The Crypto sector – the biggest challenge and what the smartest people are thinking about it

The Crypto Sector FinTech

So by now, I think we all have heard of the blockchain, ethereum, bitcoin also known as the ‘crypto’ industry. It is growing big. It will grow even bigger, however, like with any growth story, there are crucial challenges that have to be overcome. One particular challenge is scaling. Fred Ehrsam in his post ‘Scaling Ethereum to Billions of Users’:

“Everything will be tokenized and connected by a blockchain one day. Scalability is the crux of that journey at the moment. Ethereum is orders of magnitude off from being able to support applications with millions of users at the moment. Yet in true decentralized fashion, there are a diverse set of efforts attempting to solve that problem. The biggest bottleneck to solving scalability is the number of people working on the problem. If current efforts are well-executed, Ethereum could be ready for a 1–10m user app by the end of 2018.”

There are a number of efforts that are underway to solve this conundrum, but they take it and have some of the smartest people on the planet working on them. What is best is that we finally have a way to monetise and reward these efforts – crypto tokens. As Chris Dixon puts it:

“Crypto tokens are currently niche and controversial. If present trends continue, they will soon be seen as a breakthrough in the design and development of open networks, combining the societal benefits of open protocols with the financial and architectural benefits of proprietary networks. They are also an extremely promising development for those hoping to keep the internet accessible to entrepreneurs, developers, and other independent creators.”

All these new advancements in the crypto sector have drawn a lot of media attention. And investors. The value of bitcoin has soared more than 200% in recent months. Even The Economist, a rather conservative magazine, often features articles on cryptocurrency and bitcoin. Recently, The Economist has raised a very valid question – more often than not, the word “bitcoin” now comes attached to the word “bubble”. But the question of what has driven up the price is important. Is this just a speculative mania, or is it evidence that bitcoin is taking on a more substantial role as a medium of exchange or a store of value?

There are other big challenges too, particularly computing power. And when it comes to computing power, the next big thing is quantum computing and Moore’s law. Vijay Pande explains how Moore’s law will be even more effectively:

“Classical computers thrive on the curve of Moore’s law, with performance roughly doubling every year; after n years, classical computers are 2^n times faster. This means we’ve seen roughly a 1000x increase in computing power in under a decade. In the quantum hyperscaling Moore’s Law, the speed of a quantum computer is exponential in the number of coherent quantum elements or “qubits” — that is, 2^q. But successfully incorporating technological advances in using silicon technology would enable the qubits themselves to follow Moore’s law (q = 2^n)… making the resulting performance power of the quantum computer 2^2^n. This means that the performance of quantum computing is exponentially more rapid than Moore’s Law. It’s as if Moore’s law itself sped up like Moore’s law.”

Finally, the use of the ‘crypto’ infrastructure will go far beyond financial transactions. Chris Dixon has written previously:

“Bitcoin was introduced in 2008 with the publication of Satoshi Nakamoto’s landmark paper that proposed a novel, decentralized payment system built on an underlying technology now known as a blockchain. Most fans of Bitcoin (including me) mistakenly thought Bitcoin was solely a breakthrough in financial technology. (It was easy to make this mistake: Nakamoto himself called it a “p2p payment system.”) In retrospect, Bitcoin was really two innovations: 1) a store of value for people who wanted an alternative to the existing financial system, and 2) a new way to develop open networks. Tokens unbundle the latter innovation from the former, providing a general method for designing and growing open networks.”

And the new ‘killer’ app could be anything. Fred Ehrsam argues it may be VR, it could be anything else.

Deep-dive into the world of AI from a FinTech Lens

Deep-dive into the world of AI from a FinTech Lens

AI has reached has finally reached its tipping point.
“The technology has finally reached its tipping point, AI, and its close relative machine learning, have taken a variety of industries by storm, bringing self-driving Ubers to the streets of San Francisco (and then carting them away); robotic vacuum cleaners to dirty household floors; and natural language processing to chat bots and IVR communications. With AI already embedded into these industries, it’s easy to find examples of how the technology is shaping fintech.” – A Fintech Filter for Artificial Intelligence in 2017 by Julie Muhn (@julieschicktanz)

The goal of AI is not to replace the human in the first place, but rather to remove the repetitive and time-consuming robot-like tasks from the stack and to empower the insurer to be more human again. 
“To make reliable predictions AI needs, apart from a clearly formulated question, are masses of clean data to learn from, highlighting another challenge for insurers, namely data quality, privacy issues and the integration into legacy systems. It is easy to let these challenges cloud our sight for the opportunities that lie ahead. With AI we can automate major parts of the process. The goal is not to replace the human in the first place, but rather to remove the repetitive and time-consuming robot-like tasks from the stack and to empower the insurer to be more human again.” – Artificial Intelligence: the new kid in town by Insurers.AI

Even though AI feels like it’s going mainstream, consumers don’t yet fully trust it.
“Artificial intelligence is booming. The success of Amazon Echo and Google Home smart speakers show there is a healthy appetite for AI assistance. Autonomous, self-driving cars are in being tested by the likes of Google and Tesla. AI-powered platforms such as IBM Watson and Wipro Holmes are able to diagnose cancer, analyze retail data, and communicate through ordinary spoken and written language. But even though AI feels like it’s going mainstream, consumers don’t yet fully trust it. A study of more than 12,000 people in 11 countries reveals that people aren’t quite ready to surrender control to silicone and microchips. Research reveals a lack of understanding and trust in fintech that is stalling mainstream adoption of innovative new services which could make millions of people’s daily lives simpler and more secure.” – Rise of the Machines? Consumers Say They Don’t Trust Financial AI By Jeffry Pilcher

The real threat of artificial intelligence is not a cyborg armageddon but unprecedented economic inequalities and even altering the global balance of power.
“Too often the answer to this question resembles the plot of a sci-fi thriller. People worry that developments in A.I. will bring about the “singularity” — that point in history when A.I. surpasses human intelligence, leading to an unimaginable revolution in human affairs. These are interesting issues to contemplate, but they are not pressing. They concern situations that may not arise for hundreds of years, if ever. At the moment, there is no known path from our best A.I. tools (like the Google computer program that recently beat the world’s best player of the game of Go) to “general” A.I. — self-aware computer programs that can engage in common-sense reasoning, attain knowledge in multiple domains, feel, express and understand emotions and so on. This doesn’t mean we have nothing to worry about. On the contrary, the A.I. products that now exist are improving faster than most people realize and promise to radically transform our world, not always for the better. They are only tools, not a competing form of intelligence. But they will reshape what work means and how wealth is created, leading to unprecedented economic inequalities and even altering the global balance of power. Or to put the matter more optimistically: A.I. is presenting us with an opportunity to rethink economic inequality on a global scale. These challenges are too far-ranging in their effects for any nation to isolate itself from the rest of the world.” – The Real Threat of Artificial Intelligence by By Kai-Fu Lee

Second and third level consequences of crypto-revolution – do we know what they are?

FinTech Cryptocurrency Revolution

Cryptocurrency is becoming somewhat of a hot buzzword these days, however, I think it can go beyond the buzz and add real value (see the summaries below). There are many industries that it will impact directly, one great example would be law or peer-to-peer (P2P) industry. However, one thing we understand little of still is the second/third level impacts that it will bring, i.e. how a more modern/flexible law system will affect our lives or decentralised P2P system (i.e. Airbnb/Ebay/Uber) will transform the way we transact. Are people even going to own houses or a smart contract will manage the crowdsourced ownership and it will be rented out Airbnb-style with the profits shared among many ‘investors’ that is easily tradable? This would change property as an asset class dramatically, transforming it from a very illiquid to extremely liquid investment.


Ethereum Market Map — June 2017
By Jordan Odinsky

Facebook, Amazon, Airbnb, and Uber all played a role in shaping the way people view the world. They made it normal to share moments and thoughts online. They taught us that it’s okay to hop into a stranger’s car or even sleep in their spare bedroom. They forever changed the way we purchase goods and services from one another. And I believe that blockchain technology will be the next innovation that changes the way we think about and interact with the internet. I believe that Ethereum has the potential to overtake Bitcoin as the digital currency and framework of the future because of its strong developer ecosystem, coding simplicity, and the variety of applications that can utilize smart contracts.


Tokenomics – A Business Guide to Token Usage, Utility and Value
By William Mougayar

Despite the incredible amount of attention and material written about cryptocurrency tokens, there hasn’t been a good mainstream definition of what they are. In the technical realm of the blockchain, the concept of a cryptocurrency token is well understood. It represents a programmable currency unit that is bolted to a blockchain, and is part of smart contract logic in the context of a specific software application. But in the non-technical arena, what is a token, really? A token is just another term for a type of privately issued currency. Traditionally, sovereign governments issued currency and set its terms and governance; in essence directing how our economy works with money as the exchange medium for value. With the blockchain, we now have new types organizations (and soon, more of the existing type) who are issuing their own currency in the form of digital money as cryptocurrency, and they are setting their own terms and rules around its operations, in essence creating new self-sustainable mini-economies. A unit of value that an organization creates to self-govern its business model, and empower its users to interact with its products, while facilitating the distribution and sharing of rewards and benefits to all of its stakeholders. 


Universal Basic Income: The Potential of Cryptocurrency
By Albert Wenger

Universal Basic Income is essential to getting from the Industrial Age into the Knowledge Age. Basic income gives people economic freedom, which is essential if we want them to freely allocate their attention. Much of the writing on that to date, including my own, has taken the approach of looking at existing budgets and figuring out how to rearrange them. That, however, is thinking too narrowly. Instead, I am now convinced that the right way to implement a Basic Income is through changing how money is created. At present most industrial economies use some form of fractional reserve banking. Commercial banks can create extra “money” in the economy in the form of credit as they only need to keep a fraction of their deposits as a reserve. Central banks have also used other mechanisms to provide liquidity to commercial banks, especially following the 2008 financial crisis. An alternative approach would be to move money creation the individual level by issuing a basic income. This is variously referred to as helicopter money and quantitative easing for the people. One exciting potential of crypto currencies is that they could make it much easier to build such a system.


What is Coinbase’s strategy?
By Brian Armstrong

At Coinbase, our mission is to create an open financial system for the world. We believe that open protocols for money will create more innovation, economic freedom, and equality of opportunity in the world, just like the internet did for publishing information. However, an open financial system is difficult to get started because it requires a network effect. Every transaction requires both a sender and recipient who are willing to use the new system. To overcome this, our strategy is to draw new users into the digital currency space via an initial use case (investment, or currency speculation) that does not require a network effect. This will create the critical mass of people required for the network effect to develop.

A world without money, AI and promise of big data, blockchain control and next gen finserv – FinTech Summary 80

FinTech Summary 80

This Monday we had our first Fintech dinner and I’m pleased to say that it was very successful. I was so impressed by the people attending, thank you very much for making it happen, and for reading fintech summary! We all learned something new, met someone fascinating and had fun in the process. While this was the first, it certainly won’t be the last fintech dinner. Just reply to this email if you want to join the list to attend any of the future ones. I’ll keep you in the loop 🙂

Thanks for reading; YOU are awesome! Just hit reply if you want to get in touch 🙂

Have a wonderful week,


A world without money
By Chris Skinner

Before this seismic change, money didn’t matter. We shared beliefs that allowed us to live together in relative peace, but the creation of money changed the balance of humanity. Some of us became more powerful, whilst others weaker. In fact, the biggest change between the first age and the second age is that it is no longer muscle that wins. It’s brains. The reason I’m writing this is that I’m wondering about the future of money. If money is a myth, created by governments to control the masses.  Then what happens if we have no money in the future? Stripping the world of the wealth focus and monetary controls could be an interesting future nirvana … or it could be anarchy and destruction.


Artificial intelligence: fulfilling the failed promise of big data
By David Weldon

The topic of artificial intelligence is dominating discussions of data management this year. But while a growing number of organizations are interested in AI, many don’t fully understand what the technology can do to help boost their customer engagement or the bottom line. AI promises to automate the process of understanding customers and anticipating their needs, then delivering the right experience to them at the right time. Organizations are hoping to impact the top line by acquiring new customers and increasing the value and lifetime of existing ones, and they’re hoping to impact the bottom line as well by reducing costs through automation. The primary challenge is and will always be the data. Data is the lifeblood of AI.


Who controls the blockchain?
By Patrick Murck

Blockchain networks tend to support principles, like open access and permissionless use, that should be familiar to proponents of the early internet. To protect this vision from political pressure and regulatory interference, blockchain networks rely on a decentralized infrastructure that can’t be controlled by any one person or group. Unlike political regulation, blockchain governance is not emergent from the community. Rather, it is ex-ante, encoded in the protocols and processes as an integral part of the original network architecture. To be a part of a community supporting a blockchain is to accept the rules of the network as they were originally established.


Financial services – the next generation … where is it?
By Chris Skinner

We have three major fintech models, each with their own unique blend of thinking. You have the Legacy West, the Growth East and the Innovative Emerging. If you’re looking for the next-generation financial system, you definitely will not find it in the Legacy West. That will show you the next generation of the existing system. You need to look to the emerging markets specifically, as they’re leapfrogging all of us. A great example is that the emerging economies will show us the next digital identity scheme, as this is critical to inclusion.

How has fintech transformed regulator – proactive vs reactive approach

Proactive regulator fintech

Regulators perceived slow, inefficient and reactive. This would be best visualised by 1000’s of pages long tomes of regulatory frameworks such as Dodd-Frank Act. However, the role of the regulator has changed significantly. The regulator is under a constant spotlight to make sure that financial crisis of 2007 does not repeat itself. Equally, it is pressured to foster innovation, which, in turn, fosters competition. Having many small players reduces system risks and is fairer to the customer.

To do this regulator can’t simply be reactive anymore, i.e. you mis-sold insurance products – pay a fine and refund customers. The regulator is encouraged to become much more proactive to prevent the misconduct from happening in the first place. For this, the regulator needs to have a hand on the pulse of the market, lots of data and access to the innovators of tomorrow. Sandbox by the Financial Conduct Authority (FCA) is a great example of embracing forward-looking innovation. However, a sandbox is as much of proof of concept for the regulator as it is for the startups. It serves as a forum for discussion, a way to capture data and keep a hand on the pulse of cutting-edge innovation. Arguably, because of this the regulator will be much better positioned to take action when its needed next time.

Thanks for reading; YOU are awesome!

Have a wonderful week,


Brexit is not the death knell for UK fintech
By Oliver Bussmann

To be clear, I’m not saying that Brexit has sounded the death knell for UK fintech. Quite the contrary: there will doubtless be opportunities as well as challenges. Outside the larger EU framework, the UK government may have more room to introduce fintech-friendly regulation, or pursue policy to make it easier for these firms to find financing. It would also find it easier to enter into bilateral agreements with other countries. If the UK can, for instance, get closer to the US administration on the fintech topic, bringing each country’s fintechs and investors closer together, UK fintechs would no doubt profit. The shock may also prove to be a catalyst, pushing UK-based entrepreneurs and tech talent to work harder to produce the increased efficiencies and lower costs that fintech promises. Yet, there’s no doubt that Brexit has upended the apple cart. As long as the current uncertainty remains, concern is more than warranted.


Bitcoin vs Gold: which is a better long-term bet?
By Aaron Stanley

Imagine that you have $100,000 at your disposal. You must spend all of it on either bitcoin or gold – no mixing and matching – and the assets will then be stored in a trust that cannot be accessed again for 50 years. Which option would you choose? With the two commodities now in roughly the same price range, it’s worth putting aside some of bitcoin’s short-term volatility and liquidity concerns to compare them as long-term stores of value side by side. Sure, you might argue bitcoin is newer and flashier, and that it has arguably more utility in the digital era than gold. But, gold has the indisputable track record, having been a cherished store of value for thousands of years across human civilizations. However, bitcoin’s traits have led to those backing the cryptocurrency to believe it could potentially unseat gold over the long haul.


What does FinTech investment success look like?
By Rupert Bull

CBInsights quote “Venture Capital Funnel Shows Odds of Becoming a Unicorn Are Less than 1%” seems to imply everything else is failure. I strongly disagree. They reinforced this impression by saying further down in the article “70% of companies end up either dead, or become self-sustaining (maybe great for the company but not so great for investors).” This is wrong. I think FinTech investment success means creating a self-sustaining company. Becoming self-sustaining is good for the founders, the early stage investors and the employees. It is also good for the broader economy if more companies survive and grow – just think of all the spin off professional service revenues that ensue. If this were to happen at scale it would also mean less capital was wasted and therefore less capital would need to be raised and invested.


Rethinking capitalism with the blockchain – part II
By Kary Bheemaiah

As we move into a more digital world with faster technological evolution providing strong headwinds of change, it is important to realize that adapting to this change will not simply be a case of investing in the new tool or updating one’s skillset. Capitalism has always been a renegade, whose greatest impacts have been born out of conflict and change. At every turn, this has required that tough questions be asked, and our notions and conceptions be rewritten. If we are to continue growing with hedonistic sustainability, we need to better understand capitalism. The unison of complexity economics and the blockchain is a step in that direction and will entail the creation of new cultural forms, institutions and a new vocabulary for education. But with a better understanding of capitalism, people in democracies can play a much more positive and vigorous role in shaping their economic institutions. There would be no capitalism without a culture of capitalism and there would be no culture if the existing ideologies were not challenged and overcome. At a time when information is so abundant that we can get the answer to any question, the real responsibility becomes asking the right question. If we fail to ask these questions and leverage the power of decentralization and transparency, we risk starting a conversation with the next generation by beginning with an apology.

Why bankers like sour grapes; bank-fintech partnerships that work; bitcoin fork – FinTech Summary 76

fintech bankers sour grapes

A few weeks back I have mentioned about a small FinTech dinner I’m hosting. We have an impressive group of people who have expressed interest in joining. I have one more slot left, let me know if you want to join. The dinner will be in London, at some point in April (we’ll agree on the best date with the group).

I’m planning to host this every month so even if you can’t make April let me know and I will add you to the list.
Thanks for reading; YOU are awesome!


Making a bank-fintech partnership actually happen

By Anna Bennett

It’s no secret that fintech companies can easily get caught between a rock and a hard place when trying to grow their businesses. They know that getting their proposition into a bank is likely to be the only realistic way to achieve mass market scale and, crucially, deliver their backers the returns they expect on their investments. But they also won’t have to go far to find a fellow fintech with grisly war stories to tell about the bitter and brutal experience of trying to navigate a bank’s due diligence process, and demonstrate that they are fully compliant with all relevant regulations. Some fintechs have been broken entirely by the process, and plenty of others brought close to the brink. But why is the process such a nightmare and what practical steps can fintechs take in order to minimise the risks, maximising their chances of securing a business-defining deal with a bank?


The banker and the sour grapes
By Duena Blomstrom

Fintech these days has become like an immensely fast-paced game with absurd levels of difficulty thrown in for ever-diminishing (or at least largely unclear) pots of gold. No one has to bear the stress more than those working in large incumbent banks. I’ve said this many times before: no other industry behaves quite like ours, or has been affected by the sharp advent of technology and its effects on customer experience in quite the same fashion, so we’re experiencing unprecedented levels of discomfort in many ways irrespective what part of the industry we’re in. All of us – bankers new and old, technology makers and commentators – we are all impacted by this spectacular time in the growth of digital and the money retail business. There’s no time to complacently relax into anything – deep conceptual thinking is nearly banned if we wanted to keep up, there is definite uncertainty to accompany ever growing demands, and it feels like the more we learn and the more we try, the harder it is.


War of the words: who’s said what about a bitcoin fork?
By Alyssa Hertig, Stan Higgins & Garrett Keirns

Bitcoin is abuzz with chatter about the prospects of a possible network split, a development that could drive the emergence of two separate blockchains. It’s an eventuality that has businesses in the industry weighing in again on a long-standing impasse over the digital currency’s future direction. What’s more, the nature and tone of the scaling debate appears to have sharpened, driven by animosity between those who support one vision over another. As such, a range of bitcoin startups (exchanges, wallet providers, miners and hardware makers) have weighed in on where they stand on the issue. Perhaps unsurprisingly, much of the preparation seen comes from companies that would find themselves in possession of handling two separate bitcoin assets on behalf of customers should the network split.


InsurTech industry has grown by 25%
By Igor Pesin

InsurTech is a relatively new industry. However, it’s developing quite fast and becoming one of the most booming verticals in the FinTech space. First of all, don’t pay too much attention to the 34% drop in the InsurTech market in 2016; it actually grew up by 25% considering the number of deals. The year 2015 showed an abnormal rise in the InsurTech market, which was mainly driven by Chinese large and extra-large deals, including $1B USD invested into the world’s largest InsurTech startup Zhong An. More and more investors are being attracted to InsurTech/HealthTech segment. It turns out that insurance companies are more active in InsurTech than banks used to be in FinTech; it seems that they have learned from the unsuccessful experience of the latter to not to resist changes or ignore them.