Bits and stuff: June 17, 2018 – bitcoin, banks and bubbles (the real ones)

Earlier this week I was in Dublin, moderating at MoneyConf. Here’s one of my panels (via MoneyConf’s Facebook page), on cryptocurrency exchanges, with Adam White of Coinbase, Marcus Swanpoel of Luno, Nejc Kodric of Bitstamp, and Charlene Chen of BitPesa.

The best part of the event? Catching up with friends and acquaintances, and the wonderful people I got to know (you know who you are).

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Remember all those articles that gleefully pointed out that the bitcoin price was manipulated? One thing is for sure: in statistics, things are never as simple as they at first appear to be.

Aaron Brown in Bloomberg dove into the accusatory paper, and points out that their conclusions are not, well, conclusive. The data is tenuous and the evidence relatively scant. While there may have been manipulation, we can’t assume that it accounts for all (or even most) price movements. And while it is dangerous to make assumptions on which systemic decisions may be based, we do need to continue to dig further, and use the information gleaned as a guide to where to dig next.

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Check out this and 12 more jaw-dropping photos of winged creatures, on National Geographic. They make time stand still.

image by Bret Charman, via National Geographic
image by Bret Charman, via National Geographic

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Bloomberg’s Matt Levine writes about the statement that William Hinman, director of the SEC, made at an event this week, in which he dismissed the notion that ether could be considered a security. Perhaps it was in the beginning, he says, but it isn’t any more.

“There have been reports that the SEC is skeptical of the idea that crypto startups could sell tokens packaged in security wrappers in limited offerings solely to accredited investors, with the promise that those tokens will eventually be unwrapped and usable by everyone. Hinman’s speech suggests that the SEC has gotten over that skepticism.”

Note the word “suggests”. We don’t know for sure. And the subject is still damn complicated. Is ethereum “decentralized”? One could even make the argument that bitcoin is run by a “handful” – does that make it decentralized? What about Ripple’s XRP?

The statement was greeted with glee and astonishment from the opposing factions on Twitter – CoinDesk gave a good summary of the different interpretations.

And some are even rubbing their hands at the increasingly likely prospect of ether futures on a regulated exchange.

My concern is that we are all assuming that Hinman was speaking for the SEC – even though the print version of his remarks carries the disclaimer: “This speech expresses the author’s views and does not necessarily reflect those of the Commission.” Maybe that’s a standard disclaimer that doesn’t mean much. Or maybe it’s a significant detail that was omitted in the spoken version?

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Unrelated, the best part of the previously mentioned Matt Levine newsletter of the 15th was a bit further down, in a section talking about presidential pardons:

“What a sad lot of moral nullities these people are.”

A memorable sentence if ever I saw one.

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There were some surprising announcements from the finance sector this past week. Surprising because they are talking about imminent launches of production-ready blockchains doing useful things.

In South Korea, a national consortium of banks will roll out in July a blockchain system for managing identity.

Suning Bank in China is testing a blockchain platform that will allow several banks to share a database of account holders with bad credit scores. No release date was specified, but it sounds as if launch is relatively imminent.

While not exactly finance, here’s an interesting real-world test: Switzerland’s crypto city of Zug is trialling a voting system based on uPort’s blockchain, in which residents can participate in an online poll which, in beautiful circularity, asks them about the blockchain voting system (and other local matters). It’s not a huge test, and results will not be binding (it’s just a survey), but it is public.

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This was a satisfying takedown of economists pretending they understand crypto and therefore know better than everybody else (because economists are known for their systemic awareness and accuracy, right????).

“At a high level, the flaw in their positions is: ‘I know finance, crypto is finance, so I know crypto.'”

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Bubbles, bubbles and more bubbles: a captivating video of Melody Yang and her art. “A language that anybody understands.”

Bits and stuff: June 10, 2018 – votes, vegetation and vantage points

Switzerland votes today on whether or not to ditch fractional reserve banking. Citizens are being asked if they support the Vollgeld initiative, which would limit money creation to the Swiss central bank.

This is more than a step towards mitigating the threat of bank runs. It tantalizingly dangles the possibility of an entirely new economic model in front of a watching world

It’s worth noting that the central bank does not want this proposal to go through. This is a good sign, I suppose – as with royalty, better to have power thrust upon you, than to actively seek it.

Why is it against the plan? Because it would leave the central bank controlling the money supply, and that, it argues, was shown to be a bad strategy 20 years ago. Also, the central bank would rather not get involved in politics, thank you very much.

A further consideration is the impact it would have on Switzerland’s competitiveness. At a time when dependence on traditional banking services has left the economy fragile, the reduced lending and possibly reduced growth would further put it at risk.

An interesting twist is that the centralization of digital money that this implies – combined with the country’s bid to become a centre for cryptocurrency businesses – seems to further entrench the growing conviction that cryptocurrencies are not money, or at least, are not a threat to central bank money.

Staying with central banks, there was a flurry of blockchain-related announcements this past week that indicates progress on use-case research.

The South Africa Reserve Bank announced the completion of a 14-week trial that managed to settle the country’s approximately 70,000 daily payment transactions within two hours, while preserving anonymity.

The Bank of Thailand is looking into developing a central bank cryptocurrency for interbank settlement.

China’s central bank has finished work on a blockchain-based system that digitizes cheques, which are still a significant tool for domestic business finance.

On a more bearish (or realistic?) note, the Dutch central bank said that it’s blockchain trials indicate that the technology is promising, but not yet practical for payments.

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“Modernity is alienating, and it has been alienating for a great while; look at an Edward Hopper painting if you think this post-industrial misery has come about only since the Internet was invented.”

Andrew Solomon in The New Yorker, trying – like all of us this week – to make sense of the senseless.

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I gave a keynote talk at the OpenExpo 2018 event in Madrid on Wednesday, in which I talked about how blockchain development would go nowhere without open source platforms, and open source platforms are going to depend on blockchain development for growth.

In the talk, I referenced an article from the Financial Times a few weeks ago, that I’ll mention here because it’s so damn intriguing. The opposite of open-source has to be patents, and here are some interesting statistics:

  • In 2017, 406 patents were filed that related to blockchain technology – that’s more than one a day on average.
  • More than half originated in China (which presented more than double the number of US applications).
  • The most prolific patent application presenter in 2017 was MasterCard. Hmm.
  • In 2017, 607 patents were filed that related to cryptocurrencies. On average, that’s way over one a day.
  • The most prolific cryptocurrency patent application presenters over the past five years were IBM, Gemalto and Intel.

On this last point, what do these three companies want with cryptocurrencies? IBM is a strong proponent of open source development – it was one of the original contributors to Hyperledger’s Fabric, and has led development on several Hyperledger tools. Intel is also a prolific Hyperledger contributor.

But those are blockchain platforms, not cryptocurrencies. Again, hmm.

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This is captivating: miniature gardens in trucks (via Colossal).


An exercise in design, botany and whimsy, this festival is an annual event sponsored by the Japan Federation of Landscape Contractors.


First of all, who thought of creating gardens in little trucks, more commonly used for construction work?


Second of all, that person deserves an award for creativity, because gardens in trucks should definitely be a thing. Mobile oases. Contained fantasy. Urban nature.

(Images via Colossal)

Bits and stuff: June 3rd, 2018 – funding, frocks and frills

Given the rush of conferences, airports and hotels over the past few weeks, I didn’t have the time and mental space to update here. I even considered taking a longer break, to catch up with research and longer-form writing. But then I discovered that I missed it, so I’m back, after a useful gap of distance and perspective. No commitments, obviously, because work is getting intense (more on that some other day) and I keep promising myself to find time to read more fiction and watch more old black-and-white movies. But meanwhile, hello, it’s good to be here…

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Whoever said ICOs were going to replace venture capital? This week we saw that venture capital was very much alive and kicking…

Several major venture capital investments were announced, a surprising number for just one week:

CLS, a major forex settlement provider, invested $5 million in R3.

Paxos raised $65 million (wow) in a Series B round.

And supply chain management firm Tradeshift (not technically a blockchain company, but heading there) received $250 million in Series E funding (led by Goldman Sachs and others).

It will be interesting to see what their next steps are. Last week it launched a trade finance platform with blockchain capability (as well as traditional payments, an intriguing hybrid). $250 million is a LOT of money – and one rarely hears of Series F funding, so… are they done fundraising? Will the funded developments go live and generate cash flow any time soon?

And we were told of a handful of new investment funds focusing on blockchain startups:

Huobi announced a partnership with Chinese investment firm NewMargin Capital and South Korean securities firm Kiwoom Securities on the creation of a new investment fund dedicated to blockchain startups in China and South Korea.

On the same day, Binance revealed plans for a $1 billion fund to invest in blockchain projects and in other funds.

And Japanese mobile game maker Gumi launched a $30 million fund to invest in blockchain startups, via both equity and tokens.

This is just based on perception, but it feels like there’s more money than ever pouring into the sector. New vehicles are needed.

Speaking of that, Huobi (who has been particularly busy of late) launched a cryptocurrency ETF (exchange-traded fund) for retail investors – but you can only buy the fund with cryptocurrencies, so I don’t see how it will help encourage retail investors to venture into a market they are already into.

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While I was in New York in May for Consensus 2018 (I’ll post links to my panel videos as soon as they’re up), I spent part of a rainy Sunday at the Metropolitan Museum of Art, one of my favourite places in the world.

Generally I’m predictable and head straight for the Temple of Dendur, the Frank Lloyd Wright and the Tiffany glass collection in the American Wing. This time I took a detour through the medieval galleries and my mind was blown.


As well as the usual strangely hilarious sculptures and breathtaking windows and grilles, they were hosting an exhibition of Fashion and Catholic Inspiration. Gorgeous dresses and headpieces, with religious iconography, in the middle of the medieval galleries?? A perfect setting. Gautlier, Dior, Dolce & Gabbana, Chanel, Givenchy… modern and traditional, sober and glitzy, all melded with an evocative music piece that made you feel part of something big. It moved me to tears.


Why? Because it opened a window of understanding of why iconography matters, and why fashion matters. They are both shared languages.


But what most got me was the exhilarating sense of continuity through the ages. Symbols endure, form matters, and art has always taken many shapes. I’ve never been “into” fashion, but seeing art and fantasy come alive on a female form (or male, sure) broadens the scope of the enjoyable. I am a convert, and I am in awe.


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Vermont added its clamour to the states positioning themselves as blockchain friendly, as its governor signed a bill allowing for the creation of so-called “blockchain-based limited liability companies”. (Does this mean that they can now get bank accounts?)

Wyoming still seems to hold the lead, though, with the first “utility token bill” – which expressly acknowledges the designation as utility token (ie. exempt from SEC regulation) some digital assets that meet certain conditions.

Writing more about this (which I’d love to) would require a full essay rather than a humble blurb, so I’ll leave it at that for now… except to say that we are likely to see much more of this as states realise that getting businesses to domicile in their jurisdiction is profitable, and safe if regulation is passed and followed.

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Bailey Reutzel turned her playful eye to Twitter crypto scams – apparently anyone who’s anyone has had a scam account created in their likeness. They say it’s an even better mark of legitimacy than the elusive blue check mark.

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Bits and stuff: May 6th, 2018

A brief update this week, as I need to focus on prepping for CoinDesk’s Consensus conference in New York in just over a week. See you there?

Last week at Collision in New Orleans was epic – the best thing about these events is the people you meet. My panel was apparently one of the most attended in the entire event – it was pretty basic, since the audience was “general tech” rather than crypto fans, but most of the audience held some, a major change from similar conferences a year ago.

You can see it here.

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Great street art in New Orleans:

New Orleans street art

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Nathaniel Popper of the New York Times wrote an interesting contribution to the growing literature on blockchain standards… with a twist: blockchain as geopolitical tool. Blockchain as national strategy. Blockchain as power play.

“The Russian interest in the normally wonky technical sessions has caused concern among other delegations, who worry that individual countries could push standards that would make the security of the blockchain technology vulnerable to surveillance and attack.”

The Russian aims seem obvious:

“Another delegate who had a separate conversation with the head of the Russian group remembers a slightly different wording: ‘The internet belonged to America. The blockchain will belong to the Russians.’”

And the potential consequences are worrying:

“One of the Russian delegates to the I.S.O. blockchain group, Maxim Shevchenko, gave a talk last summer in Russia in which he spoke about the country’s goals in the I.S.O. group. The bullet points on the slide included “possibility to influence the technology” and ‘implementation Russian standards and solutions worldwide.’”

Blockchain technology development has for some time been used as a tool to attract funding and investment, but generally at the margins. The game seems to be intensifying.

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Ripple seems to be coming under increasing public scrutiny… Apart from its curious declaration before the UK Parliament…

“We didn’t create XRP … What we do have is we do own a significant amount of XRP, it was gifted to us by some of the open-source developers that created it. But there’s not a direct connection between Ripple the company and XRP.”

… you have an investor suing it because it might be a security. Since XRP is currently not used (with one exception) in cross-border transfers, its future value depends on Ripple’s success in getting it used. Therefore, it could be considered a security in that its value depends on the efforts of others.

“The development of the XRP Ledger, and the profits that investors expected to derive therefrom, were, and are, based entirely on the technical, managerial, and entrepreneurial efforts of Defendants and other third parties employed by Defendants.”

If XRP does get designated a security, it was not registered as such, and so would face some legal and economic problems. But that designation is not clear: it’s an open-source token, freely traded by many. Ripple’s recent efforts to boost its value, however, leaves a trail of breadcrumbs that isn’t going to help its defense…

Preston Byrne’s thread highlighting the inconsistency of Ripple’s stance regarding its token XRP is scathingly brilliant:

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Karen Hao wrote one of the most thoughtful and thorough pieces that I’ve seen on the prickly subject of “women in crypto”. Definitely worth a read, whatever your gender.

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The news that Goldman Sachs will start trading bitcoin futures is intriguing, in that (in spite of what several headlines implied) they are not touching the underlying asset, actual bitcoin… because it’s unlikely that the OCC would be ok with banks holding cryptocurrencies. In most of the rest of the world, it’s either expressly forbidden, or “advised against” (which is pretty much the same thing).

But, as we’ve repeatedly seen, derivatives are fine… even though they are usually more volatile than the underlying asset.

Rather than boost bitcoin’s liquidity, this will boost the liquidity of hedging strategies… which could support the price of bitcoin itself, if more institutions decide that the enhanced hedging facilities (increased liquidity on the acknowledged exchanges) make a crypto strategy less expensive.

Meanwhile, Barclays is denying reports that it is also planning to launch a crypto trading desk… although, if I understand correctly, its CEO was talking about the underlying asset, not derivatives. Where Goldman goes, others are sure to follow.

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This is kinda cool in terms of increasing crypto’s diversity: the number of bitcoin developers is increasing, as is the number of submissions and pull requests on GitHub, apparently a result of education efforts.

“’One of the things that surprised me is what kinds of people take my class. I expected it to be all developers,’ said Song.

But as it turned out, participants ranged from teenage girls to hedge fund managers and retirees.”

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Bits and stuff: April 29th, 2018

A really short summary today, I’m off to the Collision conference in New Orleans… (never been to Louisiana before!).

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Oh, I’m on the Blockchain Insider podcast this week! It was even more fun than I expected, and the best part was meeting my fellow panellists, Sara Feenan, Jo Lang and Olivia Vinden – I could have chatted to them all night. Host Sarah Kocianski was brilliant as usual, and apart from her eloquence and wit, had the generosity to provide wine during the taping…

blockchain insider

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Jemima Kelly of the FT wrote a great article calling out the dubious governance (and maturity) of the IOTA team… (yes, we do need to hold pioneering founders to a certain ethical standard).

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This past week we saw the debate kick off in earnest on whether or not ethereum and ripple’s tokens are securities.

Gary Gensler, former chairman of the CFTC and ex of the Obama administration and Goldman Sachs, believes that they are.

But at the same time, he believes that cryptocurrencies will be “somewhere in the financial system in a meaningful way.”

Peter van Valkenburgh of CoinCenter argued that ether should not be considered a security. Preston Byrne explained why he thought it should.

A Twitter battle ensued, of course.

‘Dis gonna be good.

dis gonna be good

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Gillian Tett of the Financial Times points out that overlooking the rise on non-bank lending – at this point in the market (when everything looks rosy) – should be setting off alarm bells.

She reminds us that, according to the International Monetary Fund:

“’Signs of late cycle credit dynamics are already emerging in the leveraged loan market,’ the IMF Global Financial Stability Report observes, noting that ‘in some cases, [this is] reminiscent of past episodes of investor excesses’.”

On the one hand, “getting non-banks involved means that any future pain will be widely dispersed, rather than just sitting with banks” (although not sure how that’s better).

On the other hand, “if the non-banks suffer losses when defaults rise, it is also possible that this will spark severe capital markets contagion, hurting banks and non-banks alike.” Yes, especially when we take a look at who else those non-banks have lent to, and under what conditions.

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So much more to talk about, it was a damn interesting week, but gotta go to the airport so I’m just going to hit “Publish” and try and catch up next week (yeah, that’s not gonna happen…).


Bits and stuff: April 22nd, 2018

Noah Kulwin’s interview of Jaron Lanier in NYMag is a gut punch. I don’t subscribe to his apocalyptic view of social media, nor do I believe that the world is worse than when we were kids… but he does identify, with blistering clarity, the inherently centralizing forces underlying the technology that was meant to democratize everything.

“And despite all the warnings, and despite all of the cautions, we just walked right into it, and we created mass behavior-modification regimes out of our digital networks. We did it out of this desire to be both cool socialists and cool libertarians at the same time.”

And given that we hear the same democratizing claims about cryptocurrencies and blockchain, as we see centralization of services and the encroachment of the regulators (who are – reasonably, I might add – being welcomed with open arms), the alarm is (pardon the terrible pun) ringing a bell…

“The argument is that social media hates your soul… And it’s also fucking phony and false. It suggests that life is some kind of optimization, like you’re supposed to be struggling to get more followers and friends.”

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Let’s talk about patents.

News of applications to do with blockchain technology are interesting, but do not indicate plans to use said technology.

They do indicate an interest in the concept, and they reveal that the company has developers (probably in-house?) working on fleshing out ideas.

But they do not point to an intention to actually use said ideas. Or that said ideas would even work.

So, why would a company spend time and money on the patent process if it’s not to use the darn thing? Why invest without an expected return?

Patents can be tactical and point to new product launches… but more often, they’re defensive. A company wants to stop someone else from staking that claim. Sometimes, they just want to stop a competitor from entering a certain segment of the business (the defensive patent doesn’t even need to actually work for this to achieve its objective).

What perhaps many don’t realise is that a patent doesn’t need to be very detailed. It’s generally enough to just explain how the idea would work, in theory.

As anyone in the blockchain world knows, theory is tough to implement, especially when stakeholders, costs, latency and generally, you know, reality start to show that things are always more complicated than they seem.

So, just because Walmart has been granted two patents that show how payments data could be protected on a blockchain, we can’t assume that they have plans to implement this technology.

Nor that they should. Patents don’t generally make judgements about economic viability, or strategic common sense.

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Here’s an article about a group of reaaaally young aspiring crypto hedge fund managers… setting up a “Global Center for Investment Fund Studies, to help new fund managers raise capital” at Harvard this month. With a crypto hedge fund lawyer (who says he gets about 6-8 enquiries daily from other aspiring crypto hedge fund managers).

You can’t make this stuff up, really.

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So, what with Microsoft and it’s Azure platform, hints last month that Google was looking to incorporate blockchains into its cloud offering, and now Amazon’s announcement that its cloud platform Amazon Web Services will offer out-of-the-box blockchain services, it seems that cloud-based blockchains are becoming a thing…

I’m confused as to how they’re decentralized.

Sure, you can host your blockchain on an Amazon server and invite other nodes to participate. And you can share control of the data input. But you can do that on a database, too, with permissions and write access.

But, where’s the decentralization? And where’s the robustness? The server goes down and the blockchain is offline? No matter how many redundancies Amazon has built in, it does not sound as secure as a non-cloud blockchain with, you know, distributed nodes.

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From an article in Colossal:

“How is it OK to paint a wall one dull color of paint? But it’s illegal to paint the same space with multiple colors.”

A very good question…



Murals by Subset, via Colossal

Bits and stuff: April 15, 2018

Hi everyone! Earlier this week I had a brief escape to a city in the clouds…

canary wharf

(Canary Wharf in London, if you’re wondering)

…and came home to find half the trees being cut down on the street my apartment looks out over. Why? Apparently they’re “not safe” and the powers-that-be are worried that, in a rough storm, they might fall over. I’m not sure what’s more disconcerting: that they’re preparing for “rough storms”, or that beloved trees that have been struggling to grow for 40 years are not even being given a chance to show their sturdiness. Safety is important. But so are trees. And Madrid is poorer for their loss.


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This article by Rachel Rose O’Leary highlights a fundamental tenet of capitalism: it is naturally monopolistic.

Apparently crypto communities are up in arms over the arrival of ASIC (Application-Specific Integrated Circuit) chips, which give their owners an advantage in mining certain cryptocurrencies. Developers and users of ethereum, zcash and monero fear that the advantage that the new chips can give miners of these cryptocurrencies will upset the delicate balance in their decentralized ecosystems.

And they’re right, it’s likely that the result will be increased centralisation, as those with money (to spend on the chips) end up producing a greater number of tokens and thus making more money, which means they can buy more chips, and so on.

This freedom – to spend money on making more money – is capitalism’s centralizing force. And while factories and transportation networks have certain physical barriers that could slow the centralisation down, the digital world moves faster. Network effects are realised in a shorter time frame.

Yet this is antithetical to the crypto spirit of decentralized finance. Hence the existential conflict. To stop it from happening, strict rules will be needed. But rules decided by whom? Invariably, those that make the rules end up controlling the system. Not exactly decentralised.

It’s not often we get to watch capitalism at work in a petri dish. And the accelerant of networks and social media will make this expected plot twist particularly edifying to watch.

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The reveal that several projects are contemplating launching an ICO on codebases incubated within the Hyperledger consortium is further evidence of the spread of non-ethereum ICOs…

The Sovrin Foundation, creator of the Hyperledger Indy codebase for digital identity management, is planning a crypto token launch this summer.

And PokitDok, a healthcare API platform exploring blockchains, is looking into launching an ERC20-based token on top of Sawtooth, another Hyperledger codebase. ERC20 is a template designed to simplify the issuance of digital tokens on ethereum – this is the first I’ve heard of it potentially being used on other blockchains.

While that in itself is fascinating, taking this forward, I’m intrigued as to what it could do for interconnectivity…

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christian nagel

by Christian Nagel, via Google Arts

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JP Koning sets out an excellent description of what a digital central bank currency could look like…

“Like banknotes, these digital tokens are anonymous and untraceable. To make use of them, people don’t have to register for an account. Rather, the tokens are held independently on one’s device, sort of like how paper money is held in one’s wallet without requiring any sort of registration with the issuing central bank.”

… why it wouldn’t destabilize the system…

“…imagine a world with digital currency. In the event of a panic, customer redemption requests will be instantaneously granted by the bank facing the run. But that same speed also works in favor of the bank, since a request to the central bank for a top-up of digital currency could be filled in just a few seconds.”

… and why it probably wouldn’t work.

“…what if there just aren’t that many people who care about online privacy? Countries like Sweden, where banknote usage is plummeting, give credence to this concern while surveys of cash users in the eurozone show that anonymity is not terribly important to them.”

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I’m far from a cryptocurrency maximalist, and am more interested in what blockchain’s can’t do than what they can, so it would be fair to think that I’m enjoying the growing chorus debunking the hype of both.

To some extent, yes, but I am now getting increasingly irritated by a new kind of hype: articles that decry blockchain’s futility and crypto’s lack of fundamentals, without understanding either. There are many smart realists out there (you’ll see me retweeting their stuff in approval). But as the hype cycle moves into the trough of disillusionment, others are jumping on the negative bandwagon without having the credentials or depth of knowledge to present arguments that hold up to either fact-checking or logical scrutiny. I’m not naming names because they don’t deserve the publicity – and that, more than reasoned debate, seems to be more what they’re interested in.

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Dramatic interior shots by Spanish artist Lino Lago – via Colossal

Stock exchanges, cryptocurrency trading and trying harder

Until a few years ago, Avis – the second-largest car rental firm in the US for much of the last half century – ran an iconic advertising slogan: “We’re No. 2. We Try Harder.” Given my soft spot for underdogs, I thought it was brilliant. Embrace reality, turn a negative into a positive and move the goal posts.


I was reminded of that this week when Germany’s no. 2 stock exchange revealed a planned launch this autumn of a cryptocurrency trading app. Börse Stuttgart’s subsidiary Sowa Labs has developed a mobile platform that enables clients to trade bitcoin, ethereum, litecoin and ripple. Onboarding will supposedly take minutes, and although initially only available in German, apparently an English language version is in the works (the company also runs the second-largest stock exchange in Sweden). Perhaps even more interesting, the app will use “artificial intelligence” to sift through crypto Twitter and select those tweets that best indicate price trends (can’t wait to see that).

While a distant second to Deutsche Börse in terms of turnover, Börse Stuttgart is – according to its website – the market leader for exchange trading in corporate bonds (as opposed to over-the-counter trades, which dominate volume). What’s more, and this is especially interesting given its cryptocurrency strategy, Börse Stuttgart is Germany’s leading exchange for retail investors. Its website claims:

“Ground-breaking ideas for the benefit of retail investors are a tradition at Boerse Stuttgart.”

Although founded as far back as 1861, it seems to have been eager to embrace new technologies, offering “best size” and “best price” practices for the retail market, long before most of its peers. And now, cryptocurrency trading.

As well as the empowering idea of the second largest having to try harder, another underlying force is at work here, one that we’ve seen replicated across the finance sector: the incumbents are the best positioned to take new technologies mainstream.

The economist Joseph Schumpeter posited, almost 100 years ago, that large firms are more enablers than barriers when it comes to technological development. Their reach and economic power gives them a huge advantage when it comes to “appropriating” technology, further consolidating their position and further centralizing the sectors in which they operate.

True, the landscape has changed. The growth of computing and open source technologies has distributed access to new ideas among a much broader range of actors. Startups are gaining significant clout, and are likely to become the new incumbents as market structures shift.

Yet, the current incumbents seem to be aware that embracing new technologies is not only good for the bottom line, it could also become a matter of survival. And, in the process, the technologies reach a wider audience.

We’re seeing this in the cryptocurrency sector. Most commercial banks, central banks and stock exchanges are running blockchain trials and designing proofs-of-concept. And in cryptocurrencies, while many institutions are still keeping a cautious distance, a few brave innovators are incorporating new services to improve access to a market that is obviously not going away.

Is this just another case of a financial institution using “cryptocurrency” as window dressing to enhance its profile, or is there significant demand amongst Börse Stuttgart’s retail client pool for cryptocurrency trading? According to an internal survey, there is – and the company’s record on innovation and retail focus points to a genuine interest in improving the customer experience when it comes to a new asset.

Beyond the easier access to cryptocurrencies, a more subtle change could result: the increased perception that bitcoin, litecoin and peers are neither a threat to the established system, nor a clandestine investment opportunity. The backing of a large and reputable financial institution brings what was once a niche activity into the hubbub of mainstream markets – and, it perhaps further entrenches these assets’ role as trading vehicles rather than decentralized enablers or financial disruptors.

Bits and stuff: April 8th, 2018

An excellent article from Jemima Kelly of the FT Alphaville team on Vitalik’s “testing” of the ethereum waters with his April Fool’s “joke” about a hard cap on supply. She also talks about how hard caps are pointless when open-source chains can be forked and ICOs can be spun out on whim.

Of course, the ethereum community is split on whether a hard cap would be a good idea or not.

Hmm, conflict in a crypto community over the best way forward? This leaves us wondering when talk of an ethereum fork will materialize – capped ether vs non-capped ether – even though the possibility of a fork makes the cap pointless… But, it’ll be an interesting experiment to watch.

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This longform article in The Guardian – “The demise of the nation state” by Rana Dasgupta – should be included in every history syllabus from high school up.

“When we discuss “politics”, we refer to what goes on inside sovereign states; everything else is “foreign affairs” or “international relations” – even in this era of global financial and technological integration. We may buy the same products in every country of the world, we may all use Google and Facebook, but political life, curiously, is made of separate stuff and keeps the antique faith of borders.”

It’s an epic, zoom-out look at the rise of populism, pointing out that it’s not just the west, and it’s not just a national problem.

“The most momentous development of our era, precisely, is the waning of the nation state: its inability to withstand countervailing 21st-century forces, and its calamitous loss of influence over human circumstance. National political authority is in decline, and, since we do not know any other sort, it feels like the end of the world.”

The author talks about “post-national solidarities”, and the impact on human life (and death):

“Since 1989, barely 5% of the world’s wars have taken place between states: national breakdown, not foreign invasion, has caused the vast majority of the 9 million war deaths in that time.”

And, of course (this is The Guardian, after all), financial deregulation is part of the problem:

“Today’s failure of national political authority, after all, derives in large part from the loss of control over money flows… These fleeing trillions undermine national communities in real and symbolic ways.”

Does this mean that finance is becoming more centralized (concentrated in the hands of the wealthy), or decentralized (ignoring borders)? Will cryptocurrencies change this by putting more of this borderless wealth in the hands of anyone, or will it entrench the have/have not divide?

The whole article is worth reading for its take on citizenship, the EU, international law and global financial regulation.

“There is no reason to heed those interested parties who tell us global financial regulation is impossible: it is technologically trivial compared to the astonishing systems those same parties have already built.”

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This… is brilliant. Simple yet effective, and possibly enough to get people to think differently without them noticing.


By Pejac, via Colossal.

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At first I though this piece (by Maryland governor hopeful Alec Ross) was political fluff, perhaps, but nevertheless awesome… Now I’m perturbed. “Blockchain as a political tool” not only buys into the fluff but also perpetuates it, elevates it to slogan status and entrenches misconceptions and misaligned expectations.

A pro-innovation stance is good – but if misdirected will end up wasting money and setting progress back by years.

As an example, just take a look at the news that a bill that would allow residents of the US state of Georgia to pay their tax in cryptocurrency has stalled, due to “a lack of understanding”. It will have to be resubmitted in January 2019.

Meanwhile, in Arizona, a similar bill is again moving forward after stalling earlier in the year. Interestingly enough, the revision is removing “bitcoin” as the specified cryptocurrency. I seriously doubt that this will help it get passed.

There’s so much more to unpack here, from why the lack of understanding persists, why anyone would want to pay taxes in cryptocurrency and how, if passed, this could affect the nature of asset and the growth of the sector.

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It’s hard to draw a big-picture conclusion from the Wall Street Journal’s provocative article on the diminishing weight of auditing in the Big Four’s revenue. While the easy thing to do is to jump up and down chanting “blockchain will replace auditors!”, that’s actually far from clear. Sure, the technology affords increased transparency and immutability of data. But, “garbage in garbage out”, so verification of the data will still be a valuable service.

In line with both this and the shift towards consulting fees, most of the big auditing firms have their own blockchain departments. These could benefit from the trend of increased outsourcing of technology builds.

However, the impact of the spreading custom (sometimes mandated by law) of changing auditing firms every few years is unclear. Will it boost technology spend, as proprietary platforms are more frequently replaced? Will it make spending more selective, since the maintenance (and replacement) costs will be significant? Or will it increasingly push development towards open-source solutions that don’t depend on the chosen provider?

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I’m far from a cryptocurrency maximalist, and am more interested in what blockchain’s can’t do than what they can, so it would be fair to think that I’m enjoying the growing chorus debunking the hype of both.

To some extent, yes, but I am now getting increasingly irritated by a new kind of hype: articles that decry blockchain’s futility and crypto’s lack of fundamentals, without understanding either. There are many smart realists out there (you’ll see me retweeting their stuff in approval). But as the hype cycle moves into the trough of disillusionment, others are jumping on the negative bandwagon without having the credentials or depth of knowledge to present arguments that hold up to either fact-checking or logical scrutiny. I’m not naming names because they don’t deserve the publicity – and that, more than reasoned debate, seems to be more what they’re interested in.

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Northern lights or not, this looks like a gorgeous place to spend a night (I’m assuming it has heating…)



Iceland’s Panorama Glass Lodge, via MyModernMet.

Bits and stuff: April 1, 2018

Happy, happy April Fool’s Day!

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I’ve been doing some digging into the top-down approach of blockchain research – in other words, what various governments are doing to support development. It’s disconcerting, because – just judging from the headlines (I know, I know, facts and figures to follow) – the US and Europe are not dedicating nearly as many resources as others (cough, China and Russia).

This article from Politico looks at Europe’s attitude towards another transformational technology: artificial intelligence. And the conclusion is alarming.

“With advanced image recognition, data analytics, prediction systems, military brain science and unmanned systems, devastating wars might be waged and won in a matter of minutes.”

That much we knew. It’s when we compare China’s approach:

“In a three-year action plan to develop AI, published by China’s Ministry of Industry and Information Technology in December 2017, Beijing laid out a goal of being able to mass-produce neural-network processing chips by 2020. The country’s cloud computing companies are racing to deploy increasingly sophisticated services featuring machine learning and AI.”

… to Europe’s:

“The EU’s strategy is organized around three concerns: the need to boost Europe’s AI capacity, ethical issues and social challenges. Unfortunately, even the first dimension quickly turns out to be about “European values” and the need to place “the human” at the center of AI… In a 14-page document, only two pages are devoted to ways of boosting Europe’s AI capacity.”

… that things start to get… alarming.

“In a passage perhaps aimed at responding to the Chinese gambit for AI supremacy, the Commission intends to argue — or so it is written in the current draft — that the EU “can position itself as a leader in the international reflection on AI.” Let others lead on AI. The EU will be able to reflect on it better than anyone else.”

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Following on from the above and from what I mentioned in the previous post – the increasing use of technology as a tool for power – this article from the Financial Times is potentially alarming.

“Data collated by Thomson Reuters from the World Intellectual Property Organisation (Wipo) database showed that in 2017, more than half of the 406 blockchain related patent applications were from China… China filed 225 of the blockchain patents last year and 59 in 2016, followed by the US (91 in 2017 and 21 in 2016) and Australia (13 last year and 19 in 2016). “

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It’s starting to feel like Spring…

by Amanda McCavour, via Colossal
by Amanda McCavour, via Colossal

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This piece in Reuters – “Wall Street rethinks blockchain projects as euphoria meets reality” –  is not only good journalism (getting stories that are both interesting and ignored), but also a refreshing reminder that we should be reporting about the cancellations and disappointments – they are, after all, more newsworthy these days than yet another pilot doing the same things as before but better. But for some strange reason, the protagonists are much more eager to talk about their importance, creativity and success than they are about their failures.

Media, on the whole, tends to focus on what innovators want us to know. We take the easy option of relying on press releases and conference leads, and forget to follow-up on projects that didn’t happen and deadlines that weren’t met – it’s understandable, even, since few outlets have the resources to keep up with everything. It’s a pity, though, and I’m sure we could do better.

And I am beginning to believe (later than many) that, yes, blockchain is in the typical hype-cycle slump. Good. Finally. Now is when it gets interesting.

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A stunning display of post-crisis data from the Wall Street Journal that shows that neoliberalism is not only still alive but doing very well, thank you…

“Analysts say the financial crisis highlighted the risk of concentration. But 10 years later the trend of larger firms is still intact.”

More than intact, according to this graph:


“The financial sector is again becoming a bigger piece of the economy. That could translate to future risks for borrowers and consumers in another crisis.”

And it’s not that GDP has fallen… (It would be interesting to see a breakdown of finance vs insurance, and how much of that is shadow banking.)


“Regulations are tougher, but the regulators enforcing them often come from the industries they oversee.” Omg…

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The display of graphical information in finance is getting better and better…

Via The Economist - click on the graph to go to the article, and check out the scrolling effects...
Via The Economist – click on the graph to go to the article, and check out the scrolling effects…

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For refreshing clarity and a cathartic amount of swearing, this is a damn good read: “I Survived the Eternal Boy Playground, But Will Puerto Rico?”