Finance

Data Centers, AI and finance

Data Centers, AI and finance

Data Centers, AI and finance 800 533 Efi Pylarinou

Data Centers, AI and finance

Future data centers of all kinds will be built like high performance computers,” — Nvidia CEO Jensen Huang 

We are living in a world in which, more or less unconsciously, we increasingly “Trust in Math”. After the GPU adoption in business, we moved to new hardware that is not only faster but also smaller in size. We basically reinvented how data rooms looked.  

And this the world from Nvidia’s angle. They have facilitated the growth and new value creation, all powered by Artificial intelligence tools.  The use cases in Finance are immense. Fintech solutions for:

  • Operations: automating claims processing and underwriting in insurance
  • Customer service & engagement: alerting customer for fraud, chatbots, recommendations
  • Investing/Trading: automating research, trading signals, trading recommendations
  • Risk & Security: fraud detection, credit scoring, authentication, surveillance
  • Regulatory & Compliance: AML, KYC, automating compliance monitoring and auditing.

Marc Stampfli, the Swiss country manager at Nvidia shared the journey of the Artificial Intelligence Fall, Winter and into Spring, during his talk at the Fintech+ conference last year in Zurich. He explained neural network concepts borrowed from biology and the initial difficulties of neural network computations outperforming statistical approaches. The first tipping point came with increased data availability through the internet, and only then we had evidence that neural networks could outperform statistical models.

Data Centers, AI and finance

After that point, we ran into the next problem which was the lack of computing power to process all this data and multi-layer neural networks. And this is where GPU – a kind of parallel computer – was created and first used in vector mathematics. This is the technology of Nvidia’s processor.

The next inflection point came with the use of GPU to accelerate the next generation of machine learning algorithms. This led to an explosion of AI research, development and application, all powered by NVIDIA.

Today, NVIDIA is turning into a data center company. This positioning has become evident with NVIDIA’s announcement to buy the data center networking company Mellanox for $6.9B. This is the first large size acquisition for NVIDIA and one that is in alignment with their belief that Datacenter will play an ever-increasing changing strategic role whose architecture will need to be agile and scalable.

“Future financial service centers will be powered like high performance computers”.

2020 is only a year away. In March NVIDIA`s GPU Technology Conference (GTC) is the place to hear use cases and innovative approaches to AI from some of the world’s largest financial institutions at GTC.

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.

Who is redesigning financial services?

Who is redesigning financial services? 1000 624 Efi Pylarinou

Who is redesigning financial services?

Simon Sineck says that you always have to start with the “Why”. True, but for the digitization of financial services, we have already answered the “Why redesign financial services”. The “Who” and “How” is a work in progress. The “Paradeplatz meets Silicon Valley” event in Zurich last week, organized by RFS, was an opportunity for me to think around this multi-faceted topic. My insights today are by no means an attempt to cover it all but to shed light and a few noticeable trends.

This is Switzerland, the small country in which Swiss banking contributes around 80billCHF to the Swiss GDP. This includes banks and insurers, that account for nearly 10% of GDP. Despite the fact it has been declining, it is still much higher than several G20 countries.

As I reflect on whether Swiss Banks and Insurers, are the ones that are taking the lead in redesigning their businesses; the answer is that they are not. This is in alignment with the fact that Swiss Banks and Insurers understand their businesses very well but only Backwards (as Dan Kimeling, of Deciens Capital said). They are not those that foresee and shape the future of their businesses. They are not pushing their own thinking and challenging their current offerings like Google X does. They are trapped still in the mode of growing their market power by acquiring more assets to manage. They are not in the mode of acquiring human resources, IP, and investing heavily in being in the flow of innovation wherever it is happening, in whatever way. There is no Goldman Sachs in Switzerland. Meaning, there is no boutique, brand investment bank, that is in the flow of it all. With Marcus, with Honest Dollar, partnering with Betterment, investing in Kensho, with and Circle & Poloniex. There is no BBVA here. There is UBS and SwissRe, but not as aggressive and with no sense of urgency.

Switching over to the firms that have been in the financial software business, like Salesforce, they are the ones that are powering the Software as a service (Saas) model and becoming platforms which integrate the scattered Fintech innovations. They are the ones that have the distribution channels and can “save” their clients (the banks and insurers) the resources and time, needed to integrate. Switzerland does have a Salesforce and a Finastra of its own. Temenos and Avaloq are the ones that redesigning financial services. At “Paradeplatz meets Silicon Valley”, Francisco Fernandez, co-founder and ex-CEO of Avaloq reminded me of several Fintech innovators that are already integrated on their core banking.

IBO – TheScreener  –  Spitch – Sanostro

Avaloq’s app store and developer portal, is already 3yrs old and includes over 90 apps or Banklets as they call them, for a diverse use (PFM, payment mgt, alternative investments, asset & market info, etc) and through their recent strategic investment in Metaco, they also offer custody solutions for crypto assets that can be integrated in a bank’s core system (SILO). Will the clients rush and buy from such Saas providers? The signs here in Switzerland are not that encouraging. The offering is there, it is a work in progress but the buyers have to make the strategic decisions. The bottom line issue is that IT people in banks and insurance companies are not the majority on the Boards or at high-level management. Martin Naville, CEO of the Swiss-American Chamber of Commerce, highlighted this issue when he was discussing on stage the successful case of Swissquote. This is a 30yr old Swiss listed company that merits to be called a Fintech focused on online financial and trading services. With robo-advice, e-mortgages, e-forex, and crypto offerings, Swissquote is the leading online banking /trading platform in Switzerland and has even established partnerships with banks that are white labeling their technology (e.g. Postfinance e-trading powered by Swissquote).  Their annual conference in collaboration with EPFL is a unique combination of academics and startups. What is the main reason that a 30yr Swiss bank, is an unstoppable leading innovator in online financial and trading services? It is a business founded and managed by engineers.

Technology and data parlance is built-in organically in their board meetings and amongst all their decision makers.

If you come from that angle into today’s reality, then you can cannibalize your business offering; you can even “hire the young to teach the old”. Anyone 35yrs and up, can qualify as old actually and can benefit hugely from being mentored by the young. Young people get it, how Revolut is acquiring 10,000 customers a day and is only 2.5yrs old. I get it too, because it took me a few minutes to open a business account on Revolut this past weekend which is open 24/7.

RFS by Who?  –  (Redesigning Financial Services)

Here in Switzerland, it is the seasoned financial services businesses that are overweight engineers that are pushing the status quo to change. The redesigning of financial services can happen from the Avaloqs or the Swissquotes. These are those transforming into Saas platforms for B2B penetration or those growing fast their digital offerings for B2C and at the same time white labeling their technology to other players (B2B2C) and revenue sharing.

However, if the banks don’t “buy” into all this, then these offerings will be exported and German or African or Middle Eastern banks and insurers will digitize faster than the Swiss. At the same time, there is still one major factor that the Swiss ecosystem has not leveraged enough, and which may turn all the above into a tale much like Aesop’s “The Tortoise and the Hare” race. What is this underutilized X-factor?

Swiss data protection laws, coupled with the unstoppable Transparency trend

Regulation has more or less shaped the dominant technology, in all innovation cycles (inspired by Guenther Dobrauz, PWC partner).

The place to Open Transparency centers that enable international stakeholders to review the vetted offerings, is Switzerland.

With the toughest data protection laws, quality control is essential. At the end of the day, this is how the Crypto ecosystem scaled in the Alps. One of the tipping points was when foreign businesses moved here.

Financial services will become invisible and intertwined with IOT. Whether you enter and exit a parking lot and payment is done; whether you send money or borrow money with an SMS; or your online financial advisor keeps you intact with your long term goals; or your insurance claim processing is done with two swipes; it will be all about Data quality and trusting the code that connects behind the scenes the devices and the service providers. IOT and invisible finance, is no utopia. It is happening as we speak. Switzerland can be the home of Open Transparency centers for all data used for the networks that will link invisible finance via IOT and make it all a reality. Regulators and entities like governments, agencies or corporates will be able to review and monitor these invisible business processes (data & code).

It was Kristine Braden, the country officer of Citibank, that opened her keynote with the FT headlines about “Spying fears prompt Russian software company move to Zurich” at the RFS event in Zurich and highlighted Kaspersky’s decision to move to Zurich and open a Transparency center for their antivirus software. This is a facility where trusted partners and government stakeholders can review the Kaspersky products’ source code as well as the tools they use.

Robert Ruttman, founder and CEO of RFS, and head of Customer Insights for FS at the Institute of Customer Insights at the University of St. Gallen; is always smiling, full of energy and a host on stage. As I walked out if the Aura hall at the end of the first  day of the RFS event, I thought:

RFS by Who and How?

Secure invisible finance in an IOT environment hosted out of Switzerland! The locals don’t see it yet. Maybe the “foreigners” do and will start moving here and that can turn Switzerland into the hub for secure, transparent centers because everybody gets it: Tough data protection can work magic within a transparent environment.

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