XBRL News about sustainability reporting, proxy votes and value chain reengineering

Here are the three most relevant developments in the world of structured reporting we became aware of in the course of last week. 1  Ep. 5: Jason Meyers on Continuous Audit and Real-Time Reporting Jason is currently developing the only known use case of blockchain for the auditing industry with AuditChain, and bringing some much […]

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Blockchain Thematic ETFs from the West to the East

blockchain ETFs

Listing on exchanges continues to dominate. Whether listing on regulated or unregulated Centralized exchanges (CEX) or Decentralized exchanges (DEX) of any sort; this has not changed at all for assets.

Brain Armstrong, the CEO of Coinbase, in his New Year medium post, foresees that we will be moving from a predominantly trading & speculation phase of cryptocurrencies and Tokens of all sorts, to a phase of actually Using Tokens.

In the meantime, however, incumbents and startups continue building all the necessary infrastructure to issue, custody, settle and clear, trade and invest of all sorts of digital assets.

Efi Pylarinou is the founder of Efi Pylarinou Advisory and a Fintech/Blockchain influencer – No.3 influencer in the finance sector by Refinitiv Global Social Media 2019.

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Blockchain exposure a la ancienne

Investing via listed equities will never die. In fact, I foresee Blockchain will enable it grow exponentially. More listed equities, across more jurisdictions, better information, fractional ownership.

For now, the traditional way to participate in the growth of the Blockchain sector is to buy publicly traded stocks. For example, mining companies, companies building enterprise software, or hardware.

Hut 8 which is the largest publicly listed bitcoin-mining company worldwide. Listed on the Toronto stock exchange Hut 8 Mining (TSXV:HUT) has a market cap close to $100million. Most pure blockchain companies, have small capitalization (less than even $10mill). As a result, the market sees more potential to capture the upside in Blockchain by investing in publicly traded tech companies with significant strategic exposure to the sector.

Blockchain Stocks that lists and tracks such stocks, shows companies like Accenture, MasterCard or funds investing in the sector; as their picks in the List of Blockchain stocks and their list of Large cap Blockchain Stocks.

Traditional investors can otherwise consider public equity exposure to the Blockchain sector through thematic ETFs. In the US, there are 8 Blockchain thematic ETFs that have accumulated $240million?

Screen Shot 2020-01-13 at 10.42.03

Source

Only 4 of them have managed to accumulate more than $10million and none of them have surpassed the $100million mark.

The top holdings of the two largest Blockchain ETFs are companies like the Japanese IT providers – GMO Internet and Digital Garage.

GMO is the company preparing for the launch of the first Yen backed stablecoin – GYEN. It is also expected to launch a new Bitcin mining device with low cost and electricity consumption, the B2 miner.

Digital Garage another Japanese company (4819-TYO) with and an ADR. They teamed up with Blockstream last year to serve institutional needs in the sector in Japan.

BLOK ETF has more than half a dozen Japanese companies in its top holdings, like LINE, KAKAO, SBI Holdings, and Korean Rakuten.

BLCN is more diverse with some Asian companies, like JD, Baidu, and LINE.

All Blockchain ETFs contain Bigtech companies, like Alphabet, SAP, or Nvidia.

In Europe, there is the Invesco Elwood Global Blockchain UCITS ETF listed on the LSE (BCHN:LN) with $38 million AUM since its launch last March.

Top holdings are similar to the US ETFs

Screen Shot 2020-01-13 at 11.18.01

In China, the Shenzhen Stock Exchange just launched a Blockchain 50 Index that includes listed companies on its exchange in the Blockchain sector.

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The top holdings are Ping An Bank, Midea Group – electricity company, East Money Information.

The Shenzhen Stock Exchange, has applied to the China Securities Regulatory Commission for permission to list a blockchain exchange-traded fund (ETF) benchmarked off its index.

All these investment wrappers, are essentially offering tech exposure with a Blockchain tilt.

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Not another Crypto Exchange; by BondEvalue & Northern Trust

  We like We foresee adoption of Blockchain not Bitcoin Digital Currencies not Cryptocurrencies Stable Coins not CBDCs Blockchain not Bitcoin LIBRA not Cryptocurrencies CBDCs from China & the BRICs not the US These are picks of business media talk from the past and the present. As Ajit Tripathi, said to me in a conversation […]

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Corda powered SWIFT GPI Link could be a game-changer in global trade finance

In September, SWIFT – the inter-bank messaging firm, announced the successful proof of concept (PoC) of the “GPI Link” platform in collaboration with R3. The SWIFT Global Payments Innovation (GPI) platform has previously trialled Hyperledger without much luck.  However, with R3’s growing network of corporates, the pilot seems to have gone better. The pilot also […]

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Two live Blockchain use cases in Mutual Funds administration and four pilots

In Blockchain world everybody wants to be `the World`s first`. The term started being a must in white papers, now it is all over social media, with announcements about The World`s first tokenized equity The World`s first STO The World`s first regulated Crypto bank The World`s first Initial Wallet Offering The World`s first Regulated ATS […]

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China’s digital currency could be a response to Libra

Earlier this month, a senior official of the People Bank of China (PBoC) announced that the country was ready to launch its digital currency. The announcement was made at a China Finance 40 (CF40) group discussion and it was revealed that China has been working on this for the past five years. Image Source The […]

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Blockchain for branding, as banks see little benefits – WEF reports

Image Source Is it a Golden bullet? or just a jewel? When I used to be a developer in banks, I used to get this question all the time – “do we have a golden bullet (tech) that can solve all our problems?”. The question used to be from very senior people in the bank […]

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The Rise of India Blockchain, Cryptos lagging – Mistake or Opportunity?

It’s an emotional week for Indians – for most of them atleast. It’s a week when India crashed out of the cricket world cup, that they were favourites to win. While I was looking for “India news” to cheer myself and my family up, I spotted an important trend worth talking about.

The rise of Blockchain in India doesn’t come as a surprise to me. It is the third most active innovation ecosystem in the world, next to the US and China. 2018 had $35 Billion of PE/VC investment in the country, and that has risen over the years at a rapid pace. However, with Blockchain, most of the initiatives have a public sector organisation driving it.

Blockchain-India-Infographic

Image Source

Most Indians would admit  that public sector organisations in India are super dysfunctional. So, this is indeed a sign of new times. Perhaps, the state governments are taking inspiration from the centre’s initiatives with payments and other technology innovation. Let us look at the three key trends that we have identified across the states.

  • Land Registry – This is such a critical use case for Blockchain in India. The real estate industry is fraught with corruption, and a system to bring integrity to the value chain is most welcome. Blockchain could add so much value to this space.

 

  • Farm Insurance – I am quite glad that this is a key trend. Less than a year ago, I wrote an article asking for exactly this. A violent storm that hit my home state, affected coconut farms and many farmers lost their 10 years of hard work. A smart contract based insurance mechanism is critical for farmers to protect their livelihoods. In a country that depends on two monsoons for agriculture, a flood or a drought could kill the crops.

 

  • Digital Certificates – There is a saying in India – You can’t go wrong with a food or an “education business”. Education has been commoditized in the country so much that, every year there are 1.5 Million engineers being produced. It is also a market where counterfeit certificates and CVs are not uncommon. Blockchain based digital certificates to maintain the integrity of the education process is yet another useful application.

The map also identifies several other use cases like Organ transplants (as the black market in India is thriving), IP Protection and Cybersecurity. I am surprised that there is no line item for Self Sovereign Identity. India has the world’s largest citizens’ database in Aadhaar. Loading it up on a permissioned Blockchain, and providing citizens the ability to share their data in a controlled fashion would be a major building block.

But that initiative needs to come from the central government. It cannot be a state government driven agenda. Also, despite all these developments, the action from the central government around Blockchain initiatives is missing. The central government needs to intervene to standardise state government based initiatives across the country.

The other elephant in the room is the cryptocurrency ban in the country. I believe, this has pushed India behind its global competition by a few years when it comes to Blockchain innovation. The country has a buzzing startup ecosystem. The centre has taken several steps even in the most recent budget to support innovation.

But when it comes to cryptocurrency, the Reserve Bank of India has taken a very binary approach. I spoke to Lizzie Chapman (CEO of ZestMoney) a few weeks ago on lending fintechs in India. During that conversation, she mentioned that the Indian regulators have been quite collaborative in setting policies for the industry. That approach seems to have been lost somewhere with Cryptos.

The challenge that India has is that of talent. With lack of innovation happening in this space, Blockchain skills will start running out pretty soon. Yes, the big tech consulting firms looking to build Blockchain skills can do so. But that doesn’t necessarily translate to leadership within Blockchain innovation.

The other challenge is global competition. China and other top economies have allocated $ Billions towards emerging technologies such as AI, Quantum computing and Blockchain. China and US fight it out for the top place in the world’s patenting charts across these technologies. India is only in 6th position in the world for the number of Blockchain patents, and without private sector innovation, will soon risk being left behind.

In essence, the centre needs to wake up to this new era in the country. It’s time for leadership at the top, much like they did with payments. They should get initiatives kicked off on Blockchain and its standardisation across states. They should ensure that the regulations are clear for the crypto community.

With just those two steps, the country should be back on the map in a much bigger way with Blockchain. The mistake (crypto ban) could be turned into an opportunity. Onwards and Upwards!! Cheer up India!!


Arunkumar Krishnakumar is a Venture Capital investor at Green Shores Capital focusing on Inclusion and a podcast host.

I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.

Subscribe by email to join Fintech leaders who read our research daily to stay ahead of the curve. Check out our advisory services (how we pay for this free original research).


 

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Numerai a small cap AI Blockchain gem

Blockchain and AI are the most trending technologies. Blockchain for Finance and AI for Finance ventures are also increasing. The combination is hoped to fuel the autonomous financial infrastructure that will host all kinds of intelligent applications in capital and financial markets.

LiveTiles-Blockchain-Infographic-E

LiveTiles brought to my attention 20 AI Blockchain projects with a great infographic. As I have profiled a few of them in 2017 at the protocol layer and the data-finance verticals, I decided to catchup with Numerai. They had grabbed my attention 2 years ago in this primer I wrote: The Big Hairy Audacious Goal of Numerai: network effects in Quant trading

Screen Shot 2019-06-02 at 16.59.44Numerai is creating a meta-model from all the Machine Learning (ML) algorithms developed by “the crowd” with cryptographic data. Numerai aims to offer a platform that generates alpha in a novel way. It wants to structure a rewarding mechanism for its traders that not only eliminates the typical competitive and adversarial behavior between them but actually, penalizes them.                              Efi Pylarinou

Numerai was and is a bleeding edge venture. It remains the only hedge fund built on blockchain and using ML and data science in a novel way. The novelty lies in changing the incentive and compensation structure of the fund manager.

Numerai launched no ICO. The NMR token was awarded to the thousands of data scientists for creating successful machine-learning based predictive models.  Once the data scientists are confident of the predictive ability of their model, they can stake their NMR and earn additional NMR if they are correct.

Numerai involves a staking mechanism.

In March, Numerai reported that $10million had been rewarded up to date. NMR tokens were distributed via airdrops initially. At launch on 21st February 2017, 1 million Numeraire tokens (NMR) were distributed to 12,000 anonymous scientists.  Thereafter, NMR  tokens were awarded as rewards to users of its platform. Bear in mind, that if a participant stakes NMR and their model doesn’t perform, the staked tokens are burnt.

According to Numerai, the NMR token is one of the most used ERC20 tokens. By end of 2018 reporting 25,000 stakes of NMR.

Numerai II.pngSource

Almost 200,000 models submitted by data scientists around the world for a competition to crowdsourced the best prediction models.

Screen Shot 2019-06-02 at 18.52.49Source from Chris Burniske`s talk at Fluidity Summit in NYC.

Numerai in March raised $11mil from investors led by Paradigm and Placeholder VCs. Numerai is a very rare case because this fundraising is not for equity but for NMR tokens.

Numerai token is a utility token and investors just bought $11million of NMR tokens.

The funds raised will primarily be used to drive the development of Erasure, a decentralized predictions marketplace that Numerai launched.

What does this mean in plain worlds?

Numerai was not a protocol but rather an application  – a hedge fund. Erasure will transform it into a protocol. This has several significant implications.

  • NMR becomes a token on the protocol and can be used to build all sorts of applications on top of Erasure.
  • Numerai becomes decentralized. The NMR smart contract will no longer be controlled or upgraded by Numerai but by NMR token holders. So, NMR becomes a governance token.
  • Numerai will have no authority on the supply of NMR tokens.

A protocol is born out of the app Numerai – its name is Erasure. Erasure is much broader than a hedge fund, as all sorts of prediction and data markets can be built on the protocol. The vision is to always to be a token that is actually used. Which brings to the spotlight the lack of transparency around data measuring use of protocol and Dapp tokens.

 Footnote: Numerai at launch was backed by Fred Ehrsam, Joey Krug, Juan Benet, Olaf Carlson-Wee and Union Square Ventures.

Efi Pylarinou is the founder of Efi Pylarinou Advisory and a Fintech/Blockchain influencer.

I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.

 Subscribe by email to join Fintech leaders who read our research daily to stay ahead of the curve. Check out our advisory services (how we pay for this free original research).

IBM and BofA lead Blockchain patents tally – but do patents matter?

patent-cartoon

Image Source

I must credit the research behind this post to Keir Finlow Bates. Keir is an entrepreneur based out of Finland, where he runs a Blockchain research company. I recently came across his research report on the Blockchain patent market.

It was refreshing to see that the report was published on LinkedIn and free for everybody to access and benefit from. It had good coverage, understandable trends, a few obvious names at the top, and a few disappointing stats too. Keir had spent three days researching on Blockchain patent information on ‘google patents’ and compiled the statistics in his report.

Before we get into the findings of the report, I just wanted to discuss the question, “Do patents matter at all?”. I believe, the answer is “It depends”.  It depends on your willingness to defend them – if you are the patent holder.

With 97% of all patents, the costs are not justified. The inventor spends the money filing the patent, but do not reap any benefits. 50% of patents are expire as inventors do not pay the maintenance fees. So why file a patent at all?

Patents make sense if your product is extremely complex and hard to develop, and if the costs of defending the patent is affordable/justified. It also helps with perception (that you own the product IP), and posturing (that you will defend it).

However, defending a patent takes years, and costs millions of dollars. So it may not necessarily be an option for a startup with a differentiated product and shallow pockets. It may also not make sense if the invention’s life span is relatively shorter. By the time the patent battle is fought in courts, the life of the product would be over.

Patents are often very narrowly defined, and getting around them shouldn’t necessarily be hard work for a smart competitor/imitator. In a conversation with a startup CEO I met recently, she revealed that she wasn’t so fond of patenting her product. She reasoned that she had to give away a lot of information about her product during the patenting exercise, that it makes it easier for a competitor to create a close enough version of it.

In the case of Blockchain, I feel, patents are a KPI to mark industry and thought leadership than protecting IP. Apart from a handful of architectural improvisation in Blockchain, innovation has been largely incremental.

Another point to ponder is that, Blockchain is a technology that knows no boundaries. As there are several Blockchain friendly island jurisdictions, patenting within major jurisdictions like the US, Europe or China may be meaningless. However, the race for getting on top of the patent list is still on.

Patents

Source: Keir’s report

Coming back to Keir’s analysis, one key dimension I missed on it was China. It’s no news to us that China is racing ahead of the rest of the world in patenting its inventions with most emerging technologies like AI, Blockchain and Quantum Computing.

A research on patent databases Patentics and Incopat about a year ago, identified that Alibaba was leading the Blockchain tally, even ahead of IBM. Of the top 36 companies with at least 20 Blockchain patents, about 50% of them were Chinese firms including BAT.

Keir’s analysis was performed on Google patent, which supposedly includes China Patents – but the data in the report indicates otherwise. The key takeaway from the reports are that,

  • Bank of America leads the tally with 60 filed and 24 granted patents in the US.
  • IBM had over 200 filings and 16 granted patents, and continue their investments in Blockchain R&D.
  • Challenging the big names, Chainfrog really stole the thunder, with over 16 filed and 4 granted patents.
  • Apple, Google and Goldman Sachs disappointed with 0, 1 and 2 granted patents to their names respectively. However, it may be a calm before the storm for these leading brands.

One key point stands out for me. Is the system of patenting fundamentally broken? If I spent two years of my life creating a complex product, addressing a huge market, I should be able to patent it, and defend my patent. Cost shouldn’t be a barrier to defend my work.

Instead of raising the innovation bar for competitors/imitators, the patenting system has perhaps raised the cost bar for inventors to defend their IP.


Arunkumar Krishnakumar is a Venture Capital investor at Green Shores Capital focusing on Inclusion and a podcast host.

I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.

Subscribe by email to join Fintech leaders who read our research daily to stay ahead of the curve. Check out our advisory services (how we pay for this free original research).