Blockchain – Crypto

Margin lending with no Counterparty risk– the Dharma open source protocol

Margin lending with no Counterparty risk – the Dharma open source protocol

Margin lending with no Counterparty risk – the Dharma open source protocol 800 533 Efi Pylarinou

Margin lending with no Counterparty risk – the Dharma open source protocol

In November 2017[1], I spoke to Nadav Hollander in California, the founder of, who had just “graduated” from Y-combinator. At the time, he described his vision to create on the blockchain a tokenized marketplace for loans. In February 2018, the Dharma open source protocol went into alpha testing.

Developers could easily use the Dharma libraries to:

  • Allow would-be borrowers and lender to generate open loan requests for debt agreements of any kind
  • Allow lenders to fill loan requests, formalizing a lending agreement with a borrower
  • Allow users to manage their lending portfolio by making repayments, collecting collateral, trading their debt tokens, etc.
  • Earn fees by underwriting debt agreements generated by Dharma protocol
  • Earn fees by relaying debt agreements between borrowers and lenders

Source Hello, Dharma.js

Dharma didn’t ICO because Hollander believed that token models were very immature right now. Hollander says “I’d rather build a community of constituent users and, only if and when it makes sense, issue a protocol token.” For now, Dharma open source protocol has no native token, but each loan that is created is a token itself

Fast forward to today, February 2019, one year later and Dharma raised $7 million from big investors including Coinbase Ventures who naturally are interested in crypto lending markets, especially for traders. Dharma has already launched the Dharma Lever product (in alpha mode) that deploys smart contract’s to offer margin loans for crypto traders from high volume investors.

No counterparty risk (smart contract risk, since assets are held there).
Instantly, at very low cost.
Lower borrowing rates than centralized exchanges.
Compatible with all wallets.

Margin lending with no Counterparty risk– the Dharma open source protocol

Dharma is in the same league as Maker – be your own bank or Defi[2] – that allow us to borrow against our Hodlings. Dharma involves no DAI and accommodates several cryptocurrencies beyond ETH. They are even looking to add WBTC soon which went live on Ethereum just last week.

WBTC – Wrapped Bitcoin is an ethereum-based token that is backed one-to-one by a regular bitcoin BTC.

It is already listed on several DEXs[3] including Radar Relay, Kyber Network, and AirSwap.

Dharma is changing the crypto lending space with their Lever offering that eliminates counterparty risk and replaces it with smart contract risk.

Margin lending with no Counterparty risk– the Dharma open source protocol

The Dharma Lever is one way to mitigate systemic crisis due to the domino effect of counterparty failures.

[1] I introduced Dharma in my Feb 2018 post Bonds & loans on the Blockchainalong with Tzero and Nivaura.

[2] Defi = Decentralized Finance, see more here.

[3] Read more about DEXs in `Are Decentralized Exchanges part oft he bottom up decentralized monetary policy?`

WhenBiance WhenSix

A world of #WhenBinance & #WhenSIX

A world of #WhenBinance & #WhenSIX 1200 800 Efi Pylarinou

A world of #WhenBinance & #WhenSIX

Stock Exchanges are the fastest and most efficient data-processing large scale system that we humans have designed so far [1].

Stock exchanges need roughly 15minutes of trade to determine the effect of a piece of news – political, scientific, ecological, societal etc – on the prices of shares.

WhenBiance WhenSix

DLT technology may change this but the How is up in the air.

In Stock exchanges and listed assets  – Part I I looked at Nasdaq`s use cases. In this second part, I am sharing insights on the pulse of the securities markets as they reshaped and get pulled (down or up) by DLT technology. As mentioned in the Foreword of the SIX white paper The Future of the Securities Value Chain, one of the reasons to look into this topic is to sharpen our understanding of what the relevant future may look like and to seek feedback and open a conversation.

With DLT technology there will be a boom in what is tokenized or securitized in traditional parlance. There is no disagreement on this front, just on the degree maybe and the when. However, the devil is in the details as always. How will this happen?

If we all agree that there will be more securities out there, what will happen to Primary markets, Secondary markets and the post-trading processes? The 64page SIX white paper, describes eight possible scenarios with enough details – as they know how these markets operate currently – and in their Summary two pager they pick the two most likely ones. Of course, opinions will vary on the likeliness and this is where it gets interesting.

The way I see the world right now, is that

we have moved from #WhenMoon #WhenLambo to a world of #WhenBinance.

Even at LyCI online webinar presented by Richard Olsen, CEO of Lykke, the question of #WhenBinance for LyCI, was asked. Day traders and speculators naturally want listed assets but through the accelerated evolution of digital assets over the past two years, we have actually realized that investors also continue to attribute value to the listing of an asset. #AndTheIrony is that this signaling effect comes from the conventional investment culture and Not from the P2P progressive culture that Satoshi Nakamoto made technologically possible.

#AndTheIrony is that for now, both retail and institutional investors in the digital assets world perceive listing as a measure of fundamental quality. Whether it is about cryptocurrencies, utility and payment tokens, asset-backed coins (commodities, real estate, revenue sharing), security tokens etc. listing makes them more valuable.

The way we are plowing ahead to increase adoption of digital assets, we are consciously or unconsciously, making sure that LISTED ASSETS WILL CONTINUE TO BE THE DOMINANT STRUCTURE IN SECURITIES MARKETS.

In such a world, we could see growth in issuing marketplaces for digital assets of all sorts, but continuously tied to the new digital exchanges. As we speak there are several issuing marketplaces launched for digital assets: Securitize, TokenSoft, Neufund, Desico, Mobu, …. And more than needed exchanges to list these assets. At the same time, incumbents like SIX and Nasdaq, are building infrastructure to prepare for a position in the digital assets boom. Most, if not all, of these initiatives, will deploy permissioned central ledgers that deviate from the Satoshi Nakamoto core principals.

Right now we are heading straight into a future for securities that is based on permissioned central ledgers and in which listed securities remain the only way to unlock full value and then some. We will have reduced costs, reduced intermediaries, a larger pie of digital assets but we will have not changed this:

Exchanges will remain the fastest and most efficient data-processing large scale system that we humans have designed.

A Satoshi Nakamoto fully aligned world, is one in which exchanges disappear simply because listing does not add value. In such a world, all issuing marketplaces are open and not permissioned. Issuing becomes ubiquitous. Imagine a world in which either on Amazon or Wechat, even retail can issue a security or a token, and investors can directly access these. This requires to move Fintech crowdfunding venues like Angelist and Crowdcube, and P2P lending venues like Prosper and Lending Club, onto protocols like HarborDharma, or Swarm. Then to get all large corporates (BMW, Johnson & Jonhson, ect) the software to issue and trade P2P within their ecosystems – i.e. DEX software. But before all this can happen, we need to solve the Digital Identity issue for both individuals and entities.

In a Satoshi Nakamoto fully aligned world, Exchanges become obsolete.

[1] The view of the Austrian school of economics

Money is a claim on an Institution and the reason for change

Money is a claim on an Institution and the reason for change

Money is a claim on an Institution and the reason for change 1000 655 Efi Pylarinou

Money is a claim on an Institution and the reason for change

Axess Think Tank, a Geneva based think tank organised a great event focused on four themes

  • The future of money
  • The Regulatory landscape
  • ICO-STO and Capital markets
  • Blockchain and the Token economy

I had the pleasure of moderating the last two panels.

One of the takeaways from the entire event, was around the issues of cryptocurrencies issued from Central Banks or some such.

When you have a board member of the SNB Andrea Maechler, a senior research advisor to the BOE Michael Kumhof, a research fellow of the Fed St. Louis & Professor at univ. of Basel Aleksander Berentsen, a research fellow of the UCL Center for Blockchain Technology Daniel Heller; there is a lot to absorb from their talks and panel discussions. Add to that the moderator Michel Girardin, from the Univ of Geneva and Jean-Pierre Roth, the ex Governor of SNB, in the audience.

They agreed that payments are the very heart of any economy and that we live in a world that customers expect payments to be like WhatsApp messages.

The SNB is actually following the innovations around payments, whether Fintech or Bitcoin originated. Andrea Maechler, emphasized that the SNB`s mandate is to support and promote cashless payments and this done through SIX. Fintechs that hold a FINMA payment license will be granted access to the SIX system.

Regarding CBDC`s they have concluded that it is not a tech issue but rather a policy issue. The SNB believes that while there are advantages, the main disadvantages, make CBDCs a no-no for the SNB. They see that a CBDC would increase the risk of bank run and would make monetary policy ineffective when it is actually mostly needed.

This is where Aleksander Bernesten actually stepped up and provoked the thinking. He firmly believes that Central Bank electronic money would increase financial stability. Give access directly to the CB to all.

His motto is that:

The Censorship resistant attribute of Bitcoin, is priceless!

He makes things simple by focusing on this attribute. Since there is no free lunch, we have to choose between

A Censorship resistant database which is inefficient and slow


An efficient and fast centralized database which is not censorship resistant

He thinks that a central bank decentralized currency has no meaning at all. Forget about a Fedcoin type of idea. However, he proposes that Central banks issue electronic money for all! So instead of having the authorised commercial banks exclusively access directly the CB, we should all have direct access to the Central Bank. Forget about the RTGS system.

For those that want to understand more details read The Case for Central Bank Electronic Money and the Non-case for Central Bank Cryptocurrencies

Note: By joining Axess think tank you can access the video recordings of this high quality and more. Check it out here.

Don’t forget that currently

MONEY is a claim on the Central Bank or a commercial bank!
Will this change? How and when?
The Why has been answered: For a Censorship resistance monetary system.


[1] Central Bank Digital Currency

Stock exchanges and listed asset assets Part 1

Stock exchanges and listed assets – Part I

Stock exchanges and listed assets – Part I 1100 736 Efi Pylarinou

Stock exchanges and listed assets  – Part I 

At the time of its Series E fundraise in May 2018, shares of Circle were worth $16.23 a piece at a valuation of $3.01 billion, but in January 2019 shares are available to be purchased at just $3.80. To be sure, it is not clear how many shares are being offered at this new price, nor is it clear if any shares have exchanged on the platform at this price. This share price implies a $705M valuation.” excerpt from Prop Shares are Hard to Sell: Shares of Crypto exchange Circle are being offered at a massive discount.

The Austrian school of economics view is that

Stock Exchanges are the fastest and most efficient data-processing large scale system that we humans have designed so far.

Stock exchanges need roughly 15minutes of trade to determine the effect of a piece of news – political, scientific, ecological, societal etc – on the prices of shares.

Whether this will change with DLT technology and when, is up in the air. For now, we have old and powerful institutions running these data-processing systems and it wont be easy to steal their Cheese.
The Frankfurt Stock Exchange is over 400 yrs old with a market cap putting it in the 10th position globally. The London Stock Exchange (LSE) and the New York Stock Exchnage (NYSE) are bother over 200yrs old and are in the 3rd and 1st respectively by market cap. Just a few blocks away from the front runner, there is NASDAQ only 45yrs old and with a 2nd ranking in market cap.

The 29yr old Australian Securities Xchange (ASX) ranking 14th in size, is actually the bravest in that they were the first to explore DLT technology for their settlement and post trade activities. Digital Asset has been their partner, with whom they have been designing a replacement of their Clearing system CHESS since 2015, which they actually own (not the case for other stock exchanges). The full launch has been pushed out again from 2020 to 2021.
The architecture of this system maintains the messaging-based interaction with its participants and does not require them to have to run a node on the network in order to participate.

“We are often told by many, including other market infrastructures, ‘You’re so brave that you’re going first, you’re using DLT’ — we actually genuinely consider it brave to embark upon a large transformation program and not adopt this technology,” said Cliff Richards ASX`s executive general manager of Equity Post-Trade Services.

[1] Data source from the Visual Capitalist as of April 2017 – Comparing the largest Stock exchanges

Stock exchanges and listed asset assets Part 1

NASDAQ is the most active stock exchange by being involved in several different DLT initiatives that are however, recent.  In Spring 2016, in a post about Fintech in action on Western stock exchanges, I had mentioned Linq, a private blockchain company focused on private securities issuance. Linq allowed unlisted private companies to represent their share ownership digitally and securely. Later, Linq and Chain, a blockchain services provider, used DLT to register digitally ownership of private shares.

In May 2017, Nasdaq partnered with CitiConnect for Blockchain and took Linq to the next level. They went through a seamless end-to-end transactional process for private company securities.  Payment and reconciliation magic via DLT.

In October 2018, NASDAq also partnered with the Azure blockchain service of Microsoft. The aim is to integrate it in order to improve buyer-seller matching, management of delivery and payment. The key advantage they present is that this deployment will allow for interoperability with customers using various blockchains.

What really caught my attention is the Nasdaq`s use of DLT technology in their newswire services. They are starting to use smart contracts for time-sensitive data like corporate announcements, press releases, regulatory filings, etc and the associated valuable meta-data. Nasdaq seems to have filed for a patent around this  Nasdaq Gets Patent for Blockchain Newswire to Solve Gaps in Audit Trail Gaps and Errors!

For me this latest use case, can be big.

Distributing meta-data through smart contracts and giving access to it on a pay-as-you-go way, will be a huge business for stock exchanges

and Nasdaq can dominate in this.

The leading Artisans of today, from Davos, WEF2019

The leading Artisans of today, from Davos, WEF2019

The leading Artisans of today, from Davos, WEF2019 1200 800 Efi Pylarinou

‘Globalization 4.0’ was the theme of the World Economic Forum this year. Naturally, the future of work, sustainability and smart technologies and living, were amongst the topics addressed.

The leading Artisans of today, from Davos, WEF2019

What struck me was that the Davos crowd clearly ranks Jack Ma as the only visionary leader. This is the first time that someone from the East wins the hearts of the global business world which has long been dominated from the developed Western world.

This is the business man that has made Techfin reality. This is the business man that was an outsider to a controlling political system and who has become wise in a Yoda like way.

The leading Artisans of today, from Davos, WEF2019

Just before taking the trains to Davos, I saw the announcement that Alibaba bought the German-based Greek starup, Data Artisans, founded by Greek entrepreneur Kostas Tzoumas. The company specializes in the fields of data analysis, fraud detection and direct communication with consumers. Its customers include Netflix, Uber, Zalando, ING, and Alibaba.

When I looked at all the other acquisitions that Alibaba made in 2018, five in total, they are all related directly to e-commerce for various products. Data Artisans is a clear data play and the other related acquisition that I could spot over the past two years was Visualead, a software company focused on the research, development and enablement of IOT technologies using Visual QR Code.

Only when I came back from Davos and looked into Data Artisans, did I realize that Alibaba was one of Data Artisans clients before being acquire, but most importantly that it is an Open source Big data technology company!

Apache Flink is the open source stream processing framework developed by Data Artisans  that unifies real-time event-driven applications and real-time analytics.

Alibaba has contributed to Flink code over the past 2 yrs. 

`Stream processing is the processing of data in motion, or in other words, computing on data directly as it is produced or received.` excerpt from Data Artisans

Efi Pylarinou Quotations Pointer

Stream processing trained by an e-commerce giant
IOT future of smart cities

is the killer combo

Jack Ma`s recent yodaism has been focused on smart people, management of people, and human superiority. While there is no way to hack his success, there are many insights to gain from the narratives he chooses to share in important events like the WEF.

Personally, I have been contemplating on the title of the Penny Power`s new book `Business is personal` (I haven’t read it yet). As a result, I was drawn to Jack Ma`s comments during the WEF around people  and business.

  • “When I hire people, I hire the people who are smarter than I am.”

  • “To manage smart people you have to use culture, the value system, [so] they believe [in] what they do. If you just want to use rules and laws and documents to control and discipline them – that’s how you control stupid people,” 

Jack Ma is devoting now his time in educational work.  We have to wait to see what that means. In the meantime, the forked version of Apache Flink, is called Blink, and is capable of handling the requirements of such a large scale platform like Alibaba. Blink is running on a few different clusters, and each cluster has about 1000 machines. Real Times processing, search capabilities, and machine learning at this scale, is not a trivial computational task.

Open source technologies have to become the basis of the 4th industrial revolution which includes IOT. Alibaba is already working on designing that future.

Jack Ma, has departed from Alibaba, but the people listen to him. He still believes and preaches that we people have hearts that can`t be built in machines. His comments on smart people and managing them in teams, made me ask again the open question:

Q – `How far can decentralization go in our society?`

A1 – Does this need smart people to collaborate? A difficult task.

A2 – Will this happen because smart people don’t collaborate? An oxymoron.

Rethinking is what we all need to do.

Listen also to the thought provoking discussion of Dr. Guenther Dobrauz-Saldapenna and the `Rock`n`Roll Plato` Anders Indset in `Outhink the Revolution`.

“Our Leaders of today need the philosophy of the past, paired with the scientific knowledge and technology of tomorrow” – Anders Indset

Blockchain digital wallet users worldwide

Digital Wallets to pay or to hold assets, will become more popular?

Digital Wallets to pay or to hold assets, will become more popular? 800 531 Efi Pylarinou

There are 32million Blockchain powered wallet users according to Statista as of Dec 2018.

While this growth is stunning, there are millions of people that still don’t understand the difference between these blockchain powered wallets and the digital wallets aiming to overtake the payment industry (replace plastic and other methods).

Wallets, purses, and handbags, have been female accessories and there is no sign of change on the horizon. Physical possession of IDs, credit cards, and cash, has been centralized in these accessories for ages. Men have been resisting the wrappers and filling front, back pockets of trousers or inside pockets of jackets. There is no adult that hasn’t been tormented by a misplaced, forgotten, or stolen “pack of personal” stuff (IDs, plastic, cash). Being able to take care of these possessions is a sign of maturity that any parent trains their teenager and delegates when it seems kind of safe.

The 24/7 mobile world seems to have moved part of the “pack of personal” stuff (IDs, plastic, cash) onto our smartphones. Digital wallets from Google, Apple, M-Pesa, and the likes are gaining traction and offering consumer banking kind of conveniences instead of cash and/or plastic. This is no shortage of mobile digital wallets even though end-users don’t seem to be spreading the word. I have yet to meet someone that looks at me in the eye and says “You cannot not have a mobile digital wallet! How can you live without that kind of accessory?”.

Digital Wallets
Digital Wallets
Digital Wallets
Digital Wallets
Digital Wallets
Digital Wallets
Digital Wallets

Some are counting on the fact that they are centralizing the multiple credit cards or store cards for us. Others are marketing loyalty programs either from our banking service providers or credit card providers or e-commerce stores. More recently, mobile digital wallets that aggregate and exchange value across various loyalty programs market themselves as creating more value with such interoperability.

All these kinds of Digital wallets are simply a digital interface to access centrally managed accounts through a mobile phone. There is no genuine innovation in these kinds of services since security issues inherent to centrally managed accounts remain and the cyber vulnerability of such third-party trust mechanism is not mitigated. The costs that these third-parties incur in order to handle the promises of maintaining deposits and accounts, keep increasing.

True wallets are those that enable each of us to hold bearer assets (like cash or cryptoassets) without needing a central third party to hold and possess these assets, and at the same time be able to transact with these. The true innovation here is removing institutional risk.

The finance future that is being built right now is offering the ability to hold any digital bearer instrument directly.

A user’s wallet will be able to hold a variety of financial instruments; cash, equity in a company, commodities, or even non-monetary instruments such as identification documents, school records, and driver’s licenses.

This world is the one that Jaxx and Shapeshift are shaping up. Their wallets aren’t just an interface to a bank. Their wallets are not just another account with an institutional provider. They aim to offer control directly to us and we can choose to trust our smartphone, our hardware wallets (Trezor, Ledger etc), or our hard copies etc.

Once they manage to scale, they will become the darlings of the regulators because who doesn’t dream of a world with reduced cyber institutional risk. The world of this next decade, will get rid of the need for reconciliation between financial service providers, a complex, and expensive process.

Fintech innovation started as a war between start-ups and financial institutions. This culture is clearly not the flavor of the day anymore.

Today we are seeing the emergence of another type of race. Will it be some branch of AI that solves the complex problems around legacy financial processes (like reconciliation between financial providers or vulnerabilities of accounts etc)? Or will it be cryptography that replaces centrally managed processes all the way from central banks to financial service providers?

The Digital Wallet User Experience will have to pass the toothbrush test.In “Consumer Banking”

7 mega waves in the Blockchain Economy and the dams holding them back In “Bitcoin & Blockchain”

Blockchain Digital ID and the vision of a Refugee Bank In “Bitcoin & Blockchain”

What has changed a decade after the financial crisis?

What has changed a decade after the financial crisis?

What has changed a decade after the financial crisis? 1300 865 Efi Pylarinou

What has changed a decade after the financial crisis?

Here we all stand about a decade later from September 15, 2008, when Lehman Brothers filed for Chapter 11 bankruptcy protection and when the tremors of the subprime crisis continued to shake the grounds where we built our homes, our pensions, and our dreams. Collapses, rescue plans, and a wave of socializing the costs of failures of several financial institutions; can describe in a nutshell the economic policies that have followed since. Bernard Lunn started the week with Do you remember where you were on 15 September 2008? and inspired me to reflect back too.

On Sep 15, 2008 I was living in Montreal and McGill University had asked me to teach Real Estate Finance with a one month notice (a part-time practitioner engagement). No textbook could reflect the unfolding reality. Freddie Mac, Fannie Mae, Ginnie Mae, the three GSEs (Government-sponsored agencies) were going to be restructured and it was exciting to understand the complexity of the evil mortgage-backed structures rather than the outdated textbooks.

Outside the university, everybody was affected, from end consumers, homeowners, corporates and the globalized economic activity whose Gas is mainly creditThe trusted institutions – the Gas stations – through which Gas is distributed to the people and to businesses of all sizes, have since created since a bottleneck that continues to choke the global economy. Over this decade, 2008-2018, we have seen (in retrospect) how this Gas station monopoly was affected by Central Bank policies that on the one hand, increased their inventories of Gas (more money has been available for banks to borrow from the Central Banks) but at the same time, new Regulations (changing the rules of the game for banks without consulting them) has led to these Gas stations shrinking their franchise network, reducing their willingness to provide service to their customers, and overcharging them/us.

Outside the university, everybody was affected, from end consumers, homeowners, corporates and the globalized economic activity whose Gas is mainly credit.

These licensed Gas stations who are led to dis-serve their clients but still hold a monopoly (granted by central governments) have led to movements like Occupy Wall Street and to lots of innovations around financial services – Fintech. From peer-to-peer lending, crowdfunding, to robo-advisors, and freemium PFM apps; and to Bitcoin. Let’s not forget that the genesis block of Bitcoin had hardcoded the title of London Times newspaper of Jan 3, 2009

“Chancellor on brink of second bailout for banks”

The hash of this genesis block is


There is a strong belief that this is no coincidence but a clear message of the failure of the financial monetary system which is designed and managed by states. A credit system based on the fractional reserve system and thus, creating Gas (Credit) out of thin air. A Credit system that can and will change the rules of Gas (Credit) creation and in the name of saving the financial system, it will pass on the costs of these bailouts onto taxpayers. Andreas Antonopoulos keeps reminding his audiences around the world, that a decentralized p2p network like Bitcoin is incompatible with fractional reserve banking and that Bitcoin is born out of the failure the latter system; Hello from Argentina (that is my addition and not Aantonop’s).

As traditional Fintech continues to make inroads – albeit by partnering with the licensed Gas stations or obtaining such licenses themselves – and as decentralized protocols, like Bitcoin, or God protocols (as introduced by Nick Szabo before even the internet was mainstream) are being tested left and right (still in early stages); what has happened to the branded Gas Stations over this decade and what has actually been accomplished regarding the Big Black Swan that haunts us since 2008  – The “Too Big to Fail” Black Swan?

What has changed a decade after the financial crisis?

Congratulations to the Central Banking system for reducing the size of the Big Wall Street houses – the Sell Side. The Wall Street Journal reported this week that their assets have shrunk 6% over this past decade.

Congratulations for kicking out from Wall Street all CEOs from the previous era. Jamie Dimon maybe one of the few, still standing strong.

Congratulations for dethroning Wall Street from being the Mortgage Kings.

#AndTheIronyIs that we need to make sure that we “Feed the Fink”, we network with Jamie Dimon and all those that were “cleaned up”, and we get our mortgage from our phone.

Blackrock, Vanguard, State Street, and Fidelity, have doubled their assets since 2009! They manage close to $17trillion and Vanguard brought $1billion a day of new money last year[1]. I call this the mushrooming of the Buy-side. Let’s all make sure that we “Feed the Fink” and we know from which direction the Black Swan may appear from.

Vikram Pandit, Citibank CEO until 2012, now founder of the Orogen Group investing in Fintech; Blythe Masters, the designer of Credit Default Swaps (CDS) at JP Morgan, now CEO of Digital Asset Holdings; Brad Katsuyama, protagonist in Michael Lewis’s book, now the co-founder/CEO of IEX Group; Susan Estes, MD at Morgan Stanley, Deutsche Bank and Countrywide Securities Corp, now the president/CEO of OpenDoor TradingLet’s be all clear that financial engineering is not dead and experience remains a valuable asset.

Non-bank lenders have become larger than Citigroup or Bank of America lending businesses. The WSJ journal reports[2] that US non-bank mortgage originators have grown from 9% to 52% over this past decade. Let’s all shop for homes in a new way (not from a bank but a kiosk or our favorite social app). And let’s make sure we know from which direction the Black Swan may appear from.

Growth in less regulated areas. From assets under management, mortgages, and experienced human resources.

Markets are still plagued from Black Swans that belong to the bread of “concentration of power and illiquidity risks”. From miners accumulating power of digital assets to the Buy Asset accumulating i-shares and passive AUM.

Markets overall continue to shift resources rather than reinvented themselves. #WhereMortgages, #WherePeople but same financial instruments designed and sold by the same people in different packaging and at different POS. Banks have been forced to downsize and be risk-averse and the Sell Side has taken over along with Fintech startups.

#WhereGas – #WhereCredit is where we can look for true innovation. Too early to see a newspaper title like:

“God Protocols on brink of privatising State Gas (Credit) monopolies”

inspired by Nick Szabo and Eric Lombrozo.

This post has elements of cynicism mixed with insights. Readers are left to distinguish the ironies from the insights.

EU Blockchain Resolution

In the EU Blockchain Resolution we Trust

In the EU Blockchain Resolution we Trust 1300 797 Efi Pylarinou

In the EU Blockchain Resolution we Trust

It was my name day on September 20th – a significant day for a Greek Orthodox – but I was by no means going to miss the “Blockchain: Building Trust in Society”event with Dimitrios Psarrakis, a Greek leading specialist in European regulatory policy. This was the first event in PwC Switzerland’s joint thought leadership series with the blockchain hub Trust Square. I was not disappointed; on the contrary, both the speech, the panel discussion with Daniel Gasteiger, Founder, Trust Square & Founder, Procivis, Doris Fiala, Chairwoman, Swiss Control/Parliamentary Oversight Committee & President, Swiss FDP Liberals Women, Guenther Dobrauz, Dimitrios Psarrakis; and the party; were unique.

Greeks built the principles of Democracy. Eva Kaili, is the Greek EU parliamentarian that is leading a team with a mission to raise awareness in the European Parliament on the revolutionary potential of Blockchain and how to grab the opportunity to lead in the 4th industrial revolution with relevant and powerful policies.

EU Blockchain Resolution

At the opening of his speech, Dimitrios Psarrakis, spoke about their team work in the EU parliament to educate, raise awareness and understanding about blockchain. They slowly but surely managed to obtain nearly 750 votes in the parliament for the Blockchain Resolution, a long and detailed policy for the EU which is based on the principle that Blockchain holds the potential to build Trust in our society in a different and better way, at many levels.

Driven by the fact that the internet has been a technological development that has undoubtedly created more convenience and connectivity, but has fallen short in creating more fairness and trustBlockchain presents an opportunity to build trust and fairness in a very different way.

Driven by the belief that Blockchain will restructure several sectors: energy, healthcare, capital markets, Intellectual property etc.; the EU wants to mobilize capital to fund this revolution – the 4th industrial revolution.

The Blockchain Resolution includes several articles and aims to be fully in place in 2019. It has no intention to regulate any instruments – like coins, tokens etc-. It will only regulate the use of them on the newly created platforms. The Blockchain Resolution sees these new digital assets as legitimate instruments and does not attempt to categorize them as securities or commoditiesThe Blockchain Resolution sees them as alternative investments or contractual arrangements. Therefore, applying the Regulation in the EU for alternative investments, which is fairly flexible, is appropriate. The due diligence process on the platforms should be similar to the due diligence process in crowdfunding.

In Europe there is no consensus on the definition of a Security. Europe has MIFID, without a standard definition of a Security.

The Blockchain Resolution sees digital assets as alternative investments and the regulatory framework that applies is fairly flexible. Europe, through the Blockchain Resolution, wants to create policies that will mobilize capital to fund the next wave of restructuring the way several markets / sectors function.

The view of the EU is to present regulatory principles that are Technology neutral, Business-model neutral, and pro-Innovation.

The main principle is to allow for Disintermediation Economics that build Trust.Such economics promise to (a) reduce transaction costs and create new efficiencies, (b) reduce operational frictions by increasing liquidity, (c) automate monitoring processes with limited informational asymmetries (e.g. agency frictions, moral hazard, adverse selection).

The Blockchain Resolution is brave enough to look into the promise of Blockchain for Public infrastructure. The view is to restructure (a) traditional public services like land registries, licenses, certificates etc. (b) ways to reduce tax evasion and fraud, (c) cross-border transactions, regulatory reporting, data transactions between European citizens via smart contracts.

The Blockchain Resolution just got support from the Strasbourg Plenary.

“Blockchain has united this House, as all the parties in the Committee on Industry, Research and Energy (ITRE) voted in favor of the resolution under the principle of being technology neutral and innovation-friendly in Europe.” “One of the core messages of our text was to signify that the European Union aspires to become the global leader in the fourth industrial revolution,” said Eva Kaili.

The European Commission will be next in November at the European Parliament Blockchain event. This will be followed by the Blockchain and international Trade Report. In December, the Crowdfunding Regulation will be updated.

Some of the recommendations that the resolution makes are[1]:


For member States to establish non-profit “innovation hubs” to promote research, education and training among their citizens


For the Commission and ECB to identify dangers for the public and incorporate cryptocurrencies into the European payment system.


To develop technical standards for Distributed Ledger Technologies


Conduct a clear analysis of legal enforceability of smart contracts among EU member States


Decentralize the storage of EU citizens’ data in preventing the misuse of data


Decentralize infrastructure to ensure no monopolies are held, for instance the storage of nodes and servers


Use blockchain for tracking EU funding to achieve greater accountability


Evaluate blockchain-based e-voting systems as a use case for the EU


The creation of funding opportunities from the EIB, EIF and EFSI 2.0


The creation of an Observatory for the Monitoring of ICOs and clarification of utility tokens and security tokens as unique asset classes


For any regulations on blockchain to remove barriers and founded on principles of technology neutral and business model-neutral

We live a world in which Trust is lacking, Trust is being re-defined, Trust has to be re-built.

Are Decentralized Exchanges part of the Bottom-up decentralized monetary policy?

Are Decentralized Exchanges part of the Bottom-up decentralized monetary policy?

Are Decentralized Exchanges part of the Bottom-up decentralized monetary policy? 1000 667 Efi Pylarinou

Are Decentralized Exchanges part of the Bottom-up decentralized monetary policy?

It was 2 days before Christmas that Lykke publicly announced it had to switch to a centralized operational model! Up to then, Lykke could claim to have been the only exchange that was semi-decentralized and charging no commissions to its users. Think of a Robinhood for all fiat foreign exchange pairs plus cross pairs with BTC and ETH; with every user storing their own private keys and Lykke using a multi-signature process for storing client funds. So, if Lykke’s key is stolen, each and every private key would need to hacked to get to the funds. Seems wonderland, doesn’t it? Commission free with the security of decentralized settlement. The only centralized piece was the matching engine that Lykke uses to execute the trades.

This past winter not only brought more snow to Switzerland but also made the blockchain scalability issues show their ugly face and force Lykke to switch to a centralized operational mode, as blockchains became slow and very expensive! “Let’s talk numbers: since Lykke Exchange was launched in June 2016, we’ve seen Bitcoin transaction fees increase by more than 24,000%. In first three weeks of December 2017 alone, Lykke has paid more 45 BTC (around USD 740,000) in fees for offchain settlement channels.” Lykke Changes Operational Mode

Decentralized exchanges (DEXs) have not taken off yet, for several technical reasons around scalability and security. And for the other simple reason, that centralized exchanges (like Coinbase and Binance) can grow so much faster so why bother. Lower hanging fruit always has priority.

#AndTheIronyIs[1] is that several crypto businesses that are scaling fast, as the demand and the supply of digital assets has grown over the past year, are focusing on establishing ties with the conventional system as if they were some Fintech looking for distribution channels, low customer acquisition cost, and offering financial services using somebody else’s license.

Since evidently, so-called professional investors, like financial institutions, asset managers, hedge fund managers, endowments etc and the so-called whales, are not begging for fully decentralized services; why bother to fund such true DEXs?

At last week’s 2-day Crypto Valley conference, the first one that had a full academic track and a focus on research and innovation, there were several 30min presentations from blockchain startups that belong to the Web 3.0 generation. The Lucerne University of Applied Sciences was the facilitator and the IEEE computer society involvement made the event a global bestseller.

Kyber Network was one of them and their CEO and founder Loi Luu gave us a great overview of the DEX space. Evidently, the eye-catcher damaging the reputation of centralized exchanges, are the continuous hacks. However, we must never forget that None of these losses have been socialized, from Mt. Gox to the $530million worth of Coincheck in January 2018.

Some of the DEX ventures that have launched already are:

As most of the insights are out of the talk that the CEO and co-founder of Kyber Network, Loi Luu, gave at the first 2day IEEE of CryptoValley conference last week, I will refer to them in a little more detail (albeit last in the list above).

It became clear to me while listening to Loi Luu, that the devil is in the details, so every time we use the term DEX, we should understand the differentiations and the “degree” of decentralization.

The factors that are relevant are:

  • The user on-boarding requirements
  • The custody of funds
  • The order matching
  • The settlement
  • The liquidity
  • The clients/users

IDEX is an example of a partially decentralized exchange because it takes custody of funds and there is settlement risk with IDEX and order matching through IDEX, however it requires No registration.

0X and EtherDelta are hybrid DEXs because they also require No registration, take No custody of funds, the settlement is on-chain, and order matching is through EtherDelta for EtherDelta, and 0X uses an ecosystem of Relayers (DDExEthfinexRadar, and Paradex). Relayers in simple words, are facilitators for the order book and allow the trade to happen in an 0x smart contract while you remain in control of your private keys (read more here). This latter part makes 0X a hybrid model.

Airswap, is a hybrid P2P DEX, because it has the same characteristics as 0X except it targets P2P users and the order matching is via done via an Indexer (more here).

Liquidity in these DEXs varies. It is high in the P2P DEXs and not so stable in the others.

Kyber Network has a different focus altogether. They want to take on the role of a decentralized liquidity newtork and target not only individual users but also vendors that currently, only accept very few main cryptos. Kyber Network wants to make token swaps an invisible transaction for everybody, be it a wallet, a payment provider, a fund manager, a Dapp, or a DEX. Loi Luu used the example of a OMG token holder that wants to shop from a vendor that accepts ETH only. Kyber Network works with the vendor so that all customers can pay with any token they like, no extra cost, no extra information needed from the client. Same with an app that accepts BTC but client wants to pay with any other token he or she holds.

Melonport, the protocol for fund management of digital assets, that operates with the Melon token, can use the Kyber Network so that fund managers on the Melonport protocol can liquidate and rebalance the portfolio seamlessly.  Kyber Network is the liquidity provider that enables instant token swaps within a wallet, multiple token acceptance for vendors, acts as a market maker to financial dDapps, and increases token usage.

Kyber Network ICO’d last September and has already traction.

Are Decentralized Exchanges part of the Bottom-up decentralized monetary policy?

[1] #AndTheIronyIs is my own Twitter tag, that of course anyone can use anytime, for any kind of incident where the disruptors are choosing to be retrofitted to the status quo.

I started using this tag line during my long talk at #CryptoMountainsRocks in March at Davos, on a “Wall Street perspective of crypto as an alternative asset class”.

It was such a hit, that I decided to keep thinking along those lines.

Misery, Velocity, and the Github for the new financial analysts

Misery, Velocity, and the Github for the new financial analysts 1000 667 Efi Pylarinou

Misery, Velocity, and the Github for the new financial analysts

With or without a Finance 101 course in your history, it is normal to gravitate towards known metrics and analytics for the new asset class of cryptocurrencies and tokens. Technical analysis is being used left and right for long and short-term trends, by all the crypto-exchanges and the new “research” subscription sites. Metrics that can be categorized as fundamental ones are being discussed as we speak on Twitter chats, at conferences and businesses are being built to serve this conventional need. Institutional appetite, the recent surge of M&A between Wall Street incumbents and crypto, increased listings on exchanges of derivative (structured products and futures) is also beckoning for more of the conventional structure.

The market is looking for crypto economists, cryptoanalysts, and all the models, tools and ways that we built over the years for stocks, bonds, derivatives, etc. I shared publicly my thoughts on “A Wall Street perspective of Crypto as an alternative asset class” at the CryptoMountains Rocks unconference in Davos in late March. It had strong elements of a stand-up comedy to make sure that the 40min on stage (stuck in a chair due to my then fresh injury) was not going to put the audience to sleep.

New technical tools from incumbents

From the incumbents’ world, we already have Thomson Reuters that has a developed a Bitcoin sentiment gauge for traders in collaboration with MarketPsych Data, a sentiment analytics company using behavioral economics using NLP and ML. These sentiment gauges will be developed for other cryptocurrencies soon.

Fundstrat Global Advisors, a traditional independent research, and strategy US firm, has developed the Bitcoin Misery Index (BMI) which is designed as a trading tool for investors to take advantage of volatility in BTC exchanges. BMI is calculated on a scale of zero to 100, taking into account factors such as volatility and the number of winning trades out of the total. When the indicator is low, the buying opportunity is at its best, and vice versa. Thomas Lee, the co-founder of FG says “When the bitcoin misery index is at ‘misery’ (below 27), bitcoin sees the best 12-month performance. A signal is generated about every year,” “When the BMI is at a ‘misery’ level, future returns are very good.”

Source: Fundstrat March 9, 2018

Fundamental tools 101

The book of Chris Burniske and Jack Tatar “Cryptoassets: The Innovative Investor’s Guide to Bitcoin and Beyond” published last October is a must. The authors cover the basic fundamental framework for thinking about cryptocurrencies.

First, we all agree that their value has a utility component and a speculative component. You can think as the speculative part, as the number of bitcoins that are held out of circulation as an investment.

The utility component can be captured by estimating the actual usage. For example, if 100,000 merchants are using bitcoin for their international trade transactions and those average 100,000USD per trade; then the number of bitcoins needed are 1.25milBTC (at a rounded price of $8,000/BTC). This is an estimate of the current utility value.

Then, we need to consider the velocity of Bitcoin, much like we look at GDP and divide by the money supply. We can start by making assumptions about the remittance market and if we expect that bitcoin may be used for 20% of that market, then say the global remittance market is 500billion then divide by max amount of bitcoin and get a value. Then assume, bitcoin grabs 10% of the gold market as a store of value, you do the same calculations.

Finally, one has to decide a discount rate. Based on this kind of framework, one can get some theoretical boundary valuations.

The one metric that is now floating around (despite its limitations) is the NVT which is seen as a PE analog from the stock market. The NVT ratio measures the dollar value of a crypto asset transaction activity relative to the network value. This is a simple way to compare how the market values one unit of on-chain transactions across different networks. Generally speaking, a “low” NVT indicates an asset which is more cheaply valued per unit of on-chain transaction volume. The main shortcoming of NVT is that it is lagging and it is not a powerful short term indicator (which, unfortunately, now is more in focus since the speculative component is overwhelmingly higher than the utility component in most cryptos). Willy Woo, who analyses crypto assets discusses thoroughly the nuances around using the NVT ratio charts or the smoothed out NVT signals by Dmitry Kalichki.

More on Fundamentals

Digital Asset Research is a startup that wants to become a top independent cryptocurrency research player.

In their standardized research reports, they include many indicators of the new fundamental metrics. These give metrics around inflation, actual usage from developers, the network, and the competitive landscape. Ivan on tech is not the only one, that has been using raw data and stats from the Github to analyze altcoins.

The first decentralized and or crowdsourced fundamental research platform with data and analytics are just being built as we speak. I will cover these in an upcoming post. If you know of any such ventures, please note them in the comments below.

Notes: Next year’s CryptoMountainRocks is on 21-23 March in Davos of course. Skiing in the morning, talks and battles in the afternoon. Watch the recording of my talk here:

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