Reports suggest that PayPal (NASDAQ:PYPL) is finally jumping into the cryptocurrency pool with both feet. That news broke shortly before Square (NYSE:SQ) reported massive revenue growth driven primarily by bitcoin.

Proponents of cryptocurrency (crypto) believe this transaction medium will eventually supplant cash and card transactions. PayPal hopes adding crypto to its offerings will allow it to garner even more wallet share. Given PayPal's much larger user base and superior financials, this development should be a major worry for Square investors.

Why crypto?

Before we get into why crypto could be a big deal for PayPal, let's quickly define how it works. Crypto is a term representing any virtual currency that can be transferred directly from one owner to another through blockchain technology.

The transaction is decentralized, transparent, secure, and reliable.In the banking system, when you make a debit card purchase, your information moves from the retailer, to the merchant processor, to a payment network, then to the bank that settles the transaction.

A crypto transaction would directly transfer your crypto to the person or business you are paying.

Crypto holders use different versions of software and hardware wallets and a growing number of exchanges to deposit, withdraw, and exchange crypto at any time, day or night.




IMAGE SOURCE: GETTY IMAGES. 


Two quick comparisons make the crypto concept easier to understand:Debit cards have largely supplanted cash transactions, allowing each payment to be recorded electronically.Stocks used to be bought and sold using a certificate. Individuals had to hold on to these certificates and sign them over to sell the shares. Today, most stocks are bought, sold, and held electronically.
Cryptocurrency is seen as the next evolution of money, allowing users to buy, sell, and pay each other directly without the need for multiple intermediaries.

 When it comes to the size of the market, a recent Forbes article reported the cryptocurrency market is estimated to be worth $270 billion.

Fortune Business Insights projects the crypto market will grow by just over 11% annually between 2020 and 2027.It seems that crypto is largely being bought and sold by individuals, as Binance Research found just 7% of crypto assets are held by institutional investors.

Financial advisors seem to be picking up on the idea of crypto as a potential investment.

A Bitwise survey suggested that only 6% of advisors were recommending crypto for their clients last year, yet this figure is expected to reach 13% during 2020.

PayPal and its subsidiary Venmo have significant name recognition among individual users. Given the size and growth potential of the crypto market, it makes sense for the company to begin offering cryptocurrencies.

Who are the competitors?

The initial information about what crypto PayPal will support is limited. However, looking at what some other companies offer gives us a good idea of what PayPal is up against.

It bears mentioning that PayPal's Venmo system ended 2019 with over 52 million users and the pandemic has driven significant user growth among its peers.

In addition, PayPal's total active users last quarter approached 350 million. In order for PayPal to effectively compete against Square and others, it will need to offer the ability to buy and sell crypto, and it should allow deposits and withdrawals to and from external wallets.

When the company releases more details, these are key factors for investors to look for.

What's in it for PayPal?

The simplest explanation for why PayPal would offer crypto is the company is looking to be a one-stop shop for personal finance needs. Venmo is so well-known that to "Venmo" someone has become synonymous with making a payment.

In PayPal's Q2 2020 conference call, CEO Dan Schulman said in the U.S. alone, there were 150 million to 175 million people using a digital wallet from either PayPal or Venmo.PayPal is also leaning into the trend of touchless payments during the pandemic. 

Cryptocurrencies fit perfectly, since a crypto payment requires neither card, cash, or physical contact. Square's Cash App reported that bitcoin revenue jumped 600% annually in its last quarterly results.

PayPal likely believes its brand awareness, and larger user base, will allow the company to attract significant interest in its crypto offerings.

The one negative surrounding Square's bitcoin business is its razor-thin margins. Last quarter, Square generated a measly $17 million in gross profits on $875 million of bitcoin revenue. However, Square is seeing attachment gains from users who came to the Cash App because of bitcoin.

Some of these users have expanded their relationship into more profitable options like direct deposit, the Cash Card, and more. The key difference between PayPal and Square is that PayPal seems to be able to afford bitcoin's thin margins.

PayPal generated over $2 billion in free cash flow in the last three months, whereas Square burned through more than $200 million in cash over the last six months. In addition, PayPal is sitting on $7.3 billion in net cash and investments, whereas Square has a little over $1 billion. 

In short, PayPal has more users, better free cash flow, and more net cash on the balance sheet. If PayPal puts its marketing muscle behind its upcoming crypto offering, it looks like Square investors should be worried.

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Recent developments indicate major shifts may be ahead in the cryptocurrency market, with the importance of stablecoin growing, PayPal rumored to announce a partnership with Paxos to offer crypto trading, and Mastercard expanding its own cryptocurrency program. 

In an economy still reeling from the impact of the COVID-19 pandemic, replete with lockdowns, shifts to telecommuting and business closures, cryptocurrency trading is becoming an attractive alternative to many businesses and investors alike. 

With recent moves to introduce or expand crypto-based services by more established and commonly-used payment providers, a mainstream adoption of digital currencies may not be far off. Here is what you need to know about it. 

The Drift towards Stability on the Cryptocurrency Market: StablecoinsRecently, stability has increased as a factor of importance in the cryptocurrency market.

After the massive value growth of cryptocurrencies throughout 2017 and the subsequent bursting of the bubble in early 2018, the market see-sawed until the beginning of 2020.

Just when it seemed another growth spike was taking off, the pandemic stock market crash sent it tumbling again. Since April, crypto values have roughly returned to February levels.

Throughout this period, one sector of the cryptocurrency market has outpaced the others in terms of growth - stablecoins. Unlike currencies whose value is volatile and driven by supply and demand, stablecoins are typically bound to a fiat currency, although some are pegged against other cryptocurrencies.

Prominent examples of stablecoins include Tether (USDT), USD Coin (USDC), or Binance USD (BUSD), all equivalent to $1.Stablecoins have been on the rise, measured by market cap and transaction volume, since the 2018 crash.

This indicates their buyers value both their innate crypto advantages and the much lower volatility of fiat currency. It also suggests the use of cryptocurrency as a vehicle for speculation is now giving way to actual use for transfers and longer-term holding.

In the tailwind of the crisis, many of these stablecoins have been doing well. 

For example, immediately after the stock crash in March, Tether's daily transaction volume shot up from around $50 billion to nearly $100 billion.

This spike was fueled by buyers converting both from USD and other cryptocurrencies, leading the currency issuers to make several billion new USDT available, for a total market cap now exceeding $10 billion.

Now, as the volatile currencies are approaching pre-crisis values, USDT transaction volumes are sinking again.Breaking into the Cryptocurrency Market - PayPal partnering with Paxos Though official confirmation is still lacking, it has emerged that payment processor PayPal (NASDAQ: PYPL), with its mobile payments division Venmo, is now set on breaking into the cryptocurrency market. 

A letter from PayPal to the European Commission, leaked earlier this week, shows that the payment provider was working on crypto capabilities even before March.

Now, it seems, the process is coming to fruition, with an announcement by PayPal expected as early as the end of this week.

Reportedly, it has picked the Paxos Trust Company, a regulated financial institution that digitizes and mobilizes assets, as its partner in offering the service, over principal rival Coinbase.

Less than a week ago, Paxos introduced Paxos Crypto Brokerage, a new API-based solution that allows companies to integrate cryptocurrency buying, selling, holding, and sending capabilities into their own applications.

Paxos takes care of the underlying regulatory and technological complexity.

Paxos had previously struck up partnerships with fintech leaders such as Square (NYSE: SQ), Robinhood, and Revolut.

Some of these have been highly profitable, with Square reporting its first-quarter revenue from Bitcoin-based services at $528 million, surpassing its mainstream financial services. 

A PayPal partnership is a step up for both Paxos and the cryptocurrency market as a whole.

With over 300 million users globally, PayPal is among the largest payment facilitators - and now set to become a key gateway into the cryptocurrency market for millions of its clients.

Opinions expressed by Entrepreneur contributors are their own.

Cryptocurrency trading has firmly taken its place in the financial market, and has been generating profits for professionals for many years. Of course, successful digital asset trading, like any other type of trading, requires a lot of knowledge and experience.

What to do for those who, for a number of reasons, cannot devote time to studying technical and fundamental analysis, as well as trading strategies and market principles?

Especially for crypto enthusiasts who are not ready to devote their lives to new science, the Crypto Accelerator project can help.

Passive earning technology involves storing WEC tokens on your wallet, during which new coins are mined. The average investor income is 50 per cent per year.Crypto Accelerator offers an option thanks to which income can be increased several times.

ACC standard unit of capacity allows to accelerate WAC production by 100-300 per cent. The mining accelerator ACC can be obtained in two ways: purchase on the exchange and for inviting referrals.

ACCs are freely traded on the exchange in a pair with USD, and their price depends on the volume of ACC sold and the supply/demand balance in the platform's internal market.

The number of ACC accelerators available to each user depends on the selected investment package and the amount of the deposit.The following license types are available on the Crypto Accelerator platform:         

               

If you have decided on the amount that you are ready to invest in the system of long-term passive earnings, you should follow 3 simple steps: register for crypto-accelerator.io; purchase a license;and replenish the deposit and block the tokens on the account.

You can transfer money to your personal account both in WEC and in USD. A dollar account can also be replenished with cryptocurrencies BTC, ETH, USDT, which are automatically converted to fiat at the current rate.

Do not worry that your money will be blocked on the platform account under the terms of the agreement.

Each investor can withdraw funds from the account at any time along with all the interest earned.In addition, as mentioned above, Crypto Accelerator provides the opportunity to earn WEC mining accelerators and bonuses in USD for inviting referrals.

The affiliate program has 4 levels, and depends on the investor's license:       


 

In order to build your strong financial future now, follow the link and register on the new cryptocurrency platform.

MOST PEOPLE USE either an app, an online platform, or a small hardware device as a wallet to store their cryptocurrency safely.

The exchanges through which cryptocurrency changes hands, though, and other high stakes operations need something more like a massive digital bank vault.

At the Black Hat security conference on Thursday, researchers detailed potential weaknesses in these specially secured wallet schemes, including some that affected real exchanges that have now been fixed.

The attacks aren't the digital equivalent of jackhammering a weak point on a safe or blowing up a lock.

They're more like opening an old-timey bank vault with six keys that all have to turn at the same time. Breaking cryptocurrency private keys into smaller chunks similarly means an attacker has to cobble them together first to steal funds.

But unlike distributing physical keys, the cryptographic mechanisms that underly multiparty key management are complex and difficult to implement correctly. Mistakes could be costly.

"These organizations are managing a lot of money, so they have quite high privacy and security requirements," says Jean-Philippe Aumasson, cofounder of the cryptocurrency exchange technology firm Taurus Group and vice president at Kudelski Security.

"They need a way to split the cryptocurrency private keys into different components, different shares, so no party ever knows the full key and there isn't a single point of failure. But we found some flaws in how these schemes are set up that are not just theoretical. They could really have been carried out by a malicious party."

For the work, Aumasson, a cryptographer, validated and refined vulnerability discoveries made by Omer Shlomovits, cofounder of the mobile wallet maker ZenGo. The findings break down into three categories of attacks.

The first would require an insider at a cryptocurrency exchange or other financial institution exploiting a vulnerability in an open-source library produced by a prominent cryptocurrency exchange that the researchers declined to name.

The attack takes advantage of a flaw in the library's mechanism for refreshing, or rotating, keys. In distributed key schemes, you don't want the secret key or its components to stay the same forever, because over time an attacker could slowly compromise each part and eventually reassemble it.

But in the vulnerable library, the refresh mechanism allowed one of the key holders to initiate a refresh and then manipulate the process so some components of the key actually changed and others stayed the same.

While you couldn't merge chunks of an old and new key, an attacker could essentially cause a denial of service, permanently locking the exchange out of its own funds.

Most distributed key schemes are set up so only a predetermined majority of the chunks of a key need to be present to authorize transactions. That way the key isn't lost entirely if one portion is accidentally eliminated or destroyed.

The researchers point out that an attacker could use this fact to extort money from a target, letting enough portions of the key refresh—including the one they control—that they can contribute their portion and restore access only if the victim pays a price.

The researchers disclosed the flaw to the library developer a week after the code went live, so it's unlikely that any exchanges had time to incorporate the library into their systems.

But because it was in an open-source library, it could have found its way into numerous financial institutions.In the second scenario, an attacker would focus on the relationship between an exchange and its customers.

Another flaw in the key rotation process, in which it fails to validate all of the statements the two parties make to each other, could allow an exchange with malicious motivations to slowly extract the private keys of its users over multiple key refreshes.

From there a rogue exchange could initiate transactions to steal cryptocurrency from its customers. This could also be carried out quietly by an attacker who first compromises an exchange.

The flaw is another open-source library, this time from an unnamed key management firm. The firm does not use the library in its own offerings, but the vulnerability could have been incorporated elsewhere.

The third attack begins when all the trusted parties originally derive their portions of the key.

As part of this process, each party must generate a couple of random numbers that will be publicly verified and tested for use later in "zero knowledge proofs," when the different key holders verify that they have the right key information without revealing the content.

This time, the researchers found that a protocol in an open-source library developed by the cryptocurrency exchange Binance didn't actually check these random values.

As a result, a malicious party in the key generation could send specially constructed messages to everyone else that would essentially choose and assign all of these values, allowing the attacker to later use this unvalidated information to extract everyone's portion of the secret key.

"This is the one that is instantly fatal," says KZen Networks' Shlomovits. "For the attack here you would craft a specific message, send it at the time of key generation, wait until the first signature, and then you're done. You would have enough information to learn all the other keys.

"Binance fixed the vulnerability in March and pointed out that it's only present during initial key generation. It does not introduce a lasting vulnerability—unless, of course, your organization's initial key generation included a malicious party from the start.

"We recommend that users upgrade to this new version of 'tss-lib' as soon as possible," the company said in a March security bulletin.

"Signing groups should only be re-created if any parties were untrusted or potentially malicious at the time of keygen.

"The attacks Shlomovits and Aumasson identified would not be trivial for an attacker to carry out.

They all involve a somewhat privileged position within an exchange, whether taking control altogether or controlling one portion of a distributed key.

Beyond identifying individual vulnerabilities, though, the two say that the goal of the research was to call attention to how easy it is to make mistakes while implementing multiparty distributed keys for cryptocurrency exchanges.

And how impactful those mistakes can be when they're in open-source libraries that can proliferate widely.

Using distributed key schemes is an important defense against takeover, but the cryptography is complicated enough that the development process can't be taken lightly.

"It takes a lot of time, a lot of expertise, and everyone makes mistakes," Shlomovits says.

"Literally everyone, because it’s really hard to do this translation from paper to an actual production system that holds funds."

Goldman Sachs is considering creating its own cryptocurrency. Having recently appointed a new head of digital assets, the company indicated a possible collaboration with other companies, including JPMorgan and Facebook. JPMorgan has created the JPM coin and Facebook has proposed the Libra cryptocurrency project.

Goldman Sachs’ Cryptocurrency Plan

Global investment bank Goldman Sachs has recently appointed a new head of digital assets, Mathew McDermott, a managing director who ran the investment bank’s internal funding operations. He has now revealed that Goldman is exploring creating its own cryptocurrency, CNBC reported on Thursday, quoting the new digital assets chief as saying:

We are exploring the commercial viability of creating our own fiat digital token.

However, McDermott added that “it’s early days as we continue to work through the potential use cases.” He is expanding his team at Goldman Sachs, reportedly hiring Oli Harris, JPMorgan Chase’s head of digital assets strategy.

Harris was involved in JP Morgan’s cryptocurrency, the JPM coin, and was also a vice president in charge of Quorum, the ethereum-based blockchain platform that underpins the JPM coin.

The coin, pegged to the U.S. dollar, enables the instantaneous transfer of payments between institutional clients, JPMorgan explained on its website.The new digital assets head said that it is crucial to build “consensus with other banks, institutional investors and regulators,” the publication noted.

He believes that “The technology will only take off when it gains a critical mass of users across the world of finance” and “industry consortiums are the best way forward.”

McDermott further explained that he “spends a lot of time talking to other companies, including JPMorgan and Facebook.” The social media giant has proposed a cryptocurrency project called Libra, which recently updated its plans to better comply with regulatory requirements. According to CNBC, he indicated:

One Goldman project involves collaboration with JPMorgan, potentially regarding how the two banks’ nascent technology efforts could work together.

“In the next five to 10 years, you could see a financial system where all assets and liabilities are native to a blockchain, with all transactions natively happening on chain,” the new digital assets head opined.

He believes that “Since the boom days of bitcoin a few years ago, interest has shifted from retail and rich investors to large institutions,” the publication conveyed.

“We’ve definitely seen an uptick in interest across some of our institutional clients who are exploring how they can participate in this space … It definitely feels like there is a resurgence of interest in cryptocurrencies,” McDermott was quoted as saying.Goldman Sachs has not been pro-cryptocurrency in the past.

In May, the investment bank told its clients that “cryptocurrencies including bitcoin are not an asset class.”What do you think about Goldman Sachs’ cryptocurrency plan? Let us know in the comments section below.

DeFi Dad is a DeFi super user sharing his money experiments and tutorials on Twitter and YouTube. He is an organizing member of the Ethereal Summit and Sessions, host of The Ethereal Podcast and a weekly contributor to The Defiant and Bankless.

Ethereum has always been difficult to explain. Even the founders of Ethereum have sometimes struggled to communicate the project’s transformative potential in layperson’s terms.

Metaphors such as “world computer” and “gas” tried to translate Ethereum to the world, but looking back it’s clear how little we understood about the platform’s true capabilities. 

By 2017, big promises were being made that Ethereum would “bank the unbanked.” But that promise seemed to go largely unfulfilled in the wake of the initial coin offering (ICO) craze. Nevertheless, the oft-repeated slogan represented the first attempt to describe Ethereum’s potential to transform personal finance. 

See also: Ethereum History in 5 Charts

While the ICO mania showed Ethereum’s potential as a distributive technology that could emulate, improve upon and democratize the initial stock offering, what was missing then was a simple personal financial use case that could be demonstrated to a friend, such as a mobile app. In those early days, there were many white papers, promises and signs of progress by a few teams (some of which have led to the top DeFi projects such as ChainLink, Kyber, and Set), but most of the benefits had yet to be delivered.

Meanwhile, there were lots of inspiring speakers from the Ethereum community who drew us into believing Ethereum would change the world. It just required a patient newcomer willing to wade through new ideas, intricate foreign concepts and a firehose of new information daily. Nothing was a simple elevator pitch.

When I saw Joe Lubin speak at Ethereal SF 2017, there was an inspiring message to take home. A lot of detail flew over my head at the time, but if you listened carefully it was impossible to not buy the idea that Ethereum could change the world for the better.

It’s worth noting that in 2017, ConsenSys and other early adopters and builders were also educating institutional players and enterprise software companies on how they could benefit from many blockchain use cases on Ethereum. Partnerships with Microsoft, IBM and Hyperledger helped cement Ethereum’s credibility in the enterprise blockchain race.

See also: How the EEA Made Ethereum Palatable to Big BusinessFast forward to July 2018, when I started full-time work in Ethereum. We were all recovering from the hangover of 2017, thinking the bull run might return sooner before watching markets unravel and get even bloodier.

We were emerging from an era without a coherent elevator pitch to be easily understood, including language that sounded like it had come from a “Big Bang Theory” script.

I recognized that Ethereum had to find any small group of fanatical users. For better or worse, I began drawing on my experience in SaaS, which taught me that startups need loyal users who find so much utility in an application that, if it were taken away, they wouldn’t have an alternative.

DeFi days

By spring 2019, I am working full time on the Ethereal Summit, a series of events celebrating the founders and builders of the decentralized web on Ethereum. It was around then that Ethereum’s narrative began to change. I heard about Compound, where you can lend and borrow – similar to MakerDAO, but with better loan-to-value (LTV) ratios. 

I was astonished – $50 MILLION in an app built on Ethereum! It was exhilarating to learn a second finance application had been built, launched and had been running on Ethereum for more than six months. 

All this activity came to be known as decentralized finance, or DeFi. The term was coined in 2018 by members of the 0x team, but the industry was just getting going. I couldn’t stop thinking about it.

I began researching every project we were hosting at Ethereal – PoolTogether, Kyber Argent and Zerion. And I did something even more radical: I began testing and using the damn products! 

See also: Why DeFi on Ethereum Is Like Algorithmic Trading in the ‘90sI needed to see my investment make money to realize the power of these DeFi applications. I started lending dai on Compound for over 10% APY and it just clicked. I’m lending dai and others borrow that money, but there’s no bank to collect the middleman fees. So, in turn, I earn better lending interest and borrowers pay smaller fees, and without know your customer (KYC) or anyone’s permission.

WHAT STOOD IN THE WAY OF DEFI MASS ADOPTION WAS BETTER STORYTELLING AND MORE VISUAL DEMONSTRATION OF HOW DEFI CAN WORK FOR ANYONE

It had long been a talking point in crypto the user experience (UX) had to improve for Ethereum to see adoption, but I found those same people espousing such criticisms often had zero experience with DeFi applications. It seemed like a lie that had stuck around long enough to become a truth, even though I was finding some DeFi UX better than my experience with legacy banking. 

For me, what stood in the way of DeFi mass adoption was better storytelling and more visual demonstration of how DeFi can work for anyone. 

EthHub.io and Cami Russo’s The Defiant were already doing lots of legwork in this space but there was clearly more to build upon.In late 2019, the DeFi community was still small compared to today, only a few thousand or possibly even a few hundred users, but it felt like we were on a bustling rocket ship of excitement.

We rallied around this term DeFi, the simplest term to describe any peer-to-peer finance app built on Ethereum, requiring a Web 3 wallet like MetaMask, that doesn’t need KYC and has no single point of failure. If ETH is money, DeFi is your bank. 

What started as a concept is now an economy of interlinked applications with more than $4 billion in value invested. But it’s more than just money. DeFi has changed the way people think about Ethereum itself and given rise to new narratives and memes.

A meme is born

Shortly after this spark was really gaining momentum in the fall 2019, DeFi users naturally found a second totem to rally around. That was the concept of Total Value Locked (TLV), coined by the team at DeFi Pulse. 

TVL refers to the sum of all value deposited into a DeFi app’s smart contracts, whether that’s measured in U.S. dollars (USD) or in ETH. TVL reflected a new, un-gameable metric for adoption. It was a way to compare how much trust DeFi users put into an application. It has its flaws, but those flaws are no worse than reducing Bitcoin to its price. 

See also: Nathaniel Whittemore – ‘Stacking Sats’ vs. ‘ETH Is Money’ – The Memes That Shaped 2019

DeFi also helped solidify the “ETH is money” meme. As co-host of the Bankless Podcast David Hoffman said, ETH is a triple-point asset, because it acts as a store-of-value, a capital asset, and a consumable asset.

“ETH is Money” is an intentional pivot from “ETH is gas,” and updates the world on how ETH is actually used on Ethereum.  

Plain and simple: ETH is money. It always has been money and to label it otherwise was a product marketing mistake in the early days of Ethereum.Yield farming is the latest viral meme in Ethereum.

DeFi is a larger all-encompassing category of p2p, self-custody, KYC-less, finance apps built on Ethereum, but yield farming describes a popular incentives program where you often provide liquidity to a DeFi application in exchange for a combination of rewards. 

As Dan Elitzer of IDEO CoLab Ventures put it, yield farming is like aquaponics because it creates a symbiotic relationship between DeFi protocols, meaning DeFi participants can earn three or more forms of yield such as interest, market-making fees and pooled rewards such as a governance token like BAL or COMP.

Because of the most composable incentive designs in DeFi, yield farming (aka “liquidity mining”) is like passive income on steroids, with programs delivering anywhere from 10-200% daily APY on average. 

Universal appeal

Five years ago, you could argue Ethereum was attempting to do too much. Even two to three years ago, that was still a valid hypothesis, with stagnant adoption.

Today, the bold experiment of Ethereum is working. Alongside the $4 billion in assets deposited into DeFi, we’ve seen a 227% year-on-year increase in ETH locked in DeFi, and a 20X increase in tokenized BTC on Ethereum (equivalent to ~$220 million) since January 1. 

See also: One Billion, Two Billion, Three Billion, Four? DeFi’s Knocking on TradFi’s Door

What was a drawback – doing “too much” – is now a strength and a reason why Ethereum’s daily transaction volume and daily network fees have eclipsed Bitcoin’s.

Although Ethereum is less than half Bitcoin’s age, it has accomplished more in the last five years, building the most advanced permissionless p2p finance system in the world while Bitcoin has continued to champion the narrower digital gold meme.

It’s getting easier every day to point to DeFi apps that clearly demonstrate value and utility you cannot find elsewhere. If you’ve managed to ignore these developments, now is as good a time as ever to catch yourself up. The story of DeFi and Ethereum is just getting started.

Jeff Dorman, a CoinDesk columnist, is chief investment officer at Arca where he leads the investment committee and is responsible for portfolio sizing and risk management. He has more than 17 years of trading and asset management experience at firms including Merrill Lynch and Citadel Securities.

Decentralized money is important, but tokenized ownership is perhaps an even bigger and more important concept, as it stands today. The idea an ownable asset can be both a utility and an investment at the same time could change the course of investing, and company formation as we know it. And based on recent actions from the government and corporations, we may be closer than ever to achieving this. 

A capitalist society means private property rights and the free market serve as the basis of trade, distribution of goods, and development, whereby private ownership and production is operated for profit. But society is now beginning to recognize that “shareholder capitalism” is also rife with negative externalities.

You need only look at the pressure companies felt (and the greediness and misaligned incentives of management teams) to increase stock prices by spending billions of dollars of idle cash on stock buybacks, only to be left with no rainy day funds during a three-month pandemic. 

See also: Jeff Dorman – What I Learned the First Time I Lost a Million DollarsThis, of course, led to trillions of dollars in bailouts at society’s expense; a negative externality that will affect multiple generations for decades. Joe Biden recently said, “It’s way past time to put an end to the era of shareholder capitalism – the idea that the only responsibility a corporation has is to its shareholders. That’s simply not true and it’s an absolute farce.

They have a responsibility to their workers, to their country. That isn’t a new or radical notion.”

Independent of political leanings, companies are feeling this pressure more than ever. Not just from Washington, but from society. Is there a way to cater to shareholders while also catering to society and your customers? As usual, we can look at Amazon as an example.

More than 150 million people have an Amazon Prime membership, and everyone pays the same price for it. However, a much smaller percentage of people own AMZN shares.

You might argue that most AMZN shareholders probably have a Prime membership, but it is certainly not the case that most Prime members own AMZN stock. The Venn diagram might look like this:





This chart is illustrative, not based on actual dataSource: Jeff Dorman

When you buy AMZN stock, you know exactly what you are getting – a share of the company’s profits and a “claim on future cash flows.”  However, when you buy a Prime membership, you have no idea what you are getting. At first, purchasing an Amazon Prime membership only gave you faster and cheaper delivery.

But over 10-plus years, Prime membership has been rewarded with additional benefits like music, movies and now discounts at Whole Foods. 

As a Prime member, you have reaped the benefits of good management and network growth, but it made no difference whether you were the first Prime member or the last to join because you pay exactly the same price as everyone else and receive the same rewards.

The same cannot be said for AMZN shareholders, where the price you pay depends on when you purchase.

THIS IS THE ONLY PATH WHERE CAPITALISM AND SOCIALISM CAN CONVERGE, AND WE’RE SEEING IT HAPPEN IN REAL TIME.

Had Prime membership been tokenized, this Venn diagram of ownership would have overlapped much faster. As an early adopter, you would have gained both financially from the increased demand for Prime membership (driving token price higher) and still gained utility as Prime membership benefits were enhanced. 

Further, you would have become a strong evangelist for the brand, as you would be financially incentivized to get others to join Prime faster.

Both Amazon shareholders and Amazon Prime members have been rewarded, but one could argue both would have done even better had the incentive structure been tweaked through tokenization.



Source: FactSet, Statista, Arca estimates

As Arca sees it, this is the only path where capitalism and socialism can converge, and we’re seeing it happen in real time. Debt, equity and tokenized digital assets will all have a place in an investor’s portfolio, and more importantly, in customers’ portfolios.

The lines are likely to blur as investors become active participants in the bootstrapped growth of the companies they love. 

The best example of this to date is Binance and its BNB token. At first, owning the BNB token simply gave you discounts when you used Binance’s services. Today, BNB’s use cases have expanded to:

Referral program staking – If a person holds 500 BNB or more, they receive double the referral bonus, as well as a portion of the trading
See also: Jeff Dorman – If Crypto Is Anything Like Fixed-Income, It’s Going to Need a Fatter Textbook

IEO staking – The number of tickets you can claim depends on the amount of BNB you hold.

Discounted Trading fees – Binance discounts transaction fees by 25% (decreasing to 12.5% in July) whenever a transaction fee is paid for in BNB. Assist network transactions using BNB on Binance DEX.

Voting power – The more BNB you own, the more votes you have regarding which coin should list on Binance.

Like Amazon, Binance’s business lines and revenues have exploded.  Unlike Amazon, Binance’s customers have benefited financially, in addition to benefiting from enhanced services.

 As a result, Binance’s Venn Diagram might look much closer to this:





This chart is for illustration purposes; it's not based on actual data

Source: Jeff Dorman

It may sound terrifying to invest in something like a digital asset without knowing exactly what rights you are receiving for your investment. That token designs can change, and features can be added or subtracted, may give you pause as you wonder what your rights are as a token holder.  

But when you dissect this, it’s no different than what you do as a shareholder. Those who bought AMZN stock in the early days of the company thought they were investing in an online bookstore.

When you back good management teams, it doesn’t really matter what your rights as a shareholder or a token holder are, what matters is that you and management saw the potential before others did. The flexibility of a token’s use cases is just as exhilarating as it is terrifying.

The best token designs will, therefore, be those that incentivize customers to take a risk in adopting a new platform before it is clear that it is worth it, and they will be rewarded via increased token prices that will have future value based on how much token holders contribute to the company’s growth.

As communities form around these network effects, token holders may be incentivized even further to evangelize on the company’s behalf, thanks to “ownership” rights and a sense of community involvement. 

Tokenized ownership may be an effective way to reduce monopolies while still encouraging development and innovation. While companies and politicians fight, the solution may already be here.

The idea of an average investor being able to afford a luxury car, fine art or even a Class A real estate property has previously been thought to be unattainable.

However, tokenization is revolutionizing the investment process by offering fractional ownership of assets via security token offerings, and creating more opportunities for small investors to get involved.

Tokenization would not be possible without the adaptation of blockchain technology, which offers new layers of transparency, security and liquidity to investors.

Tokens are a newer way to invest in many types of assets, and many believe that security tokens will ultimately replace traditional stock ownership in the future, while also offering a way to invest in asset classes that were previously unavailable to all but the largest investors. Examples of the latter include the tokenization of high-end vintage cars, which have generated an average 330% ROI to UHNW investors in the past decade, according to Knight Frank, a global Real Estate consulting firm that created a luxury investment index for a variety of assets.

 Two companies, CurioInvest and MERJ, recently partnered with plans to offer 500 vintage cars, worth over $200 million, through a security token offering. Although token holders will not be able to use the vintage cars, the expected ROI on their investment would theoretically provide sufficient incentive to invest.

Tokenization has also created the opportunity to offer fractionalized real estate property ownership via security tokens, rather than through a traditional REIT offering. In 2018, 19% of the St. Regis Aspen Resort was sold for $18 million via a security token sale. Investors participated at $1 per token with a minimum required investment of 10,000 tokens or $10,000.

The property manager received necessary capital for the ongoing development and operations, and investors received the ability to invest in a very unique property with anticipated long-term appreciation.Ultimately, tokenizing real estate presents the opportunity for investors to invest in high end properties via a unique investment mechanism.

Houston-based digital investment bank Entoro Capital is currently collaborating with Red Swan CRE Marketplace, a business-to-business CRE tokenization system, with plans to offer a $2.2 billion portfolio of Class A commercial properties in Houston, Brooklyn, Austin, Oakland and San Jose. 

Tokenization of these high-end properties will enable investors to participate in ownership of Class A real estate property via security token offerings.  According to the firm’s website, this will provide investors “a substantially easier and more efficient process for acquiring commercial real estate investments (and enable) global investors to grow their portfolio of high-quality assets in a decentralized manner.

”As more people invest in token offerings around previously unattainable assets such as Class A real estate, fine cars, and more, the potential exists for smaller investors, previously shut out from these types of investment instruments, to realize ROIs previously only available to the UHNW and institutional investors.Patrick Doyle is an intern at Entoro Capital.

The pandemic shut down major Hollywood productions in March and five months later it’s still unclear when most TV and film projects will start back up.In Chicago, the summer is typically when the three NBC shows from Dick Wolf (“Chicago Fire,” “Chicago Med” and “Chicago P.D.”) begin work on the new season. That’s obviously been delayed.

There’s also the fourth season of FX’s “Fargo,” starring Chris Rock, which was nearing the end of its shoot here in town when the shutdown hit; producers are hoping to find a way to finish work on that quickly.

There have been ongoing conversations about possible starting dates in the next month or two for all of these shows. But nothing is official yet, according to Bradley Matthys, president of the local IATSE Studio Mechanics union, which represents the majority of crew people who work on TV and film.

“The producers and unions continue to negotiate,” he said, “and while there have been many things agreed to, there are still many issues undecided.” Everyone is hopeful; everything is in flux.

We know concerns about health and safety will affect how TV and film gets made and it’s possible we’ll see significant changes — changes that were already in the works, but might be adopted much more rapidly thanks to the challenges posed by COVID-19.

What might the near future look like?

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Think digital and virtual.

The more a production can control its environment — and who enters it — the better. That could mean fewer scenes shot on location. Instead, everything (or almost everything) could be done on sound stages using high-resolution, three-dimensional photorealistic video backdrops projected onto massive walls of the set itself.

Instead of using green screens, the idea is to create a virtual reality that the actors can see and inhabit — interiors, landscapes, whatever.This kind of sophisticated technology already exists for video games and it’s how “The Mandalorian” was shot for Disney+.

Richard Janes is an entertainment analyst and the founder of the influencer studio Fanology. He recently wrote about what kind of changes he sees coming.

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“The future was definitely moving this way anyway,” he said by phone. “The technology coming out of the gaming world has just been improving so much, but with the streaming wars and COVID happening at the same time, everything has been fast-tracked.”


A scene from the Disney+ series “The Mandalorian." (Lucasfilm/Disney/IMDb/TNS)

Here’s why: With so many streaming platforms in need of content, studios are looking for faster and cheaper ways to make that happen. And a crew moving from one real-world location to another is more time-consuming and expensive than shooting on a soundstage.

“Also, we’re in a situation where insurance is difficult for film production at the moment,” Janes said.

“A lot of insurance is not covering COVID-related illness for any new productions. If you’re a multi-million dollar project and suddenly one of your lead cast members tests positive and has to go into quarantine for two weeks, the economic impact on the project can be absolutely massive. So they have to work out better ways to control those environments.”

What does this mean for a city like Chicago?

Locations and landmarks are a big part of the city’s sales pitch to showrunners and filmmakers. “I think going forward that sales pitch is going to be less about the actual location and more about if soundstages and experienced crew are available,” Janes said.

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 So if a filmmaker in France is going to shoot a movie and half of it is set in Chicago but they never leave the studio in France but they show all this Chicago stuff virtually, that’s actually still a good thing for Chicago. Is it as good as having them come and film in Chicago?

No. But by the same token, you’ll find that all kinds of weird and wonderful shows and films can shoot in Chicago and look as if they’re set someplace else — so the city’s opportunity also grows.”

This can only work on a large scale if there are digital libraries sourcing a huge number of different environments.

“That’s going to be key,” Janes said, “and a big opportunity for people to go and capture these cities as 3D environments. Especially interiors.”

Visual effects tend to drive up costs (the budget for Universal’s adaptation of “Cats” was reportedly anywhere from $100 million to $297 million) but Janes thinks that’s going to come way down, partly because these virtual environments will be captured by the camera and won’t require as much labor-intensive frame-by-frame CGI after the fact.

“Also, as with any technology, the more people use it, the cheaper it becomes,” he said. “Seeing the two worlds of gaming and film combine in this particular area, the cost implications will come down in a very quick way. Pre-COVID, I think this would have been five to eight years off, but now I think we’re going to see it in the next two years.”

Taylor Swift in "Cats." (Universal Pictures/AP)

If the technology does become affordable even to indie filmmakers at lower budgets, Janes sees big potential:

A small film will be able to create the look of an expansive world in ways that would never be possible otherwise.

Digital libraries for more than just environments

As it stands, film and TV rely on casting companies to provide background extras. And production designers and set dressers rely on prop houses – warehouses filled with all sorts of ephemera — to build out the visual world of their project. Janes thinks much of this will go digital as well, and that filmmakers will simply license virtual props and virtual people.

“The prop houses that 3D scan all their props the soonest are going to have the brand positioning in the marketplace.” And they will be able to make a good deal of money without the hassle of physical storage.

“And yes,” Janes said, “you’re going to see a smaller number of background actors on set, because you can’t really quarantine them for two weeks to ensure it’s safe for them to be there for one day and be close to the cast.

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Janes also sees this technology extending to hair, makeup and costumes.

What are the downsides?

Whenever we’re talking about how humans are presented on screen, it’s worth considering if existing biases — about skin tone, body shape, hair texture, gender, disability — might get ported over simply because not enough thought was given to these concerns ahead of time.

Sydette Harry is a writer and research fellow at the USC Annenberg Innovation Lab and her first question about digital background actors was: “Which people? And how are you sourcing those?

“One of the things I was going to look at before the pandemic was: Who gets to be presented?” she said. “If you look at things like I Need Diverse Games (a non-profit based out of Chicago that advocates for diversity in all aspects of gaming), these technologies that are already in place do not feature a full spectrum of humanity.

At all. In most video games if you want non-white hairstyles you have to download them after, they’re not part of the standard package.”

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There’s good reason to think these same concerns would exist in digital libraries for TV and film, unless people in Hollywood — from executives on down — are proactive about addressing them.

Harry pointed out yet another drawback if filmmaking becomes even more of a digital experience: Losing the serendipity that happens when actors are on location.



Donald Glover said he was scanned for his role as Lando Calrissian in “Solo: A Star Wars Story.” (Lucasfilm)

“Film sets are closed, but the energy you get from people who are not trying to be part of Hollywood or cinema or who haven’t learned to stand and deliver, that would all go away,” she said.

If everything is shot on a soundstage, cast and crew will never have to interact in real-world spaces, walling themselves off even more than they are already. Populating a scene with digital extras means everything is less messy. Less human. “And I don’t trust (creatives in Hollywood) to interrogate that going forward,” Harry said.

There are more downsides. Projects may start asking cast members to have their likeness scanned for possible future use someway, somehow. This has already happened on big titles, including the “Star Wars” franchise (and some actors are choosing to do this on their own, with an eye to licensing their digitized likeness in the future) but Janes wonders if this might become standard practice on projects of any size.

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“You can envision it as an insurance requirement,” he said. “Personally I don’t believe we’re at a stage where we have the ability to do that cost-effectively and have it look natural, but I don’t think it will be too long until that happens.

 There’s risk associated with it, because what happens to that asset after you’re done filming? On the other hand, the actor doesn’t have to be on set as much but they’re still earning the same money. It’s basically the extension of the idea of stunt doubles.”

One wonders what the ripple effects might be if this comes to fruition.Will awards organizations feel compelled to create new requirements about “real actor” screen time in order for that person to be nominated?Janes thinks we’ll find out sooner than later.

We may not be regularly watching digitized versions of actors just yet. But he estimates that “within the next three years 50% of the content we watch will have been shot on stages with virtual backgrounds.”



What does the near future of filmmaking look like? Think digital and virtual. (krisanapong detraphiphat / Getty Images)[email protected]

Nina Metz

CONTACT  

Nina Metz covers TV and film for the Chicago Tribune, including a weekly column called Chicago Close-Up. Before joining the Tribune she was a freelance writer and theater critic. She also worked as a news radio producer in Chicago and New Orleans.

This past June, Neufund, one of the first European platforms to issue security tokens, announced its intent to move away from digital securities. The Berlin, Germany based Fintech issued the following surprising statement:

“We’ve been active participants of the discussions held at the Bundestag, engaged BaFin in a dialogue about our platform and blockchain’s solutions since 2016. We’ve been patient to their months [of] delayed decisions, last-minute requests, and announcements that harm the businesses.

But the last months showed that financial authorities are not just slow, they are paralyzed with the fear of new technologies and avoid any dialogues or decisions hoping that someone else, like global corporations or other countries, would deal with it.

Together with our investors, we agreed that there is no reason to wait for the institutional changes. Today we have announced the freezing of all upcoming fundraising campaigns and start working on the new product, which will let us continue bringing value to our investors and community.

In November of 2018, Neufund announced the first digital security issuer – its parent company Fifth Force GmbH. The following month, Neufund announced that it had raised almost €3 million in the offering. Just before the offering went live on the platform, Neufund was asked by BaFin to set a fairly steep minimum of €100,000 – something that most certainly dimmed participation from a wider audience.

Regardless, soon Neufund distributed the digital securities to its investors.A second security token offering took place late in 2019 when e-Bike startup Greyp raised €1.4 million (a sister company of Rimac) backed by over a thousand investors from 34 different countries.

Things appeared to be going well on the surface but apparently the regulator must of had a different opinion. Following several successful offerings and the announcement of future issuers, Neufund announced a change of direction. So what went wrong?Crowdfund Insider contacted Zoe Adamovicz, founder and CEO of Neufund, to learn more about her struggles as the first German STO primary issuance platform. Our conversation is below.

So what happened with Neufund in the end? Was there an issue with BaFin that was insurmountable?

Zoe Adamovicz: Since the beginning, we’ve built the platform in a transparent and compliant way, and we are convinced it’s fundamentally correct that securities are regulated.

We know that innovations are anything but easy, and it has been our business practice to actively engage the financial authorities in a dialogue about the opportunities of new technologies, the way how they work and how we can create better companies and finance.

But we’ve faced inactivity and silence. It appeared to be worse than any resistance: we were neither allowed nor banned, there was never any quorum to debate or discuss.

This situation made us freeze all upcoming fundraising campaigns and start working on the new product to continue bringing value to our investors and community.

The platform is maintained, investors have full ownership of their wallets, tokens, they can claim payouts or withdraw nEUR anytime. New post-investment activities and features are progressing, but all upcoming fundraisings are paused.

At one point, Neufund had indicated it would operate via the Liechtenstein regulatory environment. Was this not a viable path?

Zoe Adamovicz: The first retail offering hosted on the Neufund was conducted under the laws of Liechtenstein. Greyp’s campaign collected 1.4M EUR in funding from over 1000 investors from 34 countries around the world. It demonstrated the power of turning a community into shareholders and proved that blockchain makes the future of finance possible today.

Together we made history, but it can not be a general solution, we may not push every company to fundraise in Liechtenstein.

Neufund has indicated that it will continue to service existing issuers. Do you anticipate spinning this vertical off?

Zoe Adamovicz: As we’ve promised, the platform is maintained. A lot of thoughts and work were put there, not to mention thousands of investors who already participated in the previous fundraisings. Investors have full ownership of their wallets and tokens, they will be able to use the tokens to collect payouts and to act on their token holder rights.

We keep working on new post-investment features and instruments, which would be available for our community and investors.

Neufund is in the midst of pivoting, can you share the direction you are heading?

Zoe Adamovicz: Our pivoting project is in progress, but we will keep the details in secret and will announce them later.Besides that, we work on several projects: maintain the investing and fundraising platform, support our current portfolio of products (like ESOP Manager, Light wallet, and others), and create new solutions, which would ease the access to blockchain-based products for a broader audience, especially non-tech-savvy users.

For example, one of the nearest releases – Neufund’s mobile app – considers all pains and fears of onboarding, will propose login with Face ID and the easiest way of storing the recovering phrases. The app will let you manage your Wallet and Portfolio, as well as signing and approving of changes and transactions using your mobile device, just like you do it every day.

How has COVID impacted things?

Zoe Adamovicz: The pandemic did not make anybody’s life easier: it has influenced all the markets, slowed the economy.  I think that we will see the consequences in the nearest future.At the same time, we may see how the process of digitalization has accelerated: personal meetings are replaced with video calls, sports clubs had to create online training programs, years of talks and discussions about remote work became our reality in several weeks.

Due to COVID 19, startups and investors had to rethink their strategies and adapt quickly to the new world. However, we still have a record high uncalled capital on the private equity market, and investors are craving for better instruments that would help them act rapidly.

Any thoughts or comments on the future of digital assets and tokenization?

Zoe Adamovicz: We may see many successful cases on the market, and there are more to come. Today all kinds of ownership claims might be digitised.

It’s a long-term game, there is still a lot of work to be done, and there are obstacles to overcome: fear of the new technology, development of Legaltech and Regtech, and implementation of user-friendly products and interfaces, which would open the technology to a broader audience.

Mainstream adoption is yet to come, but digital assets are here to stay. 

Ethereum’s biggest-ever upgrade is supposed to make the blockchain network faster and more efficient. But the new “staking” system could lock up so many of the network’s native ether tokens that investors who want to trade them may have to rely on derivatives markets. 

The blockchain, the world’s second-biggest, currently uses a validating mechanism similar to larger Bitcoin’s known as “proof-of-work,” where new data blocks and transactions are confirmed via power-hungry computers solving complex cryptographic puzzles.

Under Ethereum’s multi-year upgrade now underway, the network would shift to a “proof-of-stake” model, where investors validate transactions by staking ether on the blockchain in exchange for token rewards. It’s a bit like depositing dollars into a bank account for interest, paid out in dollars. 

Related: DeFi Traders Are Gaming Ethereum for Higher Profits, Researchers Say

A possible consequence, though, is the new staking system could soak up as much as 30% of the ether tokens in circulation, based on estimates from Adam Cochran, a partner at MetaCartel Ventures, a decentralized investment firm.

An address needs to stake at least 32 ether tokens, worth about $12,400 at the current price, to become a validator in the proof-of-stake model. “It’s possible to see a future scenario where the incentive to keep assets locked up on-chain is so great as to remove some liquidity from the market,” says Diogo Monica, co-founder and president of the digital-asset custodian Anchorage, told CoinDesk in an email. 

Lost liquidity

In May, a survey by the Ethereum developer Consensys found that 65% of ether investors were planning to stake the cryptocurrency under the new system, known as Ethereum 2.0, and half of those wanted to run validator nodes. Most staking mechanisms have a lock-up period.

Rocket Pool Staking, an Ethereum 2.0 staking service, offers staking terms ranging from three months to a year. 

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Some ether tokens might get locked in staking as the network upgrade proceeds. Ethereum 2.0 is being rolled out in three phases of what could end up being a multiyear process, with the original proof-of-work blockchain running in parallel until the two networks are merged at “Phase 1.5.” Wilson Withiam, a research analyst at the cryptocurrency data firm Messari, told CoinDesk that “ethers sent to the deposit contract will likely remain locked up” until Phase 1.5, and “that could cause a decline in the amount of ether readily available.”

Staking derivatives market?

Cryptocurrency analysts say ether-staking yields of 3% to 5% would be so tantalizing – at a time when government bonds carry near-zero or even negative yields – that few investors would opt to leave their tokens in Uniswap or other decentralized trading systems where they could be accessed by traders. 

“In that case, people will have an incentive to create ways to buy and sell ether shares that abstract whether the underlying asset is currently being staked,” Monica said. Derivatives might be a solution.  

Fixed income from staking could even be packaged as a distinct product. Holders who stake their coins could create voucher tokens representing a claim on the stake.

Then they could trade the tokens for ether or other cryptocurrencies. So buyers could capture the yield without having to own the underlying asset. As an alternative to selling voucher tokens, holders could deposit ether as collateral on decentralized lending and borrowing platforms. 

Messari’s Withiam says he thinks staking derivatives are inevitable.“It will give traders access to tradable assets so that they can continue to do what they do best,” Withiam said. “Exchanges will be able to offer new markets around these assets and potentially lock customers within their product suite if the synthetic assets aren’t transferable outside of the exchange.

” For now, all this really just amounts to speculation over how speculators will want to speculate on ether. But there’s no lack of motivation: Plenty of cryptocurrency analysts say it’s possible ether’s price could jump as demand increases for tokens to stake.

Ether’s price has tripled this year to about $390. Such returns far exceed bitcoin’s 56% gain on the year.  

Dapper Labs – the company behind CryptoKitties – has a simple mission. They want to introduce a billion people to blockchain.“The reason we decided to go for entertainment — specifically games — is because we felt that it’s just a much easier way to introduce folks to decentralization,” explains co-founder Mik Naayem.

“Gamers are the perfect target market as they already understand virtual currencies and virtual worlds.”In November 2017 CryptoKitties was Dapper Labs’ Trojan Cat, and the game introduced the revolutionary concept of NFTs (Non Fungible Tokens) to hundreds of thousands of people who had never used the word “fungible” in their lives.

It is widely believed, at least by those in the blockchain industry, that these unique or scarce digital objects have the potential to transform the internet and underpin new virtual economies.

Dapper is now leveraging the power of major sports, entertainment and music brands — including the National Basketball Association and Warner Music — to help draw their passionate fans into blockchain too.

The NBA isn’t the only major organization excited about NFTs. Some of the biggest brands on the planet are developing blockchain based games, collectibles and virtual worlds including Formula 1, MotoGP, Atari, Ultimate Fighting Championship, Nike, and even Shaun The Sheep.It’s a massive opportunity with the potential to bring about adoption by mainstream users. 
 

Between them Fortnite and Minecraft alone have 300 million users per month — a user base that dwarfs the 16 million blockchain wallet users per month. Formula 1 reached 471 million unique viewers in 2019. And the NBA claims to reach over a billion people.

Games generated revenue of $150 billion last year and if blockchain is adopted by the gaming and collectibles industries — and marketed by global brands — in the way believers think it will be, then NFTs may well be blockchain’s killer app. 

The revolution will be gamified

Galaxy Interactive is a $325 million investment fund that’s helping fuel this revolution. Its investment thesis is based on the conviction that the billions of people who spend their lives glued to screens want more meaningful ways to connect and engage with each other.

“The virtual goods that we buy, trade and sell will imbue status and define our identity just like their physical counterparts,” a Galaxy Interactive pamphlet explains.

“The value we create inside of our virtual worlds will become indistinguishable from the value we’ve historically created outside of them.”Sam Englebardt, who co-founded Galaxy Digital with Mike Novogratz, heads up the Interactive division.“I think where brands are concerned, I just think adoption is going to happen in games and in content,” he says.

“If you’re thinking about digital worlds and a technology that enables you to do really interesting things with digital objects, and to create scarcity of these objects, it just feels to me like that’s the sort of environment where this (blockchain) tech is likely to scale first.

“That’s where the people are and where the eyeballs are. That’s where the brands go.”A story that culminates in the creation of The Metaverse, starts with CryptoKitties in November 2017.

Cool cats of the blockchain

Naayem explains the whole idea behind CryptoKitties was to teach new users about blockchain.

“When we created CryptoKitties, what we were trying to do was test whether we could get people who’ve never used a blockchain before to use it… and understand why it’s different and why it’s valuable.”

Until now everything in virtual worlds has been endlessly reproducible and consequently of little value. But NFTs ushered in the revolutionary concept of real and persistent ownership of unique objects.

Three million people visited the website to buy a virtual cat, but only about 100,000 succeeded — thanks in part to the game clogging up the Ethereum network, and in part the hoops users need to jump through to obtain cryptocurrency.

But it proved that the ownership of cute NFTs appealed to people who didn’t care less about Bitcoin.“With Crypto Kitties, a little over 40% of our audience had never owned a cryptocurrency before and through analyzing their user behaviors we can see they’re behaving differently in this game than they would in regular mobile games,” he says. “And so we got convinced around that.

”The game enables users to ‘breed’ their NFTs with others and sell the offspring, which helped encourage the creation of a virtual economy (a couple of million cats have now been bred).

The value-accretion deck was heavily tilted in favor of users who made $20 million in the first year, while Dapper Labs only took $7 million. Users also created an ecosystem of DApps, building everything from racing games to Tinder and Facebook for cats.“In terms of user behavior they didn’t see it as spending, so much as value transfer,” he says.

“People were spending a lot more because they felt this was more akin to a digital stamp or a piece of art that I can liquidate at a certain time, rather than spending virtual currency in a game.” 

 Naayem says that once users have experienced uniqueness, scarcity and ownership in a virtual world, handing over cash in ordinary games completely loses its appeal.

“When someone has had that experience, it’s hard for them to go back and spend in virtual worlds where they don’t have those promises. A big part of the way I’ve been thinking about it recently is that it’s almost akin to giving users digital rights in their virtual lives.

”Blockchain in gaming is still a fledgling industry at the moment. My Crypto Heroes made $1.5 million in its first year and players took home $118,000. Gods Unchained made $4.2m with the company pocketing the lot. But the success of CryptoKitties saw some of the biggest brands in the world sit up and take notice.

“A lot of great IPs were reaching out to have these conversations,” Naayem says. “And we thought that was a really great way to tap into their vibrant communities.”

Sports fans: the perfect score

Sports fans are some of the most devoted on the planet and sports brands make a significant proportion of their revenue from video games, merchandising and memorabilia. Combining all of these things using blockchain makes a lot of sense.

The numbers involved are huge: in two decades the NBA 2K game sold 86 million units and last year the NBA signed a seven-year deal to extend the license for a cool $1.1 billion.With that sort of money on the table, it’s not that surprising that the NBA had already set up a working group on blockchain to think about ways the brand could benefit from the technology.

They approached Dapper Labs and the result, NBA Top Shot is in beta and due for release soon.The platform allows fans to ‘own’ their favorite sporting moments. That time your hero hit a three-point buzzer beater to win the game? You can now own a limited edition NFT commemorating the occasion.

The idea evolved through discussion with the NBA’s fan panel.“We gained an understanding that one of the reasons people like sports a lot is because of what I call ‘moments of greatness’,” Nayaam says.

“That’s where you create that really strong emotional attachment with that player, with that team, with a moment that essentially brought you, your family, your city a lot of joy.“We realized that could be turned into a digitally native piece of memorabilia.

”The moments will also be game pieces too, and players will be able to compete with them, trade them and use them in online tournaments and leagues.

The mixed martial arts Ultimate Fighting Championship has also partnered with Dapper to release a range of UFC branded digital collectibles on its Flow blockchain and Warner Music is exploring how its artists can leverage their technology too. 

“A big part of it is these brands, whether it’s the NBA or UFC, allowing us to tap into very passionate fan bases which then allows us to hopefully bring those communities to blockchain,” he says.

The opportunity is not just limited to sports and music — passionate fans of anything from comic book heroes to cult TV shows are obvious contenders. “We think it makes a lot of sense around characters — I’d love to work with the Batman brand, or Marvel and create digital worlds for those characters.

But it can also be things like sneaker brands. You can imagine making digital shoes for Nike or Adidas. Eventually we’ll have augmented reality. And in that case digital fashion may make a lot of sense there.”

Virtual fashion and sneakers

As it happens, Dapper Labs has already auctioned off a virtual fashion garment for $9,500 at the Ethereal Summit in New York. The owner bought the token for the opportunity to ‘wear’ the garment virtually.

And in December last year Nike patented shoes as NFTs called CryptoKicks. The concept pays homage to CryptoKitties by essentially stealing the idea outright: you can ‘breed’ different pairs of shoes to create new custom sneakers that can be made in the real world.

Englebardt expects this will be a growing trend.“Sneaker brands are going to be a very big and important leader in this space because the sneaker culture overlaps so heavily with gaming culture and you’re already seeing a whole culture around the creation of custom sneakers,” he says.

Yat Siu, the CEO of Animoca Brands, believes that a pair of virtual Nikes may end up transferable between different worlds – enabling you to take them from one game and use them in another, or on social media.

“In the real world you don’t buy Nike shoes so that you can only use them in a Nike Basketball court,” he says.

“If suddenly millions of people end up owning Nike virtual shoes, how many game companies out there might actually say, let’s make use of those Nike shoes inside our virtual games?”

While NFTs allow for objects to exist outside of the games, interoperability is probably a little way off yet. Englebardt believes it is more likely that NFTs will first become usable across multiple games owned by the same publisher.

So a Formula 1 car NFT from Animoca Brand’s F1 Delta Time game (out in July) may end up being able to drive around The Sandbox, which the company also owns.

Driving change with Formula 1   

The company made headlines in May last year when it auctioned off the first F1 car NFT for the game. Theoretically made of ‘black carbon’, the ultra-fast 1-1-1 was sold for 415.9 Ether – $106,000 at the time. Two other F1 cars sold for around 100 ETH each, demonstrating that designing collectibles that appeal to the sport’s cashed up fanbase was a clever strategy. 

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Subscribe for thoughtful explorations and leisurely reads from Magazine. “We did not expect that the 1-1-1 would sell for 415 ETH, which by any measure is an astounding amount of money,” Siu says. “It set a bar for the price of these cars which consequently also informed us of how we need to work on that scarcity model because now the cars have a certain price point.

And we now have to be mindful about how we keep issuing these NFTs.

”They’ve also auctioned off 2000 ‘crates’ of in-game NFTs conferring various advantages for players for $360,000 in total. Just like CryptoKitties, a secondary market sprung up with users buying crates simply to resell various items.

In August they’ll be reverse auctioning off three Star Trek vessels to rabid Trekkers to be used in the forthcoming CSC game, with bids starting at the ETH equivalent of $200,000 when the Enterprise NCC-1701 goes under the hammer.

Animoca is also developing another blockchain game using collectibles for MotoGP — the motorcycle racing world championship.While most purchasers of NFTs so far have mostly been crypto natives, Sui expects that to change after the games are released. 

That’s what happened with an experimental sale in May of 100 in-game NFT items for Crazy Defense Heroes “The top buyers are not crypto guys and that taught us something about adoption. They were players that played a lot and they wanted these collectibles because they were fans and because it had a benefit inside the game,” he says. 

325 new brands onboard

As the name suggests, Animoca Brand’s entire game plan is to leverage the power of existing brands in gaming — everything from Garfield to Snoopy and Thomas and Friends.

As part of this strategy it teamed up with blockchain network Harmony to jointly acquire the digital collectible startup Quidd last year, which has sold more than 2.1 billion digital collectibles since 2017. Quidd has license agreements with 325 brands including Marvel, Game of Thrones and Rick and Morty, and Sui says they are in negotiations with the IP holders to begin releasing collectibles at NFTs.

As a first step, they’ll start recording ownership on blockchain.Siu says that speaking to brands about NFTs currently requires a lot of education. “We do have to go out and tell people about the opportunity,” he says. “It’s not yet at the point where IP holders are coming to us and saying ‘Hey I heard you guys do crypto and NFTs, let’s see how we can work together’.

We’re not there yet.”“But I think this is where Animoca Brands has an advantage because we’ve already talked to them on non-blockchain games in the past, we’ve had a long history with them.

Playing in The Sandbox

Some brands have seized the opportunity — among them Atari and Shaun the Sheep (of Wallace and Gromit fame), two brands that are building their own virtual theme parks inside the blockchain powered virtual world The Sandbox.

First released in 2012, mobile game The Sandbox gave users the freedom to create whatever they wished, and it’s since been downloaded more than 40 million times.

The new version uses blockchain to power the creation of an immersive ‘metaverse’, much of which will be built by the users themselves. They’re targeting one million monthly active users.

“It’s a 3D decentralized virtual world where the players can make 3D assets and monetize them through the use of blockchain technology, essentially NFTs and our own cryptocurrency,” explains co-founder Sebastien Borget who is also President of the Blockchain Game Alliance.

Competitor Decentraland has created a similar, but more realistic looking blockchain world.The Sandbox has held three major pre-sales of ‘land’ inside the game map: the most recent of which sold out in five hours and netted 3,400 ETH ($760,000).

“What’s amazing is this strategy has been working really well,” he says. “We have already sold over $1 million of virtual land even though we are not yet launched, and we have over 1,500 land owners who are either artists, game developers, creators, crypto users and investors who believe in that vision.” 

As the initial coin offering (ICO) boom subsided and the 2018 crypto bear trend began to set in, many analysts predicted that security tokens may drive the next market cycle — with the vast capital locked in the real estate sector being eyed hungrily for tokenization.

However, with the Bitcoin halving, Ethereum 2.0, and the emergence of DeFi capturing the imagination of crypto markets recently, real estate tokenization is no longer the flavor of the month, and some are questioning its viability.

Real estate tokenization in 2017/2018

In an article in The Investor, director of global research at real estate service company JLL, Matthew McAuley, stated:

“It’s been very slow going with blockchain in real estate, despite it being touted as a game-changer for a number of years now.”

The first property sale settled using cryptocurrency happened in 2017 when a $60,000 dollar apartment in Ukraine’s capital of Kiev was purchased by TechCrunch founder Michael Arrington using Ether via the Propy platform. The following year, 2018, the momentum continued with ‘Aspen Coin’ distributing tokens representing $18 million in fractionalized ownership in a five-star, 179-room resort in Colorado.

It was the world’s first real estate security token offering.A luxury condo development in Manhattan estimated to be worth $30 million also announced a sale via a security token offering through tokenization firms Fluidity and Propellr.

Real estate tokens falter in 2019

However, the Manhattan project was scrapped the following year, with Fluidity and Propellr attributing the decision to a lack of institutional appetite for the offering. 

The absence of established secondary markets for security token trading also hindered the sector, with Aspen Coin originally being listed on the obscure Templum Markets.Efforts by the online retailer Overstock to launch a regulated Alternative Trading System for security tokens in the form of tZERO also appeared to take a blow last year, as the dramatic exit of the firm’s CEO Patrick Byrne led to lawsuits targeting Overstock and its executives.

Will tokenized real estate regain momentum?

McAuley believes that blockchain is not yet positioned to make a lasting impact on the real estate industry, arguing that greater computational resources, legislative apparatus, and “a practical workaround for immutability” are needed in order for the sector to regain momentum.

“I find it difficult to believe blockchain will be as used, or as useful, in real estate as was thought initially.”

Signs of life

While the tokenization of real estate may not have lived up to the early hype, there has been steady progress. Overstock’s tZERO grew to host more than $2 million in monthly security token trade ahead of launching support for Aspen Coin — which recently rebranded to ASPEN. 

Property tokenization platform RealT has also completed 16 offerings for tokens representing ownership in Michigan-based properties and is currently hosting active token sales for two properties — including a house in Florida.

Nine real estate tokens are currently traded on RealT’s secondary markets, generating roughly $90,000 in monthly volume.

In April, German-based Black Manta Capital launched a $12 million security token offering issuing fractionalized ownership in 2,000 square meters of apartments in Berlin.

The Dubai government has also made significant progress in building the Dubai Land Department Real Estate Blockchain (DLDRE) over recent months.

Blockchain as a great facility is expected to play a vital role in information and technology in the coming years. It has started to progress more rapidly because more and more organizations now realize the importance of the blockchain.

Moreover, it’s not easy to implement blockchain for several reasons. Blockchain development services support critical system and hardware necessities to attain a significant decrease in attack vulnerability.



Blockchain as a service supplier like IBM, Microsoft Azure and other top companies have researched BaaS to make blockchain execution easier for the industries whose chief capabilities remain in fields than information and technology.

It assists enterprises to emphasis more on the main areas, than to focus on the development space.

What do you understand by the term Blockchain as a service?

Blockchain as a service is a blockchain facility that enables consumers to use cloud-based facilities to progress, use and organize their blockchain applications, operation and smart dealings.

BaaS comprises a cloud-based facility that manages performance to keep the structure functional and agile. It’s still working on some areas to increase its growth across different businesses:

Web development company plans and codes applications for online purpose.Industries and businesses both are eager to execute the blockchain feature due to the technical difficulties in generating, functioning and handling the blockchain structure act as problems to its broad adoption.

Blockchain, as a service provides solutions to release companies of the complication of new technology.

How does it work?

A BaaS provider organizes and maintains the blockchain technology and arrangement for a consumer. The customer pays some amount to the BaaS provider for arranging and managing blockchain linked nodes on their concern.

 A BaaS provider maintains the back-end for the customer and their business. The customerprovides money to the BaaS provider for arranging and handling blockchain connected nodes on their concern.

A BaaS worker manages the back-end for the client and their industry. It is the duty of a BaaS operator to make blockchain structure work continuously. A Blockchain worker also takes care of theevents like proper distribution of sources, bandwidth controlling and organizing requirements.

By using BaaS procedure, customer can concentrate on more of the main fields and the working of blockchain without worrying about the arrangement issues.

The different method to organize your website on any web hosting provider such as Amazon Services or Azure, and they will handle all maintenance and set-up difficulties.

Blockchain as a service performs similarly to the second procedure, thus releasing you from the burden of handling structure of a blockchain application.

Some of the famous BaaS providers in the market

Microsoft

Microsoft is one of the first sellers to offer BaaS when it created Azure blockchain services in 2015. They grouped up with the industries to progress Microsoft azure services.

The administration purposes of following designers and trades consumers to test with blockchain technology and development. Microsoft Azure BaaS also permits its customers to generate private, public, and association blockchain setting with industry context and bring their blockchain applications to the market. 

Blockchain App Development Company helps with diverse blockchain platforms to improve business efficiency, effectiveness, and growth.However, by incorporating the artificial intelligence-based support system, many large companies help its customers understand and execute dispersed ledger technology.

Features of Microsoft Azure

• It helps Several Blockchain contexts, including large industries
• Constructed-in Group Management to handle associates of the network
• Total functioning and Sorting

Amazon

Like other industries, Amazon has also come up with its BaaS facility known as amazon managed blockchain. Amazon managed blockchain is a complete facility that provides its customers to arrange and maintain an accessible network with just a few hit.

The amazon managed blockchain assists two famous blockchain expansion contexts, making its simple for the customer to handle both approved and public blockchain systemsthrough a particularcontrolledservice.

Therefore, amazon managed blokchain provides you with the procedure to choose the proper sources for your workload.Features of Amazon Managed Blockchain

• Completely maintained
• Supports two famous blockchain development frameworks Fabric and Ethereum
• Follows Amazon QLDB equipment to handle amplified ordering facility

R3

The blockchain platform as an administration provided its R3 facilities that offer industries access to the one-click organization of cloud-based nodes.

Maintained R3 platform decreases the organization time of blockchain nodes for a few minutes’ permits industries, R3 associates and governments to organize the Corda system in just three clicks.

Created on the latest release of Corda, designers can advance their private systems for verifying and install CorD applications on the private network. It decreases efforts and sources and provides flexibility over a shorter period.

Designersno longer need to concentrate on the management of systems.Features of R3 Corda ServiceR3’s unique feature permits designers to function with more than one element at a time.

Features that will help you choose right Baas applications

Smart Agreements IntegrationYou need a smart deal instrument to combine business ideas into your blockchain solution. Smart deal not only comprises the instructions like typical deals but also applies penalties in case any part breaks the norms.

However, the BaaS platforms are enduring; it makes proper testing of smart deals quite complex for designers. It is vital to consider that the BaaS Company offers you the intelligent deal combined with the organization.

Identity Access Management Platforms

An authorized system permits consumers to access precise data or layers.

Combining a managed platform will make the blockchain system properly secure, and you will be capable of giving permissions to individuals.

Different Runtimes and Frameworks

Some BaaS workers only assist one kind of enterprise blockchain organization. Guarantee to select a BaaS that offers a wide range of contexts. It will help bring scalability to your enterprise necessities.

Conclusion

Blockchain as the administration is a promising offering that helps industries become flexible solution created on the blockchain technology. SaaS Development Company is an enterprise that organizesa feature and makes it accessible to consumers over the internet.


Categories: Uncategorized





Amit Agrawal

Cyber Infrastructure (p) Ltd

As the Founder and COO at Cyber Infrastructure (P) Limited, it is my aspiration to drive our global clients ahead in the competitive technology world by enabling them to receive huge financial and operational benefits in software development through my years of experience and extensive expertise as technology adviser and strategist.

In my current position at CIS, I spearhead management of various technology initiatives, expansion of our technology capabilities, and delivery of quality excellence to our clients.

China has arrested 109 individuals suspected of involvement in the PlusToken cryptocurrency fraud ring.

SECURITY

Cyber security 101: Protect your privacy from hackers, spies, and the governmentSimple steps can make the difference between losing your online accounts or maintaining what is now a precious commodity:

Your privacy.

Read More

South Korea-based PlusToken was marketed as a high-yield investment opportunity for traders interested in cryptocurrencies. 9% to 18% in monthly returns were dangled in front of investors mainly based in China and South Korea, who then stored Bitcoin (BTC), Ethereum (ETH), and EOS on the platform.

Members were encouraged to bring others to the fold in exchange for a commission, creating what is thought to be a Ponzi scheme of massive proportions.

 See also: DoJ arrests Ponzi operators planning to retire 'RAF' through cryptocurrency scam

Last year, the operators of PlusToken performed a suspected exit scam, in which roughly $3 billion in deposits was taken from up to four million users who suddenly found themselves unable to access their funds. 

Local media outlet Chain News now suggests this figure could be closer to $6 billion. PlusToken's dissolution led to an international hunt for those responsible. In 2019, Chinese law enforcement arrested six suspects -- while many others fled abroad -- and now, a further 27 individuals are in custody. 

CNET: Twitter says massive hack was result of spear phishing attack

The Ministry of Public Security and Chinese police have apprehended 27 "major criminal suspects" and a further 82 "key" members of PlusToken, described as a "network pyramid scheme.

" Law enforcement added that 3,000 "hierarchical relationships" have since been traced throughout the PlusToken network. 

TechRepublic: How to add fingerprint authentication to your Windows 10 computer

The suspects may have been cornered, but investor funds are still on the move.

Over 6,000 separate wallet addresses have been used to divide up and move the cryptocurrencies around in what is likely to be an effort at obfuscation, but researchers have still managed to keep a close eye on where the cryptocurrencies are going -- at least, for now. 

In the UK, authorities forcefully closed down a cryptocurrency scam platform, GPay Ltd, earlier this month.

The UK High Court ordered the windup of GPay following the "loss" of £1.5 million ($1.8m) in investor funds. GPay is also accused of fraudulently using celebrity images to endorse its business. 

OBSERVATIONS FROM THE FINTECH SNARK TANK

Trading of Bitcoin, Ethereum, and other cryptocurrencies increased sharply at the beginning of 2020, then jumped to a new high in February—a level that was sustained for the height of the Coronavirus crisis from March through May.




Cryptocurrency Monthly Trading Volume SOURCE:

CRYPTOCOMPAREAccording to Coin Metrics:“If historical growth rates can be maintained, Bitcoin’s current daily volume would need fewer than 4 years of growth to exceed daily volume of all US equities and fewer than 5 years to exceed daily volume of all US bonds.”Where is this Coronavirus-fueled trading volume coming from and who will drive the future growth?


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Who’s Buying Bitcoin?

A new study from Cornerstone Advisors revealed that 15% of American adults now own some form of cryptocurrency—a little more than half of whom invested in cryptocurrency for the first time during the first six months of 2020.





Percentage of Consumers Holding Cryptocurrency Assets SOURCE: CORNERSTONE ADVISORSOn average, these new investors obtained roughly $67.5 billion in cryptocurrencies, roughly $4,000 per person.

The self-reported value of cryptocurrencies like Bitcoin and Ethereum for Americans who owned these assets prior to this year is about $111 billion, or close to $7,000 per person.

At 15% penetration, the US cracks the top 10 countries with the highest adoption of cryptocurrencies according to data from September 2019 (although a lot has changed since then).





Cryptocurrency Adoption SOURCE: STATISTA

The Demographics of Bitcoin Buyers

Who fueled this Bitcoin buying binge during the crisis?

• High income, well-educated men. Nearly eight in 10 of 2020 crypto buyers were men with an average annual income of $130,000. Four in 10 have a Master’s degree or higher (70% have a Bachelor’s degree or higher).
• Millennials and Gen Xers. Millennials (26 to 40 years old) comprised 57% of the consumers buying cryptocurrency in 2020 with Gen Xers (41 to 55 years old) accounting for 30%. Overall, 27% of Millennials and 21% of Gen Xers now hold some form of cryptocurrency, in contrast to 7% of Gen Zers, and 3% of Baby Boomers.
• Bank of America customers. Overall, 21% of all consumers call Bank of America their primary bank. Of the consumers buying cryptocurrencies during the Bitcoin binge, almost half—47%—are customers of Bank of America. You’d think Bitcoin buyers would be customers of the digital banks, but only 6% of them call a digital bank their primary bank—in line with the population as a whole.

The Bitcoin Benefit

It’s hard to prove that holding cryptocurrencies is the cause of this, but 44% of Americans who have already invested in Bitcoin and other cryptocurrencies said that their financial health is “much better” since the beginning of the Covid crisis. That’s in contrast to just 5% of all other US consumers.




Change in Financial Health Since Covid 

SOURCE: CORNERSTONE ADVISORS

First Time Investors

From a demographic perspective, the first-time investors are very similar to the previous group of crypto holders, but they’re different in at least one significant way: They’re changing up the financial institutions they do business with.

Among the consumers who invested in cryptocurrency for the first time in 2020, half of them switched their primary banking relationship in the past six months—one-third did so in the past three months alone.

The Apple Effect

Apple Card holders only comprise 5% of all credit card customers, but among those that do have the card, 47% own some form of cryptocurrency—two-thirds of whom purchased crypto in 2020.

The Next Wave of Investors

The 11% of Americans who expect to invest in Bitcoin and other cryptocurrencies are somewhat different, demographically, from the current set of investors. Specifically, they are:

• Women. Women only make up 22% of current cryptocurrency investors. In the next wave of investors, they account for 35% of the total.
• Minorities. African-American and Hispanic consumers, who comprise 28% of all Americans, account for 23% of current crypto investors. Among those that anticipate investing in the next 12 months, 37% are from these two ethnic groups.
• Younger and older. Just 6% of Gen Zers and Baby Boomers already have cryptocurrencies. In the next wave of investors, 17% are Gen Zers and 11% are Baby Boomers.
• Less educated. Among current crypto investors, just 18% have not earned at least an Associate’s college degree. Among the consumers expecting to invest in cryptocurrencies in the next 12 months, that percentage rises to 36%.

One area of concern regarding the next wave of investors: Just 30% consider themselves to be “very financially literate,” in comparison to 54% of those who already hold cryptocurrencies.

The Crypto Opportunity For Banks

The surge in cryptocurrency investing has been a boon for Square. Bitcoin revenue for its Cash App for Q1 2020 was $306 million, up from $65 million in Q1 2019.

Not surprisingly, reports indicate that PayPal intends to offer crypto purchasing through its PayPal and Venmo apps.

While many banks prevent their customers from buying cryptocurrencies using the cards they issue, the mainstreaming of crypto investing raises new questions for banks—not just regarding allowing their cards to be used, but whether or not they should provide more cryptocurrency investment-related services altogether.

A new announcement from the Office of the Comptroller of the Currency (OCC) may be opening the door to that. According to an article here in Forbes, the OCC letter:

“Clarifies that national banks have the authority to provide fiat bank accounts and cryptocurrency custodial services to cryptocurrency businesses. This clarification may open the doors for larger financial institutions to provide bank accounts to cryptocurrency companies, as well as actually provide custodial services for customers’ private keys.

”Among the large banks, a few appear to have a head start over the others. A site called Moon Banking provides a “crypto friendliness” score for banks, with USAA and Ally Bank leading the way in the US.





Crypto Friendliness Score SOURCE: MOON BANKINGAll banks—in particular, community banks and credit unions—should look at opportunities to provide Bitcoin wallets and other cryptocurrency trading services as a way to differentiate their services.


Follow me on Twitter or LinkedIn. Check out my website. 




Ron Shevlin

Ron Shevlin is the Managing Director of Fintech Research at Cornerstone Advisors. Author of the book Smarter Bank and the Fintech Snark Tank on Forbes, Ron is ranked… Read More

One-third of traditional financial institutions have invested in digital assets or derivatives, according to a Fidelity survey. Yet cryptocurrency still hasn’t achieved mainstream adoption.

Volatility is often blamed as the primary culprit and is certainly a barrier, but the solution to that barrier might be easier than people think. In order for cryptocurrency to become stable and scale, it must first become an acceptable payment method across the board.

Universality is one of cryptocurrency’s greatest attributes, but acceptability, ironically, is absent. 

How can anything be considered a currency or some sort of exchange of value if it’s not universally accepted by vendors? At the heart of acceptability lie two problems: Fungibility and getting institutions and merchants to not just consider crypto payment adoption, but actually pull the trigger.

When referring to a budding currency powered by a novel technology outside the bounds of traditional, centralized principles of global finance, fungibility can be quite complex.

In order to effectively be considered money, a currency must meet six defined characteristics. It must be durable, portable, recognizable, stable, have limited supply, and be fungible.

To be fungible, a currency’s units must be indistinguishable and interchangeable from one another. The U.S. dollar is a prime example of a currency that is universally accepted and meets all six requirements, including fungibility.

For example, one U.S. dollar, even if a celebrity like NBA legend Michael Jordan autographs it, is still worth one dollar as a means of currency. Cryptocurrency, however, often suffers from the absence of this type of quality.

Adoption of the world’s first cryptocurrency, Bitcoin, was initially centered around its characteristics of privacy and decentralization. But its reputation for privacy has recently been compromised with the advent of sophisticated analysis tools and chain firms that can identify Bitcoin users based on their transaction history.

This means users can see who has owned the specific units of crypto crypto, ultimately changing the potential value of the coins. In other circumstances, the value of specific bitcoin units rose above market value because they didn't have transactional histories.

Minted without transactional histories, these “virgin bitcoins” appeal to criminal organizations and investors seeking to evade taxes. The solution to both problems must incorporate uniform price per unit for any cryptocurrency seeking to be accepted by merchants.

The proposed model could be multi-tiered, wherein official local exchanges feed information into official online exchanges, enabling real-time price discovery. Legitimate demand as unscrupulous businesses will be voted out in the interests of the community as a whole.

There would also need to be a system preventing the ability of creating premium coins worth a higher value.

In order to overcome the problem of coin traceability, which, as mentioned, can raise or lower the value of individual units, a process known as coin "mixing," or "tumbling"－typically applied to Bitcoin－can resolve this issue.

The process involves using software that mixes multiple coins from different wallets and redistributes them back to the originator wallet. Essentially, tumblers combine different sets of coins and proceed to return this combination with differing transaction histories, thus negating the traceability issue.

Tumbling doesn’t totally anonymize the transaction, but it does make it tougher to trace. Considering existing alternatives, Bitcoin tumbling has proven to be the most fool-proof way of maintaining transaction privacy. In addition to the issues of fungibility, there is another question: Who takes the first step?

The problem remains not just a matter of fungible units of exchange, but also a matter of who will adopt this medium of payment first. Will merchants adopt first or will users?

Without shops offering crypto payment options, non-crypto enthusiasts, who are a majority of the consuming population, won't use it. On the other side of the coin, if not enough consumers own and use crypto on a regular basis, then merchants won't be incentivized to offer crypto payment options.

We can harken back to the credit card story of the 1940s to better understand how cryptocurrency can enter the wallets of the people, and not remain sidelined.

As legend holds, in 1946, a Brooklyn banker named John Biggins created the first modern credit card consumers could spend in local shops, and his bank acted as the transactional intermediary. Shortly after, Diner's Club followed suit, and a new age was born of cashless payments. 

The value of the credit card was convenience, and it became apparent when the founder of Diner's Club Frank McNamara, as the story goes, forgot his wallet while attending a business dinner. He allegedly returned months later with his business partner to pitch the idea to the restaurant of a charge card.

Likewise for crypto, the "Eureka!" moment has yet to pass. 

Economic recession was not enough in 2008 to motivate consumers to adopt crypto in the same way they did credit cards.

Despite the clear business opportunity, like a market size of 50 million users spending €3.4 trillion annually; blockchain wallet adoption rising 425 percent between Q3 of 2016 and Q1 of 2020; cheaper transaction feeds for merchants; and drastically reduced user data attack potential, merchants still don't quite understand it.

A Dutch study on virtual currency adoption found that "unfamiliarity with cryptos is the most cited reason for non-acceptance," at 58 percent. The same study also concluded that not enough consumer demand for crypto is the reason merchants are unwilling to offer crypto payment options.

Just as McNamara accomplished in 1950 and paved the way for the credit card era, cryptocurrency companies must be able to replicate the same value propositions. In essence, stronger awareness campaigns are required to foster the demand among, not just consumers, but retailers, too.

Most importantly, cryptocurrency campaigns must focus not on supplanting fiat currency and credit cards, but coexistence. Fiat currency will likely never disappear, but cryptocurrency has a unique place in our world as an alternative payment method with its own applications and benefits.

Widespread acceptability among merchants is one of the final few hurdles before crypto achieves price stability and, as a result, mainstream adoption as a relevant form of currency, rather than remains a fad that will eventually fizzle out.

A wider awareness campaign alongside intra-crypto regulatory changes provides for a roadmap that will ensure the further advancement in the acceptability of crypto, thereby removing the hurdles in its long-term adoption alongside credit card and fiat currency as viable payment options.

About author: Josh Tate is a seasoned executive officer with more than 20 years of experience as an entrepreneur, practitioner and legal professional. Prior to founding ForumPay, he founded and launched multiple companies in diversified industries such as fintech, media, real estate, and energy.

Josh concurrently holds positions as Director, CEO and General Counsel of several companies and provides a wealth of experience in both fintech and traditional finance. He holds a Bachelor of Science from Kansas State University and a Juris Doctor from the University of Kansas.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Chainlink’s LINK tokens have quadrupled in price this year to become one of the biggest success stories this year in cryptocurrency markets.

The project’s market capitalization, now the 12th highest among all digital assets at $2.7 billion, according to CoinGecko, reflects investor perceptions of Chainlink as the leading crypto “oracle” provider. That means it supplies prices and data streams to semi-automated lending and trading systems built atop blockchains.

You’re reading First Mover, CoinDesk’s daily markets newsletter. Assembled by the CoinDesk Markets Team, First Mover starts your day with the most up-to-date sentiment around crypto markets, which of course never close, putting in context every wild swing in bitcoin and more.

We follow the money so you don’t have to. You can subscribe here. 

The function is crucial in the fast-growing arena of decentralized finance, or DeFi, which has generated such a speculative fervor in recent months that supposed money-of-the-future bitcoin has almost started to look passé.

But now Chainlink’s early lead as the dominant DeFi oracle is starting to attract competitors, and cryptocurrency investors are wondering if the niche industry might be due for a shakeup. Given the key role played by oracles in DeFi, users of the decentralized systems also stand to benefit. 

  Potential rivals could include dedicated oracle upstarts like Tellor as well as leading DeFi projects like MakerDAO that are developing their own solutions. Another data oracle, Band Protocol, launched a new version of its network on the Cosmos blockchain last month, to avoid congestion on the more popular Ethereum network, on which Chainlink runs.

Others in the space include Augur and Nest, according to the industry-tracking website DeFi Pulse.

“I think it’s good that there are different projects that are offering this, obviously,” Niklas Kunkel, head of backend services for MakerDAO, said in a phone interview.




LINK price and volume in 2020.
Source: CryptoCompare

Chainlink has taken a commanding lead among DeFi oracles, a perch that’s been strengthened with frequent announcements of new partnerships and node operators. Just last week, Deutsche Telekom’s IT subsidiary, T-Systems, announced plans to join Chainlink as a node operator.

This past Friday, Korean banks IBK Bank, Shinhan Bank, KEB Bank, NH Bank and CenterPrime announced they plan to provide oracle data for Chainlink.The project even has galvanized a community around it, and its most ardent supporters are known as Chainlink Marines on social media.

DeFi applications are built using “smart contracts” – strings of computer programming that are embedded into blockchain networks and designed to automate specific functions like lending or cryptocurrency swaps, based on incoming data inputs.

There’s no human middlemen as in the case of centralized banks and Wall Street trading firms to monitor pricing, so the smart contracts rely on distributed input sources, known as oracles.

Under Chainlink’s protocol, data is aggregated from third parties and then batched into oracle feeds that are streamed out to DeFi systems. Various information providers, mostly from the cryptocurrency ecosystem, provide the data as “node operators” and are rewarded with payments in LINK.

Many of Chainlink’s oracles have over a dozen participants. 

Chainlink’s most popular product is pricing for cryptocurrencies like bitcoin; the platform lists 36 trading pairs on its website. 

“If you don’t have data on-chain, you can’t build a contract for a certain market,” Sergey Nazarov, co-founder of Chainlink, told First Mover in a phone interview. “We don’t make contracts. We don’t secure blocks. We don’t secure transactions. We just feed data into various systems.” 




The BTC/USD price oracle.Source: ChainlinkBut in the fast-moving DeFi industry, where anything resembling an establishment could be years or even decades in the making, few competitors are ready to concede. 

MakerDAO, the decentralized-lending project behind the dollar-linked stablecoin dai, has provided its own distributed oracles since 2017 and now lists seven price feeds on its website.

DeFi projects including 0x, Gnosis and Kyber Network are using MakerDAO’s oracle feeds as well as contributing to them as third-party data sources, according to Kunkel. Node operators in MakerDAO oracles are chosen and paid in the project’s cryptocurrency, dai. 

“When we started building dai, there weren’t any existing oracles that we could utilize,” Niklas Kunkel, head of backend services for MakerDAO, told First Mover in a phone interview. 

A newer entrant is Tellor, which uses a complex algorithm, based on the SHA-256 hash function that’s used in bitcoin mining, to assure the integrity of its data.  

“Miners compete for the right to submit the data,” Tellor CEO Michael Zemrose said in a Telegram chat. 

The rewards for providing data are paid out in Tellor’s native token, TRB. Its price has nearly quadrupled this year, but off of a smaller base: The token’s market capitalization stands at just $16 million according to CoinGecko, a tiny fraction of LINK’s. 

At this point, the DeFi oracle market is Chainlink’s to lose. 

Tweet of the day

Bitcoin watch

Source: TradingView

BTC: Price: $11,196 (BPI) | 24-Hr High: $11,214 | 24-Hr Low: $10,847Trend: Bitcoin has been struggling to maintain momentum since a quick rush of volatility and a price surge to multi-month highs above $11,300 on Monday.


Since then, the price action has been largely centered around $11,000, with both lower highs and higher lows setting up a contracting triangle on the hourly chart. Such a pattern atop a prior bullish run ($9,000 to $11,300) is known as a bull pennant. 

Chart analysts consider a bull pennant as a continuation pattern – one that recharges the bulls’ engines for an extension of the preceding rally. As such, we may see a bullish breakout and a rally toward the resistance at $12,000. A move above the upper end of the pennant, currently at $11,317, is needed to confirm the breakout. 

That said, the possibility of the breakout failing to accelerate the uptrend cannot be ruled out, as the 14-day relative strength index is reporting overbought conditions with an above-70 print. In addition, Thursday’s doji candle is signaling buyer exhaustion. 

If prices drop below the pennant support, currently at $10,920, a deeper decline toward the former hurdle-turned-support at $10,500 (February 2018 high) may be seen. 

At press time, though bitcoin had risen to near $11,200, representing a 0.66% gain on the day.

Way back in 2014, I debated the merits of bitcoin with cryptocurrency evangelist Andreas Antonopoulos. It was a wonderful, civil and not too disobedient dialogue. I was sceptical, not cynical.

Six years later, I remain sceptical but now have a cynical bias.Let me explain what I see as the good, the bad and the ugly across the cryptocurrency landscape. I won’t cover the blockchain (for that, I have only optimism).

Cryptocurrency: the good

• A democratised currency can only be described as good.  
• A decentralised currency that cannot be controlled by any — misanthropic, missing or maddening — government leader must be described as good.
• A digital currency that does not recognise sovereign borders and so requires no conversion taxation or limitations is good.
• A currency for places that do not have a stable or developed one is very beneficial.
• Hooray for a currency that is ready, maybe too willing, and able for our global, digital world without all range of account establishment hurdles, capital movement restrictions and other challenges.

If you believe the rule of three, then those five points ought to be more than enough to wipe out the scepticism and initiate our living the crypto dream.

Cryptocurrency: the bad

What if the world fully embraced a cryptocurrency? No more paper money. The social contract that we fear is fraying today would be torn to shreds.Without delving into what led to our social contract challenges, how would ‘universal sovereign individuals’, based upon their money, be taxed to enable and support a social contract with their schools, police, fire stations and safety nets?

Answer: they could not, I cannot imagine, without creating a violation — breaking the sovereignty — that would tear down the crypto kingdom as it stands. Moreover, governments with social contracts know this and will do whatever it takes to stop any real breakaway from their currencies.

Now, re-visiting the five ‘goods’, because hope and hype is not a strategy, we can lose the first one because a democratised cryptocurrency is kind of fictional.

Why? Because today, big controlling hands exert an influence on the cryptocurrencies that exist through mining or any other process.

Cryptocurrencies have not been distributed like some type of universal basic income (UBI). To be sure, introducing a form of cryptocurrency could make for a brilliant UBI, but it would be guaranteed to be controlled by a central, sovereign state actor – so much for that idea.

And, for all those who think crypto is fabulously anonymous, it is not. Hello blockchain – the real dream tech!

There is a reason that governments have threatened or begun to remove from circulation larger denominations of paper currencies. Hint: cash is much more anonymous.

Cryptocurrency: the ugly

All paper currencies can be lost or stolen. Ugh! But crypto is not demonstrably more secure. There are big thefts and hacks and people lose their crypto keys all the time (ugh again!).And, don’t forget the infamous American bank robber Willie Sutton.

When asked why he chose banks, Willie allegedly responded “because that’s where the money is”. Well, crypto exchanges are arguably bigger and easier targets than any individual bank today. And exchanges don’t offer complimentary insurance.As if that isn’t ugly enough, try to stomach these:

• Cryptocurrencies can be manipulated or schismed – such as the schism in bitcoin’s most notable spin-off, bitcoin cash, in 2018.
• How would you feel about paying the equivalent of several thousand dollars for a pizza? If a cryptocurrency cannot remain stable, why would buyers/sellers be motivated to use it? Aside from potential illicit applications and maybe for collectibles, there is no use, no purpose. Unless…
• You view your cryptocurrency as an investment. Maybe just don’t. Investments offer dividends or a yield. Cryptocurrencies have neither. They are… speculations, collectibles? Does the world really need any more private ornaments? And digital gold? Really? That’s nice marketing. But why not just buy gold?

Be careful if you’re crypto dreaming

The sceptical me remains sceptical and not crypto dreaming. You may wish to be careful, too.Furthermore, the idea of sovereign digital currencies – the stuff of efficiency/effectiveness dreams – could be dangerous, too. Take a moment and think of the temptation to tax, repress, fine or devalue with the proverbial press of a button if there’s any form of centralised control.

Fiat currencies – that is, government issued money – are no panacea, but for me still, today, I’ll take paper or plastic/credit, please, at least until decentralised digital is a reality.

If you liked this post, don’t forget to subscribe to the Enterprising Investor.For more research and analysis, visit CFA Institute.

By Michael S. Falk, CFA, partner at the Focus Consulting Group.All posts are the opinion of the author.

As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.