Efi Pylarinou
November 3, 2020

Fintech

4 different Digital asset categories in one wallet — The Bakkt App

4 different Digital asset categories in one wallet — The Bakkt App https://efipylarinou.com/wp-content/uploads/2020/11/FI-Baakkt-app.jpg 800 767 Efi Pylarinou Efi Pylarinou https://secure.gravatar.com/avatar/901f8526e9a0f3445aa4dd5241bd8631?s=96&d=mm&r=g November 3, 2020 November 3, 2020

4 different Digital asset categories in one wallet — The Bakkt App

Most Fintech grownups are either focused on retail or serving institutional clients. Today I want to highlight Fintechs that are focused both on serving institutional and business needs, and also retail needs. These Fintechs that aim to create unique ecosystems.

Square is one example with its core offering for merchants that is built around its square hardware for payments at point of sale, and a growing software suite. And it`s Cash App for end-consumers.

Coinbase is another one, with its institutional suite for trading cryptocurrencies and its landmark retail Coinbase app.

Both of these examples are fairly seasoned companies. Square was launched 11yrs ago and is already public (since 2015) and Coinbase is 8yrs old and close to going public even though it does not need it ($547million funding and a valuation of $8B).

Another one that I want to highlight is much younger and upcoming. Bakkt was founded in 2018 and is part of the Intercontinental Exchange (ICE). It has raised $482million already (Series B was $300million in March 2020) and has a valuation of just over $1billion.

Bakkt is in the exchange business with a focus on cryptocurrencies and digital assets. Its institutional offering includes custody and derivatives (futures for now and options) on cryptocurrencies. The current menu includes Bitcoin futures settled in cash and physically.

Its consumer offering is the Bakkt App that includes the capability to buy and sell cryptocurrencies and make payments, but also wallet capabilities for gift cards and loyalty points. And this is where the differentiation starts compared to other crypto wallets — exchange apps.

The institutional part of Bakkt is growing but has still a very small share (less than 2%) of the overall Crypto futures activity which remains mainly OTC (on exchanges like Okex, Binance, and Huobi). The retail app was beta tested with Starbucks app (as an alternative payment) in Spring. The big push on the eCommerce front is clear with the recent acquisition of Bridge2 solutions that ICE completed to support Bakkt App. ICE and Bakkt spent close to $300million to acquire Bridge2 solutions, a Saas loyalty program provider that is well established in the US.

Let me make it clear that the Bridge2 solutions have nothing to do with blockchain and tokenizing loyalty points. The fact that it is behind the scenes powering up the Bakkt App`s reward & loyalty points, does not mean it stores points on a ledger or enables p2p transactions between users.

What the Bakkt app enables end users is first to obtain a simplified and visual overview of their holdings, ranging from cash, cryptocurrencies, rewards and loyalty points, and in-game assets.

The second capability is to spend rewards and loyalty points (provided that Bakkt can grow a merchant network) so that they don’t go to waste (estimated market in the US is c. $160billion). For this functionality, Bakkt acts as an exchange of points into cash charging a small fee to users. End-users wouldn’t mind paying a small fee as long as they save themselves from wasting earned rewards. However, Bakkt needs to onboard merchants and convince them to join the Bakkt app.

The third capability is to send gift cards via an sms much like we send payments these days (in Switzerland where I reside, we use Twint). Also to view balances and spend gift cards.

For those thinking of ICE as an investment not only because it is a fee business with a significant positioning but also as an innovator, there are a few facts that make it look like a decent candidate.

ICE is already held in 185 ETFs and SPY is the ETF that is currently the biggest holder. ETF.com reports that the top 5 ETFs with the largest exposure to ICE are

IAI (ishares of US broker-dealers), CWS (Advisor actively managed ETF), ARKF (Arkinvest Fintech ETF), BLOK (the Blockchain ETF), KOIN (Innovation Next Gen.).

Three of these five ETFs are more focused on innovation.

ARKF holds 3.5% in ICE and it is its 9th top holding just below Adyen.

BLOK holds 3.0% in ICE and it is its 8th top holding just below AMD.

KOIN does not include ICE in its top ten holdings. It is their 16th holding with a 2.82% allocation in their `portfolio`.

12 Thought Leaders Share Insights on Blockchain's Impact on Wealth & Asset Management

Efi Pylarinou
October 5, 2020

Fintech

12 Thought Leaders Share Insights on Blockchain’s Impact on Wealth & Asset Management

12 Thought Leaders Share Insights on Blockchain’s Impact on Wealth & Asset Management https://efipylarinou.com/wp-content/uploads/2020/10/FI-Wealthtech-2020.jpg 800 450 Efi Pylarinou Efi Pylarinou https://secure.gravatar.com/avatar/901f8526e9a0f3445aa4dd5241bd8631?s=96&d=mm&r=g October 5, 2020 October 5, 2020

12 Thought Leaders Share Insights on Blockchain’s Impact on Wealth & Asset Management

Blockchain technology is powering up cutting-edge innovation and experimentation in wealth & asset management. We all acknowledge that digitalization is threatening traditional business models in finance and that it is unstoppable. These threats also present opportunities for wealth and asset managers.

We, The Wealth Mosaic, and I embarked on a journey to provide you with updates and insights on this trend which is evolving, and dynamic. We echo the views of thought leaders and various market players sharing evidence that Blockchain, has the potential to fundamentally change wealth and asset management, both by replacing the infrastructure in the management of existing asset classes and as the backbone for new alternative assets.
We started speaking to players and asking them `How Distributed ledger technology and Blockchain is currently reshaping wealth and asset management? Where is the industry today and how do they foresee things changing in the future?` Along with the products and services of the participants, this inaugural report includes a thought leader from each company that shares her/ his views on these questions.
Now is the time for the wealth and asset management industry to start preparing for the changes in business process and in investment products that are coming from the adoption of Blockchain technology. Surely, some of these will come later and some are already here. Regulation and mass scale adoption takes time. In the current environment, things happened slowly, gradually, but then Suddenly. So, keep learning, understanding the changes that are underway.
The report can be downloaded here. It includes, opinion pieces from ARK Investment Management, the manager of the first ETF that included Bitcoin in its holdings in 2015, and from MAMA, the Multichain Asset Managers Association, a trade association focused on the development of on-chain management.
In this report, we profile 10 solution providers from across the globe, with participants based in Switzerland, Liechtenstein, Luxembourg, the UAE. The companies are — Area2Invest, Chainalysis, Consensys, CrescoFin, DSENT, FiCAS, FundsDLT, Lykke, SEBA Bank, and Securrency.
As this is the first report on this topic it is by no means covering all the activity in the area as the space is evolving fast, with some subsectors maturing (e.g. custody), and other nascent ones emerging (e.g. DeFi — Decentralized Finance). Given the level of innovation in this area, we plan to publish updates and/or sequels to this report on an on-going basis and will make this an annual WealthTech Views report for the sector.
The Wealth Mosaic is the digital marketplace & intelligence resource for the global wealth management sector.Dr. Efi Pylarinou is an ex-Wall Street professional who has become a thought leader and recognized global influencer in Finance.
We hope you enjoy reading the report and look forward to hearing your thoughts. We are committed to building bridges between the old and the new economy. We believe in the fusion of technological innovations in financial markets, in ways that benefit the end customer and the entire ecosystem as a whole.
If you are a solution provider in this space and would like to feature in any of the updates, please do not hesitate to get in touch.
Efi Pylarinou
Founder, Efi Plyarinou Advisory
connect@efipylarinou.com
Simon Ramery
Co-founder, The Wealth Mosaic
simon@thewealthmosaic.com

Efi Pylarinou
March 8, 2019

Blockchain – Crypto

A world of #WhenBinance & #WhenSIX

A world of #WhenBinance & #WhenSIX https://efipylarinou.com/wp-content/uploads/2019/03/4-logos-stock-exchange.jpg 1200 800 Efi Pylarinou Efi Pylarinou https://secure.gravatar.com/avatar/96dce27466844b3fa11db86eaa9f0858?s=96&d=mm&r=g March 8, 2019 April 9, 2019

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.

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 Harbor, Dharma, 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

Efi Pylarinou
March 18, 2018

Blockchain – Crypto

Without any permission, experimenting with tech for decision making on a global scale

Without any permission, experimenting with tech for decision making on a global scale https://efipylarinou.com/wp-content/uploads/2018/03/zurich-cityscape.jpg 1000 667 Efi Pylarinou Efi Pylarinou https://secure.gravatar.com/avatar/70a8bd2d4afea9141943a58181ea9d74?s=96&d=mm&r=g March 18, 2018 August 8, 2018

Without any permission, experimenting with tech for decision making on a global scale

The Blockchain Leadership Summit at the Dolder hotel in Zurich last Friday, was an amazing international experience. Immersed in the stunning art installations of the Dolder hotel; amongst an international crowd from Russia, Kazakhstan, Liechtenstein, the Americas,…; and with panel discussions on a variety of short-term and longer-term topics of concern. Organized by Innmind, a global community of all stakeholders in the startup scene, and in partnership with Kickico

I had the pleasure to participate on a panel on the broad topic “Blockchain financial and social implementation and impact. How can the world benefit from the implementation of new technologies?”. Even though we had 40min, a wonderful moderator, Tanja Schug from Brand-Trust, and a diverse group of panelists (William Mougayar, Marc Taverner – Bitfury, Olinga Taeed – CCEG, Mauro Casellini – Bank Frick) there was so much more that we could have discussed.

In this post today I will zoom in and zoom out on a few insights that the Blockchain Leadership Summit triggered as I prepared for the panel discussion.

We are already better-off

The impact of blockchain technology has already arrived and can be measured by the mere fact that

an increasing part of human resources are devoted to thinking, experimenting, building upon the seeds of the Bitcoin blockchain, without permission.

The driving force of this reality is

the consensus that “We are not able to make decisions on a global scale”

(simple or big ones like solving poverty, climate even though we have the resources) with the current societal structure. Our civilization to date is based on collaboration processes that are central (e.g. corporations, governments, institutions etc) and even though we have adopted the internet as a global tech enabler for communication at scale, we have not yet found a tech solution to scale TRUST and decision making.

In a nutshell, this is what Blockchain is promising us. And even if the current Blockchain platforms aren’t adopted at mass scale, there are enough futurists, engineers, and entrepreneurs that will figure it out eventually.

This genie is out of the bottle too. We are steadily marching towards a different way of collaborating and organizing our processes as a global society. Luckily, blockchain technology includes a funding solution too and we also have capital increasingly investing and hoping to capture “the decentralized” technology that will be the tech solution to scale TRUST and decision making.

We are already investing in finding the tech solution to scale TRUST and decision making.

Open source innovation at scale

Blockchain is shifting us into a Linux kind of world on multiple fronts. A 10yr old freemium idea, the Github, is now not only a profitable business but a great example of “network effects and a marketplace” that has been growing organically (like in nature). Two massive asset classes are the result of this, (1) a code repository to tap into any kind of project (79mil), (2) a global decentralized social network of computer engineers and private companies that interact (28mil developers, 117k companies) (3) a powerful open-source database for due diligence and analytics on ICOs. The overhead of managing patches, versioning and hosting are all taken care of by GitHub. There is a business offering for developers, teams, and enterprises that offers an efficient way to manage projects and develop software. Ivan on tech and others are using raw data and stats from the Github to analyze altcoins.

Welcome to the new emerging era of low cost, non-chaotic (no versioning, patching, hosting nightmares) open source software a la Github (public or private)!

A de-risking technology for the finance industry and other regulated industries

Our memory of the structural problems of the financial industry that led to the subprime crisis and its consequences are not fresh but they are painfully present. One of the top five contributing factors was the huge web of complex financial products (like CDOs, CMOs, CLOs) and the related collateral management and counterparty risks that were out of control. When I say “out of control” I mean that issuers, investors, and regulators were unable to have reliable data and thus any risk management capability. Goldman Sachs had at the time its own relational database (graphic database) that gave them a huge advantage in figuring out within a day or two their exposure and managing it better than others.

Imagine a world that international regulatory standards (whether from the BIS or in another way) require all financial institutions to adopt blockchain technology for all over the counter financial structures, all SPVs and trusts. The process has shyly but surely already started with the fairly standardized but still OTC, Swaps and derivatives world.

Last August, ISDA (International Swaps and Derivatives Association) in collaboration with the global law firm Linklaters released a whitepaper with the legal considerations for the application of executable distributed code contracts (EDCCs) (i.e. smart contracts).

Vitalik Buterin himself has touched upon how CDOs (Collateralized Debt Obligations) can be launched on the blockchain so that the risks associated with the “traditional structure” are mitigated. CDOs are tranches created from a pool of similar loans (e.g., mortgages, car loans, student loans). The tranches created have different seniority levels and risk profiles. In the traditional structure, there were too many intermediaries involved and an opaque structure that resulted in a disaster when the markets turned sour.

The Dharma protocol (covered last month in Bonds & loans on the Blockchain) can be used for CDOs – Building Collateralized Debt Obligations with Dharma Protocol.

CDOs on the blockchain are one example of automating Trust at scale and de-risking the financial system.

Startup pitches

The BLS conference was packed with panel discussions and parallel workshops (Polyswarm, ByteBall, NiceHash) and startup pitches in the afternoon. The winners were (No.1) LiveTree Adept and (No.2) Digipharm. LiveTree Adept, a blockchain use case for the film and TV industry with the mission to empower and reward the creators of such content and the viewers. Digipharm, a healthcare blockchain use case taking aim at the problem the burden on health systems, the risk of patients being denied innovative treatments, and the barriers to reimbursement for manufacturers.

And two special prizes (Lakeside Partners training) were decided by the jury on the spot, for Wunder and PhotoChain. PhotoChain is a blockchain use case for digital stock photography and Wunder is a blockchain use case to build a decentralized art museum for digital art.

Sources of inspiration: (a) Thought leadership from Antonopoulos: The Courage to Innovate Without Permission (b) Use the Github to analyze: Ivan on Tech youtube

Disclosure: I am an advisor to the Wunder project launched out of the IconiqlabGerman accelerator. Wunder will be the token that will allow Artplus (a startup from Belgium) to integrate their business on the blockchain and create a marketplace for digital artists, collectors, galleries, curators, advisors, art fairs and enthusiasts in the new media art industry (video, sound, etc).

Blockchain