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.

Screen Shot 2019-02-11 at 09.26.37

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.


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 Blockchain along 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?`


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

Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email.


Blockchain Front Page: Security Tokens take center stage


Last week our theme was “Lightning Network Gaining Traction”

Our theme for this week is “Security Tokens take center stage.

Despite the collapse of cryptocurrencies prices in 2018, dropping by more than 80%, for Initial Coin Offerings (ICOs) was a good year. Indeed it was a very good year. We saw more money being raised by more projects.

According to a report published by ICOBench, in 2018, 2,517 ICOs raised $11.5 billion, a 13% increase, compared to 2017. The country leading the pack was Singapore with 228 ICOs, followed by the US with 195, the UK with 165, and Estonia with 112.

In 2017, we saw the rise of utility tokens. Utility tokens were meant to be used to access some kind of service or utility. When the ICO market took off, everyone was issuing some kind of utility token, sold during an ICO, that allowed users of a blockchain platform to pay with tokens for a decentralized service, or earn tokens for providing value to the ecosystem. Utility tokens are very similar to loyalty points, just like those given by credit cards.

Bloomberg’s Matt Levine compares utility tokens to the Starbucks card: “A Starbucks gift card is probably not a security, even though you pay money to a corporation for the card and expect to get back something in the future, because you are not investing the money in the expectation of profit: You’re investing it in the expectation of coffee.”

The fact is that backers of utility tokens are purchasers of a service, and not investors in it. There are many examples of utility tokens in the market. For example, BAT (Basic Attention Token) rewards users with tokens for using the BRAVE browser and viewing ads. Filecoin, which raised a record of $257 million with its ICO, provides a decentralized cloud storage service that takes advantage of unused computer hard drive space. Users that need storage, pay other users that provide storage with tokens.

But, we’ve been seeing the market shift, with “utility” being replaced by “security” and ICOs by STOs. The increase for tokenized securities has many saying that 2019 will be the the year of the STO.

Asset tokenization and security tokens are not a new idea. But with the ICO model crashing, STOs (Security Token Offerings) and security tokens have taken center stage. Security tokens have the potential to disrupt the way investors and securities issuers operate today.

Security tokens are digital, liquid assets, fractions of any real asset. Security tokens can be real estate, funds, equity in a company, derivatives, hotels, licensing, restaurant chains, anything with monetary value. A security token’s value is derived from a real, tradable asset. Security tokens can be used to grant ownership rights or shares of the company, to pay dividends, share profits, pay interest or invest in other tokens or assets to generate profits for the token holders.

We’ve been reading more and more news about STOs in the past months, as more companies are leaning towards launching an STO.

According to an article on MarketWatch, tZERO announced a partnership with Dinosaur Financial Group to facilitate customer trading for the tZERO tokens. In August, tZERO, the security token exchange arm of e-commerce and retail company Overstock, raised $134 million with its STO. tZERO issued to investors tokens in October with a three-month lockup and now the first trades of their security token are already happening.

In July 2018, SPIN an electric scooter company launched an STO to raise $125 million for its start-up. In September, the Malta Stock Exchange signed an agreement with Binance to launch a security token trading platform.

Various platforms have emerged to assist start-ups with their STOs, like StartEngine, Harbor, Polymath, Dusk Network, TokenSoft, Republic, and Atomic Capital.

The ecosystem of security tokens is in its early stage and there is a certain lack of legal practices. As security tokens are investment contracts, in most places around the world they are covered by securities laws. There are people who argue that cryptocurrency tokens are an entirely new asset class which deserve their own laws outside of the existing ones, but this is not reality, at least not as of now. For now, strict regulations concerning securities could pose obstacles, but they could also be a blessing in disguise, legitimizing security token offerings and ensuring compliance from the start.

Security tokens have the potential to attract additional capital from new investors who previously haven’t been interested in this kind of investment. STOs are projected to have a market cap of $10 trillion by 2020. Also, STOs and security tokens could prove to be the answer be the answer to the government’s woes, protecting investors and ensuring operations within the law.

STOs provide a more intelligent and innovative approach to capital funding that frees access to both investment and capital ways, while providing transparency to all of the services in question. The security token ecosystem could lead to the emergence of a new equity ecosystem separate from the public stock exchange, as security tokens allow for compliance, automation, and interoperability all across the securities stack.

For more about the Front Page Weekly CXO Briefing, please click here.

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Ilias Louis Hatzis is the Founder & CEO at Mercato Blockchain Corporation AG. He writes the Blockchain Weekly Front Page each Monday.

Open banking – Keep calm and saddle up for a five year run

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A year on – and that’s a big milestone for many. But in the legacy banking world, nothing gets done in a year. And it’s not surprising that open banking has been more of an introvert than we expected. Eventful or not, open banking is one of the best things that could have happened to consumers, and will eventually turn out to be a case study for other global economies to learn from.

Open banking is not just a movement to get banks to relinquish their ownership of consumer data. It is more of a data revolution to identify consumer behaviour and use data analytics to provide personalised services – not just banking services.

There are multiple stakeholders involved in the process of making the most of this data revolution. Getting a consolidated view of a customer’s financial products is perhaps a low hanging fruit.

For a consumer focused data driven use case, that is more integrated into their lifestyle, more work needs to be done on open banking data.

  • Downstream apps need to build their interfaces with banks that have opened up their APIs.
  • That will be followed by proprietary intelligence that these downstream apps will add.
  • Proprietary intelligence using machine learning, predictive analytics etc., need critical mass of data – which only builds over time. For this these firms will also need to onboard customers.
  • Customer onboarding is easily said than done – comes with serious cost of acquisition for a small firm – that happens when they have backing such initiatives from Venture capital.

Every step above takes time. It would be a few years before a real data driven use case can reach the customer and for us to start seeing some success stories. But where are banks largely, and where are the startups in the journey?

A year ago the Competitions and Market Authority (CMA) set the pace for a bunch of banks (9 of them) to open up customer data through APIs. And 12 months on, there is more noise about a lack of noise in this space. I don’t believe there is any action missing, and this is why.

Banks had to open up customer transaction data through APIs – but CMA only came up with this idea in 2016. For banks to get it, plan it, and execute the APIs within even 24 months was always an aggressive timeline. HSBC’s Connected Money app was perhaps an exception to the usual pace of banks. Barclays seems to have a similar capability as well.

However, the integration that legacy Banks have provided to downstream systems are not the most intuitive. APIs exposed by banks use apps like Yodlee (who create the plumbing for the data) who then integrate to downstream customer facing apps like Money Dashboard for example.

One quick look at the apps show that the the experience offered by legacy banks to integrate into a customer facing app are so outdated. Especially for a customer segment that are used to a frictionless Monzo like experience. That is an area where banks can definitely do better. However, most Millennials and Generation Z customers directly bank with neo-banks, so this will be less of an issue with that customer segment.

Startups are still building the intelligence to make the most of the data revolution. However, most firms that I know of that are looking to provide PFM services, lending (underwriting, brokering or credit scoring), SME loyalty, or simply cleverer product switching, are all focused on growing their customer base in search of more data volumes.

Most of the clever applications need machine learning algorithms to feed on a lot of high quality customer data. That is when their results get accurate as the machine learns from continuous feedback. Releasing half trained machine learning apps to consumers can actually result in poor customer experience and churn.

Most firms I speak to, are focused on identifying product market fit for their data driven use case this year.

Customer acquisition has to be cleverly managed to ensure there is growth in data volumes, but also the predictive analytics is accurate enough to cut down churn. Its a hard game to play.

In a recent interview Tom Blomfield, CEO of Monzo mentioned that he wasn’t afraid of legacy banks or even the Neo-banks. But he was wary of new open banking powered apps just bringing clever capabilities and acquiring customers to dwarf the likes of Monzo. Open banking will be a slow burner, it would have failed if we didn’t see some success stories in the next 5 years.

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

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Cyber Risk Insurance translates Nerd-Speak to Boardroom-Speak


Cyber Risks Extra Extra

Reposted, as it is Chinese New Year for Zarc Gin, our regular Insurtech Expert based in China.

Why do Banks exist? That is not some deep, philosophical question about the role of money in society. Banks exist to protect your assets from thieves. Because they do a good job of this, they can make a lot of money lending some multiple of what they store in the vaults. The only difference now is that the modern version of Butch Cassidy and the Sundance Kid are getting monitor tans as they cyber-attack the vaults from their computers.

Money is one asset to protect. Data is another. So is data about assets. In the digital age, it is all about data. And data is easy to steal.

All the good things that we write about on Daily Fintech – all that agility/productivity enabled by data and connectivity – also benefit Butch Cassidy and the Sundance Kid.

Cyber Risk is one nerdy subject that gets Board level attention because the risk is so high. Global 2000 companies can lose $ billions from a single hack. The problem is that cyber security is also an intensely complex subject technically.

One reason that so many influential leaders subscribe to Daily Fintech is that we are good at translating Fin to Tech and Tech to Fin. So we are attracted to the challenge of translating Cyber Security Nerd-Speak to Boardroom-Speak. It is one of the toughest translation jobs around. Even with a lot of technical experience, Cyber Security can be daunting. Even with a lot of business experience, understanding how a Global 2000 Board thinks can be daunting. Both are tough on their own. Translating between the two is even tougher, because they could not be further apart.

That translation, though hard, is ultra-critical. The Board has to really understand Cyber Security and they are currently failing at this task. This article on LeadingBoards describes the problem very well

Cyber Security technology = big budgets & bigger risk

The global cybersecurity market reached $75 billion in 2015 and is expected to hit $170 billion in 2020 (source, Forbes).

This is one market where the “you never get fired for buying (insert Big Tech vendor)” mantra breaks down. In most other enterprise technology markets, the big vendors tend to win because the Boardroom does not really care who is picked. So the senior IT managers making the decision go for the vendor that is competent enough to do the job and big enough that if it all goes wrong they can say “but all our well-respected peers made the same decision”.

That defence breaks down in Cyber Security because the risk is so high. Nor can a Board simply say “the CISO who made the decision has already been fired”. The Board has to take direct responsibility. Which means the Board has to understand Cyber Security.

How is the Board supposed to understand something as nerdy as Cyber Security?

We take a lot of briefings on cyber security technology, because we know how important it is. Listening to all these super-smart tech guys explaining the latest cyber security teaches us that a) it is hugely complex and b) there is no silver bullet.

We use a simple mental map that translates Cyber Security to the analog world:

  • Perimeter Security is where most money is spent. Think fences, guards, dogs. The fundamental problem is that somebody will always get through. The bad guys also benefit from Moore’s Law and can use SMAC (Social Mobile Analytics Cloud) to collaborate and share (what has been dubbed Crime As A Service). You can be the biggest bank or the biggest government and you still get hacked.
  • Digital ID. Think body part scanners (finger, eye, voice etc) that determine who can get into the building. We have written a lot about Digital ID technology and it is improving at a remarkable pace. The problem is collusion with a trusted inside-person who is part of the crime gang; the person with perfect Digital ID is a criminal.
  • Protect from the inside. This assumes that both Perimeter Security and Digital ID is imperfect. One way to protect from the inside is process controls (for example needing more than one person to send a wire). This also suffers from the collusion problem, but it is better as it is harder for criminals to corrupt the two individuals in a process. Another way is to write code that is secure. The problem is that both better process and better code hit the agility/efficiency problem. Banks have to move fast and efficiently to beat competition AND be secure. One alone is not enough. For example, Banks want to use high level languages and tools that enable rapid time to market even if that means the developers are not thinking much about security.
  • Protect when data leaves the vault. This assumes that all three methods above will fail. The analogy here is marked banknotes used in a kidnap ransom. Again, the bad guys have very sophisticated technology to get rid of these markings, so this is yet another arms race.

If you cannot measure it, you cannot manage it

That is one of the oldest truisms of business. If you listen to the pitches of any Cyber Security vendor, you will hear that they have the solution. The problem – as any reasonable attentive business person can observe – is that even companies with all this smart technology still get hacked. The empirical evidence is that there is no silver bullet.

Insurance has historically worked on statistical models. This works fine – until it no longer works. When something fundamental changes, the models become deeply flawed. We have tracked this as it relates to catastrophes created by climate. The use of data and connectivity by cyber-criminals is analogous. The risk went up in unpredictable ways. It is no longer good enough to rely on historical models. Cyber Risk is like Climate Risk – the historical models do not predict the future accurately enough.

What companies want is something as simple as a cyber security safety rating. Insurance Companies have the right motivation to give an honest rating (unlike credit rating agencies that are paid by the seller). Insurance Companies won’t award a AAA cyber security safety rating to a BBB company, because they will pay in claims for getting it wrong.

That means Insurance Companies need to turn into cyber security experts. A tech vendor may say “we have the secret sauce” to change your rating from BBB to AAA and thus lower your premiums. The Board will say “sure, if you can convince our Insurance Company that this will lower our premiums, we have a deal.”

Startups in this risk metrics space include CyenceBitSight and Security Scorecard.

Cyber Risk Insurance is a data game and that is a problem

Cyber Risk is one of the fastest growing parts  of the Insurance market, accounting for over $3 billion in premiums.

Banks are in better shape than others. Protecting against thieves has been a core competency for longer.

Cyber Risk Insurance people differentiate between Micro and Macro. The latter is the news-worthy hacking between governments (cue image of the nerdy young Q in recent James Bond movies). Our concern is the more boring Micro Cyber Risk Insurance – exciting enough as this is about whether huge companies can lose $ billions from a single hack. The Micro could become the Macro if a number of Micro hacks led to a crisis of confidence in the financial system akin to September 2008.

Talking to experts in this relatively new field it is hard to get a lot of on the record quotes. That indicates a market that is nascent enough that the solutions are not obvious. To entrepreneurs that signals opportunity.

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Bernard Lunn is a Fintech deal-maker, investor, entrepreneur and advisor. He is the author of The Blockchain Economy and CEO of Daily Fintech.

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Square launches SMB Card and POS platforms hit payday

This week Mastercard launched a report in collaboration with CB Insights where it made the not so terribly startling prediction that SMBs would ‘become the next battleground for fintech’ in 2019. I think SMBs have been the battleground ever since the word fintech was coined, however the market has proven incredibly hard to crack.

One key area that the report did zone in on, which I think is interesting, is the renaissance of the point-of-sale system, or POS. Its centrality in the SMB ecosystem, both in driving business for an SMB and in providing a platform for fintech plugins is still widely under recognised, and under-utilised.

The report notes a few companies who are starting to embrace this privileged position, by branching out of pure hardware and basic software capabilities and into payment, sales enablement, inventory management and CRM hubs. These POS systems are generally also compatible with cloud accounting packages, the hub on which many fintech lenders sit. All these parts of the ecosystem are heavily dependent on each another, creating a symbiotic and hopefully stronger financial infrastructure, ultimately powered by a layer of dynamic data.

The report calls out some of these POS systems – Toast, Upserve and Toronto based global player Touch Bistro, a company I remember working directly with on an Australian integration, during my time at Tyro.

Square of course is rapidly deploying into this ecosystem, having seen the forest for the trees years well before many others. That, or Jack and co were simply brave enough to act on their foresight.

Proof its continuing to lead the charge in the SMB battle came in late January, when Square launched Square Card, it’s SMB Mastercard debit card. The card allows business owners to draw on their Square takings, and also offers an instant discount on purchases made at other Square sellers. Deceptively simple, and an idea Amex could and should have monopolised on long ago via their Shop Small initiative. It’s one of those ideas a ruthless focus on the core customer – SMBs – allows platforms like Square to launch.

Keep an eye on the POS platforms, as this is where a good degree of the action will take place going forward.

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech. Jessica Ellerm is a thought leader specializing in Small Business and the Gig Economy and is the CEO and Co-Founder of Zuper, a new superannuation startup in Australia.

What is the problem with Money being a claim on an Institution? Reflections from the AxessThinkTank event

axessThe first full day event focused on what is now `Alternative finance` was of high quality and non-tribal. Organized by the Geneva based, Axess Think Tank, with four themes

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

I had the great pleasure of moderating the last two topics.

Watch Alpha Point the US based leader in digital Exchange software white label solutions and DLT software. Both team members were extremely upbeat about the growth prospects of their market sector. The CME group and the Royal Mint of England are already their customers and Novogratz invested in them last summer.  I felt that they are out there for a mass distribution of Crypto Exchanges that will allow for the tokenization of all kind of illiquid Assets. While selling exchange software, they are disintermediating the oligopolistic conventional exchange software business.

Cryptofinance is a Swiss quality business that offers asset management services, brokerage and custody. Lewin Boehnke CTO of Crypto Storage AG and head of research and shared insights from their journey, seemed to have a card up his sleeve when he repeatedly stated that

`there are a few major players that will join the digital asset class soon`[1].  Stay tuned on their news.

SCX is the new fully regulated Swiss Crypto exchange live since last summer. The Chairman of the board Christian Katz joined our panel. He is the former head of the SIX exchange and is now devoted to building an institutional grade business. A secure and transparent crypto exchange is undoubtedly needed and C. Katz knows the inside outs of the exchange business.

Taurus is a new Swiss player offering brokerage and trading services. Recently also added storage solutions.

LakeDiamond & Monart, were the two specific tokenization use cases that participated. One in tokenizing the industrial production of diamonds and the other in the contemporary art space.

Capco shared lots of insights from their clients and the projects that they have working on.Romal Almazo, Capco’s UK DLT & Crypto Lead continuously emphasized that we need to go back to the core issue

`What is the problem we are trying to solve?`. Five words please. Then we see whether blockchain can do the magic and solve it.

He was also assertive, in his belief that only what is FCA approved will be the dominant tech that will scale. He announced a CAPCO pilot project that is by invitation only, in which CAPCO will use its global network of SMEs to participate in a solution around digital assets that will be led by CAPCO. The aim is to develop a blueprint in solving market problems via digital assets.

CVVC and Amazix, participated in the panels, sharing their experiences from the growth and pivoting of the startup ecosystem.

e-Money, CBDC, and BTC

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[2]`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 fort he SNB. They see that a CBDC would increase the risk of a 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 authorized commercial banks exclusively access directly the CB, we should all have direct access to the CB. 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: This post is not comprehensive coverage of the event. By joining the Axess think tank you can access the video recordings 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] Check

[2] Central Bank Digital Currency

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

Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email.

Blockchain Front Page: Lightning Network Gaining Traction

lightning-netLast week our theme was “New York regulators approved new Crypto ventures”

Our theme for this week is “Lightning Network Gaining Traction.

Since it went live early last year, the Lightning Network has skyrocketed. With over 630 Bitcoin (BTC), more than 23,000 channels and a total network capacity of $2 million on the Bitcoin mainnet, according to data from 1ML, LN’s capacity for BTC has had crazy growth, going from 4 to over 600 BTC since last February.

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In the last three months, LN’s growth has been even more steep. The release of Casa Lightning Node has been a huge factor driving this growth, making it very easy for non-technical users to run an LN node.

But, Casa is not the only reason. Campaigns carried out by the community, like Lightning Torch and the growing number of wallets that support LN, are some of the other reasons for this growth.

The first Lightning implementation by Lightning Labs was launched in beta in March 2018. The other two, by ACINQ and Blockstream, were launched in late March and late June.

Last week, Casa announced the launch of a new browser extension. The software will allow Bitcoin Lightning Network-enabled nodes, to be accessed directly from crypto websites. Casa Extension will make interactions seamless, allowing users to click on a button and make a payment on a website that accepts BTC.

The original Lightning Network white paper was released in February 2015, by blockchain researchers Joseph Poon and Tadge Dryja. Since LN’s introduction, we’ve seen different projects developing on the Lightning Network and others working protocols that use some of the same technology.

One of these projects is Arwen, that wants to be for trading, what LN is for payments. With $865 million lost to hacks on centralized cryptocurrency exchanges in 2018, and more than $1.5 billion in total up to now, Arwen is trying to solve a big problem. Arwen has developed a new protocol that allows traders to have control over their private keys, even when their coins are stored on an exchange. Users maintain self-custody of their coins in their own hardware or software wallet, without having to transfer their keys to a third-party. Last week, KuCoin announced a partnership with Arwen, to offer a non-custodial service to its customer base.

While the technology is still in testing, LN aims to make Bitcoin transactions faster and cheaper. The most remarkable growth metric for LN is the growing number of nodes, with active channels. On average, each node has nearly 8 channels and each channel has an average capacity of $110.

The Lightning Network has become one of the most promising approaches to making Bitcoin a fast, cheap and secure payment network. The technology is still in its infancy and for most people, LN is not relevant. But given the growth we’ve seen, it may very soon be. At this rate the LN’s capacity could exceed a billion, over the next year.

Whether LN is successful or not, in many ways depends on how successful Bitcoin is, in maintaining its lead over other cryptocurrencies. Currently the entire crypto market is valued at $113 billion, with BTC representing 53% and Ripple, the second in line, at 10%. But prices and market cap will not be the only factors, it will also depend on how quickly competition can scale and how seamless the experience becomes for users.

For more about the Front Page Weekly CXO Briefing, please click here.

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Ilias Louis Hatzis is the Founder & CEO at Mercato Blockchain Corporation AG. He writes the Blockchain Weekly Front Page each Monday.

Fintech India boosted as Blockchain Consortium for SME lending kicks off

Fintech India saw a boost in 2018 with over 132 investments in startups, with a large proportion of them going into Lending and Insurance. The total investment was about $2 Billion as of Nov 2018. Sequioa, Omidyar, and Kalahari capital were the top investors in the sector.

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The New Year opened with a bang as 11 Indian banks have now come together to form a Blockchain consortium to address the under served SME lending market.

The rise of India Fintech in comparison with the likes of China, is still dwarfed. However, the policy makers have provided ample support to the innovation ecosystem to thrive. Initiatives such as NPCI (National Payments Council of India), Digital India Programme have helped.

The Reserve Bank of India (RBI) has approved 11 fintech firms
who could now be payment banks that offer deposit, savings, and remittance services. Unified Payments Interface (UPI) has been the bedrock of the digital payments boom in the country.

You are probably thinking – too many TLAs (Three Letter Acronyms), but the impact of all these measures on digital payments and lending in the country has been significant.

Inspite of all this, the SME lending market in India has been particularly challenging. SMEs in the country relied on a complicated supply chain that was broken and lacked transparency. A Blockchain network would provide lenders with public credit data, that they could use for their underwriting decisions.

The Micro SME lending market is about 17.3% of the overall corporate lending market in India. And after the recent IL FS scam, the corporate lending market needed a boost to tap into the under served SME sector. The 11 banks involved in the Blockchain consortium would first reach out to supply chain vendors and get their records digitsed.

The consortium includes names like ICICI, AXIS and State Bank of India, who together make up a big proportion of the lending market. Getting them all on a single network along with digitised supply chain information, should allow them to make near real time lending decisions to Micro SMEs.

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

Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email

Insurtech Front Page Weekly CXO Briefing – Emerging markets


The Theme last week was about Online Insurance Marketplace.

The Theme this week, is about emerging markets. Emerging markets are about hopes, potentials and future growth. When a market grows huge enough, it could evolve into something better.

For more about the Front Page Weekly CXO Briefing, please click here.

Incumbents embracing InsurTech is a common theme in our posts. This time, it’s about customer engagement.


Story 1: Global reinsurance giant drops “emerging market” label for China

Extract, read more on Asia Insurance Review:

“Global reinsurer Swiss Re no longer places China as an emerging market, but instead views the country as a important strategic market, according to Mr John Chen, head of Reinsurance China and China country president for Swiss Re.”

What is an emerging market? According to Wiki, an emerging market is a country that has some characteristics of a developed market, but does not satisfy standards to be termed a developed market. And according to Insurance Information Institute, China’s insurance market by annual premiums has been top 2. It’s safe to say China was huge enough to graduate from the identity of emerging market.


Story 2: Allianz launches reinsurance business in India

Extract, read more on Verdict:

“Allianz Global Corporate & Specialty (AGCS), part of German insurance group Allianz, has set up reinsurance operations in India after securing regulatory nod.

The new reinsurance branch will be located in Mumbai. It will provide facultative, proportional, and non-proportional reinsurance solutions for property, liability, marine, financial lines, construction and engineering, as well as energy.”

India, despite of the biggest population, is more like an emerging market than China. According to IRDA, India’s premium income in 2017 is 98 million USD which can’t make top 10 worldwide. But the population is in place, therefore the potential.


Story 3: Allianz to Enter Vietnam Insurance Market via Joint Venture with IT Firm FPT Group

Extract, read more on Insurance Journal:

“Allianz announces its intention to enter the general insurance sector in Vietnam through a digital joint venture (JV) to be set up with the FPT Group – driving long-term success in the market and expanding Allianz’s footprint in Asia.

FPT Group, as the strategic technology partner, will support Allianz in the fast-growing Vietnamese insurance market to develop innovative digital insurance products and services to meet the protection needs of local customers.”

Vietnam is one of the most promising emerging market in the world as it is likely to become a next world factory after China. Insurance, as a financial infrastructure, is an attractive treat for top insurers like Allianz.


Since the developed markets have a sophisticated operating system for insurance. Gaining old policyholders’ attention can be intense. The emerging market is a great new battlefield for international insurance superpowers. I think we will see more and more top insurers tapping into emerging countries in the years ahead.


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Zarc Gin is an analyst for Warp Speed Fintech, a Fintech, especially InsurTech-focused Venture Capital based in China.

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Education is the cost of doing business in invoice finance

Strategic partnerships are booming in this sector globally, as the magical tech-meets-distribution sweet spot sees more banks and fintech vendors cuddling up.

One needn’t look further for proof than news out last week that British based invoice financing platform MarketInvoice had closed a £26 million equity funding round with Barclays and Santander.

Barclays have been involved with MarketInvoice for some time, after acquiring a minority stake in the business in August of 2018. Banks, like Barclays, are slowly realising deploying growth capital to SMEs isn’t something they are equipped to do – from a risk management or digital delivery perspective.

Invoice finance isn’t child’s play. There are plenty of traps for new players, and technology isn’t always a failsafe against rogue business owners and fraudulent activity. Automating the credit-decision process is still a challenge, and imperfect information sets, even in cloud accounting software, still present challenges and risks to lenders.

But the upside, if you can get it right, is huge.

To get a sense of the nuances within this industry in the UK, the UK Finance body reports are a good starting point. The Q2 2018 report sheds some light into the ebbs and flows of the various financing flavours that make up the sector: Here are some highlights.

  • Export and Import factoring grew by 13.1% over the quarter, while Export Invoice Discounting fell by 9.9%.
  • UK invoice finance growth overall trails asset based lending, however its slice of the total lending pie is significantly greater.
  • Construction, followed by retail and transport were the fastest growing industry sectors
  • The two sectors with the biggest concentration of clients, when measured by turnover are £ 0.0-0.5M, at 12,193 and £ 1.0-5.0M, at 13,289

Numbers have been fairly static on many growth fronts for the UK sector over the past year or so – possibly a Brexit or trade uncertainty signal flowing through into growth investment decisions made by SMEs. While there is room for growth given the various statistics on growth capital demands more generally, finding the lever is key. It is probably less a ‘do we have capital available to deploy’ challenge for invoice finance businesses and more a lack of understanding about the product set amongst potential borrowers, something many vendors can tell you about in this space.

Perhaps MarketInvoice will use its new working capital to raise the profile of the sector to the benefit of the many startups in the ecosystem. Someone will need to bite the bullet and make this investment for the sector to grow.

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech. Jessica Ellerm is a thought leader specializing in Small Business and the Gig Economy and is the CEO and Co-Founder of Zuper, a new superannuation startup in Australia.