What Business Opportunities Can be Captured as Banking Evolves in the Next Decade

What Business Opportunities Can be Captured as Banking Evolves in the Next Decade

Zion Market Research's findings indicates that as of August 2022, the worldwide fintech-as-a-service platform market size is expected to increase to over $949 billion by 2028, with a compound yearly growth rate (CAGR) of about 17%. 

A report issued by the Treasury Department in November 2022 describes in detail how big and small businesses are providing financial services at actual consumer points of need, opening up a new market for startups, small businesses, and regional banks to diversify their product offerings and compete with national banks and institutions. 

What we currently think of as banking will evolve into the foundation of our daily digital activities, taking on new forms and legal requirements. Here are the top Three banking trends and opportunities that Entrepreneurs can leverage, to capture the market.

1. A New Crop of Fintech Companies will Spawn from the Transfer of Wealth By Gen Z.

Gen Zers financial habits and behaviors will shape the next decade of banking, as the wealth transfer proceeds discreetly. By 2031, their income will have surpassed that of millennials, and it will have increased 5x by 2030 to $33 trillion, accounting for more than a quarter of global revenue. 

Survey results released in November 2022 by the Stanford Graduate School of Business, the Rock Center for Corporate Governance, and the Hoover Institution of 2,470 investors indicated significant demographic differences, with younger shareholders indicating want fund managers to pursue ESG objectives.

As a result, Fintechs and BaaS (Banking as a Service) platforms will emerge, catering specifically to young wealth and focusing on concierge-style wealth management. And as it spreads out the red carpet for young people, the banking industry will continue to become more democratized.

2. The Embedded Financial Ecosystem Will be Improved By Additional Regulations.

Several McKinsey partners coauthored an article in October 2022 that stated embedded finance generated $20 billion in revenue in the U.S. alone in 2021. Today's consumers have access to "buy now, pay later" services for online purchases, one-click payments on Uber, Amazon, or Walmart, and the ability to plan vacation and lodging with built-in insurance options.

Embedded finance's infrastructure is still in its early stages, and the business has developed swiftly without any oversight or quality control. Regulators will get more involved as the business develops, leading to more specialized, effective banking products. In the end, customers will benefit since a better banking product will be produced.

3. The Normalization of Crypto Through Regulation.

One of the pillars of decentralized financial currencies continues to be the future of finance. It will manifest itself in a number of ways over the next several years, including through securities and legislation, the debut of the first consumer enterprise product, and an increase in use cases outside of finance.

Utility and private business token investments, which are equity certificates produced on the blockchain often linked to a firm's shares, may soon be subject to Securities & Exchange Commission (SEC) regulation. This oversight will be appreciated and bring about adequate investment-risk disclosure, but it will also mean that they are no longer available to everybody.

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History First - How a Real House Sold as a Digital Asset in form of an NFT

History First - How a Real House Sold as a Digital Asset in form of an NFT

A real 3 bedroom house, located in Columbia Sout Carolina, has become the first on-chain house to be sold as a non fungible Token (NFT), for $175K, reported unusualwhales.com. 

The rental property "was sold on the Roofstock onChain NFT marketplace by transferring the Home onChain identity to an Ethereum address owned by the house buyer Adam Slipakoff," Unusual Whales reported.

How did the transaction transpire?

The term “Non-fungible” implies something unique and can’t be replaced with something else. A simple example would a one-of-a-kind trading card. Once it's traded, the user gets a different card. In this scenario, Roofstack, a real estate platform had the property listed on its blockchain by a limited liability company (LLC), as an NFT. When the NFT is purchased, the ownership of the digital asset, representing a physical asset, is transferred to the owner. 

In more techy terms, the "physical" property located at 149 Cottage Lake Way, Columbia was listed and sold on the Roofstock onChain NFT marketplace, by transferring the Home onChain identity to an Ethereum address owned by the house buyer Adam Slipakoff. According to Adam Slipakoff the process of acquiring his new property using NFTs was less cumbersome than the traditional mortgage process. 

Is this Legal?

NFT trading has now been around for sometime now and there are several platforms that allow for buying and selling these digital assets. In summary, there is no definitive answer to this question yet. 

According to this law.com report, "NFT Boom: What Are the Regulatory and Enforcement Risks?", Federal law requires businesses involved in the exchange of “value that substitutes for currency” to comply with money laundering regulations, but some regulatory lawyers are skeptical that NFTs, as they are being used right now, would fall under that classification. 

The report further suggests that Securities and exchange commission (SEC) if/when NFT's can qualify as a security. Although the SEC hasn’t yet issued guidance on the subject, lawyers generally think the vast majority of the NFTs, as they are currently being used, would not be considered securities. 

What happens next?

As the next evolution of technology happens - which is now dubbed as Web3 (Read: What is Web3?), rules and regulations will continue to evolve. For now, NFT sale of this house in Columbia, marks an era where the lines between digital and physical assets are starting to blur. This also signals a demand by consumers to access channels which reduces overhead to industries that are marred by high fees and complexities.

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How Mastercard is Bringing Cryptocurrency Trading to Banks

How Mastercard is Bringing Cryptocurrency Trading to Banks

According to Mastercard Press release, the firm will bring crypto trading capabilities to banks. Mastercards' 2022 New Payment Index highlighted that 29% of respondents globally hold cryptocurrency as an investment and 65% indicating crypto-related services should be part 'n parcel of services provided by their financial institutions. Understanding there is demand, Mastercard has introduced Crypto Source, a program to enable financial institutions to bring secure crypto trading capabilities and services to their customers.

Ajay Bhalla, President, Cyber & Intelligence at Mastercard has stated, “At Mastercard, trust is our business. What we are announcing today is a connected approach to services that will help bring users safely and securely into the crypto ecosystem. Our recent investments in this space, such as the acquisition of CipherTrace and Ekata, are providing us with a unique set of capabilities to help provide our customers and consumers with the most technically advanced solutions available in the market,”.

How will Mastercard Accomplish this?

Mastercard has partnered with licensed and regulated crypto custody providers, to create an ecosystem that provides  a comprehensive suite of buy, hold and sell services for select crypto assets, augmented with proven identity, cyber, security and advisory services. In addition to Crypto Source, Mastercard will extended Crypto Secure, to ensure security to the crypto ecosystem and support card issuers in their compliance with complex regulations. 

More specifically, Mastercard will use Paxos crypto trading platform to let financial institutions offer cryptocurrency trading to their customers. Paxos will handle custody and trading, while MasterCard will handle regulatory compliance and security. Paxos offers similar services to PayPal, which launched crypto services in late 2020. The platform is known for providing blockchain infrastructure that allows other companies to offer crypto-related products and services

What Does the Offering Include?

The offerings to financial institutes will include:

• Technology and partnership support to enable buy, hold and sell of select crypto assets
• Security management including Mastercard’s identity solutions, crypto analytics, transaction monitoring, anti-money laundering, ‘Know Your Business’ and lifecycle stages, cybersecurity, and biometrics
• Crypto spend and cash out capabilities offered through a range of products, including crypto cards, open banking and cross border services. Financial institutions would also be able to offer additional functionality using Mastercard’s technology such as digital receipts and loyalty solutions
• Crypto program management including program design, product development and technology implementation, as well as go-to-market optimization and marketing consultancy services, providing end-to-end support for banks, fintechs and issuers to offer crypto programs at scale

The So What?

As the cryptocurrencies normalize in both value and maturity, so does the adoption by mainstream. Financial institutions and service providers will be remiss to not enter a market, where there demand. In the end, its about maintaining market share by aligning and providing services that customers expect from their providers.

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Robinhood Introduces New Non-Custodial Crypto Wallet for 10,000 Users

Robinhood Introduces New Non-Custodial Crypto Wallet for 10,000 Users

What's the difference between a Custodial vs a Non-Custodial Wallet?

Let's first by clarifying the difference between a custodial vs a non-custodial wallet. In essence, it has to do with private keys that are associated to digital wallets. This private key enables crypto owners to perform transactions from their digital wallets. A Custodial digital wallet is where the digital wallet service provider (like Coinbase or Kraken) hold on to the private key on behalf of the user. 

A non-custodial digital wallet is where the users holds the private key and is responsible for protecting their assets and proving ownership of the funds. This decision of custodial vs non-custodial wallets is done upon the purchase of the cryptocurrency by the user. There are pros and cons to both, primary have to do with security. The custodial wallets may be considered less secure as if an exchange or provider is hacked, the primary keys are compromised. With non-custodial wallets, if the user loses the private key, users could lose access to the funds.

What is Robinhood doing then?

Robinhood is rolling out a beta version of its non-custodial crypto wallet to 10,000 beta customers - which was announced in Q2 '22. The product is called Robinhood Wallet and will be the company’s first internationally-available app. The offering will be done with Polygon, a popular layer-two blockchain that plugs into Ethereum and makes the network faster and cheaper to use. The beta users will be able to purchase the Polygon MATIC token on Robinhood’s main exchange app and transfer it to their Robinhood provided wallet. 

Additionally, beta users will be able to fund their wallets using USDC stablecoin tokens, trade and swap crypto and connect to dApps to earn yield, according to the company. Furthermore, users will also be able to access dApps directly on the Polygon network, including DeFi apps such as Uniswap, Balancer and Kyberswap, and metaverse games such as Decentraland.

Aren't Gas* or Transaction Fees Too High for a Blockchain Network?

*Gas or Transaction Fees, are transaction fees done on the blockchain network. Similar to a standard financial institution, every transaction has a different cost associated to it. In the blockchain world, many computers are using electricity to compute and verify transactions taking place. The fees are compensation to users, who provide the compute power to run and validate the transactions.

The value-add or differentiator according to Robinhood is that, it won’t charge Robinhood Wallet users network or gas fees for transactions, differentiating it from popular non-custodial wallets such as Metamask and Coinbase Wallet. 

Seong Seog Lee, Robinhood crypto product manager has stated that gasless swap feature is, “an important step in lowering the friction for users to get started doing on-chain things.”

One of the reasons that Robinhood can probably forego the gas fees, is that Ethereum recently has gone through a merge, where it has switched from Proof-Of-Wor (PoW) to Proof-Of-Stake (PoS). This change will reduce Ethereum overhead by approximately 99%. Another reason for low or no cost, is due to partnership with Polygon, which uses "Layer 2" solution for processing transactions built on top of an existing blockchain. The goal with a layer 2 solution is to increase transaction speed and reduce costs by “rolling up” work before recording it on the primary blockchain.

Does Robinhood offer a Custodial Wallet and What's Next?

Yes it does - Robinhood rolled out a custodial crypto wallet to its users earlier this year and says it plans to complete a full rollout of the non-custodial wallet to 1 million+ users on the waitlist after the beta is complete, sometime before the end of 2022. 

According to Lee, the next steps for the Product Team is to build out multi-chain support for the wallet beyond the Polygon ecosystem. “I think there are two or three main considerations [around going multi-chain], Lee said. “The first is, we do want to get this initial wallet out into the world and see what user feedback is like. I think the demand for multi-chain is something that we’re going to keep at the forefront if a lot of users are asking for it … I think number two is, if we think that going multi-chain ends up delivering a better, more liquid decentralized trading experience, that’s also something that will prompt us to go multi-chain. And the third is, in the future, as we look into use cases like NFTs, we think multi-chain might be a great, great way to achieve that goal.”

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Another Day, Another Crypto Attack, Costing Users More than $5 Million

Another Day, Another Crypto Attack, Costing Users More than $5 Million

There has been a recent influx in crypto wallets being wiped out. This at a time, when crypto currency is going through growing pains, both from a technology resiliency and asset class point of view.

The Solana network is viewed as one of the most promising newcomers in the crypto market. Solana’s sol token is one of the largest cryptocurrencies after bitcoin and ether and it touts backers like Chamath Palihapitiya and Andreessen Horowitz. It is also considered a strong challenger to Ethereum with faster transaction processing times and enhanced security. 

Not any more...

Starting Tuesday evening, multiple users began reporting that assets held in “hot” wallets — that is, internet-connected addresses, including Phantom, Slope and Trust Wallet — had been emptied of funds. The Twitter account Solana Status confirmed the attack, noting that as of Wednesday morning, approximately 7,767 wallets have been affected by the exploit. “Engineers from multiple ecosystems, with the help of several security firms, are investigating drained wallets on solana,” according to Solana Status, a Twitter account that shares updates for the entire solana network.

Elliptic’s estimate is slightly higher at 7,936 wallets.  Blockchain audit firm OtterSec tweeted that the hack has affected multiple wallets “across a wide variety of platforms.”

The identity of the attacker is still unknown, as is the root cause of the exploit. Accroding to Tom Robinson, chief scientist at Elliptic, “it appears to be due to a flaw in certain wallet software, rather than in the solana blockchain itself.”

The incident comes one day after the $200 million hack of the Nomad blockchain bridge. It’s the latest crisis to grip the crypto market in recent weeks.

“Four addresses are currently linked to the hacker, a far cry from yesterday’s ‘decentralized looting,’ which involved over 120 individual users,” said crypto investor and analyst Miles Deutscher. “This implies that it was a singular party who conducted the SOL exploit, although the specific details remain ambiguous.”

The identity of the attacker is still unknown, as is the root cause of the exploit. The breach is ongoing.

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Investors Are Paying Millions To Purchase Premium Virtual Land In The Metaverse

DappRadar recently reported that Virtual land has become a booming business, selling for hundreds of thousands to even millions of dollars. The price of virtual land is driven by the popularity of the platform and scarcity of assets available.

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What is virtual land and where does it exist?

Akin to real estate (physical land on Earth,) thanks to Metaverse, there now exists virtual land in a virtual space. This virtual piece of land, referred to as a parcel, can be bought through a virtual land provider and then converted into anything - ranging from empty block to a 5 star hotel.

Decentraland, a provider of virtual land for example has 90,000 parcels of land, each roughly 50x50 feet. Investors in Metaverse believe there’s gold in those pixelated hills.

As reported by The New York Times (NYT), In October 2021, a blockchain technology company, Tokens.com acquired 50% of Metaverse Group - one of the world’s first virtual real estate companies, for about $1.7 million. Then a month later, it closed an even larger land deal in Decentraland’s fashion district for roughly $2.5 million. The company, plans to develop the area into a virtual commerce hub for luxury fashion brands, à la Rodeo Drive or Fifth Avenue.

Which Platforms offer virtual land?

The boom of virtual land and Metaverse, coupled with lure of high return potentials, has attracted many entrepreneurs and developers to build platforms supporting these trends. Two of better known providers in this industry are:

Decentraland: One of the more mature Metaverse platforms, running on Ethereum, it allows users to buy, virtual land, NFTs, trade in their native crypto MANA. In Decentraland, three aspects influence the value of land: Size, Proximity to hot spots, and if it’s next to a road. The biggest sales have been for estates, which are basically a bunch of land parcels bundled together.

Sandbox: Sand also uses Ethereum and offers more user freedom to create amazing creations in their virtual space. Virtual land evaluation is based on size of the estate and the proximity to brands or communities. It's also Snoop Dogg’s platform of choice, where he has recreated his villa, displays his $17M NFT collection, sells his own Snoop Dogg NFT collection, and hosts private parties and performances. Janine Yorio’s virtual real estate development company, Republic Realm, spent a record $4.3 million on a parcel of virtual land on the same platform. 

Should I give into this and start buying virtual land?

Yorio, in a CNBC interview shared that her company sold 100 virtual private islands last year for $15,000 each. “Today, they’re selling for about $300,000 each, which is coincidentally the same as the average home price in America,” she said.

Buying virtual land is quite simple; either directly from the platform or through a developer. Once purchased, users can build on their land and make it interactive. “You can decorate it, you can change it, you can renovate,” Yorio says. “It’s code.”

If you'd like to enter the world of virtual real-estate, do your research, as both the market and technology are still maturing. Every platform provider will have their nuanced approach, and buyers investing in the Metaverse will have their own motives. 

Mark Stapp, professor at Arizona State University, commented that. “I would not put money into this that I didn’t care about losing. I certainly wouldn’t,” Stapp says. “If it continues the way it’s going, it is most likely going to be a bubble. You’re buying something that isn’t tied to reality.”

What is clear is that, no matter where you look, location (just like the real world) will be the driving factor when buying a plot of land, influenced by factors like virtual foot traffic and aesthetics.

“The metaverse is the next iteration of social media,” said Andrew Kiguel, CEO of Toronto-based Tokens.com. Just like property in the real world, Kiguel says the metaverse is about three things: location, location, location.

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Digital Dollar Gains Momentum as Boston Fed and MIT Report Ability to Manage 1.7 Million transactions per second

 

The Federal reserve bank of Boston, in collaboration with Massachusetts Institute of Technology (MIT), have published a research paper that could serve as the foundation to create a government-backed crypto currency. This collaboration, referred to as Project Hamilton, focuses on technological experimentation that could lead to the creation of central bank digital currency, or CBDC. The whitepaper does highlight that this research is separate from the Federal Reserve's Board's evaluation of the pros and cons of a CBDC.

"It is critical to understand how emerging technologies could support a CBDC and what challenges remain," said Boston Fed Executive Vice President and Interim Chief Operating Officer Jim Cunha. "This collaboration between MIT and our technologists has created a scalable CBDC research model that allows us to learn more about these technologies and the choices that should be considered when designing a CBDC."

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Why technological experimentations, when crypto currencies already exist?

There are two main problems with existing crypto currencies (security is a different topic):

1. Power consumed to find the next unique hash
2. Settlement time to reach consensus, before the block is added to the chain

Consider the following, currently, the Bitcoin network is capable of handling just 7 transactions per second and Ether just 25, according to research by Shihab Hazari, a software developer and former researcher at Ontario Tech University. Solana blockchain can process an industry-leading 65,000 transactions per second (TPS). Since, its launch in March 2020, Solana has racked ~$50 billion in transactions and ~$10 billion worth of crypto, according to DeFi Llama.

Visa's CFO Vasant Prabhu recently told Barron's that, “True cryptos aren’t fast enough for purchase transactions,” he said. “The cost of doing a transaction using fiat currency on the Visa network is minuscule compared to the cost for Bitcoin and Ether.”

So how does Fed & MIT mitigate this lag?

The whitepaper points to a multi-phased project, released as open-source license for anyone to inspect, modify, and enhance the code at OpenCBDC. Phase-1 of the project is focused on developing software to process digital transactions. The results are quite promising.

The resulting code from Phase-1 is capable of handling 1.7 million TPS. Researchers also highlighted that majority of the transactions settled in under two seconds.  

To put this achievement in perspective, albeit theoretical, credit card payments in 2018 totaled $44.7 billion in the U.S. alone and credit cards can settle 5,000 TPS. 5K vs 1.7M TPS may be seem like a no brainer to expedite adoption; considerations have to be made on infrastructure, scale and security controls that credit cards have in place.  

That's what the second phase of the project will focus on i.e explore more complex capabilities and issues, such as cybersecurity and how to balance user privacy with the need for transparency to deter criminal activity. 

How will this impact existing Fiat currency and financial institutions?

Just like with every new technology shift, there are risks and opportunities.

“While central banks’ CBDC initiatives are not intended to disrupt the banking system, they will likely have unintended disruptive consequences,” Morgan Stanley’s Ahya said. “The more widely digital currencies are accepted, the more opportunity for innovation and the greater the scope for disruption to the financial system.”

Digital currencies may have major consequences for commercial banks, especially if users prefer to hold their currency in digital wallets provided by a firms like PayPal or Venmo. “This substitution effect could reduce the aggregate amount of deposits in the banking system,” the Fed report said.

On the other hand, digital currencies could be easier and less expensive to access for people without bank accounts. Furthermore, if the digital currency is backed by the Fed's, then unlike a bank or the companies issuing stable coins, they can't simply go out of business. This also opens the doors to a global economy, utilizing common digital assets.

For U.S in particular, there is also the ever looming threat from China. With the launch of a digital yuan, there are concerns that China could undermine the dollar’s status as the world’s reserve currency. A Bank of America report notes that issuing digital dollars would let the U.S. currency “remain highly competitive … relative to other currencies.”

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Is Bitcoin and Stock Market Correlation, a Signal of Maturity For Crypto Currencies

Crypto currencies continue to bottom out, as 2022 marches on, and we're only a few days into the new year. 

Show me the correlation:

Bitcoin, the world’s most valuable crypto currency by market value, dropped 8% to trade around $35,000. Bitcoin had previously hit a record high of $69,000 in November. Meantime, Ether, the second-largest crypto currency by market cap, sank nearly 10% to trade in $2,400 territory. 

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While, the crypto currencies were taking a nose dive, so was the over all stock market. 

The Nasdaq, home to many of the biggest tech firms, dropped ~10% below a record set in November, indicating a technical correction. Right around the same timeframe, Dow Jones Industrial Average (DJIA) fell 313.26, closing below its 200-day moving average since December 2021. The S&P 500 fell 1.1% and closed below 4,500 for the first time since October 2021.

These correlation have led some analysts to speculate that Crypto currencies are now showing a strong, positive correlation with the stock market. According to Joanna Ossinger report on Yahoo Finance:

The 40-day correlation coefficient for the digital token and the tech-heavy Nasdaq 100 has reached almost 0.66, the most in data compiled by Bloomberg since 2010. A similar correlation with the S&P 500 is at a record too.

Why do investors flock to crypto currencies?

There are varying set of reasons, though the most common and often cited by institutional investors, is that crypto currency is used to hedge against inflation. Secondarily, it's used as a lever to gain higher returns on an investment class that is not dependent on the movements of the stock market. 

According to Wharton professor Jeremy Siegel, "Let's face the fact, I think bitcoin as an inflation hedge in the minds of many of the younger investors has replaced gold," he told CNBC. "Digital coins are the new gold for the millennials."

What does this all mean for main stream?

Crypto currencies are here to stay, as this asset class has a strong footing in developing countries, due to fears of local fiat devaluation and inflation. In the developed world, gold is usually the go to commodity to hedge against inflation. 

Technical analyst Katie Stockton of Fairlead Strategies has suggested that, "The correlation between bitcoin and high-growth benchmark ARKK still stands at ~60% year-to-date, versus ~14% for the price of gold, reminding us to categorize bitcoin and altcoins as risk assets rather than safe havens,". 

Whilst gold has been around for ions, bitcoin just turned 13. This simply implies that when it comes to crypto currencies, the technology is still maturing. With complimentary technologies such as NFT's and Metaverse starting to take a strong foothold, digital or crypto currencies will become their enablers. 

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REV Acquires RadioShack Brand And Pivots It To DeFi

For those who remember the original "Tech store - RadioShack", it's a brand that came to existence in the early 1900's and served as the go-to for DIY techies. Due to multitude of financial and operational missteps, RadioShack had to file for bankruptcy protection (Chapter 11) in early 2015. In late 2020, Retail Ecommerce Ventures (REV), announced that it had purchased the iconic brand and its related assets.

“The RadioShack brands have resonated with consumers for nearly 100 years, and we are confident RadioShack’s relaunch as a cutting-edge ecommerce company will amplify the awareness of this iconic brand internationally,” said Alex Mehr, CEO of REV. 

Tai Lopez, Executive Chairman of REV added, “We were impressed with both the strong existing sales and sales potential of the Radioshack.com and related websites across the globe, including the U.S., Canada, India, Australia, Europe and China. Our approach builds off the existing strength of extraordinary brands such as RadioShack and supports our mission of transforming these beloved entities into Internet-first companies.”

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REV's vision for the brand? 

Re-purpose RadioShack for decentralized finance, or DeFi. The idea is to create a decentralized exchange (DEX) [1], allowing a way for users to more easily move in and out of different tokens, à la Uniswap and Sushiswap. This is different than likes of Coinbase, which are more of a centralized exchange.

Whilst in early stages, according to RadioShack web site, here's how they envision reaching the end-game (excerpts are taken directly from RadioShack.com as of Jan 14th 2021).

What is RadioShack DeFi:

RadioShack is a 100 year old brand embedded into the global consciousness… and we are going to lead the way for blockchain tech to reach mainstream adoption by other large brands.

The problem to solve (The Challenge):

There is a real generational gap between the average crypto buyer and the average business decision maker.

This demographic difference creates a substantial psychological barrier to crypto adoption.

‍

We will be the bridge between the CEO’s who lead the world’s corporations and the new world of cryptocurrencies.

How to solve this problem (Partnering with Atlas USV):

RadioShack DeFi will start with a token swap. We believe this is the lowest hanging fruit among the many defi opportunities.

‍

Our symbiosis with Atlas USV will allow us to offer the most efficient and competitive swap on the market.

Why does REV think the pivot will be a success?

For those not familiar with REV - it was founded by Alex Mehr and Tai Lopez in 2019, as a means to transform brands that have struggled to succeed in the age of ecommerce. Responsible for brands and products that have generated more than $1 billion in sales, including a $258 million exit for Mehr's Zoosk, REV has set their sights on acquiring distressed retail brands with global renown. 

Between NFTs, DeFi, DAO the metaverse, and crypto payments, firms worldwide have been dabbling in digital assets. REV predict that executives, who increasingly see crypto as legitimate, will dive headfirst into it by having their firms issue their own tokens. And to do that, they'll want a trusted partner, which Lopez and Mehr hope will be RadioShack.

Lopez says some parts of RadioShack's crypto ambitions will only be available initially to people outside of the U.S. to steer clear of any U.S. regulatory issues, though he did not go into specifics.

"If this becomes a little bit more of a trustworthy, well-understood process, the demand for it is going to be super high," Mehr has suggested. "That's the bet." 

[1] DEX:  Decentralized exchanges, are a set of smart contracts that enable trade cryptocurrency tokens for other cryptocurrency tokens.

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Top 3 Crypto Mining, Value, Growth and Momentum stocks

As 2021 goes into the record book, the term cryptocurrency has continued to burst out of the shadows and seep into mainstream vocabulary. Even the securities and exchange commission (SEC) has approved its first cryptocurrency centric Exchange Traded Fund (ETF).

Unlike fiat currency, which is minted by the government that owns it, cryptocurrency (known as coins) are mined by crypto mining firms, by solving complex computational problems. Cryptocurrencies then utilize blockchain technology to ensure secure and decentralized record of transactions, without the need for a trusted third party (like a bank). 

Matthew Johnston, recently reported on Investopedia, that:

Crypto mining stocks, as represented by the Amplify Transformation Data Sharing ETF (BLOK), have outperformed the broader market. BLOK has provided a total return of 39.3% over the past 12 months, above the Russell 1000's total return of 23.6%. 

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A quick refresher...

As a refresher, Value stocks represent an asset class where the value is usually higher than the market. Growth stocks, carry higher risk and hence are expected to outpace the market. Momentum stock are assumed to have an event that continues to give them an advantage, leading to outperforming the market.  

How this is applied to crypto mining...

Similar to Value, Growth and Momentum driven stocks, Johnston suggested that BTCM, HUT, and BITF were top for value, growth, and momentum, crypto mining stocks respectively. Johnston research has shown that:

• BTCM, has a 12-Month Trailing Price/Sales ratio of 0.7. This implies, the stock is currently undervalued and a good candidate for Value buy.
• HUT has seen a 825.6% Year-over-Year (YoY) growth, and such has been tagged as a growth stock.
• BITF has had 323.8% return in its trailing 12 months, and therefore classified as a momentum stock.

Disclaimer:

This is for informational purposes only and should not be considered investment advice or recommendations to invest in any security or to adopt any investment strategy. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice.

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PayPal Confirms its Own Crypto Currency, Backed By the US Dollar

PayPal has been steadily increasing its foray into crypto currency. According to press release in 2020, PayPal suggested that it will enable cryptocurrency as a funding source for digital commerce at its 26 million merchant. The press release also pointed out that PayPal has also been granted a first-of-its-kind conditional Bitlicense by the New York State Department of Financial Services (NYDFS).

"NYDFS' approval today follows our June 2020 announcement for a new framework for a conditional Bitlicense to encourage, promote, and assist interested institutions to have a well-regulated way to access the New York virtual currency marketplace in a way that is both timely and protective of New York consumers, through partnerships with New York authorized virtual currency firms," said Linda A. Lacewell, superintendent, NYDFS. "NYDFS will continue to encourage and support financial service providers to operate, grow, remain and expand in New York and work with innovators to enable them to germinate and test their ideas, for a dynamic and forward looking financial services sector, especially as we work to build New York back better in the midst of this pandemic."

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How will PayPal accomplish this:

PayPal has added  the ability for its users to buy, hold and sell select cryptocurrencies, initially featuring Bitcoin, Ethereum, Bitcoin Cash and Litecoin, directly within the PayPal digital wallet. The company plans to expand the features to Venmo and select international markets in the first half of 2021. The service is enabled in the U.S. through a partnership with Paxos Trust Company, a regulated provider of cryptocurrency products and services.

How is this different than any other provider:

To gain a competitive advantage and mainly alleviate the fluid valuations of crypto, PayPal is exploring it's own Stablecoin [1].

Jose Fernandez da Ponte, SVP of crypto and digital currencies at PayPal, has confirmed to Bloomberg that the online payment provider is "exploring a stablecoin." He also said that the company will work closely with relevant regulators "if and when [it] seek[s] to move forward."

The Bloomberg piece has also identified that a software developer Steve Moser, found hidden code and images for a "PayPal Coin" in the company's iPhone app. Based on Moser's discovery, the PayPal Coin will be backed by the US dollar. It may also feature the PayPal logo with two horizontal slashes across it, though that may change upon the coin's launch, if this were to materialize.

Global trends suggest this strategic move by PaylPal is viable: 

Blockchain analytics firm Chainalysis’ 2021 report on global cryptocurrency adoption index, has revelated that, Worldwide Adoption Jumps Over 880% With P2P platforms driving cryptocurrency usage in Emerging Markets.  

It's not a surprise that emerging markets are well ahead in this space. These markets usually face significant currency devaluation, driving residents to buy cryptocurrency in order to preserve their savings. Others use cryptocurrency to carry out international transactions, either for individual remittances or for commercial use cases. 

The report also points out that China and the U.S. have seen a dip in the rankings. Both fell from 4th and 6th place on the index respectively, to 13th and 8th. The primary reason both countries dropped is that their rankings in P2P trade volume weighted for internet-using population declined dramatically — China fell from 53rd in this component to 155th, while the U.S. fell from 16th to 109th.

"The clear takeaway, the report suggests is: Cryptocurrency adoption has skyrocketed in the last twelve months, and the variation in the countries contributing to that show that cryptocurrency is a truly global phenomenon."

[1] Stablecoins are cryptocurrencies backed by fiat currencies and are considered more stable than their decentralized counterparts. 

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Kickstarter's Move to Blockchain, signaling evolution to autonomous organizations

We had recently shared how crypto currency is becoming mainstream. The underlying technology that enables crypto is called Blockchain. At a very high-level, Blockchain allows a decentralized, immutable, chain of trust to be formed between entities. 

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Another leading indicator of crypto and Blockchain becoming mainstream, is the recent announcement from crowdfunding firm Kickstarter. According to the firms mission statement, blockchain will become an integral part of the firms strategy.

We think bringing all that we’ve learned about crowdfunding since 2009 to inform the development of a decentralized protocol will open up exciting new opportunities for creative projects to come to life. In the coming weeks, a white paper will be released outlining the technology and plans for the protocol, Kickstarter founder Perry Chen and CEO Aziz Hasan wrote in the post. 

To accomplish this task, Kickstarter is partnering with an open-source, carbon negative blockchain platform Celo, to build brand new protocol. Once ready, Kickstarter will move to using this new platform. 

According to Kickstarter, the protocol will also, "be available for collaborators, independent contributors, and even Kickstarter competitors, from all over the world to build upon, connect to, or use.". The project is slated to kickoff in first quarter of 2022, with Kickstarter transitioning to leveraging this new protocol by end of year.

If you're wondering the so what of it...Enter DAO's (Decentralized Autonomous Organization)

Cooper Turley, an investor and builder of several popular DAOs defines them as, "a DAO is an internet community with a shared bank account". 

Many DAOs fall into two general categories: Those that manage open source, blockchain-based projects together and those that make investments. 

Venture capital firm Andreessen Horowitz (a16z) has led multimillion-dollar fundraising rounds in both individual DAOs and companies that support DAO creation. 

Mark Cuban calls DAO's, “the ultimate combination of capitalism and progressivism.”

Cuban also cautions that DAO's, “won’t be a fit for every type of venture,” but, in his opinion, ”[t]here are so many features and processes in any given company that can be more efficient and productive using a decentralized, trustless approach.”

Turley predicts that next generation of successful companies may be DAOs. “I believe that the next Facebook-like company will be formed as a DAO rather than an LLC,” he says.

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Crypto is becoming mainstream, are you ready for it?

Crypto currency is starting to become mainstream. Is that a controversial statement or possibly conjecture, maybe yes, albeit, there is increasing evidence to suggest the hypothesis holds true. Here are a few evidentiary statements:

AMC Movie Theater, starts accepting crypto as payment

Some universities will start accepting crypto in form of tuition

Mastercard will start allowing crypto as incentivization

SEC has approved an ETF (Exchange Traded Fund) linked to crypto future trading

Mayor of Miami wants to get paid in Bitcoin 

What does this all mean? 

Going back to the opening statements, this implies that a technology is starting to mature and becoming mainstream. 

For sake of clarity, Bitcoin is only one type of asset class in the crypto currency space. Blockchain is the technology that enables different crypto asset classes (e.g: Ethereum, Dogecoin). Blockchain in itself is not all the same. Some are completely secure and closed, others are public and while are some hybrid.

The so what of it then?

In business & technology cycle, there are usually innovators, early adopters, early majority, late majority and then laggards. Between early adopter and early majority, there is usually a chasm, crossing it, or lack thereof, can makes and/or breaks the business. This especially holds true for any technology. Due to this primary reason, early startups go for growth vs profitability.

What these few examples suggest is that crypto is now on its way to crossing the chasm into early majority. Furthermore, it's evident that crypto is not specific to an industry type, rather most, if not all segments/industries are starting to leverage this technology.

On top of aforementioned, decentralized finance (DeFi) will also leverage the technology and all the asset classes to ease day-to-day finance. As such, it's high time to make crypto, DeFi part of vernacular.

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