Know more about Blockchain: Overview, Technology, Application Areas and Use Cases
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This is chapter 1 in The Blockchain Economy serialised book. For the index please go here. I do not intend to contribute to that hype; my objective is exactly the opposite. My aim is a shoutout to those syndicated loans blockchain youtube blockchain explained blockchain bitcoin mixing the hard and unglamorous infrastructure work of building the Blockchain Economy, the equivalent of sewers, roads and trains in the industrial revolution.
This introduction is a level set. For those deep in the space it might seem elementary. For those deep in one part it offers context. Further posts in the weekly series will go into greater detail on individual parts of the Blockchain Economy. Any asset can be bought syndicated loans blockchain youtube blockchain explained blockchain bitcoin mixing sold using Blockchain. You name it, you will be able to trade it. Every single one of those assets has an ecosystem today that needs to adapt fast or be disrupted.
So the phrase became regarded as hype after the bubble burst, but there really was a New Economy. This is obvious from even a a cursory glance at FANG stocks Facebook Amazon Netflix Google and all the old economy companies that became roadkill in front of their digital truck.
I will be describing the current categories in the traditional economy and their analogs in the Blockchain Economy. This is particularly true when the historical category is largely a construct of tax legislation such as how Carried Interest is taxed as Cap Gains not Income. For example a Hedge Fund and a Prop Trader and a Single Family Office might have the same investment objectives, but the difference between them is driven by tax policy. Technology also changes the revenue model and the name, even if fundamentals are the same.
However, even if the revenue models change due to tax policy and technology, the fundamental needs remain the same. So this post will focus on fundamental needs driving the following entity types in the Blockchain Economy:. In ye olde stock syndicated loans blockchain youtube blockchain explained blockchain bitcoin mixing, matching was usually separate from settlement. In the Blockchain world there is real time settlement cash and assets are exchanged concurrently.
One entity, usually referred to as an exchange, does both both matching and settlement. We are seeing 5 types of exchange go after this opportunity:. Our thesis is that all exchanges for all assets will move to a decentralised P2P model. The reason is simple — centralisation is a massive cybersecurity risk, the biggest risk of the digital age. This is an obvious threat to the new cyber syndicated loans blockchain youtube blockchain explained blockchain bitcoin mixing where the blow ups hit the news cycle almost weeklybut traditional exchanges are not immune they have invested in more sophisticated defence mechanisms, but this is an expensive arms race with the bad guys.
There is a huge gap between price quote and liquidity. Today we have price quotes on crypto exchanges aggregated by the cyber data feed vendor, CoinMarketCap but try transacting in any volume and you will see the difference between price quote and liquidity.
The fees and lack of liquidity are a shock if you come from markets like FX, Public Equities or Bonds. The Exchange that cracks liquidity without the security risk of centralised settlement will win big. Exchanges need to attract all of the above. So while the bits of destruction will erode margins as they always do, they will also increase the size of the market.
After some period of turbulence, we expect a more digitised and efficient buy side industry to thrive AB After Blockchain. The differences are largely driven by Issuer Maturity. Investment Bankers traditionally did mature companies while Incubators and Accelerators traditionally did early stage ventures. The Blockchain disruption impacts this because early stage ventures can get to liquidity quickly an attribute that we normally associate with late stage.
A new breed of sell side firms, the Digital Merchant Bank, is emerging into this opportunity gap. We put Seed and Turnaround together.
Both are hard work syndicated loans blockchain youtube blockchain explained blockchain bitcoin mixing the lines between them will blur. The Blockchain disruption will lead to a lot of troubled legacy companies and stranded assets.
These will be turned around by entrepreneurs who bring new technology, not just traditional roll up techniques using leverage, and these entrepreneurs will be helped by the new breed of Digital Merchant Bank. The mantra will be Buy and Build not Buy or Build. I have omitted all the name-plate offshore centers. The ones listed above all offer access to talent, infrastructure, investors and consumers as well as a regulatory framework.
The Regulators have a tough balancing syndicated loans blockchain youtube blockchain explained blockchain bitcoin mixing. The instinct to press on the accelerator comes from the need to bring high quality Blockchain Economy jobs to their country. When we physically cross borders we use a paper passport, with some machine-readable code if we are citizens of a reasonably modern economy.
There is lots of innovation in this area at both the government level eg Aadhaar in India and SwissID and the consumer venture level e. I have not included forks and Altcoins that I think will fade into the dustbin of history. These include many of the currently hot Crypto Tokens where the speculation is based on the Fat Protocol Layer thesis that was first expounded by Albert Wenger of Union Square Ventures. I believe it will be the same in the Blockchain era for three reasons:. Lets not forget the point of all this — which is how innovation that improves all our lives gets financed.
We want more real innovation in areas such as transportation, clean energy, a cure for cancer and CO2 extraction. That is what finance is meant to do. Sadly, Wall Street East and West forgot this. Wall Street West aka Sand Hill Road stopped funding innovation and simply became a funding stop on route to Syndicated loans blockchain youtube blockchain explained blockchain bitcoin mixing Street — hugely profitable for them but not much use for funding real innovation.
Investors have shunned early stage because of risk. To change that means reducing both technical and market risk; simply saying that investors should fund real innovation falls on deaf ears. There is lots of technical risk, but there is no market risk. Would they have seen a future Bill Gates? Probably not; the first filter of technical risk would have killed the deal.
In contrast look at the individuals who bet early on Ether in ; they had some ability to assess the technical risk of building a decentralised computer, because they were developers first and investors second. Now imagine a Biotech or Cleantech venture with a massive market but lots of technical risk.
Biotech or Cleantech scientists who can assess that technical risk can use ICO mechanisms to vote with their wallets by buying in early. Those scientists will be the technical smart money voting on Technical Risk. Professional investors will follow that technical smart money. Most ventures funded by VC have close to zero technical risk.
Then as VC funds grew in size they also shunned market risk. They wanted to invest after Product Market Fit, letting founders, friends and families and the occasional Angel take that market risk. That outsourcing of market risk caused the innovation funnel to dry up and made entrepreneurs jump on the ICO train.
Again Ethereum is a useful case study. They speculate based on some hype in a YouTube video; these ventures will probably fail. A promising sign is when, like Ethereum, the early investors also build stuff with the new technology coming from the ICO; that is when passion, expertise and capital are aligned.
The long hot summer of ICO of changed all that and almost made one hanker for ye olde world. The democratisation of media via blogging and vlogging is a good thing — MSM needed the competition and it offers the opportunity to create a new road show format with:. I call it No Collar because Blue Collar obviously does not fit, but neither does White Syndicated loans blockchain youtube blockchain explained blockchain bitcoin mixing, which tends to mean Organisation Man working in big companies.
Yet by using the word Collar I do want to associate with hard work — often unglamorous behind the scenes work. No Collar workers building the Blockchain Economy wearing a uniform that is more jeans and T shirt than suit and tie need familiarity with 5 complex functional domains:. This is where generalists score over specialists. When change is slow, you hire specialists in each domain. When change is very rapid, which it is as we enter the Blockchain Economy, consulting lots of specialists becomes confusing.
I have seen decision-makers get very confused as they get advice from specialists in each of those 5 functional domains:. This is the kind of cross-functional advisory work that we do at Daily Fintech Advisers.
You can reach out directly to discuss our advisory services by sending an email to julia at dailyfintech dot com. Bernard Lunn is a Fintech deal-maker, authoradviser and thought-leader.
Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email. You confuse the trade process with the settlement process as you attempt to use DLT for the clearance of market transactions that requires the efficient transmission of information!
A decentralized trade process of crypto P2P exchange is mot market efficient as it hides and not discloses order info to all participants and fails to centralize coordination of bids and offers to achieve equilibrium positions but rather unstable multiple stasis positions that do not clear all orders.
But even in the settlement process crypto creates problems of reporting requirements,denies reval, reversal error failure and complicates any post transaction dispute resolution! You are commenting using your WordPress. You are commenting using your Twitter account. You are commenting using your Facebook account. Notify me of new comments via email. November 25, February 2, Bernard Lunn. The Blockchain Economy will go through the same boom, bust, build cycle.
So this post will focus on fundamental needs driving the following entity types in the Blockchain Economy: We are seeing 5 types of exchange go after this opportunity: There are two well established players.
