Banks must adapt to the new world of decentralized finance in which contracts will be created through crypto technology or risk becoming irrelevant, according to the Société Générale banker who was a driving force behind a recent high-profile digital bond launch.
Jean-Marc Stenger, the head of SocGen’s blockchain technology unit Forge, told Insider that banks face a “Kodak moment” if they do not adapt to decentralized finance or DeFi, referring to the failure of the famous camera company to transition to the digital era.
DeFi is the use of blockchain technology – the same tech that underlies cryptocurrencies – to create financial products.
It replaces the usual middlemen like banks and brokerages and instead lets pieces of digital code called “smart contracts” automatically execute, or control, financial products, taking care of things like interest payments, for example.
Stenger told Insider that SocGen – Europe’s sixth-biggest bank – sees DeFi as a big opportunity for the sector that brings the ability to do things “quicker, cheaper, [and] with more security or transparency for the regulators.”
Although some are skeptical the technology can truly disrupt the giant industry, DeFi’s advocates argue that it will revolutionize finance. DeFi’s fans say it will eliminate the need for intermediaries and central overseers such as clearing houses, and the fees they charge. Instead, a decentralized computer network would keep the contracts and transactions secure.
Stenger acknowledged the DeFi model might pose a threat to some of the ways banks traditionally make money. But he said: “When there is a shift like this in an industry, the financial industry as we speak, obviously it also means that you have to adapt and to change.
“Decentralized finance is certainly a threat to these financial institutions, which will not adapt and embrace this change, that’s for sure. There might be kind of a ‘Kodak effect’, if I may use that term, for some banks or financial institutions which again will not adapt quickly.”
He said banks would still generate returns from providing customers the services they want, which he argues will increasingly be DeFi contracts. “In today’s world, clients are paying for services where they see value-added.”
Internet Computer, a cryptocurrency launched Monday by blockchain non-profit Dfinity, is already the eight-largest digital asset with a market capitalization of $45 billion, data from CoinMarketCap showed on Wednesday.
The project, developed by founder Dominic Williams, is a result of five years of research. The token’s promoters claim it can provide the core basis of a new, decentralized internet.
The first day of trading saw its price swing wildly as it hit an intraday high of $700 before declining to around $250. It is currently trading around the $340-range.
“The Internet Computer is an open platform that frees the world from a dependence on centralized server farms, making it possible to host software and data directly in cyberspace without the need for legacy IT such as proprietary cloud services, server machines, software stacks, databases, and firewalls,” Dfinity said in a statement.
A research report from crypto-insight platform Messari details the idea behind IC and what it aims to overcome. IC’s founder Williams has said the internet has become more monopolistic by controlling tech monoliths like Facebook or Amazon, whose users get affected by any changes made to its platform parameters, the report said.
He recently told Insider mainstream venture capital firms are sitting on “billions and billions of dollars” that they’re ready to invest in crypto and so-called “open internet” startups.
To that end, the digital token’s objective is to offer “a public compute platform so that developers, enterprises, and government agencies can deploy software and services directly to the public internet.”
Another development by Dfinity allows the Internet Computer protocol to securely manage user identities on certain apps without usernames, passwords, or cryptographic keys.
“I want you to imagine a world where you can securely authenticate yourself to online services without ever touching a username and password, or touching cryptographic key material, using just your devices,” Williams said.
“I want you to imagine a world where you can log into internet services without ever being tracked across internet services. And I want you to imagine a world where this is happening at a far greater degree of convenience than any kind of authentication service that you use today.”
The total market value of cryptocurrencies currently stands at about $2.5 trillion, up from around $1 trillion at the start of the year.
The founder of Reddit’s Wall Street Bets forum, Jaime Rogozinski, is planning to launch a blockchain app and exchange-traded portfolios in an effort toward “rooting out corruption” in the world of finance.
Rogozinski has been working on a decentralized application and collaborating with blockchain and financial technology experts to create exchange-traded portfolios, or ETPs, that will give retail investors exposure to a variety of assets, as well as a say in how the portfolios are run, according to a statement released on Wednesday.
“The amalgamation of blockchain technology with financial markets is the next logical step for finance — and not just for Wall Street but everywhere,” said Rogozinski in a statement that calls him a strategic partner in the Wall Street Bets Decentralized Application, or DApp, project. “It will result in stronger, more democratized markets and will empower individuals around the world.”
Blockchain-based finance would give retail investors the opportunity “to fight back against corrupt institutions and to end dependence on them altogether,” the statement said.
The profile of the Wall Street Bets forum on Reddit was elevated this year after investors on the message board sparked a rally in shares of video game retailer GameStop that resulted in losses for short sellers.
The ETPs would be run under a decentralized autonomous organization, or DAO, that would allow community members to vote on issues related to the portfolios using a $WSB governance token. In a given example, token holders who believe electric vehicle maker Tesla should comprise 90% of a particular ETP instead of 10% can vote on it by signing a transaction using their $WSB tokens during voting cycles.
Wall Street Bets, formed in 2012 in the wake of the global financial crisis, calls itself a movement centered on empowering “little guy” investors against “unaccountable” financial institutions. Wall Street Bets ETPs are being pitched as an “alternative to the kind of market manipulation perpetuated by opaque and politically connected” banks and hedge funds.
“For WallStreetbets, the forthcoming release of our $WSB token is a shift in strategy,” said BTCVIX, CEO of the Wall Street Bets DApp.
“We tried to fight back through protest after the global financial crash back in 2008-2009. We then tried to beat Wall Street insiders at their own game by short squeezing them to near bankruptcy. And now, with our soon-to-be-launched ETPs, we aim to simply exit the existing system for one that is fair and relies on community,” said BTCVIX whose Twitter bio says “Banned from r/WSB for talking crypto in 2015.”
A new “green” cryptocurrency called Chia is set to start trading next week. It was created by Bram Cohen, the inventor of BitTorrent, and uses what’s called “proofs of space and time” to “farm” rather than “mine” new coins.
The model is a less energy-intensive method of producing digital assets compared to bitcoin’s “proof of work” concept, which has led that currency to be criticized for using as much energy as some entire nations.
Chia and the company behind it, Chia Network, have already attracted significant attention from investors.
Chia Network boasts big-name backing from the likes of Andreessen Horowitz, Naval Ravikant, and Cypherpunk Holdings, according to data from Crunchbase.
The company also has attracted publicly traded crypto mining companies like iMD Companies.
“We’re going all-in on Chia,” Rick Wilson, iMD CEO, said in a recent press release. “With our extensive research, we believe that Chia is here to stay and will be utilized on a global financial level. We believe our early decision to farm Chia will result in increased revenues for iMD.”
Chia Network released a Business Whitepaper describing its new cryptocurrency (XCH) on February 9 and launched “farming rewards” on March 19.
Chia will begin transactions and trading on May 3.
Here are six things to know about the new cryptocurrency before it starts trading.
The ‘proofs of space and time’ model
The “proofs of space and time” model is central to Chia’s value proposition. The idea is that users, called “farmers,” will “seed” their hard drives or solid-state drives (SSDs) with software that puts cryptographic numbers into specific “plots.”
These “plots” are then awarded with blocks from the blockchain based on the percentage of total space a farmer has compared to the entire network. Then a VDF server, known as a “Timelord,” verifies that block, allowing the chain to move forward and awarding XCH to the farmer.
Chia Network says the system will provide better security than Ethereum and reduce the energy expenditure costs required by bitcoin’s “proof of work” model.
Chia’s “proofs of space and time” model may be an energy saver, but the method is already creating issues for hard drive and SSD suppliers.
A recent report from DigiTimes revealed the Taiwanese memory and storage manufacturer Adata has seen a 500% increase in SSD orders since the start of April.
The South China Morning Post also reported that Chinese e-commerce platforms, including Alibaba’s Taobao and JD.com, have seen multiple models of enterprise-grade hard drives with large capacities selling out.
“Many people have inquired about large hard drives for Chia mining in the past few days,” one customer service agent at a Taobao online told the South China Morning Post.
The rise in hard drive and SSD sales is a result of the new requirements for storage to “farm” Chia.
If the cryptocurrency ends up being anywhere near as popular as other altcoins, the business model could put real pressure on memory and storage manufacturers’ supplies and pricing moving forward.
A new transaction programming language
Chialisp is Chia Network’s new smart transaction programming language.
The company says its language combines the best aspects of bitcoin’s “UTXO model” and Ethereum’s “Solidity model” to allow for more secure, less energy-intensive functionality.
Unlike many other cryptocurrency offerings, Chia has a formal company behind it, and they intend to go public.
“We hope to file and list our equity in the next six to 12 months,” Gene Hoffman, the CEO and President of Chia Network told Decrypt.
Not only that, but Chia Network has also said it will embrace regulation because management has seen “scams and farces” in the space hurt investors.
“It should not be controversial that investors deserve protection through public disclosure and certainly the public shouldn’t be sold investments without that legally required transparency,” the company’s whitepaper states.
An at-home farming push
Bitcoin mining has become increasingly difficult for at-home miners due to the expansion of publicly-traded mining companies like Riot Blockchain and Marathon Digital Holdings. These companies use ASIC miners that have greater computing power than the average at-home miner could afford.
This has made it so the rewards for mining bitcoin at home no longer make financial sense for many miners, especially when energy costs are considered.
With Chia, that could change. At-home users will have the capability to compete to earn XCH by “seeding” their SSDs or hard drives and, at least for now, the lack of competition should allow for a more profitable experience.
Chia is also a very accessible cryptocurrency. Gene Hoffman, the CEO and President of Chia Network, says it was designed that way on purpose.
“It is super simple. Just download the Mac or Windows version and double click,” Hoffman told CoinDesk. “I’m pretty sure this will be the easiest cryptocurrency to validate for normal people ever.”
New cryptocurrencies are a dime a dozen, but it’s rare to see big-name investors in the crypto space come together with top developers to address a common criticism of crypto, rising energy consumption.
While no one can say whether or not Chia will be a success, it’s clear the cryptocurrency is offering something that most new altcoins don’t with its “proofs of space and time” model.
JPMorgan Chase announced it is teaming up with Singapore’s DBS Group Holdings and Temasek Holdings to form a blockchain payments platform in a bid to ease cross-border payments, trade, and currency settlements.
The newly-established technology company, Partior, will leverage blockchain technology and digitize M1 commercial money, according to a statement Wednesday.
The platform will develop wholesale payment rails based on digitized commercial bank money to enable “atomic” or instantaneous settlement for various kinds of financial transactions, according to a statement.
“We are thrilled by the launch of Partior as it marks yet another milestone for JPMorgan and the industry – blockchain-based wholesale payments infrastructure where information and value can change hands around the world in a 24/7, frictionless way,” Takis Georgakopoulos, global head of wholesale payments at JPMorgan, said in a statement.
Partior will be designed to complement ongoing central bank digital currencies initiatives and use cases.
In the beginning, Partior will focus on facilitating flows primarily between Singapore-based banks in both US and Singapore dollars but will expand its service offerings to other markets and currencies.
Headquartered and listed in Singapore, DBS is a financial services group in Asia active in 18 markets.
Temasek, also based in Singapore with 11 global offices, is an investment company with a portfolio of $214 billion as of March 2020.
For the uninitiated, NFTs are tokenized versions of assets that can be traded on a blockchain, the digital ledger technology behind cryptocurrencies like bitcoin and ethereum. Whereas one bitcoin is directly interchangeable with another, meaning they are fungible, NFTs are the opposite because the underlying assets are unique in some way and can’t be exchanged like for like.
This uniqueness enabled Christie’s to sell digital artist Beeple’s “Everydays” NFT in March for an eye-watering $68 million. For those who don’t have that sort of money, NFTs are also being used for trading collectibles like baseball cards and computer gaming items like swords and avatar skins.
Look no further than celebrities like music star Grimes and YouTuber Logan Paul releasing their own flagship NFTs to ride the wave. Even Vignesh Sundaresan, the entrepreneur who bought Beeple’s record-breaking artwork, sees investing in NFTs as a “huge risk” and “even crazier than investing in crypto.”
But history also tells us to be careful about dismissing NFTs as a passing fad, since the importance of technological innovations often becomes clearer once the hype dies down. Many commentators dismissed the influx of tech companies around the dotcom bubble of the late 1990s, and the first wave of mass cryptocurrency enthusiasm in 2017, only to be proven hopelessly wrong when Amazon and bitcoin re-emerged.
NFTs themselves are actually well down from their highs, with a 70% drop in average price since February. Perhaps this is less the bursting of a bubble than a “weeding out” of gimmicky tokens now that the initial hype has begun to die down.
This phenomenon is captured well in US consultancy Gartner’s hype cycle, which illustrates the typical progression of a new technology. With NFTs, we are probably emerging from the “peak of inflated expectations” on a journey towards the same “plateau of productivity” that Amazon reached a long time ago.
This ties in with what Austrian economist Joseph Schumpeter said about why capitalism works. Schumpeter viewed capitalism as a relentless churn of old into new, as the latest and most innovative enterprises replace those that came before – he called this “creative destruction“.
In this light, NFTs are the newcomers challenging how we perceive and register ownership of assets. And the tension between innovation and incumbency also contributes to the skepticism that always surrounds such new technologies.
What happens next
NFTs create opportunities for new business models that didn’t exist before. Artists can attach stipulations to an NFT that ensures they get some of the proceeds every time it gets resold, meaning they benefit if their work increases in value. Admittedly football teams have been using similar contractual clauses when selling on players for a while, but NFTs remove the need to track an asset’s progress and enforce such entitlements on each sale.
New art platforms, such as Niio Art, are able to demonstrate in a really simple way that they own digital works. When customers borrow or buy art from the platform, they can display it on a screen in the knowledge that there is no issue with copyright or originality because the NFT and blockchain ensures that ownership is authentic.
NFTs give musicians the potential to provide enhanced media and special perks to their fans. And with sports memorabilia, between 50% and 80% of items are thought to be fake. Putting these items into NFTs with a clear transaction history back to the creator could overcome this counterfeiting problem.
But beyond these fields, the potential of NFTs goes much further because they completely change the rules of ownership. Transactions in which ownership of something changes hands have usually depended on layers of middlemen to establish trust in the transaction, exchange contracts and ensure that money changes hands.
None of this will be necessary in future. Transactions recorded on blockchains are reliable because the information cannot be changed. Smart contracts can be used in place of lawyers and escrow accounts to automatically ensure that money and assets change hands and both parties honour their agreements. NFTs convert assets into tokens so that they can move around within this system.
This has the potential to completely transform markets like property and vehicles, for instance. NFTs could also be part of the solution in resolving issues with land ownership. Only 30% of the global population has legally registered rights to their land and property. Those without clearly defined rights find it much harder to access finance and credit. Also, if more of our lives are spent in virtual worlds in future, the things that we buy there will probably be bought and sold as NFTs too.
There will be many other developments in this decentralized economy that have yet to be imagined. What we can say is that it will be a much more transparent and direct type of market than what we are used to. Those who think they are seeing a flash in the pan are unlikely to be prepared when it arrives.
Bitcoin’s path to $100,000 per coin is less important than its potential impact on the corporate world over the next decade, according to Wedbush.
In a note to clients on Thursday, Wedbush’s Dan Ives said that the story around bitcoin is much larger than its “potential path/timeline to $100,000.”
The analyst argued the important theme when it comes to cryptocurrencies is “the potential ramifications that crypto, blockchain, and Bitcoin could have across the technology and corporate world for the next decade.”
Ives said moves into blockchain technology and cryptocurrencies could surge over the coming years after companies like Tesla, IBM, Visa, Square, Mastercard, and more entered the fray recently.
There’s a “growing shift for companies to accept this digital currency as a form of payment,” according to the analyst.
Ives added that he still believes “less than 5% of public companies” will invest in bitcoin over the next 12-18 months but said that number could move “markedly higher” as more regulation and acceptance of the currency takes hold.
“Bitcoin mania is not a fad in our opinion, but rather the start of a new age on the digital currency front,” Ives wrote.
Although Ives was one of the first to the party, his comments about cryptocurrencies and their regulation are becoming more in sync with other Street commentators and even CEOs as cryptocurrencies and blockchain technologies continue to develop.
David Solomon, the CEO of Goldman Sachs, said his bank is looking into ways to support clients’ desire to own cryptocurrencies and other digital assets in a CNBC “Squawk Box” interview on Tuesday.
The CEO added that he believes there will be a “big evolution” in the way the US government regulates digital assets in the coming years.
Ives and his team also highlighted the potential of using blockchain technology for decentralized storage in their note to clients on Thursday.
The analyst said blockchain technology can help increase the overall speed and lower the price of digital storage moving forward. He noted, “there are a number of business models attacking this new market opportunity with privately-held Filecoin one of the more impressive strategies we have seen in the market.”
As far as Wedbush is concerned, Bitcoin isn’t going away anytime soon, rather it’s set to become “mainstream” and the effects on Wall Street and the corporate world will be huge.
Coinbase’s 840% revenue jump in the first quarter may be the perfect example of what Ives is talking about.
Coinbase posted $1.8 billion in revenue in its first-quarter report. That means the crypto exchange pulled in over $120 million more than Intercontinental Exchange, the company that owns the New York Stock Exchange, did in its most recent earnings report.
Mergers and acquisitions will be a big theme in the cryptocurrency space, according to PwC, after the value of M&A deals in the sector doubled year over year in 2020.
In a report published on Monday, the Big Four accounting firm revealed that the average M&A deal size jumped by 174% from $19.2 million to $52.7 million, with four deals valued at more than $100 million in 2020. The firm also revealed that transactions are shifting away from the Americas, with 60% occurring in Asia and Europe compared to 2019.
Transactions, according to PwC, are also more spread out across categories.
“With increasing interest in crypto from retail and institutional investors following the positive market momentum, it is not surprising to see increase M&A in the broader train sector,” the report said.
The report comes amid a rapid rise of interest in the cryptocurrency space, with bitcoin, the most popular digital asset, rising 600% in the past year alone. While many bitcoin bears continue to criticize cryptocurrencies, many advocates are expecting the boom to continue amid rising interest from both retail buyers and institutions.
The UK-based firm, in the report, then outlined the three trends to expect in the M&A activity in the crypto space across the globe after a record-breaking 2020.
Crypto M&A will be be driven by large players
PwC said it expects to see further consolidation in the industry with larger, well-funded, and profitable firms seeking to continue their M&A activities. “We expect the focus to be not on the acquisition of smaller competitors but rather of firms that offer ancillary services to their current offering,” the report said, referring to crypto media, data, and compliance research.
Institutionalization of the crypto industry will continue
The firm said it predicts a steady continuation of institutionalization of cryptocurrencies, driven by the rally in the price of the digital tokens as well as heightened media attention on central bank digital currency (CBDC), stablecoins, decentralized finance (DeFi), and non-fungible tokens (NFTs). PwC said all these will serve as catalysts to more institutions wanting to enter the space through investing or acquiring.
M&A, as well as fundraising, will increase
Based on the bull market in the first quarter of 2021, PwC said it expects the number and value of M&A deals to increase this year. It also said it sees more activity comeing from Asia-Pacific and EMEA reagions.
The buyer who paid $2.9 million for an NFT version of Twitter CEO Jack Dorsey’s first tweet said he’s valuing it like fine art – specifically the Mona Lisa.
On Sunday, Hakan Estavi, chief executive at at Bridge Oracle, had the highest bid in an online auction for the piece. Insider has reached out to Estavi for comment.
“This is not just a tweet!,” Estavi said on Twitter. “I think years later people will realize the true value of this tweet, like the Mona Lisa painting.”
Dorsey’s message – “just setting up my twttr” – clocked in at 24 characters, including spaces, placing its value at more than $100,000 per character.
What made a tweet from 2006 so valuable? Even in the form of a non-fungible token, or NFT, with a digital signature from Dorsey, it was still just a few lines of code.
“An NFTs value is largely derived as a function of scarcity and speculation,” said Tom C.W. Lin, a professor at Temple University’s Beasley School of Law.
The value of high-priced NFTs – like, say, the $69 million NFT sold this month – comes from the combination of high demand and rarity, as with any piece of art. An NFT version of Dorsey’s tweet is a digital object that can’t be duplicated, making it scarce.
Lin added: “An NFT itself does not have much intrinsic value beyond those factors.”
Demand for Dorsey’s tweet started slowly. According to Valuables by Cent, where the auction was hosted, the chief executive created the auction for his own tweet.
The first offer was made on December 15, coming in at one dollar. Within a few weeks, the top offer was $3,500. But that offer was canceled by the bidder, sending the price back to zero.
After Dorsey tweeted a link to the auction in early March, bidders quickly entered nearly 30 offers, sending the price to $2.5 million. As of midday Sunday, that was still the highest bid.
Dorsey said he would convert the proceeds from Sunday’s sale into bitcoin, then donate it to charity. He sent a tweet confirming his donation on Monday.
Skeptics and NFT novices may question whether a public tweet can truly qualify as scarce, commanding such a high price. After all, Dorsey’s Twitter post had been live for all the world to see since March 2006. And it will continue to be live on Twitter even after Sunday’s sale, so anyone can read it for free anytime they want.
So what exactly did the buyer get with an NFT version? That version would add a digital signature, making it a one-of-a-kind moment, akin to a work of signed art, according to the Valuables FAQ.
Dominik Schiener, cofounder and chairman of the IOTA Foundation, said anyone who buys an NFT version of a tweet is basically getting the “essence” of the tweet’s value.
It’s important that the buyer trusts both the auction website and the seller. Otherwise, they could just post a new NFT version someplace else, he said.
“In order for the tweet-NFT to be valuable, there has to be consensus that the platform and technology is a de-facto representation of scarcity,” Schiener said via email. “If the world comes to an agreement that the NFT version of an asset on blockchain is ‘real’, then it means you are acquiring the ‘essence’ of that thing’s value.”
Dorsey’s tweet might also be worth $2.9 million for collectors simply because they could resell in the future for an even higher price, said David McCarville, a director at Fennemore Craig.
He said the rise of the NFT market is being driven by early adopters who’ve made money from cryptocurrency. They may be seeing similar opportunities in the NFT market.
McCarville said: “These early adopters believe that they are in a position to be the first movers in a market that is still very new and therefore should enjoy significant appreciation in value.”
Twitter CEO Jack Dorsey has sold his first-ever tweet for $2.9 million dollars as an non-fungible token, or NFT, on Monday.
The tweet, published on March 21, 2006, simply said: “just setting up my twttr.” The first offer was made on December 15 and the bidding ended on March 21.
Dorsey first tweeted a link listing his tweet as an auction on March 5. On March 9, the executive said in a tweet that he will “immediately convert proceeds to bitcoin” and donate to nonprofit GiveDirectly’s Africa response. Hours after the news broke, the executive posted a screenshot of his donation, thanking the buyer.
An NFT is a unique digital asset secured on a blockchain that has gained traction this year, in step with the rapidly rising popularity of cryptocurrencies. Each NFT has its own signature, which can be verified in the public ledger and cannot be duplicated.
When a person buys an NFT, they gain the rights to the unique token on the blockchain. For instance, if a person buys an image, a meme, or in this case, a tweet, they are not buying the content per se. In fact, they have no ownership of the artwork itself and have no control over the rights to distribution. Instead, they are buying the rights to the unique token that connects their name to the artwork.
“An NFTs value is largely derived as a function of scarcity and speculation,” said Tom C.W. Lin, a professor at Temple University’s Beasley School of Law told Insider. ” An NFT itself does not have much intrinsic value beyond those factors.”
Dorsey’s tweet was auctioned on Valuables, a platform by Cent, a social media network built on blockchain. Tesla’s Elon Musk has also listed a tweet on the same platform but has yet to sell it.
For Dorsey’s tweet, it was bought using Ether for 1630.5825601 ETH, which was worth around $2,915,835 at the time it sold, Cent CEO and co-founder Cameron Hejazi confirmed to Reuters. Dorsey will receive 95% of the proceeds, while the remaining amount will go to Cent.
Crypto art has been around for over half a decade but became mainstream only recently, with an auction by Christie’s of a digital work for almost $70 million in February representing a watershed moment.