Why Are Big Tech Companies Betting Big on Blockchain?

 

Big tech companies have increasingly started investing in cryptocurrency and building up their treasury assets by primarily focusing on Bitcoin.

“2020 is fast becoming the year of crypto acceptance and we see 2021 as the year of mainstream adoption,” – Constantin Kogan, managing director at digital asset manager Wave Financial.

When it comes to big companies buying crypto over the course of the summer and fall of 2020, several big companies have made headlines by purchasing large quantities of cryptocurrency.

MicroStrategy had announced that it had accumulated $425 million in Bitcoin, thus making it its main reserve asset. Galaxy Digital Holdings also invested $134M in June 2020.

Moreover, a mobile payments service Square declared a $50 million investment in Bitcoin, while asset management company Stone Ridge Holdings has disclosed its purchase of over 10,000 BTC as part of its long-term treasury reserve strategy.

Even Microsoft and PayPal joined this crowd of big companies using cryptocurrency by expanding their offerings to customers who want to buy crypto by using their services.

This turn of events cannot be a coincidence and aligns with previous predictions of experts like Raoul Pal, the founder, and chief executive of Global Macro Investor, who recently stated that big companies were starting to recognize the potential cryptocurrencies offer and accumulating this digital asset would be perfectly natural.

“I’d be surprised if within five years’ time Apple, Microsoft, and others don’t have cash in bitcoin,” Raoul Pal said in a YouTube video.

The reason for big companies buying Bitcoin, he stated, is to protect their capital from USD devaluation.

As the price of Bitcoin steadily rises throughout the better part of 2020 (so far we have seen an increase of 40%) corporations are identifying cryptocurrencies as a solid defense mechanism against the wave of inflation some see on the horizon.

It can be argued that they are guided by the logic that when fiat currencies go down in value, crypto goes upwards. Therefore, in order to keep the balance between the two, companies investing in Bitcoin are doing so to diversify their financial portfolios and thus prepare for future developments in the global economy.

“The genie is out of the bottle,” Mr. Pal told his YouTube viewers. “Nothing is a reserve asset like bitcoin.”

And it makes sense if you take into account that apart from USD decreasing in value, bond-yields are practically non-existent, and gold is underperforming.

With a diminished number of places for liquid companies to place their money, cryptocurrency has emerged as the obvious solution. With the growing credibility Bitcoin has been enjoying lately, large companies investing in Bitcoin have taken that as a hint that its extra-accommodative monetary stance will stay in place for years to come.

Mr. Pal went on to compare Bitcoin to the cockroach that is indestructible by traditional financial systems as they are about to collapse under the pressure of the global pandemic. He also called Bitcoin the “life raft” that will take the population and corporate giants through the end of global fiscal policy as we know it.

And it is already happening.

In Stone Ridge’s announcement about the Bitcoin purchase, many financially strong entities – banks, philanthropists, companies using Bitcoin – were also called upon to turn to crypto as part of their treasury reserves.

“Digital assets, tokenization – it’s all coming, and it’s all going to slot into these new digital currencies brought by the central banks.” Mr. Pal concluded.

“So payment systems and rails and everything are going to change massively. Everything we understand – it’s going to be as big a revolution of money that the internet was from everything to email to video to shopping to commerce. It just changed the world we live in. That’s the size of what this is.”

In that sense, companies investing in Bitcoin are those that will make the transition easy for everyone interested in entering the cryptocurrency market. Fighting alongside them are companies that provide services crucial for safe and easy use of the platform, like secure authentication and identity and safe payment services.

This article originally appeared on aikon.com

Protecting Companies from Fraud in the DeFi Space

 

The rise of alternative financial markets that aren’t tied to any particular government or banking system has led to them being organized differently from what we’d seen beforehand. In essence, we’re entering a new era where financial structures are being operated entirely digitally by a distributed network of players – the DeFi space. 

One of the panelists from The New Normal of Blockchain & Cryptocurrency talks held in late October is Luke Lombe, a person with extensive experience in the blockchain industry and a deep understanding of capital formation and market strategies. 

Mr. Lombe is the founder of Echelon One, a consultancy and advisory firm to a wide range of clients including blockchain startups as well as the co-founder of MYNTD, a capital access firm specializing in digital securities. 

Given his background, Mr. Lombe’s provides insights into the functionalities of the Uniswap DeFi platform and the way companies that would want to participate in this space that can safeguard against bots and fraudulent behavior.

To explain the current state of threats in DeFi, Mr. Lombe made a distinction between the traditional and newly formulated, fully decentralized market exchanges. 

All the well-known traditional exchange markets today – the Nikkei, the NASDAQ, etc. – are centralized markets based on the order book model. In these traditional markets, buyers offer a price for a share and sellers offer to sell an asset at a certain price. The exchange is where these players compromise and meet in the middle. When there is a gap in the market, the market makers close it by minimizing the difference between the buying and asking price. 

In doing so, they are also providing liquidity and generating operational profit for the exchange markets. 

This is the opposite of decentralized exchanges where there is no such central authority pulling the strings, Mr. Lombe explained. In the DeFi space, every crypto transaction is a smart contract entry that requires a gas fee, usually paid in Ethereum. 

What makes decentralized exchanges unattractive to market makers is the fee each transaction requires, which would essentially make them go broke due to the high number of transactions executed every minute. The perfect example of that is Uniswap since it’s based on smart contracts and liquidity pools without the presence of any middlemen. 

It is an exchange where two assets are provided in equal value. Moreover, anyone can provide liquidity – individuals, investors, funds, etc – and by doing that, they get rewarded and incentivized to continue with the process. 

According to Mr. Lombe, this new trading model (via Uniswap DeFi token) has seen an explosion in interest in the last six to nine months with the volume going from $1 million to $1 billion a day. This indicates that the decentralized exchange space is attracting a lot of interest. As a result, Uniswap, for example, recently received investments from some of the world’s biggest VC’s, including Andreessen Horowitz.

However, there are also risks involved with this model as well which may lead to fraud on DeFi. On these decentralized exchanges, there are also bots – computer programs or algorithms – whose purpose is to identify opportunities to be exploited within the smart contracts and trading platforms themselves. 

Quite similar to the traditional equity exchanges, arbitrage bots will find a price on one platform, recognize the difference in the price on another, and then make a trade to exploit the difference and generate profit. Consequently, they would create liquidity in the process and stabilize prices, which is a good side-effect, Mr. Lombe noted. 

He also pointed out another unique aspect of decentralized exchanges like Uniswap. Upon placing a trade order on the platform, and announcing it via the blockchain smart contract, the action is also visible to the bots who are ready to exploit the deal for themselves. 

To protect from fraud, speed is crucial – the quicker you can make the trade, the less time there is for the bots to jump in front of the queue and either buy or sell the tokens or affect the price before you get the chance to buy it. The transaction can be sped up by paying a bit more in gas fee, so it’s a good idea to do that to avoid being exploited by the bots and affecting the trade. 

If you pay a small fee, your speed of transaction could be several minutes. If you pay a high fee, it could be just a few seconds, 10 seconds or so. That’s where the varying fee is very important.” – Luke LombeClearly, the DeFi space offers plenty of opportunities, but it also comes with its own set of risks. In that sense, it’s crucial to be informed as much as possible about the potential downsides such as these fraudulent behavior instigating and arbitrage bots.

This article originally appeared on aikon.com

Can Bitcoin Become the Next Global Reserve Currency?

 

One of the most interesting trends surfacing in the crypto industry today is the increasing likelihood of Bitcoin emerging as the next global reserve currency – something that Bitcoin fundamentalists have been preaching for the last decade. 

With the combination of transparency and decentralized trust brought on by the blockchain, individuals and companies across the world have had the opportunity to participate in a free financial system since the emergence of Bitcoin some twelve years ago. 

Since the dawn of Blockchain, trust in this trustless system has been slowly rising with a diverse range of individuals, institutional investors, and even world governments investing in the technology and the various tokens in circulation today. One result of this has been the free flow of liquidity across borders in a remarkably revolutionary way – satisfying the ever-growing need for a more efficient global financial system. 

Mr. Yoon Kim is an accomplished and dynamic crypto analyst and strategist. He successfully built the TMT sector of Tremblant Capital and helped the company increase its AUM from $200 million to $5 billion in five-years’ time. He then launched Vestry Capital, a global TMT equity fund as the head of which he served as an advisor and consultant to various hedge funds and blockchain projects.

With his 20 years of experience in investing and in the blockchain industry, Mr. Kim acutely understands these shifts in the global financial system. 

For that reason, one of the key topics of conversation during The New Normal of Blockchain & Cryptocurrency panel which AIKON organized in late October was “where the future lies for the USD and its long-term position as the world’s reserve currency”. 

Mr. Kim indicated that the USD losing some of its standing in the global financial system and possibly its status as the reserve currency as an inevitable product of blockchain’s accessibility and decentralization. 

As Mr. Kim has pointed out, the current financial system has been in place since World War II – 75 years now! On average, global financial systems have typically lasted for ~70-80 years each. We are, then, coming to the end of an era and can stand with bated breath awaiting the next financial revolution. 

Moreover, history has shown that significant global events often precede the breakdown of institutionalized financial systems. For the Pax Britannica, it was World War I. For the global financial system, we have today, it may very well be the impact of COVID-19 on the world economy. 

Having been a staple of the global economy, and considering the turmoil, the US has endured throughout 2020, USD is in serious danger of being dislodged from the position of power it has enjoyed over the last three-quarters of the 21st century. 

Given the amount of influence that US politics now has on the rest of the world, and being mindful that the level of engagement that USD (as a global reserve currency) will have on the rest of the world after the presidential election will probably never reach the levels from 40 – 50 years ago when it was at its peak. With the decrease in the level of engagement of the US with the world economy after the Soviet Union dissolution, what we see now are the effects of the politics that took 20 years to materialize. 

In that sense, Mr. Kim pointed out that it is very probable that USD is about to be dethroned as the most important currency in the world. 

And while there are those who would like to see the Chinese RMB take its place, Mr. Kim considers this very unlikely to happen. For one, dethroning USD from the position of the global reserve currency would put a significant amount of pressure and responsibility on the Chinese financial system, responsibilities the country seems to be shunning presently. For instance, China has been accused of intentionally increasing demand which then leads to an increase in the prices of international commodities. 

Therefore, the question is what will supplant USD as the global reserve currency or at least become an alternate reserve currency running in parallel with USD?

Mr. Kim stated that Bitcoin seems to fit perfectly, especially taking into account the timing of its rise, as well as its ability to cross borders with very little effort. 

As political and economic relations between the US and China continue to collapse, it is becoming increasingly unlikely that either the USD or RMB will be viewed as a viable global reserve currency going forward. 

Bitcoin may prove to be the thing that both nations, as well as the rest of the world, decide they can live within the upcoming decades. 

While the Chinese government is actively restricting crypto trades, there is massive support within the government for cryptocurrencies and blockchain. This implies that they have a long-term strategy in place, where Bitcoin would be used to dislodge the USD as the global reserve currency. 

In the same way, we’re seeing the causality of the US global economics politics conducted in the past 20 years and its effect on the situation now, there is a good chance that 20 years from now we will have Bitcoin as the reserve currency of the world simply because it will not be controlled by any one nation and its financial system. 

Should Mr. Kim’s predictions come to be realized, individual and corporate players in this new market that is quickly gaining momentum should be preparing for the shift.

This article originally appeared on aikon.com

Privacy Concerns of Smart Cities Projects

 

There is no exact definition of a smart city. Some individuals have their ideas concerning what they envision to be smart cities. However, despite the differences in opinions of how a smart city should be, some things remain clear: a smart city utilizes information technology to enhance the standard of living.

The level of tech used in smart cities ultimately allows a super-efficient city. This efficiency will be needed in the coming years when the population of cities inevitably explode. Recent research has analyzed investments in smart cities to increase by 48% in a space of five years.

The establishment of a smart city is projected to introduce several economic advantages. For one, smart cities are bound to create a multiplier effect in the economy of that city. Since companies and firms will be encouraged to build offices in the smart city, the overall GDP and per capita income will experience growth.

Resources like energy and water will also be managed. Sensors in the city will tackle the issue of pipe leaks and alert city officials to rectify the problem. A great example of this is observed in Cape Town, where water consumption was reduced by an average of 50%.

Major Problems Behind Smart City Establishments

The problem behind smart cities is embedded in the most important element of its creation: data collection. To function effectively, a smart city needs significant amounts of data. Accompanying a large storage of data is the privacy issue. Smart city data can be used for adverse means which include its utilization against the people.

Scandals about the government spying on its people have been exposed. What can stop the government from using the data of the people against the people? Privacy is a human right. It is what gives us the freedom to make our choices. What happens when this privilege gets revoked?

Also, there’s the issue of the centralized data storage getting hacked. Cyber threats will surely probe the storage systems that are always online for weaknesses. Once a weakness is found and user data is exposed, what could stop criminals from carrying out their activities? We’ve seen several instances of this over the years when data from big firms get leaked.

Possible Ways to stop Smart City Privacy Misuse

Before the establishment of a smart city, there should be rules protecting the populace against privacy infringement. Data should only be recorded when necessary and identification associated with the data should also be discouraged. For instance, sensors only need to determine the number of people at a bus-stop and not recognize their identities.

Super-strong cybersecurity measures against theft of data also need to be implemented before creating a smart city. The use of security tools like VPNs should also be encouraged. You can ensure privacy with a VPN, an app that encrypts your online traffic, shielding you from spying by the government and hackers, especially on networks managed by the government.