Wrap of Week #23: Ethereum mining and more, SparkUp, Hive, Insurtech, IRTA & Watson

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Join any of the conversations on the Fintech Genome. The global community is sharing insights, creating great conversations, and business is starting to happen.

Check also the latest topics that include ICOs, WealthTech, Lending, Insurance, bitcoin & blockchain, Web 3.0, API, etc.

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Announcing Our New Author Ilias Louis Hatzis doing Blockchain Bitcoin & Crypto CXO Briefing on Monday

This has been quite a journey. I started Daily Fintech on 29 June 2014. In those days, I wrote every post. Just under 9 months later, that all changed when Efi Pylarinou started writing every week, an event memorialized here at the time (March 2015).

Then Jessica Ellerm joined to write on Wednesday about Small Business Finance and Arunkumar Krishnakumar joined to write on Friday about consumer banking & finance.

Today is another big day, because from today I will only be writing one post per week. That is the nearly 3-year journey from 5 posts per week to one post per week.  It took 3 years because I would never compromise on quality. Daily Fintech is about high signal to noise ratio and respecting the attention of our senior and influential subscribers (nearly 18,000 as I write, coming from 130 countries).

The high signal to noise ratio is most critical to the Monday slot when we do the Blockchain Bitcoin & Crypto (BBC) Weekly CXO Briefing. Read more about this Other BBC News here. This is a market that has a great number of specialist publications and that is also being covered occasionally in most mainstream publications. Our mission with the Other BBC News is not to preach to the saved who already read everything that comes out every day. Nor do we want to write the occasional post to introduce this complex subject to a mass audience. Both are hugely valuable, but not what we do. Our mission is serve the CXO level business leaders, entrepreneurs and investors who will use this technology to change the world. These are super smart people who want to be in the know and in the flow about Blockchain Bitcoin & Crypto – without getting stuck in the weeds.

Serving that super smart audience requires deep knowledge of the space, plus a learn-it-all attitude in a world that is changing so fast, plus an ability to communicate complexity without jargon, obfuscation or dumbing it down

That is why I was delighted to come across Ilias when we chose his post on regulation as our weekly Opinion to link to during Week 8. Then he agreed to write our post this week. From next Monday it will always be Ilias.

Ilias is the “other Greek who lives and breathes Bitcoin, Blockchain and Crypto”. I am referring of course to Andreas Antonopoulos as the more well-known Greek in this space. It is wonderful to now have two such talented Greeks on the Daily Fintech team, as Ilias will be joining our famed Femtech leader, Efi Pylarinou.

Ilias Louis Hatzis is an Internet entrepreneur that started his first company, an internet search engine, in the mid 90s during the dot-com era. Later on he founded several Consumer Internet and AdTech startups and went to work for Google and JWT. As well as still being an active entrepreneur, he mentors startups at the MassChallenge, MITEF and other startup accelerators and competitions.

Having lived and worked in America, Ilias is currently back in his native Greece. So he has the global perspective that our subscribers from 130 countries prize.

Start your week with Ilias and the Blockchain Bitcoin & Crypto Weekly CXO Briefing in your email by 7am CET. It should take you 5-10 minutes to read properly (and a minute or less to skim if it is one of those crazy Mondays).

You owe it to yourself to invest 5-10 minutes a week to learn about the technology that will change your company, your career and your world. Don’t get blindsided by important news. Be in the know and in the flow – without getting stuck in the weeds.

Each week we select 3 news items that matter. We keep it to 3 because we know that you are busy. If it is a big news week, it is our job to find the 3 news stories that matter so that you get a high signal to noise ratio.

For each news item we offer News Decrypted, which explains why investors, bankers and entrepreneurs should take notice. We include a Glossary if we have to mention some critical jargon.

Then we offer Our Take on the underlying trends represented by this news and “where the puck is headed”.

In addition to 3 news items, we select one analysis/opinion/insight piece each week on a controversial subject that we think is excellent.

Our point of view is that all three are important – Blockchain Bitcoin & Crypto. There can be private, permissioned Blockchains without any Bitcoin or any other Cryptocurrency. There can also be Cryptocurrencies other than Bitcoin (Altcoins) and distributed ledgers that use some form of Crypto other than Blockchain. We cover them all.

Please welcome Ilias who will be doing the difficult job each week of parsing the torrent of news and opinion to come up with important signal along all that exciting noise.

Wrap of Week #22: Ether, ICOs, 0x, Numerai, Neos, Jude, US regulation

What a week again! Exciting topics, new names, and our insights.

The Fintech Genome platform

Join any of the conversations on the Fintech Genome. The global community is sharing insights, creating great conversations, and business is starting to happen.

Check also the latest topics that include ICOs, WealthTech, Lending, Insurance, bitcoin & blockchain, Web 3.0, API, etc.

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How Bitcoin will disrupt Wall Street West and East

We will be discussing how the Wealth Management business can profit from Fintech by gaining access to previously inaccessible assets and managers, at our first Round Table in Geneva on 28 June. The Bitcoin, Blockchain and Crypto revolution will be one of 7 subjects on the agenda.

Today we look at how Bitcoin will disrupt the current nexus of power between top tier Silicon Valley VC Funds and bulge bracket investment bankers in New York – what I call Wall Street West and East. This may lead to new opportunities to invest at the early stage with better risk adjusted returns than current models. Or it may lead to scams and bubbles and become a footnote in history. Or, like most disruptive innovation it might be scams and bubbles first and then change the world later.

Wall Street West is my name for the permanent aristocracy of top tier VC Funds on Sand Hill Road. Today they are far removed from their founding days as early stage investors. Today they are more like momentum investors who accumulate large % stakes in private companies before taking them to their connections in Wall Street East (i.e. the bulge bracket investment bankers in New York).

John Doerr of Kleiner Perkins Caufield & Byers famously called the personal computer industry’s growth from zero to $100 billion in 10 years “the greatest legal accumulation of wealth in history.” Then he saw how that the PC industry was a small wave compared to the Internet which went from zero to $400 billion in 5 years. “There are waves,” says Doerr, “and then there is a tsunami.”

It has been a great ride, but it is coming to an end.

The tsunami referred to by John Doerr is what we will in future call the Centralized Internet and recognize as a 20-30 year period in a multi-century history of the Internet. The next tsunami, powered by Bitcoin, Blockchain and Crypto will be the Decentralized Internet. This brings the Internet back to its founding days as a decentralized network. Bitcoin, Blockchain and Crypto technologies will enable the Decentralized Internet by creating a digital value exchange system.

The Decentralized Internet will also be funded in a decentralized way. This is what will disrupt Wall Street West and East. The value creation will be even bigger than the Centralized Internet, but these gains will be much more broadly distributed (good news for reducing inequality).

The Decentralized Internet will be powered more by the Rest than the West.

A big theme on Daily Fintech is “first the Rest then the West”.

For most of the 20th century, technology was limited to the West. Countries in the Rest (formerly known as developing, then emerging, then rapid growth economies) were “tech deserts” until those economies started to open up (first China, then India, then Africa). Then technology adoption started to flow from the West to the Rest; the last decade has been a boom time for Western tech firms selling to the Rest.

Now the flow is reversing as technology adoption starts in the Rest and then goes to the West. For example, look at Xiaomi to see the future of mobile phones and Alibaba for the future of e-commerce and Paytm for the future of mobile money.

Firms in America and Europe will profit from this shift, but will not drive the shift. This is the same as Britain making money investing in America (when America was an emerging market); British firms made money, but American firms drove the shift and took the lion’s share of the profits.

This megatrend is not limited to Fintech, but within Fintech mobile payments and mobile e-commerce is the big disruption and that is happening first in the Rest and then will flow to the West. Note that I am referring to technology adoptionWhere something is invented matters a lot less than where and how it is adopted, as Steve Jobs taught us after wandering around Xerox Parc and seeing the first graphical user interface and using that for the Mac. Network effects and branding have replaced patents as the technology moat.

The Centralized Internet was dominated by Silicon Valley companies. The top tier Silicon Valley VC Funds could network with the best ventures without using more than half a tank of gas in a Ferrari. This was fortunate because VC Funds have had trouble globalizing and many have given up the challenge.

This opens the market up to new innovation such as Initial Token Offerings (ITOs). These are currently at the bleeding edge stage, with lots of risk, scams and sketchy characters that are typical of the early days of a disruptive technology (think Silk Road and Mt. Gox). You can learn more about ITOs and attempts to create a self-regulatory code of conduct on this discussion on the Fintech Genome.

This is still very early days, but the key point about Initial Token Offerings is that they are a) permissionless and b) global. Anybody can invest from anywhere. This is the power of a global network that the top tier VC Funds catalyzed with their investment in Centralized Internet players. Now the genie is out of the bottle and those same top tier VC Funds have to compete on a level playing field with anybody who has capital and insight.

Watch out when this tsunami crashes on the shore

Bull markets end in a frenzy. The bull market in Centralized Internet ventures is currently in a frenzy. People look for historical analogies to the Dot Com era, but as the old saying goes “history does not repeat but it does sometimes rhyme”. Most of the frenzy/overvaluation this time around is in private not public markets. For more data on this, see this post.

This led to a strange inversion of the norm during 2015 and 2016 when private companies were valued higher (on paper at least) than public companies.

Thanks to artificially low interest rates for a long, long time, even public stocks are overvalued on historical norms. So the ending of the Centralized Internet will be brutal. From this rubble will emerge the new Decentralized Internet.

Liquidity

For many reasons, the IPO bar keeps getting higher. So ventures need much longer and much more capital before getting to liquidity. This is good for really big funds in the short term, but will end badly when the public/private inversion ends. ITOs in contrast offer liquidity from day one.

Don’t need $ billions for data centers

The key point about the Decentralized Internet is that you do NOT need $ billions for data centers, because the network is powered by the computers of the users in the network.

This ends one of the wonderfully simple ways that top tier VC Funds made money. They tracked ventures until they saw signs that hyper-growth was about to start, knowing that large amounts of capital for data centers (and other things) was needed to fund that hyper-growth.

Some centralization, but permissionless

Bitcoin today has a scalability problem. For more, read this post. To put that in perspective, pundits for decades have talked about the Internet’s scalability problems (and yet it has scaled very well).

To scale Bitcoin, it is likely that some form of offchain processing is needed; about 80% of Bitcoin transactions today are offchain. The cyber purist view that every human will run a full node that records every transaction is clearly not technically feasible at scale.

It is likely that this will happen in future through something like Lightning Network.

This is not the post to explain how Lightning Network works. Here are a couple of good introductions:

https://www.youtube.com/watch?v=jUhe7J6-aG0

https://www.youtube.com/watch?v=BFXrTS_MJlQ

The assumption about offchain processing is that it has to be centralized. Offchain processors today such as Coinbase and Bitpay are centralized.

That assumption is false. As we have seen from services such as Skype, large scale services can be decentralized. However, there is something more important than centralized vs decentralized which is permissioned vs permissionless. Skype is decentralized but it is controlled by Microsoft. The idea behind Lightning Network is that anybody can choose to run a full node or a Lightning Network node. Permissionless adds economic incentive and makes it scalable.

A global Wall Street, spanning both early and late stage that is truly decentralised and permissionless will change the game.

Join us in Geneva on 28 June

One of the subjects for our Round Table in Geneva on 28 June will be:

Bitcoin Disruption and the possibility that permission-less innovation and decentralization will change the game.

Note; this is one of 7 subjects on the agenda.

If you are interested in attending this Round Table, please email julia at daily fintech dot com and we will send you the full agenda and other details. Please note that this Round Table is invite only for Family Offices, Private Banks and Asset Managers.

Wrap of Week #21: BlockchainBitcoinCrypto, Quantopian, RIP Global, Insurtech, Nubank, Neon

The Fintech Genome platform

Join any of the conversations on the Fintech Genome. The global community is sharing insights, creating great conversations, and business is starting to happen.

Check also the latest topics that include ICOs, WealthTech, Lending, Insurance, bitcoin & blockchain, Web 3.0, API, etc.

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When money is data, data protection becomes job number one for banks

We will be discussing how the Wealth Management business can profit from the Fintech revolution to gain access to previously inaccessible assets and managers at our first Round Table in Geneva on 28 June (which we announced here)

Today we look at a basic question – why we need banks. The answer is quite simple and goes back to the American Wild West days, when it was safer to store your hard-earned money with a bank than under your mattress or in a safe at home.

In today’s Global Digitized Wild West, the problem is the same; only the style and techniques are different. The modern version of Butch Cassidy and the Sundance Kid are getting monitor tans in some basement somewhere as they hack into systems to steal data. Stealing data might be an indirect route to stealing money (via ransomware or phishing to get codes to transfer money) or in the Cybercurrency age it might be direct (Bitcoin is simply data, so if you steal the data you steal the money).

It is a very old-fashioned concept, but the execution is complex as it involves multiple dimensions such as:

  • Is data private by law? For example, Switzerland scores high on this front.
  • Cybersecurity (in all its many complex forms).
  • Physical server security. Safe from physical disruption (weather, terrorism) and from external breaches by thieves and with hot backup if the unexpected happens.
  • Staff security. This includes issues such as vetting and processes to avoid collusion.
  • Government/Taxpayer Insurance such as FDIC.
  • Private Cybersecurity Insurance (see this post for more)
  • How Custody works today and how it will work after Blockchain based Custody goes mainstream.
  • How is the bank perceived in relation to data protection? This can change fast with a big breach.

Wealth Managers, like doctors, must “first do no harm”. They must first protect assets and keep them safe.

Then Wealth Managers, must grow that wealth. Our Round Table is about how to grow wealth. Growing assets is not a scale game, it is all about the mix of talent, insight and discipline, but protecting assets is a scale game. That list above is not something a small firm can do.

So we see a value chain forming with big players offering the data/asset protection at scale to smaller, agile firms innovating in asset/manager selection. That value chain is changing as we enter the cyber asset world with assets stored on distributed ledgers.

That value chain is also changing as a new breed of micro asset managers emerge from the Fintech marketplaces in fixed income, equities and other asset classes. That will be a big subject for our Round Table in Geneva on 28 June. If you are interested in attending this Round Table, please email julia at daily fintech dot com. Please note that this Round Table is invite only for Family Offices, Private Banks and Asset Managers.

Wrap of Week #20: BlockchainBitcoinCrypto, Melonport, Zuper, Lemonade, Root, Slice, Cyber Attacks

Also Daily Fintech is Pleased to Announce Our First Round Table

The Fintech Genome platform

Join any of the conversations on the Fintech Genome. The global community is sharing insights, creating great conversations, and business is starting to happen.

Check also the latest topics that include ICOs, Lending, Insurance, bitcoin & blockchain, Web 3.0, API, etc.

If you enjoy reading the Daily Fintech insights by our experts then Subscribe to this newsletter.

If you want to engage and converse with the Fintech community then Register on Fintech Genome.