the number of accounts (which increased by 37%), as well as a greater share of accounts being systematically linked to an individual’s identity, allowing us to increase our estimate of minimum user numbers associated with accounts on each service provider.

A Variety of Other Key Crypto Factoids

The vast amount of findings within UC’s study discusses a number of other subjects like stablecoins, IT security, and government regulations. Stablecoins like tether (USDT) have become very prominent and “increasingly available” the report highlights.





“Tether support [grew] from 4% to 32% of service providers and all non-Tether stablecoins [grew] from 11% to 55%. This increase is not simply from service providers holding stablecoins diversifying their holdings, but rather more service providers offering stablecoins,” the study insists.

The report also says, at the same time crypto asset companies are complying with new regulations, the “decoupling of duties, such as between custody, clearing and settlement responsibilities, appears to be underway” as well.
UC’s authors say the number of crypto companies that didn’t adopt know-your-customer rules (KYC), dropped from 48% to 13% during the last two years. This metric highlights that regulatory guidelines and compliance is on the rise. The UC study insists that the standards enforced by the Financial Action Task Force (FATF) invoked this significant change





Despite the increase of KYC/AML procedures, UC’s third benchmark study underscores the recent emergence of decentralized finance (defi) platforms.


UC’s authors Apolline Blandin, Gina Pieters, Yue Wu, Thomas Eisermann, Anton Dek, Sean Taylor, and Damaris Njoki emphasize defi has introduced “more risky and experimental innovations.” In the near future, it is possible that crypto service providers will be impacted considerably by the defi space, the study notes.

Defi will likely impact large crypto service providers in particular and their business models “in the next 12 months.

”The third “Global Cryptocurrency Benchmarking Study” in its entirety can be viewed here.

The rapid pace of innovation and increased investment in the cryptoasset industry
is increasing the need for information analysing these developments.

 With the
publication of the first edition of the Global Cryptoasset Benchmarking Study
three years ago, the CCAF set out to progressively track and take the pulse of
this nascent industry by transparently collecting, analysing and disseminating
knowledge about cryptoassets.

Similarly, the 3rd Global Cryptoasset
Benchmarking Study seeks to shed light on the market dynamics of the
cryptoasset industry since late 2018.
The report collates data from entities operating in four main segments of the
industry: exchange, payments, custody, and mining.

A total of 280 entities
from over 50 countries across various regions responded to the surveys. This
benchmarking report is compiled using data from one of the most comprehensive
and robust databases currently available in the cryptoasset industry.


The research findings suggest that the industry has entered a growth stage
despite the notable headwinds the cryptoasset markets had encountered since
2018.

Additionally, regulators’ collaborative dialogue and regulatory interventions
in the industry appear to be supporting its growth by providing regulatory clarity
and harmonisation on the treatment of cryptoassets and related activities.

This
is an important development that has had immediate effects. For instance, the
publication of updated AML and CFT standards by the Financial Action Task Force
(FATF) in June 2019 encouraged compliance by industry participants, with an
increased share of the surveyed service providers performing KYC & AML checks
on their customers.


Nevertheless, our analysis has identified several hurdles – ranging from regulatory
compliance, IT security, and insurance – which need to be addressed for the
industry to grow to scale.


Our hope is that the findings captured within this study will offer insight into the
evolution of the industry and inform the decisions that industry stakeholders
will face as the space matures.

As with all of our research projects, we appreciate
that our ability to produce high quality research is highly dependent on the
cooperation of industry players and we extend our thanks to all the entities that
have contributed towards the publishing of this report.

Finally, I want to gratefully
acknowledge the financial support of Invesco as a long-standing supporter of
CCAF’s research and whose support made this study possible.
Dr. Robert Wardrop
Director
Cambridge Centre for Alternative Finance

Download the full 71 Page Report here: https://www.jbs.cam.ac.uk/wp-content/uploads/2020/09/2020-ccaf-3rd-global-cryptoasset-benchmarking-s...

The European Commission is moving to provide more legal clarity and certainty for the cryptocurrency industry in its member states.

On Sept. 24, the EC officially adopted a new digital finance package including digital finance and retail payments strategies, as well as legislative proposals on crypto assets. 

The EC said that the new package represents the first time that the authority proposed new legislation on crypto assets.

As part of the new legislative proposals, the EC pays special attention to stablecoins — a type of cryptocurrency that pegs value to an external reference like the United States dollar or an algorithm.

 Specifically, the proposals aim to introduce more stringent requirements for stablecoin issuers in terms of capital, investor rights, and supervision, the text of the proposal reads.

Therein, the EC aims to require stablecoin issuers to complete authorization by a national competent authority if the outstanding amount of stablecoins is above 5 million euro ($5.8 million).

The authority also wants to oblige crypto asset issuers to publish a white paper with mandatory disclosure requirements.

Small and medium-sized enterprises will be exempted from the publication of such a white paper where the total consideration of the offering of crypto assets is less than 1 million euro ($1.1 million) over a period of 12 months. 

The exclusion makes sure that “the requirements imposed on crypto-asset service providers are proportionate to the risks created by the services provided.

” According to the authority, the new measures will be crucial in supporting the EU's economic recovery as it will unlock new ways of channelling funding to Europe's businesses.

“By making rules safer and more digital friendly for consumers, the Commission aims to boost responsible innovation in the EU's financial sector, especially for highly innovative digital start-ups,” the EC noted.

The package is now subject to consideration by the EC's legislative counterparts, the European Parliament and the European Council.

The hype around DeFi is not fading away and is only just beginning, said Neo founder Da Hongfei, during a live stream on China’s Hub on Sept. 25.

Da said DeFi created a process in just a few years that traditional finance took hundreds of years to perfect.

DeFi projects are now experimenting with all sorts of financial products and services. He added that:

“Lending and borrowing, decentralized exchanges, insurance and all kinds of derivatives are on the rise in DeFi. The initial stage DeFi infrastructure has a solid good start, and now it is time to see more and more applications to be built and innovated on DeFi.”

According to Da, DeFi has brought numerous new possibilities in the financial arena, including creating a new type of asset that allows users to access cash at any time. DeFi, Da said, will have a significant impact on future economic life.

He predicts people will not need banks in the future as they turn towards DeFi services. And this scenario may already be happening. Using China as an example, Da said:

“Chinese people have done this more or less, probably dealing with banks, dealing with Alipay and WeChat, at least doing this kind of financial behavior without going to the bank.”

Da, and Binance co-founder He Yi, revealed in the live stream that Neo and Binance are actively looking into DeFi applications. One such application is Flamingo, an interoperable, full-stack DeFi protocol built on the Neo blockchain. It allows users to participate as traders, stakers, and liquidity providers.

Binance has announced it listed Flamingo on its launch pool on Sept. 23. Both are also looking to build DeFi infrastructure further.As Cointelegraph previously reported, China’s state-endorsed public blockchain is looking into building a regulatory compliance platform that can bridge global DeFi applications and government regulations.

1.

What is yield farming?

Yield farming is the practice of staking or locking up cryptocurrencies in return for rewards. While the expectation of earning yield on investments is nothing new, the overall concept of yield farming has arisen from the decentralized finance sector.

The general idea is that individuals can earn tokens in exchange for their participation in DeFi applications. Yield farming can also be called liquidity mining.

The popularity of yield farming has become a self-fulfilling prophesy comparable to the initial coin offerings boom of 2017 due to the laws of supply and demand.

As each new project that emerges offers new tokens or ways to earn rewards, users have been flocking to it, hoping to get a cut of the yield on offer. In turn, this creates a demand that pushes up the value invested in the project and the tokens.


2.

How does yield farming work?

The precise mechanics of yield farming depend on the terms and features of the individual DeFi application. The practice started out by offering users a small share of transaction fees for contributing liquidity to a particular application, such as Uniswap or Balancer.

However, the most common yield farming method is to use a DeFi application and earn the project token in return. 

This practice became popular early in the summer of 2020 when Compound announced it would start issuing its COMP governance token to lenders and borrowers who use the Compound application. It was an instant hit, pushing Compound to the top of the DeFi rankings. 

Since then, several projects have followed suit by creating DeFi applications with associated governance or native tokens and rewarding users with their tokens.

These copycat tokens have replicated COMP’s success like, for example, Balancer’s BAL token, which gained 230% immediately after launching.

The continued success of each new project fuels more innovation, as projects compete fiercely for users.

The most successful yield farmers maximize their returns by deploying more complicated investment strategies. These strategies usually involve staking tokens in a chain of protocols to generate maximum yield.

Yield farmers typically stake stablecoins, such as Dai, Tether (USDT) or USD Coin (USDC), as they offer an easy way to track profits and losses. However, it’s also possible to farm yield using cryptocurrencies such as Ether (ETH).

3.

What are the benefits and risks of yield farming?

The benefits of yield farming are immediately apparent — profit. Yield farmers who are early to adopt a new project can benefit from token rewards that may quickly appreciate in value. If they sell those tokens at the right time, significant gains can be made.

Those gains can be reinvested in other DeFi projects to farm yet more yield.

Yield farmers generally have to put down a large value of initial capital to generate any significant profits — even hundreds of thousands of dollars can be at stake.

Due to the highly volatile nature of cryptocurrencies and particularly DeFi tokens, yield farmers are exposed to a significant liquidation risk if the market suddenly drops, like it did with HotdogSwap.

Furthermore, the most successful yield farming strategies are complex. Therefore, the risk is higher for those who don’t fully understand how all the underlying protocols work. Yield farmers also take risks on the project teams and underlying smart contract code.

The potential for gains in the DeFi space attracts many developers and entrepreneurs who bootstrap projects from scratch or even copy the code of their predecessors. Even if the project team is honest, its code is often unaudited and may be subject to bugs that make it vulnerable to attackers.

There have been several examples of this risk playing out as yield farming has grown in popularity.

One is bZx, which suffered a series of hacks early this year and, most recently, lost another $8 million, which were later returned, due to a single misplaced line of code.YAM Finance was another high-profile example.

The project’s YAM token went from zero to $57 million in value locked in only two days after its launch in August — then crashed when the founder admitted a major flaw in the underlying code. A subsequent audit revealed several more issues related to security and performance.


4.

What are the key challenges and opportunities for yield farming?

Most DeFi applications are currently based on the Ethereum blockchain, creating some critical challenges for yield farmers. Ahead of the Ethereum 2.0 upgrade, the network is struggling with a lack of scalability.

As yield farming becomes more popular, more transactions clog up the Ethereum network, leading to slow confirmation times and spiraling transaction fees. 

This situation has led to some speculation that DeFi could end up self-cannibalizing.

However, it seems more likely that Ethereum’s woes will ultimately work to the benefit of other platforms.

For example, the Binance Smart Chain has emerged as an alternative option for the yield farmers that flocked to the network to take advantage of new DeFi DApps, such as BurgerSwap. 

Furthermore, Ethereum’s existing DeFi operators are also attempting to alleviate the issue with their own second-layer solutions for the existing platform.

Therefore, assuming that the problems with Ethereum aren’t fatal to DeFi, the practice of yield farming could end up being around for some time to come. 

In order to achieve blockchain mass adoption, three fundamental problems should be solved. Let’s dive into the third one: governance.

This is Part 3 of a three-part series in which Andrew Levine outlines the issues facing legacy blockchains and posits solutions to these problems.

Read Part 1 on the upgradeability crisis here and Part 2 on the vertical scaling crisis here.

Upgradeability, vertical scaling and governance: What all three of these issues have in common is that people are attempting to iterate on top of a flawed architecture. Bitcoin and Ethereum were so transformative that they have totally framed the way we look at these issues.

We need to remember that these were developed at a specific moment in time, and that time is now in the somewhat-distant past when blockchain technology was still in its infancy.

One of the areas in which this age is showing is in governance. Bitcoin launched with proof-of-work to establish Byzantine fault tolerance and deliver the decentralization necessary to create a trustless ledger that can be used to host digital money.

With Ethereum, Vitalik Buterin was seeking to generalize the underlying technology so that it could be used not just to host digital money but also to enable developers to program that money.

With that goal in mind, it made perfect sense to adopt the consensus algorithm behind the most trusted blockchain: proof-of-work.

Proof-of-work is a mechanism for minimizing Byzantine fault intolerance — proving BFT is not as easy as people like to pretend. It is not a governance system.

Bitcoin doesn’t need a governance system because it is not a general-purpose computer.

The reason general-purpose computers need a governance system is that computers need to be upgraded.

One needs no clearer proof than the magnitude of changes planned for Ethereum 2.0 and the aggressive advocacy for the adoption of the necessary hard forks.

We are not the first to point out this problem. The founders of Tezos accurately forecast this problem, but they ultimately failed to deliver a protocol that meets the needs of most developers for the following reasons:

• The blockchain is written in a different language than the smart contracts.
• They introduced a political process where decision-making occurs off-chain.
• They failed to deliver on an on-chain explicit upgrade path.
• They failed to establish distinct classes that can act as checks and balances.

The smartness of smart contracts

Developers must be able to code up the behaviors they would like to see in the blockchain as smart contracts, and there must be an on-chain process for adding this behavior to the system through an explicit upgrade path.

In short, we should be able to see the history of an upgrade just as we can see the history of a given token.

The appropriate place for governance is in determining which smart contracts are made into “system” contracts based on whether they will increase the value of the protocol.

The challenge is, of course, coming to a consensus on that value.The most controversial point I will make is the critical need for algorithmically distinct classes that act as checks and balances on one another.

While intuition might suggest that more classes make consensus more difficult, this is not the case.

First, if the upgrade candidates are already running as smart contracts on the mainnet, objective metrics can be used to determine whether the ecosystem would benefit from turning the “user” contract into a “system” contract.

Second, if we were not trying to bundle upgrades into hard forks, they could be piecemeal and targeted.

We would simply be trying to assess, in a decentralized manner, whether the system would be improved by a single change.

Checks and balances

It is commonly understood that in any economy, there are essentially three factors of production: land (infrastructure), labor and capital. Every major blockchain only recognizes one class: capital.

In PoW chains, those who have the most capital buy the most ASICs and determine which upgrades can go through. In proof-of-stake and delegated proof-of-stake chains, control by capital is more direct.

In addition to being problematic on its face, the absence of any other classes to act as a check on capital has a paradoxical effect that leads to political paralysis.

No group is homogenous. Classes, properly measured, create efficiency — not inefficiency — by forcing the members of a class to come to a consensus around their common interest.

Without such pressure, subclasses (groups within a class) will fight among one another, leading to gridlock. Properly designed classes motivate their members to come to an internal consensus so that they can maximize their influence on the system relative to the other classes.

If we can codify individual classes representing infrastructure, development and capital, then upgrades that receive approval from all three classes must, by definition, add value to the protocol, as these three classes encompass the totality of stakeholders within any economy.

Such a governance system, when combined with a highly upgradeable platform, would be able to rapidly adapt to the needs of developers and end-users, and evolve into a platform that can meet the needs of everyone.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Andrew Levine is the CEO of OpenOrchard, where he and the former development team behind the Steem blockchain build blockchain-based solutions that empower people to take ownership and control over their digital selves.

Their foundational product is Koinos, a high-performance blockchain built on an entirely new framework architected to give developers the features they need in order to deliver the user experiences necessary to spread blockchain adoption to the masses.

In August 2018, a report on the state of cryptocurrency regulation across Africa came back with one obvious conclusion: most countries were undecided on what to do.

In fact, 21 African countries had made no public stance on cryptocurrency regulation at the time, while only two had shared favorable stances about potential regulation.

But, in what represents a major shift, Nigeria and South Africa—two of the continent’s largest economies—are stepping up regulatory plans.


In April, South Africa took its first steps towards creating cryptocurrency laws by publishing a framework proposal and, more recently, Nigeria laid out plans to regulate cryptocurrencies through its Securities and Exchange Commission.

This is a marked turnaround from two years ago when the Nigerian lawmakers asked the central bank to “investigate” bitcoin.But progress remains uneven across the continent.

Kenya, which has typically been at forefront of adoption of financial technology solutions in Africa, has not set out concrete plans for regulation since its central bank warned local banks against cryptocurrency dealings.

“We seem to be in limbo,” says Aly-Khan Satchu, a Nairobi-based investor and financial analyst. “The spillover of the central bank governor taking such a strong stance against [cryptocurrency] remains the overarching situation.”

There is increasing evidence of adoption due to the global pandemic as Luno reports a 122% increase in new customers across Africa in the first six months of 2020

For their part however, local users and cryptocurrency startups across the continent are not exactly waiting for regulation to catch up.

In fact, cryptocurrency trading has long taken off and is partly powered by homegrown exchanges which continue to operate in regulatory gray areas.

For context, the total value of retail bitcoin transfers (worth less than $10,000 per transaction) in Africa reached $316 million as of June, according to research by Chainalysis, a blockchain market intelligence firm.

Full speed ahead

The growing volumes of transactions at local exchanges also suggest pace is unlikely to slow down.

Luno, one of the continent’s oldest exchanges says monthly trading volume in Nigeria and South Africa alone topped $549 million in August—a 49% increase since the start of the year.

(Luno also operates in Uganda and Zambia.) Meanwhile, BuyCoins, a three-year old Lagos-based exchange, says it has already processed $110 million in transactions so far this year, compared with $28 million for all of 2019.

“The demand we see now is a result of the challenges that people experience across Africa,” says Marius Reitz, Luno’s general manager for Africa.

“When people find value in using a cryptocurrency and are able to fulfill their needs with that better than they’re able to do with fiat currency, then they will naturally choose cryptocurrency—that’s what we’re seeing.

”There is also evidence of increasing adoption specifically due to the global Covid-19 pandemic as Luno reports a 122% increase in new customers across Africa between the fourth quarter of 2019 and the second quarter this year.

Among several operational challenges, Africans attempting to do business beyond the continent’s shores face risks of fluctuating exchange rates and difficulty around cross-border payments.

And, amid further economic challenges posed by the Covid-19 pandemic, those underlying factors which hobble businesses have become more prominent, resulting in locals increasingly turning to cryptocurrency to facilitate international trade.

These issues are particularly stark in Nigeria’s flailing economy where the local naira currency continues to slump against the dollar, leading to shortages of foreign exchange and recurring restrictions on forex transactions by the government.

As such, local adoption is being driven by “people trying to move money in and out of the country,” says Timi Ajiboye, founder of BuyCoins.

“It is exacerbated because it’s so much harder to do so now,” he tells Quartz Africa.Another key example is seen in Zimbabwe where locals now have a history of turning to bitcoin as a more stable storage of value in the wake of the country’s ongoing currency crisis.

It’s a situation that resulted in Zimbabwe having the highest bitcoin prices in the world, at a point in 2017, due to surging demand.In addition to facilitating cross-border trade and payments, anecdotal data also suggests remittances are also a practical use-case for cryptocurrencies on the continent.

It’s a scenario that’s plausible particularly given the historical context of the costs of sending remittances to Africa being higher than anywhere else. It’s a situation that likely drives African immigrants to “opt for cryptocurrency to try to maximize the value they can get,” Reitz explains.

Put together, these factors serve to explain why cryptocurrency adoption is booming across Africa despite the lingering question marks over regulation and legality.

In turn, it also explains why global investors are making million-dollar bets on the future of cryptocurrency in Africa and the continent’s startups.

Wanted: regulation

With significant levels of growth and adoption already happening without regulation, anyone could think African cryptocurrency startups might prefer the status quo.

Indeed, the prospect of being regulated by local financial authorities that have a well-established history of antagonistic rhetoric towards cryptocurrencies could very well translate into more uncertainty for players in the sub-sector.

But in fact cryptocurrency startups welcome regulation.“It is important that the space is regulated and properly guided by the financial authorities to ensure confidence and protection of the consumer,” says Stephany Zoo, head of marketing at Bitpesa, a Kenya-based exchange.

“When you do that, it feeds back into the ecosystem and encourages innovation around this specific technology which there’s always been so much grey area around.

”The theme of regulation as a building block for fostering consumer confidence is a recurring one among cryptocurrency startup founders and insiders. By setting out requirements for cryptocurrency startups to operate, the belief is regulation will ultimately make it easier for interested customers to identify credible and licensed exchanges.

Crucially, it will also offer a differentiation from unlicensed operators and outright scams. It’s a key factor given the relative anonymity of how cryptocurrencies operate also provides room for bad faith actors to thrive: fraudulent cryptocurrency platforms received just over $8 million from users in Africa in June alone, Chainalysis research shows.

With fraudulent operators currently existing alongside credible cryptocurrency businesses without regulation, it leaves prominent startups and exchanges with the vital task of educating consumers to ensure more adoption and making cryptocurrencies more synonymous with safety than they are with scams.



REUTERS/SEUN SANNI

Going mainstream: bitcoin teller machine in LagosAnother major potential benefit of regulation could come in form of formalizing relationships between banks and cryptocurrency exchanges which will then ease the process of changing fiat currencies into cryptocurrencies and vice versa.

“Once governments regulate better, there’s more chance of opening up integration with traditional financial infrastructure and there would be more mass adoption as well,” Zoo says.

But as is typical with regulation, there are potential pitfalls as recent history in some of Africa’s key tech markets show.

 For example, capital requirements for fintech startups in Nigeria are believed to pose barriers to entry.

And in Lagos, Africa’s largest city, regulators ultimately banned motorcycle-hailing startups earlier this year after controversial attempts to regulate their operations. 

”What we’d like to see is a phased approach,” Reitz says.

“It can be very easy for regulators to want to regulate the entire industry from the onset but it could stifle innovation.”

While the outlook of regulation across the continent broadly remains unclear, there’s a growing belief that Nigeria and South Africa’s stances could trigger similar discussions across board. 

And Kenya could yet prove an example of that, Satchu predicts. “Given the recent announcements and developments, it’s increasingly going to be difficult for Kenya to maintain its hardcore stance,” he tells Quartz Africa.

As it turns out, the waiting game by Kenyan authorities may be coming at a cost of being at the forefront of the industry given the scale of local adoption: Kenya is the highest ranked African nation on the 2020 Global Crypto Adoption Index.

“The challenge stakeholders will be concerned about is that the advantage is being eroded the longer Kenya does not take an appropriate stance towards this market,” Satchu tells Quartz Africa.

“This is fertile ground to look to develop a leading edge cryptocurrency market on the continent—the question is if the regulators want that.

”Sign up to the Quartz Africa Weekly Brief here for news and analysis on African business, tech, and innovation in your inbox

Chandler Guo was a pioneer in cryptocurrency, the digital currencies that can be created and used independently of national central banks and governments.

In 2014 he set up an operation to produce one of those currencies, Bitcoin, in a secret location in western China.

"Mining" Bitcoin is a power hungry enterprise involving dozens of computers so he used power from a hydroelectric station, in partnership with a local Chinese government official.

At its peak his machines were capable of mining 30% of the world's Bitcoin. He believed Bitcoin would one day change the world and replace the dollar.But now he sees a new force emerging - a payment system created by the Chinese state and known as Digital Currency Electronic Payment (DCEP).

It's really a digital version of China's official currency, the yuan, and Mr Guo feels DCEP will become the dominant global currency.

"One day everyone in the world will be using DCEP," he says."DCEP will be successful because there are a lot of Chinese people living outside of China - there are 39 million Chinese living outside of the country.

"If they have a connection with China they will use the DCEP. They can make DCEP become an international currency."But many question whether it will succeed and there are concerns that it will be used by Beijing to spy on citizens.



Media captionBitcoin explained: How do cryptocurrencies work?

Like Bitcoin, DCEP utilises a blockchain technology, a type of digitised ledger used to verify transactions.

Blockchain acts as a universal record of every transaction ever made on that network, and users collaborate to verify new transactions when they occur.In practice, that means users don't need a bank if, for example, they want to pay each other, perhaps with their phones.

China plans to launch DCEP later this year.

But so far, the People's Bank of China has not given an exact date for the nationwide launch.

China began testing the digital currency earlier this year in selected cities. When rolled out it will allow users to link downloaded electronic wallets to their bank cards, make transactions and transfer money.



Image copyright

GETTY IMAGES
Image caption

The new digital yuan will be controlled by the People's Bank of China

"It's hard to predict the timeline but the People's Bank of China is under a lot of pressure to accelerate the development because they do not want to be in a world where Libra (Facebook's digital currency) becomes the global currency, which they think is worse than the current global financial system controlled by the US," says Linghao Bao, an analyst from Beijing-based Trivium.

Observers say China wants to internationalise the yuan so that it can compete with the dollar.

"The Chinese government believes that if some other countries can also use the Chinese currency it can break the United States' monetary sovereignty.

The United States has built the current global financial system and the instruments," says an anonymous Chinese cryptocurrency observer known as Bitfool.

The technology enthusiast worked in the venture capital sector before joining a number of Chinese internet companies. He started researching Bitcoin and believes that digital currencies represent the future of money.

"Some traditional banking systems can't serve a poor country. In the traditional system, if you only have $10 a bank can't make money from you, but with digital currency, everyone has the right to enter.

The threshold to enter is really low," he says.Although Facebook has scaled back its plans for Libra, it was still a concern for China. The social media giant plans to roll out an e-wallet known as Novi later this year.

 It will work as a standalone app but can also be available on Messenger and WhatsApp.

"The two sides are definitely involved in financial warfare even though no large confrontation has happened yet," says Linghao Bao.Observers like Bitfool believe that China is already further ahead of the US in the battle for the future of money.

China's digital payment systems are widely seen as the most advanced in the world.The country is on the verge of becoming a cashless society.

In 2019, four out of every five payments in China were made through either Tencent's WeChat Pay or Alibaba's Alipay.



Image copyright

GETTY IMAGES

Image caption

The new currency could be big if Chinese communities outside China adopt it"

America is the leader of the global financial system. But they don't have the motivation like China to make the change [to a digital currency]," says Bitfool.

  "China wants to share that power.


But for America, Libra is just a backup plan."In poor countries and also in China there are a lot of people who live in villages. They have very little money but they are using smartphones.

If you can buy a smartphone you can use DCEP."However, DCEP will be centralised and state-run, unlike Bitcoin or Ethereum which are free of state control.

Image copyright

CHANDLER GUO

Image caption

To create a significant amount of cryptocurrency you need a lot of computing power

Many Bitcoin enthusiasts fear that DCEP will be used as a tool by the Chinese Communist Party to exert greater control over their citizens through surveillance.

The authorities will be able to monitor how money is spent in real time. They will also have the same controls over DCEP as with the yuan.

The yuan is tightly controlled by Beijing and its exchange rate is the source of much tension between the US and China.

The US accuses China of keeping the yuan weak to benefit its economy."DCEP is the antithesis of Bitcoin. The ultimate goal of a cryptocurrency is the separation of money and state," says Stewart Mackenzie, a cryptocurrency expert based in Hong Kong.

"It's easy for them to say that it's like Bitcoin when it's worlds apart."Linghao Bao agrees. "DCEP is built on an idea of centralised control.

The value of Bitcoin lies in its decentralisation nature and its isolation from the financial system," Mr Bao says."I trust Bitcoin more. Because it really belongs to me," says Bitfool.

The internet in 2030? To answer, two assumptions: First, we are still alive. Second, things on Earth are improving for more than just a few as we shake off our 20th century monetary systems and our 18th century systems of governance. 

There has been a radical transformation in these infrastructures of sociality for two main reasons: First, survival. The old political, monetary and communication structures simply cannot process the informational complexity necessary to sustain planetary life with 8 billion people.

There are social movements demanding new forms of cooperation that take their needs and aspirations into account. 

By signing up, you will receive emails about CoinDesk products and you agree to our terms & conditions and privacy policy.

Second, there has been a growing recognition that monetary media and communications media have converged as economic media. Communication, computation and finance have already converged.

Jonathan Beller is Professor of Media Studies at Pratt Institute and member of the Economic Space Agency (ECSA) think-tank. His forthcoming book The World Computer: Derivative Conditions of Racial Capitalism will be published by Duke UP in 2021. This essay is part of the Internet 2030 series exploring the future of the digital economy.

The internet, though purporting to solve historical forms of inequality by flattening communications, failed to realize its collective dream. It failed in large part because although it broadened and democratized speech, its economic logic was still beholden to hierarchical capitalist models of value extraction.

The internet became, without our really knowing it, an economic medium, and a medium of brutal extraction – a deterritorialized factory.

Indeed, by 2020 world communication had been turned into the most potent engine for centralized value accumulation ever created. The very infrastructure that grew precisely because it promised equality became a distributed machine for the production and intensification of inequality.

By 2020, this pyramidal logic of accumulation resulted in a world where three or four individuals held half the world’s wealth, and more that two billion people (population Earth, 1929) lived on $2 a day in a “planet of slums.” 

The digital revolution was a failed revolution. The economic hobbling of communication led to a collapse of governance as everyday meaning-makers were progressively disenfranchised, disempowered and dispossessed.

And the internet’s extractive model of value capture – long part of colonial, industrial, monopoly, imperial and financial protocols – had been imported into our communications infrastructure. 

See also: ‘We Blew It.’ Douglas Rushkoff’s Take on the Future of the WebAs computational media colonized our expressive power, our hopes and dreams along with our very struggles to survive made money for our oppressors. The farther down the food chain you were, the more true this was.

Redesigning the convergence

Now, in 2030, there is a global movement to redesign the convergence of communications and monetary media as post-capitalist economic media. 

The internet of the past has been clearly grasped as an extension of capitalism that turned everyone to workers in the social factory, who are paid in company scrip, while the real value was hoarded by shareholders.

The “background monetization” of our words, images, locations, faces and metabolic processes was recognized as a key impediment to general emancipation and as a blockade against solving world historical problems including climate change. 

Indeed, some claimed (rightly from our perspective), that the economic logic of the internet in 2020 also prevented the possibility of adequately addressing the egregious forms of profitable oppression that come under various headings including “racism” and “sexism,” endemic to what was essentially racial capitalism. 

No longer, it had been decided by a growing number of Earthlings by 2030, will companies and governments strip us of our expressive power, our powers to create cultures, worlds and value(s). No longer will they devalue our lives in accord with their agendas. 

We will no longer alienate our “content” as property for someone else’s platform, we will no longer provide labor for someone else’s capital, we will no longer be a pawn in centralized sovereign governance that couldn’t care less about us.

We refuse the psychopathology and megalomania that comes from having to assert ourselves by actively denying the real conditions of existence, conditions that inexorably convert our expression into murder. In short, as one manifesto put it, “We will no longer serve as batteries for someone else’s matrix.”

OUR COMMUNICATION IS INCREASINGLY OUR ECONOMY, AND OUR ECONOMY IS OUR COMMUNICATION.

For many people in 2030, the battle lines are not quite as crystalline as all that. Some clearly see that the redesign of the internet as post-capitalist economic media is the key historical movement that will lead us out of the ongoing crisis that came to a head in 2020.

And some are also clear that such a redesign of internet as post-capitalist economic media means as well a redesign of money itself.

These two projects, the redesign of communications and the redesign of money are actually one. We know that you only get democracy with economic democracy, and that both imply radical decentralization.

We know quite well that states and banks only serve the poor… on a plate to the rich. We know that our communicative and creative activities have intrinsic value and we want to control what happens to that value (who benefits from it, what values it fosters) with our communication.

In fact, in 2030, most of us live in two worlds: Still, the old capitalist world with all of its waste of the social product on military and police that help keep people on message with regard to the “intrinsic” value of the various fiat currencies. 

But in addition, we partly live in and are building an emerging, post-capitalist world of shared equity, horizontal governance, trustworthy messaging and co-authored performance. 

In this emerging world, we offer our capacities in and as our messages, we collaborate on the intellectual and physical creation of new projects and products, be they software, dance moves, farmed goods, anti-racist organizing.

 Our messages generate our currency, and our networks platform our equity.

We do not convene to make decisions as with some 19th century parliament, we offer decisions as messages that people can join. 

In 2030 we do not need banks to provide us with liquidity, we receive liquidity over the same medium we use to communicate; we receive it from our trust-worthy network of peers, who will share stake in our activities as we share stake in theirs. 

Our communication is increasingly our economy, and our economy is our communication. 

Those whose skills and values were not properly recognized by a world bound to dollars, euros and racial hierarchies, have found their networks and with that recognition and validation, and have done so in a way that translates directly not just into the too-soft currency of “likes,” but into economic power. 

Here, everything we do that is valuable to anyone else in our network can provide us with liquidity, units of credit on a secure, distributed computing fabric that is collectively built and owned. 

We provision one another’s liquidity and share equity in cooperative projects. We create our own value and do so in accord with our values. 

See also: Joon Ian Wong – A New Era of Media Begins With TokenizationThe “tokens” we issue one another are spendable in our networks, and can, if desired be cashed out to interface with the capitalist economy that still persists, but is, we wager, receding.

I say that we wager on that recession of capitalism (indeed we do bet on it—we “short” capital and put our resources in post-capitalist economic media), because the internet in 2030, the economic medium that is available for us to use, is itself an offer. 

The collectively owned internet of 2030 provides a convivial space of sociality and economy that is not only non-extractive, it is both cooperative and trustworthy because of its peer-to-peer network architecture and issuance protocols.

These protocols allow us to create forms of postmodern kinship with trusted peers who are known to us by reputation and interaction histories that can be both measured and felt. 

We receive equity in the infrastructure of post-capitalist economic media in exchange for our participation. Accordingly, we move more and more of our economic activity into this medium, one both semiotic and monetary, because it feels better and is more rewarding.

It offers the capacity to scale decision making and to finance ideas (futures) that appreciate in value as they are appreciated and that in drawing interest can be self-actualizing. 

Crypto as an emergent medium

Although secure messaging and protocolized issuance began to reengineer aspects of the social contract by creating new consensus mechanisms and immutable ledgers, the real breakthrough emerged when all messaging on secure, distributed computing did not have to be reduced to “price” or a single denomination, that is when all information in the network did not have to be collapsed into a quantitative amount of a single value such as dollars or bitcoin. 

Though primitive, Bitcoin was like photography in 1845 or cinema in 1900, a new medium answering historical needs and promising an incredible if barely imaginable future. 

With the rise of crypto, finance became an expressive medium and value could be multiply denominated in a variety of interoperable secure networks themselves organized by users for their own purposes.

In the mid-2020s, in response to social movements seeking access to liquidity and new forms of cooperation, platforms emerged such that those who created value recognized by others could be those who received value. 

See also: Paul Brody – How Small Business Can Achieve ‘Economies of Scale’ by 2030

“Value” was no longer a one-dimensional (dollar denominated) monologue.  It became possible to value, in economic terms, “externalities” such as care, the environment, and indigenous forms of life.

The wagers that people made in the realm of culture (as they did on say Instagram or TikTok, but also as novelists or technologists or social architects), could, by the late 2020s themselves aggregate participation in complex ways to accomplish their own ends. 

Sharing ideas and images became ways of working together, of scripting projects, amalgamating energies and participating in the development of collectively held dreams.

Thus today, in 2030, most of us try to build at least some of our relationships and economy on post-capitalist economic media in order to issue futures that we want to make real and also to avoid the extractive logics of a capitalist world that though in recession will not disappear without a fight. 

We must add that 2030 also means the further preparation for this fight so that the neo-fascism endemic to the racial capitalism of the early 2020s, bolstered by their banks and media companies, do not foreclose on the diverse futures we seek.

We perceive that if we can create an economy that allows broad-spectrum values to persist while offering a collective authorship of options, that is, of futures, we will move towards the horizontalization and democratization of communication and finance, and thus, we might survive.