Blockchain Bitcoin & Crypto Weekly CXO Briefing for week starting 14th August 2017

The Blockchain Bitcoin & Crypto Weekly CXO Briefing is all you need to know, each week, jargon free for CXO level business leaders and investors who will use this technology to change the world. Each week we select the 3 news items that matter and explain why and link to one expert opinion.

For the intro to this weekly series, please go here.

News Item 1: Bitcoin Falls 3.5% Post SegWit Victory, Community Figures Continue Arguing

Decrypted: On August 9, the highly-anticipated Segregated Witness (SegWit), a solution to Bitcoin’s scaling issue, was officially locked in on block 479,707. The prolonged debate between different miners and developers resulted in the adoption of Bitcoin improvement proposal BIP 91.

SegWit, the brainchild of developer Peter Wuille, isn’t expected to activate until August 21. It paves the way to solve Bitcoin’s scaling issue. Right now the Bitcoin network can only manage a few transactions per second. SegWit essentially increases transaction capacity and makes it even harder to manipulate unconfirmed transactions.

Our take: Not everybody agrees on Bitcoin’s future. Governance is a huge issue in the Blockchain community, yet its amazing to see Bitcoin developers coming together to create SegWit and offer a possible solution to Bitcoin’s scaling issue.

But the continued debate has cast a shadow of uncertainty, especially when on August 1 a group of developers and miners split the blockchain and created a new digital currency called Bitcoin Cash (BCH).

So far, Bitcoin survived the fork without a major price catastrophe. Bitcoin’s price is maintaining an upward trend, despite the appearance of Bitcoin Cash. The market capitalization of Bitcoin Cash is under one tenth of Bitcoin. After Bitcoin’s (BTC) price bottomed out at $2,643 on August 1st, Bitcoin rallied more than 30% before reaching a record high near $3,500, as a result to Tuesday’s BIP 91 upgrade. The record marked an increase of 264 percent year-to-date, after months of community dispute in the world of cryptocurrency.

The activation of SegWit represents the first major milestone for scaling Bitcoin and it looks like its clearing the way for higher prices in the future. Another factor driving Bitcoin’s price is rising demand from institutional investors. This week, CBOE, the largest options exchange in the US, announced that it will integrate Bitcoin futures contracts and options on its trading platform by partnering with regulated Bitcoin exchange Gemini.

SegWit lays the foundation to establish the necessary infrastructure for solutions like the Lightning Network. The implementation of the Lightning Network will further scale the Bitcoin network by enabling micro-payments and applications. Lightning adds a layer on top of Blockchain and allows instant clearing, letting users instantly withdraw, deposit, send Bitcoin to someone and build apps. One of the most important features the Lightning Network offers is the ability to transfer value between blockchain networks without the need for an exchange or a trusted central party.

It’s possible that we are in one of Bitcoin’s last bubble cycles before mass adoption. According to analysis by Dennis Porto, a Bitcoin investor and Harvard academic, Bitcoin’s price could hit $100,000 by February 2021, if it continues to follow one of tech’s golden rules, Moore’s law.

Bitcoin is rapidly coming into its own. Leading economies around the world are seeing a major increase in Bitcoin’s adoption and most importantly, the market is demonstrating confidence in Bitcoin.

News Item 2: Medical Society of Delaware to Pilot Blockchain Technology for Better Healthcare Access

Decrypted: The volume of patient data managed by hospitals, doctors, and insurance companies increases each year. How can organizations securely and quickly share information and allow each party verify the data is correct?

The Medical Society of Delaware teamed up with healthcare services company Medscient to develop a solution to address the challenges that authorization requirements pose to patients and healthcare providers.

But Delaware is not the only state experimenting with blockchain to tackle some the challenges in the healthcare industry.

The State of Illinois will use blockchain to improve the efficiency and accuracy of the state’s medical credentialing process, potentially making it easier to verify medical licenses are valid across state lines. The Illinois Blockchain Initiative’s new pilot program, in collaboration with Hashed Health, will leverage blockchain and distributed ledger technologies to streamline the sharing of medical credential data and smart contracts.

Arizona has passed a law in March that would expand the definition of an electronic record to include those hashed or stored on a blockchain system.

Our take: The healthcare industry, especially in the United States, is a complex system of interconnected entities. As 54% of Americans are dissatisfied with a healthcare industry, the U.S. healthcare system is at a crossroads. Since Obamacare was passed in 2009, the US healthcare system has continued to struggle with the increased spending, inefficiencies and antiquated systems.

President Trump and the Republican party struggle with rejection to repeal Obamacare, while massive issues continue to challenge the U.S. healthcare system: fraud, waste and abuse.

According to a report from the Department of Health and Human Services and the Department of Justice’s Health Care Fraud and Abuse Program (HCFAP), the federal government recaptured over $3.3 billion in healthcare fraud judgments and settlements, along with administrative actions, in the fiscal year of 2016. Since this initiative was established in 1997, HCFAP has recovered over $31 billion, with over $18 billion of that recovered since 2009.

Lack of interoperability between healthcare providers costs 150,000 lives and $18.6 billion per year, according to the Premier Healthcare Alliance.

Conceptually, blockchain applications can benefit the healthcare ecosystem as a whole. Blockchain technology has the potential to transform health care, especially when it comes to medical records, sharing patient information, security, privacy and making data more interoperable. The elimination of third-party entities and middlemen would reduce administrative costs and increase efficiencies in claims processing. The distributed ledger and built-in authentication controls lower the risk of data theft and fraud.

The federal government and the Department of Health and Human Services (HHS) is already doing something about it. The HHS Blockchain Challenge gathered more than 70 submissions of academic papers on blockchain usage in health IT and health-related research, announcing 15 winners, spanning organizations including Deloitte, IBM, MIT (MedRec was one of the winners), and The Mayo Clinic. The winners, who presented to the HHS for possible development and implementation, proposed blockchain solutions for everything from health insurance claims and payments to data interoperability and Medicaid applications.

MedRec is a solution developed by graduate students at MIT, using the Ethereum blockchain, to serve a digital family history of medical records.. It acts as an interface between multiple institutions’ health records. It allows the patient to grant access to their medical records securely to their healthcare provider. Think about sitting down in a doctor’s office and being asked your family medical history for a certain illness. You might have no idea of the answer. But with MedRec blockchain, families and medical providers can create a shared medical history that can be passed from generation to generation. All the real-time health data collected by wearables and fitness trackers and even apps like Apple Health. MedRec is also exploring the possibility of using blockchain to give doctors and hospitals access to that data, at the patient’s consent.

As the cost of healthcare delivery continues to increase rapidly, blockchain has a huge potential to become the next big innovation engine and provide answers to challenges facing this medical industry.

News Item 3Ukraine’s Central Bank Moves Closer to Cryptocurrency Regulation

Decrypted: In a recent announcement the National Bank of Ukraine indicated that its set to soon discuss how it should regulate cryptocurrencies. The decision comes at a time when Ukraine has seen increased Bitcoin activity. Today Bitcoin does not have concrete legal status in Ukraine. Due to regulatory uncertainty, recently local law enforcement arrested several suspects that allegedly set up 200 computers to mine Bitcoins within a state institute in Kiev.

While in different countries Bitcoin is classified in differently, ranging from virtual currency, money substitute, intangible value, virtual commodity and other things, the NBU has not taken a official position up to now.

Our take: Ukrainians have been passionate about cryptocurrencies. The Ukrainian national economy and its currency have suffered greatly from the armed conflict with ethnic Russian separatists. which would explain the high interest in alternative ways to protect wealth. Many of the country’s citizens use Bitcoin as a hedge against extreme inflation and an unstable Ukrainian hryvnia, which has lost 80% of its value because of continued instability.

Since 2014, nearly 5,000 BNK-24 ATM terminals nationwide began offering the option to buy Bitcoins for cash as effortlessly as one would conduct any other automated banking transaction. The Kuna Cryptocurrency Exchange announced that they have plans to install 150 Bitcoin automated teller machines (BTM) in 2017.

Earlier this year, Ukraine partnered with the Bitfury to put a sweeping range of government data on a blockchain platform. The government is working with Bitfury to create an eGovernance solution on the Blockchain. The main areas of partnership include the use of Blockchain in state registers, public services, social security, public health and the energy sector.

For quite some time, the National Bank of Ukraine has been considering using blockchain for the implementation of cashless economy. In 2016, it unveiled a roadmap to use blockchain or distributed ledger technology in the country to facilitate a cashless economy. According to the roadmap, the central bank would issue e-money which would serve as the cashless payment instrument and to create an alternative to card payments.

During 2016, the average investment volume reached US$92,000 per week. Even though the volume is small when compared to other countries, its especially promising when compared to previous all-time high of US$18,400.

But, one of the biggest contributing factors to Bitcoin’s success in the country, is the initiative taken by the Ukrainian Exchange. Ukraine is the first regulated market in the world to offer futures on Bitcoin contracts.

Undoubtedly, Ukraine’s blockchain initiatives underscore a growing trend among governments that have adopted the technology to increase efficiencies and improve transparency.

OpinionBitcoin “Has No Intrinsic Value” But Neither Does Fiat

The question of intrinsic value has haunted Bitcoin since its inception. Recent developments, have brought the question to the forefront again. When Bitcoin forked last week into two distinct cryptocurrencies, Bitcoin (BTC) and Bitcoin Cash (BCH), uncertainty flooded the market. Yet, over the weekend, Bitcoin’s price climbed to over $4,000, for the first time since the cryptocurrency was created in January 2009.

Despite the rising demand for Bitcoin, economists like Howard Marks, who manages $90 billion at Oaktree Capital, believe that cryptocurrencies don’t have a value and he’s gone so far as to say that its just a fad.

“Digital currencies are nothing but an unfounded fad (or perhaps even a pyramid scheme), based on a willingness to ascribe value to something that has little or none beyond what people will pay for it.”

But, why do people value Bitcoin?

The answer to this question lies in basic economics: scarcity, utility, supply and demand. The financial value of an asset is a reflection of supply and demand. The demand for a currency is fueled by its utility. Assuming there is some demand, the price, in other words the value, of a currency is determined by its supply. The more scarce a currency is, the more valuable it is.

Like gold, Bitcoin is scarce. Its supply is limited. Currently just over 16.5 million Bitcoin are in circulation and the maximum is at 21 million Bitcoins. This set cap is well known, making its scarcity transparent.

However, to have value, Bitcoin must also be useful. Bitcoin is fast, borderless and decentralized.  Not only does it have value as a payment system, but also a store of wealth. It’s built on open protocols, that allow anyone to innovate on top of Bitcoin and improve it.

The argument that Bitcoin doesn’t have any intrinsic value, is a weak argument. Figuring out value is a complex task. Most modern paper currencies, fiat currencies, have no intrinsic value. The value of fiat money is no longer linked to physical commodities such as gold or silver.

The intrinsic value fiat money is based solely on the faith and credit of the economy. Fiat money derives its value from the faith people put in them.

People believe in Bitcoin because it transcends nations, politics, religions, cultures and regulations. It requires no trust, it can’t be counterfeit. It allows movement across borders. It can be spent without a bank account, credit report, identification, and other permissions. It provides a global and universal wallet. It represents economic freedom.

Bitcoin has intrinsic value, because people believe in Bitcoin.

Ilias Louis Hatzis is a Blockchain entrepreneur who writes the Blockchain Bitcoin & Crypto (BBC) Weekly CXO Briefing each Monday.

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Wrap of Week #31: Bitcoin cash, Billon, Tezos, Crypto Hedge funds, ZipMoney, Jarvish, Fintech M&A, Steemit, EOS

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Why I am closing my Steemit account and why I am a bear on EOS

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TL:DR. Steemit feels like a cross between a popularity contest and a work from home hustle. And the EOS ICO turned me into a bear on Dan Larimer who is also the man behind the curtain for Steemit (and EOS and Bitshares).

Clearly I  don’t expect this post will get a good reaction from Steemit fans! That is part of the point. Media should be independent. A post on Steemit slamming EOS is probably not a good way to earn Steem.

This was an experiment that had reached a natural conclusion for me. Steemit enthusiasts will tell me I should persevere, but there are only so many hours in a day. 

There was a lot to like about Steemit. The idea of a social network where content creators get paid by other content creators is appealing. 

Right objective, wrong implementation.

I can see how to make Steemit work as a creator. It is similar to points systems on venues such as Hacker News and Reddit. That is what makes it a popularity contest. If you write something that the top influencers like, you collect Steem. That feels like a PR game of “you scratch my back, I will scratch your’s”. Yes that is similar to the “if you follow me, I will follow you game on Twitter” which I don’t do either.

The Internet has been brilliant at enabling everybody to write as well as read. It has been less good at providing an income for creators. For a long time, Advertising was the answer, but with ad fatigue and adblockers that model is challenged. However Steemit does not look like the answer either – which is the subject of today’s post.

The blockchain part of the Steemit story seems like contrived PR – a bit of a random buzzword generator. You don’t need blockchain to rate content – hello Reddit, Hacker News and Fintech Genome. Nor do you need blockchain to pay content creators – hello Patreon. 

The blockchain part of the Steemit story seems to be designed to sell a narrative that EOS is the Ethereum killer platform. I do not buy this story either. The technology advantage is totally unclear. I can see a pitch that you can program Smart Contracts in any language not just Solidity, but no clue how they will do this, let alone a MVP.  There are lots of blogs and vlogs along the lines of “I don’t understand the technology but Dan Larimer is a genius so I am sure it will be an Ethereum killer”. Steemit is proof that Dan Larimer is a genius and thus why investing in EOS is a winner. Does that translate to “I bought some EOS coins and I hope somebody will buy them for a good price”? The pitch is a bit like for a super expensive car – “if you have to ask the price, you cannot afford it”. In this case “if you have to ask what the technology advantage is, you are probably too technically illiterate to understand it”.  Who knows, but without a convincing technical explanation of why EOS is better than Ethereum, one should note that the EOS ICO is done using….Ethereum. 

I onboarded onto Steemit using standard two factor authentication. Then I was told that my application was “awaiting approval”. I was not the first to find this seemingly manual process step strange, but I was approved after a few hours. So I will probably remain as a statistic around “inactive registered users” along with all the other social networks where one is inactive.

This apparently manual process step was a red flag for me.

What happens if I recommend Steemit to someone and they cannot sign up? I think there are better ways to trap spam accounts. Maybe this is a pragmatic entrepreneurial “do things that don’t scale” that is life-stage appropriate, or maybe not. I don’t know but it is a red flag. 

Steve Jobs managed two companies successfully. Dan Larimer is managing 3 – Bitshares, Steemit and EOS – and I doubt he is in Steve Job’s class as an entrepreneur. No professional investor would back an unproven entrepreneur with three parallel ventures. Is the crowd being smart or dumb?

I imagine that Dan Larimer is brilliant, probably a visionary who is far ahead of his time. Some of his experiments may appear as a footnote in history along the lines of “back in 2017 there was an attempt at a similar idea that failed…”. I like experiments, I just choose not to be part of this experiment by donating either my time or my money.

Image Source.

Bernard Lunn is a Fintech deal-maker, author, investor and thought-leader.

Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email.

Key Trends in Q2 Fintech M&A activity – Payments lead the way

Fintech deal activity hit a peak in Q4 2015, and as discussed in a previous post, steadily went down through most of last year. However, this year after a good start in Q1, there was a strong rebound in Q2 2017, and recent news have been pointing to some big ticket deals happening within the payments space.

As per KPMG’s quarterly report, globally Fintech investments hit a healthy $8.4 Billion across 293 deals. Rebounds were particularly noticeable in both Europe and UK. Fintechs in Europe managed to attract $2 Billion (in investments) in Q2, which is more than double the Q1 number ($880 Million).

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Some of the key trends from the report,

  • Corporate Venture Capital continue to increase their involvement in Fintech deals
  • Asia sees a dip in Q2 investments due to low China deal activity
  • Regtech deals could create a record year 2017. At the current pace its likely to surpass 2015 and 2016 activity (in size and count)
  • Focus moves from B2C (customer experience) to B2B (mid and back office efficiencies)

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Apart from the VC activity, Private Equity firms have turned their attention to Payments, as the deal sizes within payments start to increase. In the last eight weeks we have had some M&As and private equity deals announced within payments.

  • Igenico acquires Bambora for $1.5 Billion. This happened after Ingenico tried a hostile takeover of WorldPay assets
  • Worldpay merged with Vantiv with a £9.1 Billion deal. The new firm will be jointly led by Vantiv’s Charles Drucker and Worldpay’s Philip Jansen.
  • Worldline acquires Digital River World Payments and First Data Baltics, giving them operational positions in the Nordics and in the Baltics.
  • Visa invested in Klarna – how much they invested and at what Valuation is not disclosed.
  • Blackstone and CVC announce acquisition of Paysafe for £2.9 Billion

These are some of the top stories, but the key takeaway is that money is flowing the Fintech way, again!! Both in the VC and the PE space!!


Arunkumar Krishnakumar is a Fintech thought leader and an investor. 

Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email.


 

The Jarvish smart helmet IOT Insurtech from Taiwan is another First the Rest then the West story

Jarvish

Jarvish is a Taiwanese company that is doing a lot more than making it easier to buy insurance. They are using hard technology innovation to reduce accidents and therefore reduce the cost of insurance, using smart helmets that can monitor your driving.

We are seeing the same thing in the West with sensors embedded into cars. Jarvish is doing this in the Rest of the World where a motorbike is the first automated transport that a family can afford. Rather than selling into a motorbike market in the West with tens of millions of hobby bikers (they also have a car but just love to bike for fun), Jarvish is selling to the hundreds of millions of bikers in the Rest who use motorbikes as their primary means of transport.

Rather than having to negotiate with car manufacturers, Jarvish simply make the helmet and sell it to consumers.

That is why Jarvish illustrates a megatrend we have been tracking for a while that we call “first the Rest then the West”.

In doing so they are solving a Catch 22 for motorbike insurance. If driving a motorbike is so dangerous then claims will be high so premiums will be high, so the poor people who rely on motorbikes as their primary means of transport cannot afford insurance.

First the Rest then the West

This is one of the big stories of our time. It is the end of what historians have called the Great Divergence, when the Western economies rose to dominance.

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 or Paytm for the future of mobile wallets.

This megatrend is not limited to Fintech. 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.

Technology adoption starting in the Rest rather than the West is one of the big 21st century megatrends.

Note that I am referring to technology adoption. Where 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 to create a PC with a much better UX. What really matter is innovative customers and customer innovation is driven by blue ocean markets with big unmet needs and lack of legacy technology constraining innovation.

If you need a smart helmet to keep your family safe, you have a big and so far unmet need. That is why we think Jarvish is a company to watch.

The Asia Inurtech story 

We have already tracked Insurtech innovation coming from India, Korea, Singapore, China. This is the first we have seen from Taiwan. Asia has all the ingredients to become the locus of Insurtech innovation:

  • Big blue ocean markets with lots of unmet needs
  • Lack of legacy technology constraining innovation
  • Hard core technology skills linked to manufacturing expertise (so they can build physical products and are not limited to digital innovation).

Technology innovation not just UX layer digital innovation

The idea of a smart helmet is not new, but like so many Taiwanese companies, Jarvish competes through technology innovation. This is not just another digital UX layer startup. Jarvish has invested years and lots of Ph.D level resources to create a smart helmet that does not require Bluetooth. Even more critical from a safety POV, the Jarvish helmet does not use lithium batteries (which can overheat and explode) and they use “military-grade ceramic anti-explosive batteries”. First do no harm – the helmet has to be safe.

The best way to think about the Jarvish smart helmet is like the black box system that crash investigators extract from commercial aircraft, except that this black box is tiny, cheap and cloud-connected.

Like Apple, this is innovation from technology to consumer marketing and Jarvish is not shy about making the comparison:

“Much like smart phones, at first they were only cool high-tech gadgets, but quickly became an essential part of everyone’s daily life. In the near future, smart safety helmets will definitely be as common as smart phones.”

Illustrating the “first the Rest then the West” megatrend,  the Jarvish roadmap includes products we can envisage also getting traction in the West:

“all types of smart headgear, with such applications such as smart helmets for skiing, diving, firefighting, cycling, drones, extreme sports, and entertainment. All of which will include smart functions and module designs, as well as all the incorporated software needed. We also provide a cloud platform, and international-level third-party value adding services to users.”

The Art of the Chef – combining ingredients

You don’t need to look too hard to see a revenue model. Jarvish sell helmets to consumers with their smart helmet technology embedded. This is simple but powerful.  It illustrates what I call the Art of the Chef business model in my book Mindshare to Marketshare. The chapter entitled Turn Secret Sauce Into Unfair Advantage describes how Fast Moving Consumer Goods (FMCG) companies grew to dominance by avoiding commoditization by combining commodity ingredients into a differentiated package. The book uses companies like Coca Cola selling sugared water at high prices or Gillette charging a premium for razor blades that cost very little to illustrate how to combine commodity ingredients into a product that is highly differentiated. The book then goes on to show how companies such as Apple and Visa used this in technology. Jarvish is on the same path.

I liken this art of combining to cooking. You have lots of components that go into a dish. You might even have a secret ingredient that defines it. Yet the whole is obviously more than the parts.

It gets more interesting when you move from FMCG to technology driven businesses:

”Consider the greatest entrepreneur the tech world has ever seen – Steve Jobs. 

Steve Jobs innovated by combining multiple commodity ingredients into a very tasty dish. He was a technology chef.

At one level he combined multiple commodity ingredients to create unique devices such as the iPod, iPhone and iPad. He combined lots of commodity components sourced from all over the world into a uniquely beautiful and useful product by adding a touch of design magic. However, if he had only created “insanely great devices”, Apple’s business would be more vulnerable to competitors like Samsung and Xiaomi. The reason that Apple is so valuable is that Steve Jobs combined great physical devices with digital services like iTunes and AppStore into a combination that still mints money long after he died. That is why Apple has massive amounts of Unfair Advantage (aka moat, aka competitive advantage). 

You  also see this art of combining in payment network such as Visa, Mastercard and Amex. Yes, these payment networks have software at the core. Yes, they own the hardware servers that the software runs on. Yet they don’t license that as a SAAS product to banks. They wrap it into other services to deliver transactions to consumers via Banks. That is how Visa, Mastercard and Amex turn their secret sauce into Unfair Advantage. 

What Coca Cola, Apple, Visa, Mastecard and Amex have in common is the art of the chef – to combine commodity ingredients into value.”

I see this same art of combining in Jarvish. At one level they combine their proprietary smart helmet technology with the commodity components and manufacturing process of making helmets to create their own differentiated helmet. They combine their own yeast with water, flour and salt to make bread. The next step, akin to Apple moving from iPods/iPhones devices to device hooked to iTunes is to create a digital product that reduces accidents and thus reduces insurance costs.

Image Source.

Bernard Lunn is a Fintech deal-maker, author, investor and thought-leader. 

Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email.

zipMoney lands Australia’s biggest fintech and bank partnership deal

zipMoney announced this week that one of Australia’s four largest banks, Westpac, has taken a $40 million equity stake in its listed point-of-sale consumer financing business.

The deal was struck at a 14.1 percent premium to last Friday’s closing price.

zipMoney has played its hand well in the SME space since launch, building a merchant base of over 4400 businesses. Over 300,000 customers have so far opted to finance their purchases through the platform, eschewing traditional credit cards, and the almost inevitable debt cycle that follows close behind.

Why is this deal significant?

It looks to be the largest ever direct investment by a local bank into a high-growth fintech venture. It signals the landscape is shifting, with banks developing an increasing appetite for fintech services that can be integrated into their existing platforms to either provide market differentiation or new revenue streams.

Who else is in this space?

The battle for bricks and mortar and online business payments is fierce, and Westpac’s tie-up with zipMoney could be seen by some as a defensive play.

In February of this year, startup bank Tyro announced its partnership with zipMoney’s closest competitor Afterpay.

Recently, Afterpay announced it had on-boarded over 6000 merchants, providing credit to over 840,000 customers. In July of this year, Afterpay completed a successful merger with payment technology company Touchcorp, forming Afterpay Touch Group. The market responded well, with the stock having made significant gains since.

Where to next?

The distribution power of Westpac’s bricks and mortar merchant network is significant and far outnumbers Tyro’s. The critical element will be how deeply the zipMoney payment experience can be integrated into existing payment workflows.

The other side of the coin – for both Afterpay and zipMoney – is how much merchants are willing to bear cost wise to close a sale. Typically point-of-sale financing companies front the payment for goods to the merchant, minus a discount. Any pricing tie up that allows for margin protection for the bank and the financing business is ideal. This could be through discounts elsewhere in the payments chain.

No doubt both banks will be looking at pricing models very carefully, to see how best to leverage these partnerships, and in what sectors.

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech. Jessica Ellerm is a thought leader specializing in Small Business.

Shapes and colors of the booming US crypto hedge fund space

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At the end of March, I covered Polychain Capital which caught my attention since Andreessen Horowitz and Union Square Ventures funded them with $10million. In Polychain Capital: A hedge fund investing at the Protocol layer of Web 3.0, I started with the motto: “Today is the slowest day of the rest of our lives”, and just 4 months later Polychain Capital is proof of accelerated growth. They have already accumulated already $200mil in assets under management.

Over the past year, despite the stricter regulatory pre-positioning towards the crypto world (digital “currencies” or “assets” and tokens) in the US, the growth of dedicated hedge funds aiming to capture the boom is stunning. In early July Forbes reported Crypto Boom: 15 New Hedge Funds Want In On 84,000% Returns

“43 projects raised $1.2 billion in initial coin offerings since May 1, according to Nick Tomaino’s The Control, and with stratospheric returns for so many ICOs — 82,000% for Ethereum, 56,000% for IOTA, 44,000% for Stratis, 21,000% for Spectrecoin” excerpt from Forbes.

There is clearly a summer boom in investment vehicles that are only suitable for accredited investors in the US and are deployed a variety of strategies to gain exposure in the booming space.

“From July 1, 2016, the value of bitcoin rallied from $680 inch-close to the $3,000 mark in mid-June and is now trading around the $2,650 mark. This impressive 12-month rally caught the attention of institutional investors who want their piece of the pie in this new high-performing asset class.” excerpt from “How Big Money Investors Will Boost the Price of Bitcoin

There are some investment vehciles taking the buy-and-hold Buffet style approach, that end up in retirement accounts. There are others that are closer to the approach of futures and commodities trading, and could end up in the “alternative” allocation of HNW portfolios, since the 90s alternatives can’t promise anything close to the spectacular returns of the crypto asset class.

There is a mesh of digital currencies of sorts of capitalizations and of tokens of all kinds (utility, or equity or hybrid). And more recently, there are investment companies that are issuing or plan to issue their own token (ICO) that gives exposure and liquidity to various of their fund vehicles.

This is my categorization of the US crypto hedge fund space right now. If I have missed any hedge fund and if the strategy changes in the future, please let us know in the commentary below.

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US crypto hedge fund space – more details

Mestable Capital was founded by Lucas Ryan, Josh Seims and Naval Ravikant, the chief executive officer and cofounder of Angel List, in late 2014 and has $45 million in assets under management.

Crypto Assets Fund (CAF) invests in bitcoinetherzcash, ripple, litecoin and dash. It is the first fund focused on Latin American family offices and is co-founded by former senior manager at Bain, Roberto Ponce Romay. The first tranche has raised $10mil and aims to grow to $50m.

The BKCM Digital Asset Fund is an investment fund for institutional clients that so far has invested in bitcoin, ethereum, litecoin, ripple and Zcash, among others. It strategy is hybrid: Buy-and-hold for about 50% of the tokens, ICOs for 20% and actively managed for the remaining. Investments consist of foundational protocol tokens such as Bitcoin and Ethereum, currencies such as Litecoin, XRP, Zcash and Stellar, plus tokens such as Golem Network Tokens (GNT), Augur’s REP and Siacoin.

Alphabit is a Cayman Islands-based fund with $13 million AUM aiming to raise $300 million and also offer an ICO. Its uses a mix of manual trading, algorithmic trading, and ICO investing. It has so far invested in Ethereum, Ark, Ethereum Classic and PeerCoin, as well as ICOs MetalPay, Blocktix, Matchpool, Aeternity, and Skycoin.

Blockchain Capital is a unique case because it is the first VC that in 2013 started investing on blockchain companies, like Bitnet (sold to Rakuten) and Coinsetter (sold to Kraken). This spring, they raised a third round ($50mil) to invest not only in blockchain startups but also tokens. Then they tokenized $10 mil of this fund, selling BCAP tokens to the public (but only accredited investors in the U.S.).

Auryn Capital will launch this month with a $12.5 million. It will be the holding company for a crypto hedge fund that is actively managed with a mix of technical and fundamental strategies. It will also launch a decentralized exchange, and ICO incubator, and token called Karma (to launch this September).

SuperBloom launched in July with both a $10 million hedge/venture fund as well as an accelerator/investment bank. SuperBloom plans to hold a $30 million pre-ICO crowdsale for the Seed token this month for both accredited and non-accredited investors to fund its accelerator companies. Seed holders can exchange the token for an individual company’s pre-sale token for a 20% discount.

The BlockTower Capital fund, will also launch this month with about $50 million, and uses a mix of strategies: Event trading; new coin listings; “activist” investing in smaller cryptocurrencies and helping them gain traction with developers and on exchanges; and invest in themes such as decentralized file storage.

Coinshares 1 LP is the 2nd fund that Masters’ Global Advisors launched in June with $5 mil. In AUM. It is a Jersey-based fund investing in protocol tokens like Ether, Tezos and EOS. Its first company investment will be in decentralized ticketing platform, Aventus.

Pollinate Capital is a new hedge fund with more than $100mil committed for actively trading digital assets with strategies similar to Long/Short quantitative trading of futures and commodities trading.

Pantera Capital is launching a new hedge fund, Pantera ICO fund, focused on investments solely in tokens that power public blockchain protocols. Pantera was the first US Bitcoin investment firm in 2013.

The founders of Koalah, a mobile app in which players can bet on the outcome of games using bitcoin, launched in July Grasshopper Capital an actively managed cryptofund with $25mil. They are using a mix of fundamentals, event-driven arbitrage trading and algorithmic trading. The fund has so far invested in Ether, Civic, Bitcoin, Singles and Storj.

Efi Pylarinou is a Fintech thought-leader, strategic consultant and investor. 

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