Daily Bits March 27th, 2017

The new (I mean, re-branded) fintech newsletter Tearsheet, from the Digiday stable, has an article that does a pretty good job of bringing the hype back down to earth.

“Many are still touting blockchain technology as being revolutionary, when they mean transformational.”

Transformational they may be, but blockchains are not going to change the financial sector overnight. If at all.

“When using the R word it’s important to remember that it is incredibly difficult to “disrupt” industries as highly scrutinized as financial services. New technology needs to integrate with old systems and interfaces – those don’t get replaced overnight. It’s also the kind of technology that’s most effective when there’s a network effect and currently, most organizations are still exploring why they actually “need” blockchains and which iteration of the technology is going to work best for them.”

The real value lies in the data. If financial firms end up standardizing their data formats in order to use interconnecting databases (such as blockchains), that opens up a whole new field of possibility for artificial intelligence.

Whether or not you’re comfortable with AI going through your financial data, the potential applications are intriguing.

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My post on CoinDesk this week: “IBM vs Microsoft: Two Tech Giants, Two Blockchain Visions”

(I wish I could claim credit for the title, but that goes to my editor who is bloody brilliant at headlines.)

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Dronesweaters.com: What every well-dressed drone is wearing these days.

via dronesweaters.com
via dronesweaters.com

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Matt Levine wrote a darkly amusing account of the blockchain revival of tontines. What are tontines? They are pools of money that end up going to the last surviving contributor. Of course, the participants then race to bump each other off.

It sounds like a financial adaptation of The Hunger Games.

Anyway, the blockchain is useful here because it can know, through oracles and smart contracts, when participants die, and automatically pay out to the last surviving member.

At least that’s how it would play out in an old-fashioned thriller.

These days, tontines are being looked at as viable retirement income vehicles. A group of people invest equal amounts, and then withdraw an annuity each year they are alive. The payments are inversely proportional to the number of recipients, and increase as the others die. The last one standing gets whatever’s left.

Apparently tontines can pay a higher yield than an annuity because of their simple structure. And they are making more sense to investors as “longevity risk” – the possibility that we could outlast our money – increases in line with healthier lifestyles and better old age care.

“The last year or so has been really hard on the notion that history is a linear progression from darkness to enlightenment, but it’s been really good for theories of history as an endlessly recurring series of cycles. You see a bit of that in finance too: So much of “financial technology” — bitcoin and blockchain and peer-to-peer lending — is really about abandoning the modern technology of finance and returning to a simpler and more primitive time. (But with computers.)”



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