Lightning Network is the Bitcoin story that matters in 2019

Offchain Second Layer Scaling Networks.001For general background, please go to this chapter of The Blockchain Economy digital book.

If Lightning Network works, Bitcoin will become more than a store of value. It will also become a currency for regular use. If not, Bitcoin may be relegated to the dustbin of history.

A lot of Altcoins will decline in value if Lightning Network works. Governments will lose control of their Fiat printing presses. Credit Cards and Banks will lose control over payments.

So there is a lot at stake. 

As of today, mid March 2019, Lightning Network is in that grey area between cool science project and mainstream adoption. We see straws in the wind indicating progress towards an ecosystem that will support mainstream adoption such as:

Sparkswap is the first cryptocurrency exchange built on the Lightning Network.

Wallet that works with Lightning Network

The world’s first self-order point using Bitcoin via Lightning Network at Energy Kitchen in Bern. (My personal favorite as it is in my home town, Bern, and I have eaten there). 

Micropayments using Lightning Network with tech celebrity endorsement.

A directory of places where you can pay via Lightning Network.

For general stats on traction and capacity, look at Bitcoin Visuals 

Sceptics will point out that Lightning Network is still in it’s early days and not yet proven. 2019 is the year Lightning Network has to be proven at scale or be relegated to the dustbin of history. I am betting that it will make it.

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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Bitcoin Maximalism is deeply threatening to Wall Street


What if somebody around 1995 had given you a simple way to invest in the Internet? All we had around 1995 to 2000 was the option to invest in the ventures being sold by the Wealth Intermediation business. Today, if you want to invest in the Blockchain Economy, there is one incredibly simple way to do so – you just buy some Bitcoin. I just gave you a strategy, so where do I send my invoice for x% of AUM and y% of Carry/Profit Share? “Thanks, but I don’t need you to buy Bitcoin on my behalf, so your invoice will go in the round filing tray”.

I am using “Wall Street” as short hand for the global business of Wealth Intermediation ie getting a risk free return connecting users of capital with investors of capital. Wall Street can today be located in any major city, just like Silicon Valley has gone global. Global Wall Street aka Wealth Intermediation is a massive business (for more, go to this chapter of The Bitcoin Economy digital book entitled Blockchain Bits Of Destruction Hit Wall Street 

Aha, saying “just buy some Bitcoin” must mean that I am a Bitcoin Maximalist. Guilty as charged your honor. Let me explain why I am a Bitcoin Maximalist

5 reasons Why I am an economic Bitcoin Maximalist

Not a moral Bitcoin Maximalist – just economic. I don’t say that buying Bitcoin is any better for the world than buying an Altcoin. I am just saying that Bitcoin will be better than Altcoins as an investment. I said investment, meaning over the long term (there are plenty of short term trading opportunities in Altcoins).

Here are 5 reasons Why I am an economic Bitcoin Maximalist:

  • One. Brand and network effects. Step outside the cryptoverse for a moment. Do you have any trouble explaining Bitcoin to a normal person? Try Ethereum. Try hundreds of Altcoins. Building a crypto product/service? Building for Bitcoin is a no-brainer. Which Altcoin do you invest your R&D budget into?
  • Two. Not making any more of it. People who are fed up with money printing tend to like investing in land, gold…and Bitcoin. A big  question for the mainstream user is, but how can we believe “they” won’t make more Bitcoin? Now ask that question of every Altcoin.
  • Three. Copy that. Sidechains and other technology allows entrepreneurs to copy most feature of a cool Altcoin. Like Smart Contracts? Use Rootstock/RSK. Like privacy? Use MimbleWimble/Grin.  Altcoins as a sandbox for experiments are a “good thing”. As a donation to the community that experimentation is cool, as an investment thesis less so.
  • Four. Lightning Network. This crushes the BCH pitch that the only way to scale Bitcoin into a currency for daily spending is to increase the block size. The “will Lightning Network work in practice?” objection is looking less credible with each passing day.
  • Five. Flight to safety from both directions. Coming from Fiat, Bitcoin is an Antifragile bet against central bank money printing. Coming from Altcoins, Bitcoin is safe haven while still believing in Cryptocurrency. 

Ethereum is a wonderful technology innovation. If Proof of Stake really works in Ethereum, Ethereum could become a true public alternative currency because Proof Of Work is expensive. But that is like saying that if we can easily transport solar energy we can get off fossil fuels – easier said than done. Watch this space, this is a wild card. If you are convinced of Ethereum, maybe your crypto asset allocation is 80% Bitcoin and 20% Ethereum. Well that sounds a bit more complex, so where do I send my invoice for x% of AUM and y% of Carry/Profit Share? Yep, thought so.

The Bitcoin is Bad, Blockchain is Good idiocy

People who made a fortune in Legacy Finance, tend to trash talk Bitcoin. To show that they are hip to new technology, they often spout the line that Bitcoin is bad, but Blockchain is good.

Even Warren Buffet is saying this. Another famous, super smart Legacy Finance titan (I am being polite by not naming him) was heard on CNBC trash-talking Bitcoin but lauding the underlying Bitchain technology. These Legacy Finance titans are super smart about Legacy Finance and super dumb about Blockchain Finance.

When they learn that Blockchain can be both Permissioned and Permissionless, they come down on the Permissioned side and trash-talk the Permissionless solutions. Then when Oracle proposes a distributed database version of their RDBMS that they call a Permissioned Blockchain solution, the Legacy Finance titan can sagely nod their assent in the board meeting.

The Crypto Fund Products you will be pitched soon

These Crypto Fund Products all justify an intermediation fee, but not all are worth paying for:

  • Bitcoin Killers.  This could be like trying to find Facebook killers in the social media era. Even if there is a Bitcoin killer out there, your chances of finding it (or finding the Fund that will find it) is statistically tiny.


  • Index of all Altcoins. If you agree that finding the Bitcoin killer is too high risk, the lower risk approach could be to take a passive index approach and invest in all Altcoins. The problem is that the analogy with an S&P Index Fund is flawed. Altcoins are early stage ventures where 1 winner can make up for 99 losers. Compare that to the S&P 500 Index where all 500 companies are viable. What if the 1 winner does not do a Token but raises conventional early stage equity capital? You have 99 losers and no winner.


  • Filling in the blanks for Bitcoin. Bitcoin is the protocol level and the world needs exchanges, wallets, custodians, sidechains, offchain networks  and a load of application level/user facing ventures.  This makes sense as an investment thesis, even if it does not sound super exciting. This strategy requires classic early stage investing skills. The problem is that backing a first time fund is high risk and the top tier funds are not open to new investors.

Watch what Family Offices do in Blockchain investing

Family Offices are like retail investors in that they make their own decisions and have no explanation risk. The difference is obviously that Family Offices invest far bigger sums than classic retail investors. Family Offices are Retail investors with clout. Watch what Family Office do in Blockchain Finance to see the future.

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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.

Check out our advisory services (how we pay for this free original research).

To schedule an hour of Bernard’s time for CHF380 please click here to send an email.

FCA pioneers digitising regulatory reporting using DLT and NLP

Too many TLAs (Three Letter Acronyms), I agree. Earlier this week the Financial Conduct Authority (FCA) published the results of a pilot programme called Digital Regulatory Reporting. It was an exploratory effort to understand the feasibility of using Distributed Ledger Technology (DLT) and Natural Language Processing (NLP) to automate regulatory reporting at scale.

Image Source

Let me describe the regulatory reporting process that banks and regulators go through. That will help understand the challenges (hence the opportunities) with regulatory reporting.

  1. Generally, on a pre-agreed date, the regulators release templates of the reports that banks need to provide them.
  2. Banks have an army of analysts going through these templates, documenting the data items required in the reports, and then mapping them to internal data systems.
  3. These analysts also work out how the bank’s internal data can be transformed to arrive at the report as the end result.
  4. These reports are then developed by the technology teams, and then submitted to the regulators after stringent testing of the infrastructure and the numbers.
  5. Everytime the regulators change the structure or the data required on the report, the analysis and the build process have to be repeated.

I have super simplified the process, so it would help to identify areas where things could go wrong in this process.

  1. Regulatory reporting requirements are often quite generic and high level. So interpreting and breaking them down into terms that Bank’s internal data experts and IT teams understand is quite a challenge, and often error prone.
  2. Even if the interpretation is right, data quality in Banks is so poor that, analysts and data experts struggle to identify the right internal data.
  3. Banks’ systems and processes are so legacy that even the smallest change to these reports, once developed, takes a long time.
  4. Regulatory projects invariably have time and budget constraints, which means, they are just built with one purpose – getting the reports out of the door. Functional scalability of the regulatory reporting system is not a priority of the decision makers in banks. So, when a new, yet related reporting requirement comes in from the regulators, banks end up redoing the entire process.
  5. Manual involvement introduces errors, and firms often incur punitive regulatory fines if they get their reports wrong.
  6. From a regulator’s perspective, it is hard to make sure that the reports coming in from different banks have the right data. There are no inter-bank verification that happens on the data quality of the report.

Now, to the exciting bits. FCA conducted a pilot called “Digital Regulatory Reporting” with six banks, Barclays, Credit-Suisse, Lloyds, Nationwide, Natwest and Santander. The pilot involved the following,

  1. Developing a prototype of a machine executable reporting system – this would mitigate risks of manual involvement.
  2. A standardised set of financial data definitions across all banks, to ensure consistency and enable automation.
  3. Creating machine executable regulation – a special set of semantics called Domain Specific Language (DSL) were tried to achieve this. This functionality was aimed at rewriting regulatory texts into stripped down, structured, machine readable formats. A small subset of the regulatory text was also converted to executable code, from regulatory texts based on this framework.
  4. Coding the logic of the regulation in Javascript and executed using DLT based smart contracts.
  5. Using NLP to parse through regulatory texts and automatically populate databases that regulatory reports run on.

If the above streams of efforts had been completely successful, we would have a world of regulators creating regulations using DSL standards. This would be automatically converted to machine executable code, and using smart contracts be executed on a Blockchain. NLP algorithms input data into the reporting data base, which will be ready with the data when the smart contracts were executed. On execution, the reports will be sent from the banks to the regulators in a standardized format.

This would have meant a few Billions in savings for UK banks. On average, UK banks spend £5 Billion per year on regulatory programmes. However, like most pilots, only part of the programme could be terms as successful. Bank’s didn’t have the resources to complete all the above aspects of the pilot successfully. They identified the following drawbacks.

  1. Creating regulatory text in DSL, so that machines can automatically create and execute code, may not be scalable enough for the regulators. Also, if the creation of code is defective, it would be hard to hold someone accountable for error prone reports.
  2. NLP required a lot of human oversight to get to the desired level of accuracy in understanding regulatory texts. So, human intervention is required to convert it to code.
  3. Standardising data elements specific to a regulator was not a viable option, and the costs involved in doing so is prohibitive.
  4. While the pilot had quite a few positive outcomes and learnings, moving from pilot to production would be expensive.

The pilot demonstrated that,

  1. A system where regulators could just change some parameters at their end and re-purpose a report would enable automated regulatory reporting.
  2. Centralizing processes that banks currently carry out locally, create significant efficiencies.
  3. Dramatic reduction in the time and cost of regulatory reporting change.
  4. Using DLT could reduce the amount of data being transferred across parties, and create a secured infrastructure.
  5. When data is standardised into machine readable formats, it removes ambiguity and the need for human interpretation, effectively improving quality of data and the reports.

In a recent article on Robo-Regulators, I highlighted the possibilities of AI taking over the job of a regulator. That was perhaps more radical blue-sky thinking. However, using NLP and DLT to create automated regulatory reporting definitely sounds achievable. Will banks and the regulators be willing to take the next steps in moving to such a system? Watch this space.

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

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Collaboration, not Confrontation for InsurTech- an Ides of March Warning No Longer Needed for Incumbents

It wasn’t long ago that the figurative tools of InsurTech were being sharpened against imperious legacy insurance.  In contrast to plans however, effecting insurance change has been found to be significantly more nuanced an effort than that which was foretold to occur within the Roman Senate on the Ides of March.  And, as with the limited effects of the Ides on the crowds in the Forum, InsurTech change to date has been primarily a focus within the inner sanctum of insurance that has remained transparent to its customers- and their perception of the industry. 

As noted in my last column, InsurTech has proven its worth in theory, and in many ways in practice – developing innovative methods that allow more efficient operations, devising effective methods to underwrite, distribute, engage, sell, service and retain customers and staff.  Very cool – but have the innovation efforts had an effect where they need to, customer satisfaction?  And, are there indications that InsurTech-founded carriers are economically viable?

There are two primary lines of insurance business to consider regarding customers’ response to InsurTech’s effects:

  1. New business lines, ostensibly where new business methods are simply the only business methods the customers know.  Innovation is simply part of the customers’ experience.
  2. Incumbent/legacy business that has in some part been changed in the service provided to the customers.  This could be back office changes, underwriting, distribution, sales, claims, after-sale service, etc.

New business lines

There have been many entrants to multiple lines of insurance since the advent of the ‘InsurTech’ initiative, in essentially all major markets around the globe.  There are carriers with explosive growth involving tens to hundreds of millions of customers such as Zhong An , a China market startup whose customers have voted their initial satisfaction with their overwhelming participation in the carrier’s ecosystem approach.  Other markets have seen the advent of online auto (motor), renters’ and homeowners’ options, including owner usage-based auto provider Root Insurance , behavioral economics/charitable giveback player Lemonade, proactive homeowners carrier Hippo, and German health insurance ‘hybrid’ start up,  DFV_AG (incumbent with a clever tech solution for claims).  In each case the firms’ primary customers are in majority digital ‘natives’ whose expectations for performance are not colored by legacy operations’ processes.  In great part these firms’ customer experiences comprise not much more than a few written premium/earned premium cycles.  Considering that, traditional financial success has been a difficult measure  (see assessment work by Adrian Jones and Matteo Carbone,  e.g., mo-premium-losses-insurtech-start-ups-get-big )  and service satisfaction is in great part solely the success of getting customers to pay the premiums.  Niche carriers such as Dinghy Insurance (cover for freelancers), or Pineapple  (peer to peer personal effects cover) are endorsed by participants as being just the right unique item for the respective policyholders.  Satisfaction by default.

Incumbent/Legacy Business

Global insurance companies have been present in some form for three hundred years (and certainly risk management has been a principle since the days of Hammurabi, and since things have changed a least a little since 1750 B.C.); it can be said that societal innovation carried risk management along for the ride and insurance customers have at least begrudgingly maintained satisfaction with the purpose of the industry during the ensuing 3750 years. 

So what about innovation/InsurTech being the dramatic industry change since 2015-16?  Have customers embraced and celebrated all the wondrous technical and process improvements that have burst forth from the slide decks of very smart InsurTech folks?  It sure is hard to tell.

Not all markets and lines of business solicit and/or maintain customer service responses from their insurance customers, so customer satisfaction changes due to InsurTech advances are not much easier to gauge for incumbents as would be for new entrants.  Certainly the P&C markets within the U.S. have more than one authority capturing customer service tendencies:  J.D. Power is a recognized provider of service data, and Clearsurance  (an InsurTech firm in its own right) is an online aggregater of customer service responses.  But can survey tendencies be attributed to tech innovation?

A review of J.D.Power auto insurance customer survey data from 2016  and 2018 find the top players remain at or near the top, that the industry average satisfaction has increased a little, and that the 2018 customers voice approval of having multi-channel access to their policies/carriers.  No overt celebration of tech advances but some tech mention is worth something.  There has not been a wholesale abandonment of incumbent carriers within the US as the top-ten carriers’ market share in 2016 (71%) and 2018 (72%) has changed little ( 

Continuing the discussion to Homeowners carriers, J.D. Power data for 2016  and  2018 find some customer tendencies being noted across the two year period, but no actionable changes that can be attributed in the majority to innovation/InsurTech.

As for customer satisfaction data for other global markets- it’s difficult to obtain comprehensive results for insurance lines across national borders, and unified markets such as in India and China do not yet have the tradition of longitudinal study of customer survey data.  It can be suggested as those markets ‘homogenize’ with influx of firms that are outside the domestic current growth there may be cross-pollination of survey habits.  And in terms of health insurance surveys, the mix of national health programs, private programs, national programs for select portions of populations, it’s an apples and pomegranates situation for customer sat information.  As for life products, annuities, etc.- efforts to collect those tendencies mirror the efforts the industry has held for a while – a little underwhelming from the customers’ perspective.

After a lot of blah, blah, blah, it’s difficult to say that InsurTech is a concept that insurance customers embrace as a reason to buy insurance, change who they buy from, or give warm, fuzzy feelings about the product, any more than the change from cuneiform text to Roman/Greek to Arabic writing changed the industry.  The overarching point- InsurTech has awakened initiatives that are blending many digital and tech methodologies with finance and insurance, e.g., API integration (thanks, Karl Heinz Passler) but not on a seismic, customer based level- yet.  Give the industry a generation and the customers will force the issue by default acceptance of societal tendencies.

Until that wave of change occurs, insurance innovators can better effect change through sharpening skills in understanding what customers indicate they need, innovating from the needs of the figurative forum-first- and helping the firms that hold the bulk of the public’s business- the legacy players- avoid the need to be warned of an Ides of March initiative.  InsurTechs might even find that in collaboration there are profits to be made.

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Patrick Kelahan is a CX, engineering & insurance professional, working with Insurers, Attorneys & Owners. He also serves the insurance and Fintech world as the ‘Insurance Elephant’.

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Fame, feeling and fluency are the weapons to SME banking mass-market domination

According to an Adaptive Labs research report, 55% of SMEs would definitely pay more for banking services that were simple and easy enough to use, to free them up to get back to doing the bits they love, and a further 34% would consider it.

If backed up in the real world, those stats are good news for UK neobank startups Tide and Starling, both of whom are going after the coveted by highly intricate SME market, and hardly want to enter into a price war with the incumbents. There’s also Coconut, who is also having a crack.

The thing is, when you drill down to the features on offer from all of them, they all feel rather similar. So, what is it that would make a SME decide one particular tech startup is the must have ‘Nike of SME banking’?

This week I’ve been mulling over the importance of brand metrics. I was recently introduced to  System 1 Research, some of whose work has looked at the way consumers make decisions in markets where there is an abundance of ‘like for like’ products (banking, anyone?).

A key pillar of their thinking aligns around a concept they’ve coined as ‘Fame, Feeling and Fluency.’

  • If a brand comes readily to mind, it’s a good choice (Fame).
  • If a brand feels good, it’s a good choice (Feeling).
  • If a brand is recognisable, it’s a good choice (Fluency).

According to System 1, the brand’s current market share can be explained by looking at the three Fs together, but future market share is a function of ‘feeling’. The science is in – if you feel more, you’ll buy more. Emotional led sales people around the world can finally say ‘I told you so’.

CEOs and leadership teams at Coconut, Tide and Starling are after one thing – market share. There are a lot of programatic and paid acquisition driven strategies that could lead them up the garden path, away from that destination. Here’s hoping they’ve realised it’s not just about products, feature, comparison tables and fancy apps, but it’s about hitting those three Fs harder than their peers. Brand investments like that still takes a degree of faith for senior leadership teams. Lucky startups are risk takers.

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.

High-quality Low-cost, Active Index investing

`Jack` Bogle passed away this past January. No matter what investment camp you belong to, he has undoubtedly impacted investment thinking, products, and services.

Last summer, Victor Hagahni and James White – Victor is the Founder and CIO of Elm Partners, and James is Elm’s CEO – wrote an article Is Vanguard More Rolls Royce, or Hyundai? that highlights an investment world particularity:

With most products and services – cars, doctors, food etc – better quality normally goes hand-in-hand with a higher price. Not so with investing.

They even quoted Bill McNabb, former CEO of the Vanguard Group saying:

`The whole cost argument from an investment perspective is counter-intuitive.` 

Listening to Bill McNabb`s short interview[1] at the 2019 Academic and Practitioner Symposium on Mutual Funds and ETFs, he makes a very important point that is not well understood.

Over the past ten years, we have transformed the investment management space into

A low-cost product space

It is NOT a transformation into

A passive beats active space

The growth of robo-advisory (apologies for the umbrella term) is Not about passive over active. Robo-advisory is about the widespread use of low-cost products. We live in a world that it is becoming more difficult to imagine high-cost investment products.

One of the best examples of low cost, active and passive management, is Elm Partners. 12bps, tax harvesting, portfolio construction based on economic fundamentals and other liquid risk premia in addition to equity market Beta.

Listen to Victor Hagahni and James White discuss with me their approach which is for accredited investors only. Their offering includes less than half a dozen investment programs and the possibility of SMAs. Elm Partners does not aim to do everything for everybody. Low cost and transparency, are paramount for their business.

You can also follow their quarterly reporting on Seeking Alpha, here. You can follow their thoughtful research here. You can savor Victor`s TEDx Talk Where are all the Billionaires? & Why should We Care?: where he uses the puzzle of the missing billionaires to help us understand why most investors fail to capture the returns offered by the market. This actually leads into the main reasoning for Elm Partners investment strategy, the so-called “Active Index Investing.”

[1] Former Chairman and CEO of Vanguard, Bill McNabb Discusses the Future of the Investment Industry from the 2019 Academic and Practitioner Symposium on Mutual Funds and ETFs. Presented by UVA Darden and the Investment Company Institute.

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

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Blockchain Front Page: Crypto Exchanges hold more than your Money


Last week our theme was “Are Apple, Amazon, Google and Facebook the future of banking?

Our theme for this week is “When Crypto Exchanges hold more than your Money

Before desktop computers and smartphones put the Internet in everyone’s hands, I sat in computer room, staring at a terminal screen with bright green text, using networks like Bitnet, MUDs, and tools like Gopher and Archie and without a graphical user interface, mouse, track pad or touch screens. You had to type in everything. Since those days, technology has vastly improved. But one thing is far worse. No matter how safe you think your data is, the Internet has changed everything about the security of your personal data and to be more specific, who uses it and how.

In the wake of the Facebook & Cambridge Analytica scandal, in Europe firms have scrambled to comply with the EU’s GDPR. But the damage is already done. Our personal data is out there, and we have lost control of it. Securing data is now on everyone’s minds thanks to Facebook. Back in September the whole world heard about the hack on Facebook, when almost 87 million of its users accounts were left exposed due to a security flaw. The security breach caused Facebook’s shares to drop by 3% in the last days of September.

In a news story on CCN, someone by the name of “ExploitDOT” was allegedly selling 100,000 personal documents that were used to comply with KYC regulations on various cryptocurrency exchanges, like Poloniex, Binance, Bittrex and Bitfinex.

The low-cost Robinhood investing app makes up for the lost profits of commission-free trades, by selling users’ data to other financial companies.

The cryptocurrency derivatives platform BitMEX denied allegations that its new user agreement will allow it to sell trading data to third-party firms. BitMEX announced that it had updated its Terms of Service Agreement, including changes to the intellectual property clause. As of March 6th, when the updates went into effect, BitMEX users will cede any rights of ownership for content posted on the platform.

Last April, Amazon won a patent in the US for a subscription feed that the company claims could “identify Bitcoin transaction participants” for governments and law enforcement. The patent, which was filed in 2014, comes at a time when regulators’ desire to track and police cryptocurrency is running up against the technology’s core promises of pseudonymity for users.

Coinbase, one of the leading cryptocurrency exchanges, is under fire the past fews days. Controversy about the acquisition of Neutrino and revelations about ChainAnalysis selling Coinbase client data to “outside sources,” has added steam to the #DeleteCoinbase movement.

Emphasizing on the primary reason why Coinbase acquired Neutrino, Christine Sandler, Director of Institutional Sales at Coinbase, revealed that Coinbase had to drop its current tracking providers as they were selling customer data without authorization: “It was important for us to migrate away from our current providers… They were selling client data to outside sources, and it was compelling for us to get control over that and have proprietary technology that we could leverage to keep the data safe and protect our clients.” 

The hashtag #DeleteCoinbase, which started on social media after the acquisition, has continued to trend, promting crypto users to delete their Coinbase accounts, following the acquisition.

The line between data and money is dissolving. In an article on Wired this past December, the author talks about how he sold his Facebook data to a stranger for crypto.

The world’s most valuable resource is no longer oil, but data. The five most valuable listed firms in the world, deal in data. Everyone wants your data. Companies want it, users have it. Your data is everything a company know about you. It runs e-commerce, contributes to new product development. It’s more valuable than your money, because without it, it become very difficult to sell you anything.

Cryptocurrencies and blockchain make it possible to think of data as a scarce digital asset that can be owned, rented, or sold. As money becomes data, data is becoming money.

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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.

Venezuela is the first country with a Fiat currency crisis at a time when Bitcoin is a real option


TL:DR. When the government is guaranteed to rob you each and every day, it is worth taking bit of risk to exchange Fiat to Bitcoin in a dark alley using LocalBitcoins

This is an update to the chapter in The Blockchain Economy digital book entitled: Some Governments Want To Shut Down Bitcoin But They Don’t Know How.

This post covers

  • Hyperinflation robbery is not just yesterday’s news.


  • Watch what real people do, ignore governments flailing around.


  • Exchanging Fiat to Bitcoin in a dark alley using LocalBitcoins sounds scary unless the alternative is worse.


  • Bitcoin vs Altcoins in the market laboratory of Venezuela.


Hyperinflation robbery is not just yesterday’s news

Yes inflation is robbery. If it is still $1 it may sound good, but not if $1 buys what used to cost 10c.

There are 3 types of inflation:

  • Low enough to be considered “good inflation” by many economists – around 2-3% pa.


  • High enough to be a big concern – nudging 10% pa. It’s not hyperinflation, but could become so and nobody will trust it as a store of value (run the numbers over a few decades if you doubt this). Many countries including USA and UK have had this level of inflation and dealt with it by having high interest rates.


  • Crazy aka hyperinflation. Venezuela, sadly for its citizens, certainly qualifies.

Many countries have had hyperinflation – think Zimbabwe recently and Weimar Germany in the 1930s. Venezuela is the first country to suffer hyperinflation when Bitcoin is a real option (and is also a much bigger economy than Zimbabwe).

Watch what real people do, ignore governments flailing around.

Before Bitcoin, the classic policy response of a country with hyperinflation was to peg the local currency to USD. This is less of an option today for two reasons:

  • Governments that fear the US Government may feel more nervous about adopting the USD.
  • If Inflation is the problem, the currency that is the least inflationary looks best. So Bitcoin looks better than USD.

After Bitcoin, the policy response includes creating a Fiat Coin. The more formal name is Central Bank Digital Currency (CBDC), meaning Central Bank determines monetary policy but that currency is traded like Bitcoin.  This is lipstick on a pig. Fiat Coins are still not sound money, even if they sound cool and modern and give some incremental efficiency gains by using Blockchain.

Ignore these governments flailing around; that is not where the action is. Instead watch real people use Bitcoin to solve real problems in their lives. Those of us living in countries with a stable Fiat currency can only imagine the desperation caused by hyperinflation. If you think buying some Bitcoin will help feed you and your family, then buying some Bitcoin will get onto your Must Do Today A List.

The reality for the people is that if feeding you and your family is your concern, black market USD looks as good as black market Bitcoin. So people will use both. What is new is that Bitcoin is now an option alongside the USD.

BTW, “black market” is a pejorative term that only carries moral weight if the government is doing the right things for its citizens. Governments that allow hyperinflation forego such respect.

Exchanging Fiat to Bitcoin in a dark alley using LocalBitcoins sounds scary unless the alternative is worse

These traction numbers (from CoinDance) are enough to to make investors salivate. Data about Venezuelans trading in bolívar for Bitcoin on the LocalBitcoins exchange looks like a classic hockey stick – but this is not a business plan projection, this is actuals. 


Screen Shot 2019-03-05 at 07.21.48

I have never used LocalBitcoins, because it sounds a bit scary to my spoiled way of thinking. You can get robbed (before or after the transaction) and I am fortunate to have other safer options. If you live in a stable country you have two much safer alternatives:

  • For big sums you can use Brokers & Exchanges after going through some routine KYC.

Bitcoin vs Altcoins in the market laboratory of Venezuela

Venezuela is where some Altcoins will either emerge triumphant or be trampled by the growing might of Bitcoin.

Altcoins such as BitcoinCash (BCH) and Dash claim to be better than Bitcoin (BTC) for regular spending.  Venezuela is the market laboratory where we will soon know if this true. The market verdict is not yet out but early indications are:

  • BitcoinCash (BCH) does not seem to be getting much traction.


  • Dash is getting some traction but not as much as Bitcoin (BTC).

Image Source.

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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FB doing a Tencent – Cryptos mainstream adoption in sight?

We have had a record breaking February in the UK weather-wise. One of the days in Feb saw temperatures go up to 21 degrees Celsius. While the cold has returned a little bit, it seems winter is largely done. I get that sense with cryptos, as large institutions one after another are announcing projects, and it only takes one of them to take off for cryptos to go mainstream.

Messaging applications thinking of launching their own cryptos is nothing new. Telegram and Signal have been at it for sometime. However, it is a bigger deal when Facebook looks at introducing cryptocurrency based payments on Whatsapp. The size of the opportunity for Facebook and their partners when the platform is Finteched will undoubtedly get them out of their issues they have faced over the past 24 months.

The Facebook Opportunity

Facebook has two problems to solve, and both potentially powered by Blockchain.
Facebook’s Blockchain team has been spearheaded by former PayPal president David Marcus since last May. In order to replicate Tencent’s successes, they need to leverage the user base of their apps (FB, Whatsapp, Instagram). Bringing payments to Whatsapp would have have been a good starting point, however Facebook’s attempt at doing that in India (the largest Whatsapp) hasn’t gone too well.

About 1 Billion people in India have a mobile, and about 300 Million of them use Whatsapp. Last year, Whatsapp pay launched in a controlled fashion to 1 Million users in India. They used the government backed UPI (Unified Payments Interface), and during the pilot, they achieved about a Million transactions per month. However, the regulators weren’t happy that the payments engine was on Facebook servers. They wanted the servers to be in India, and despite several conversations there is no solution.

The payments market in India is a $1 Trillion market by 2023, and it would be a shame if they missed the bus.

Facebook is looking to create a stablecoin attached to a basket of currencies. There is a team of about 50 people working on this project. If FB planned to use the Indian market as a testing ground for the crypto-powered Whatsapp pay, they may now have to deal with the crypto currency regulatory ban too. However, if they managed to clear the regulatory hurdle, their growth could dwarf the likes of PayTM, and that would just be the start. On top of it, Indian remittance market boomed to $80 Billion last year. If I could use whatsapp to send money to my mom, that would be awesome!!

The other issue that FB has had is around data privacy. With identity management being one of the key concerns, FB saw record number of millennials leave their platform last year. However, with a Blockchain powered Self Sovereign Identity engine, Facebook connect could redefine it’s position with data privacy as a distributed identity management platform.

How decentralised it (the identity engine) will stay if launched is another challenge. Most federated and decentralised identity management engines have ended up creating a centralised monopoly in the past. With Blockchain behind the scenes, one would expect that to be different.

Will Facebook replicate Tencent inspired successes through Whatsapp? Will FB change perceptions through a genuinely decentralised identity engine? Would 2019 be the year of mainstream adoption of cryptos? Watch this space.

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

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Welcome Pat Kelahan to Daily Fintech


I am delighted to announce that Pat Kelahan will be writing the Thursday Insurtech column from now on. We interviewed Pat a week ago and then asked him to write the regular column each Thursday. You can see the first post from earlier today. Pat joins the other 4 Authors, one for each day of the week covering a different domain within Fintech from different parts of the world:

– Monday = Blockchain, Bitcoin & Crypto = Ilias Louis Hatzis from Greece

– Tuesday = Wealth Management & Capital Markets = Efi Pylarinou from Switzerland

– Wednesday = Small Business Finance = Jessica Ellerm from Australia

– Thursday = Insurance = Pat Kelahan from USA

– Friday = Consumer Banking & Impact Investing = Arun Krishnakumar from UK.

One reason why senior people give us their attention is that we connect the dots between Fin and Tech. We translate Fin to Tech and Tech to Fin. To do that in Insurtech means combining a) a deep understanding of how Insurance really works b) a customer-centric mindset c) an ability to explain complex subjects in engaging ways. Pat combines all three. You can read more about Pat from his interview last week and on his LinkedIn profile and follow Pat on Twitter. Here is an extract from last week’s interview for Pat to tell us about himself in his own words:

I am a father of seven, husband, multi-tasker and someone who strives to see and communicate the need to keep customer service as the focus of business, including insurance. Having been involved in insurance claims assessment and management for almost twenty years, retail and business ownership for another decade and one half, and construction/disaster work, my customer-focus has seen many iterations. In addition to the direct work of insurance I have remained a student of the industry, gaining understanding of how the ‘pieces’ fit together, and how effects on one facet affects the others. My current role is as Building Consultant/Forensic Market Strategist for H2M architects + engineers, a large engineering firm located in Melville, NY. How does that keep me in the insurance world? Well, the firm has an active division that assists property insurance carriers with forensic cause and origin work, including assessing mold, asbestos, and environmental damage claims, and consulting with adjusters for understanding of what causes claims. In addition, I am charged with helping the firm anticipate changes in property insurance and what comes next. Toward that end I network extensively with insurance stakeholders across the globe, and have introduced the insurance persona, ‘The Insurance Elephant’, to better focus the industry’s need to keep customer service in all it does, particularly as InsurTech efforts evolve. My duties also include presenting at industry conferences, conducting industry training, and consulting on building damage with insurance adjusters and others within the industry. I have a graduate degree in business from a top 50 university, have served as mayor of a village in upstate, NY, and been seated as a member of boards for not-for-profit organizations.


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

Check out our advisory services (how we pay for this free original research).

To schedule an hour of Bernard’s time for CHF380 please click here to send an email.