Category Archives: Fintech International

Can Blockchains Give You Competitive Advantage?

Forbes | Alison McCauley | Dec 11, 2019

Blockchains competitive advantage 1 - Can Blockchains Give You Competitive Advantage?Blockchain executives call the tech a team sport. They speak about industries joining together to build blockchain platforms that drive value for all participants. But, put bluntly, what’s the point? Both the tech and our understanding of how to use it is raw—making this an expensive, uncharted sport to play. Why invest if your competitors will benefit?

I’ve been asking execs working at the front edge of the technology this question: if competitors all have access to the same platform, then what new competitive advantage can come from blockchains? Here’s what they shared:

Smart Companies Understand There Are Multiple Angles

Two themes emerged from these conversations.

First, while the main investment trigger right now is solving high-pressure problems that plague everyone in an industry, there was a belief that once a blockchain platform is in place, smart companies could discover ways to use it that could deliver competitive advantage.

See:  Red Cross boosts disaster-prone communities with blockchain ‘cash’

Secondly, executives observed that the new functionality blockchains make possible could arm blockchain-natives with new tools to attack long-standing value chains. In this case, investment is preventative, employed to stay ahead of disruption.

Think In Layers: Step One Is Foundation; Step Two Is Differentiation

The first challenge for executives is to wrap their head around the idea of investing in a platform that will also benefit competitors. This initial foundational layer is not about competitive advantage at all—it’s about ecosystem-wide evolution. To get there, basic infrastructure needs to be put in place—but then, you could drive new advantage by how well you use it.

“It’s like the electrical grid,” says Dale Chrystie, Business Fellow and Blockchain Strategist, FedEx. “It would be insanely expensive and complex for any one company to build it out. However, once the electrical grid is in place, and you have a consistent format, you can put an outlet on your wall, and you could figure out a way to monetize that—you could build a business model on top of that outlet.”

Dale continues, “In a sense, blockchains will be similar—we think there will be a open, and non-competitive foundation that will allow a number of business models to sit on top of it.”

Thomas Olsen, a partner at Bain & Company explains, “Once blockchain platforms are widely implemented in an industry, cost structures will change, pricing will change, and there will be a new, more efficient equilibrium. At that point, competitive advantage will not be that blockchain platform, it will be who uses it faster or better—your ability to add value to it, or distribute it, or make it easier for your clients to use.”

See:  The Decade in Blockchain — 2010 to 2020 in Review

Advantage could be derived from integration, applications, or even the skill with which you use shared data. Nadia Hewett, project lead for blockchain and distributed ledger technology for the World Economic Forum says, “If you are using blockchains to tackle a shared problem, the data that you share with the platform will ultimately become commoditized. But you can still build applications on top of this shared platform that can differentiate you.” Kim Harrington, who heads the Blockchain Center of Excellence for Bayer explains,

“Over the last few decades the cost of data has gone way down, and now with blockchains we have a technology platform that allows us to very easily share and operate on that shared data. The competitive advantage shifts from having the data to how you use the data.”

Frank Yiannas, the Deputy Commissioner for Food Policy and Response at the FDA explains it in this way: “In college everyone has the same curriculum and the same books, but some people leverage it differently than others. I think there is a way to compete on how you leverage the learnings from collaborative blockchain ecosystems and apply them in a way that benefits your customers.” But he emphasizes the benefit of solving important industry problems, even if everyone enjoys that same upside: “The gains that you get by working together offset the potential losses of others getting a little bit better. Take supply chain: you can’t gain supply chain efficiency or sustainability unless you bring the ecosystem along—you have to get comfortable with everyone getting better and smarter with you.”

Getting To Step One Takes A Shift In Mindset

Chrystie also emphasizes the importance of patience in answering the question of competitive advantage. “I think a lot of people are treating this like the internet, and want to immediately monetize it. But when you see the world like we do—we go to more than 200 countries—you see at global scale. We think there’s a need to build a non-competitive, open, foundational technology first, and it is going to take a big, open, global village to build it. It is an alliance technology, which takes us down a different path, a path of coopetition.

This is not taught in business school or the first day of employee orientation. For blockchain to be transformative, it has to be bigger than us.”

See:  Agents of Change: Making innovation agencies as innovative as those they support

Early Push Back Against A Future Arms Race?

Yet these are uncharted waters, and there is nothing clear about plunging into the unknown. Bain & Company found in a collaborative study with Broadridge that some organizations that benefit from preserving the status quo are “deliberately trying to slow some things down, not just for themselves, but for the whole industry.” One senior executive Bain interviewed who represented his firm on a blockchain consortium working group said, “Half of the people in the group are looking for a solution; the other half are there uniquely to obstruct progress.” The uncertainty is compounded by a question of whether gains will actually increase margins, or whether firms will face competitive pressure to pass efficiency savings on to their customers.

Weighing First Mover vs. Second Mover Advantage

Executives are faced with difficult decisions about when to time their blockchain moves. “No one wants to be first,” said one executive Bain interviewed, “but no one wants to be last either.” Blockchains are an ecosystem-shaping technology, introducing the risk that the future could be shaped without your participation. But waiting to develop blockchain acumen could also put you irreparably behind on future waves of blockchain-driven innovation.

Even though long term advantage may not come from the platform itself, staying ahead of the curve in making use of it could drive advantage, for a period of time.

Olsen elaborates, “It takes most institutions a long time to actually implement blockchains and deliver it to customers. If you are able to offer a blockchain solution, but it will take your competitor another year or two to integrate it, that’s an advantage. You could lower your cost structure faster, you could launch features faster than competitors, you could gain market share. Eventually competitors will catch up, but by that time you could have further integrated it to introduce new features and services on top, such as links to payments and settlements, adding analytics and sanctions checking, or offering new pricing.”

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NCFA Jan 2018 resize - Can Blockchains Give You Competitive Advantage? The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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UK: New Peer to Peer Lending Rules Kick in on December 9th: “A Watershed Moment for P2P”

Crowdfund Insider | | Dec 10, 2019

rate setter new - Can Blockchains Give You Competitive Advantage?New peer to peer lending rules come into effect on Monday, December 9th. The new rules were the result of a review by the UK Financial Conduct Authority (FCA).

The UK largely created the entire sector of peer to peer lending. One of the most prominent sectors of Fintech, P2P lending has emerged as a viable asset class generating better risk-adjusted returns in a low-interest rate environment. While not without a few growing pains, P2P has been a net positive for both credit markets and for smaller investors seeking higher rates of return on their money.

At the time the updated rules were announced in June of 2019, the FCA stated:

“[The] P2P sector had developed a wider, more complex, range of business models. Many platforms in the sector are now taking a much more active role, by taking decisions on behalf of the investor. In addition, we explained that we had also seen some poor business practices, for example, in disclosure of information to clients, charging structures, wind-down arrangements, and record-keeping.”

The response by platforms has mostly been positive with some questioning if the net effect will be to dim innovation in the online lending sector. The UK P2PFA, the advocacy group representing the P2P industry, stated at the time the new regulations were announced that the rules “reflect what is already good practice in the peer to peer lending market and we welcome that.”

Orca Money, a P2P investment aggregation site, worried that institutional money would now take over the P2P sector.

See: 

Zopa, the grande dame of P2P lending in the UK, recently published a blog post seeking to “demystify” how the rules will impact individual investors in P2P assets. Going forward, individual investors on will be classified within various categories including:

  • Certified sophisticated investor – no restrictions on how much you can invest – based on past activity.
  • Self-certified sophisticated investor
    • You have made more than one investment in a P2P agreement or portfolio in the past 2 years
    • You work, or have worked in the past 2 years, in a professional capacity relating to finance, resulting in an understanding of P2P
    • You are currently, or have been in the past 2 years, a director of a company with an annual turnover of at least £1 million
    • You are a member of a network or syndicate of business angels and have been so for at least the last 6 months
  • High net worth investor – you earn more than £100,000 per year, or hold net assets of at least £250,000.
  • Restricted investor  – you may invest 10% of your net assets with certain exclusions

See:  The future of fintech: lending + services

RateSetter, one of the largest peer to peer lending platforms in the UK labled the regulation a “watershed moment” for P2P – a positive for the evolution of the peer to peer lending industry.

RateSetter said that the FCA’s approach “decisively addressed any sense that P2P is lightly regulated” and the rules put the regulation of P2P “on par with other mainstream financial sectors.”

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NCFA Jan 2018 resize - Can Blockchains Give You Competitive Advantage? The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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Bei­jing Launches Fin­tech Reg­u­la­tory Sand­box with Cen­tral Bank Back­ing

China Banking News | Dec 5, 2019

China - Can Blockchains Give You Competitive Advantage?

Bei­jing Launches Fin­tech Reg­u­la­tory Sand­box with Cen­tral Bank Back­ing

The Bei­jing mu­nic­i­pal gov­ern­ment has an­nounced the launch of a new pi­lot scheme for fin­tech reg­u­la­tion.

On 5 De­cem­ber the Bei­jing mu­nic­i­pal fi­nan­cial reg­u­la­tor an­nounced via its of­fi­cial web­site that Chi­nese cap­i­tal was

“tak­ing the lead in launch­ing fin­tech in­no­va­tion reg­u­la­tory tri­als, and ex­plor­ing the es­tab­lish­ment of an ac­com­mo­dat­ing and pru­den­tial Chi­nese-edi­tion ‘reg­u­la­tory sand­box.'”

Ac­cord­ing to the an­nounce­ment the new trial is be­ing launched with the guid­ance and sup­port of the Chi­nese cen­tral bank, and has the goal of es­tab­lish­ing Bei­jing as a “na­tional tech in­no­va­tion cen­tre and na­tional fi­nan­cial reg­u­la­tory cen­tre.”

The Bei­jing fi­nance reg­u­la­tor said that it would ap­ply “soft reg­u­la­tory meth­ods” that in­volve open in­for­ma­tion, prod­uct no­tices and joint su­per­vi­sion.

Ac­cord­ing to its an­nounce­ment the goal is to drive fin­tech in­no­va­tion and qual­ity and ef­fi­ciency im­prove­ments in fi­nan­cial ser­vices, un­der the pre­con­di­tion that li­censed fi­nan­cial in­sti­tu­tions com­ply with laws and reg­u­la­tions, and pro­tect the rights and in­ter­ests of con­sumers.

Xin­jing­bao re­ports that Bei­jing mu­nic­i­pal­ity has ap­proved 46 fin­tech trial pro­jects

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China Banking News | Dec 5, 2019

Chi­nese Cen­tral Bank Flags For­mu­la­tion of New Fin­tech and Blockchain Stan­dards

The Peo­ple’s Bank of China (PBOC) says it’s work­ing on a to­tal of 17 new fin­tech stan­dards for tech­nolo­gies in­clud­ing the blockchain, as part of ef­forts to im­prove its fin­tech reg­u­la­tory sys­tem.

At the 2019 Bank­ing Dig­i­ti­za­tion Trans­for­ma­tion Sum­mit (2019银行数字化转型高峰论坛) held in Bei­jing on 5 De­cem­ber, Yang Fuyu (杨富玉), a se­nior of­fi­cial with PBOC’s tech de­part­ment, said that stan­dard­i­s­a­tion-based lead­er­ship was ur­gently needed to im­prove dig­i­tal bank­ing trans­for­ma­tion and the mod­erni­sa­tion of in­dus­try chains in China.

See: 

To this end Yang said that PBOC is cur­rently in the process of ar­rang­ing for the re­search and de­vel­op­ment of a to­tal of 17 fin­tech stan­dards, cov­er­ing ar­eas in­clud­ing ar­ti­fi­cial in­tel­li­gence, the blockchain, big data and cloud com­put­ing.

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NCFA Jan 2018 resize - Can Blockchains Give You Competitive Advantage? The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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Corporate venture capital deals hit new record as banks invest in fintech competitors

CNBC | Kate Rooney | Dec 10, 2019

See:  Goldman Sachs is slashing employee pay as it ramps up new tech ventures like the Apple Card

Corporate venture capital funding is at an all-time high and banks are leading the charge.

Investments by financial services firms into start-ups hit a record 329 deals worth a total $8 billion in 2019, according to a report by CB Insights published Tuesday. Nearly half of that deal activity this year came from banks.The third quarter saw the highest deal activity on record by financial services venture capital.

A handful of established companies — from Google to Airbus to American Express — have their own venture capital arm to make early stage investments. They can form strategic partnerships with the start-ups to learn from their technology, and have an early look at companies as potential acquisition targets. And much like traditional venture capital does, they eventually profit if these investments do well. The equity investments are often a way to “future proof,” according to CB Insights.

Banks are “rapidly accelerating” deal activity, with annual deal activity increasing by 8 times between 2014 and 2018, according to the report.

Investing in start-ups is becoming increasingly important for Wall Street banks as they look to diversify as their key profit engines get squeezed by falling interest rates. There’s also pressure from new fintech options like Square, PayPal, Wealthfront and Robinhood which have debuted many of the same services with zero fees.

Financial services corporate venture deals surged 500% from 2014 through the third quarter of 2019. Nearly half of the total financial services deals are in California.

Citi Ventures is the most active when it comes to deal flow with 66 venture deals, compared to 64 by Goldman Sachs’ VC arm.

See:  RBC leads $20 million Highline Beta fund that helps start-ups sell to large corporations

Goldman has backed the most so-called unicorns with five companies valued at more than $1 billion. Its bets include Plaid, Circle and Marqeta.

Six other financial services groups have invested in three or more unicorns. American Express Ventures came in at number three with 55 deals since 2014.

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NCFA Jan 2018 resize - Can Blockchains Give You Competitive Advantage? The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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HSBC’s plan to move $20B in assets to blockchain could be a watershed moment

Computerworld | Lucas Mearian | Dec 6, 2019

cash to digital currency - Can Blockchains Give You Competitive Advantage?The investment bank's trust of blockchain is likely to spur confidence in the nascent technology.

Investment bank HSBC Holdings is using a blockchain distributed ledger technology (DLT) to digitize transaction records of private investments, enabling clients globally to access the details of their assets online in near real-time.

The London-based company, the seventh largest bank in the world, plans to move $20 billion in assets that include equity, debt and real estate onto its new Digital Vault blockchain, a shift away from its current use of paper records to respond to client search requests.

"The Digital Vault is live in Asia and will be rolled out in the U.S. and Europe in the first quarter of 2020," an HSBC spokesperson said via email.

By getting investors to interact with this data on the blockchain through decentralized applications (dApps) supported by friendly user interfaces, HSBC is helping build the on-ramps and infrastructure needed to take blockchain DLT mainstream, according to Avivah Litan, a Gartner vice president of research.

See:  The Decade in Blockchain — 2010 to 2020 in Review

"Presumably, millions of potential investors and users will be on-ramped to blockchain interfaces and they likely won't even be aware of the backend technology," Litan said.

Digital Vault, developed by HSBC's Securities Services unit (HSS), is expected to eventually handle the custody of additional digital asset classes, enabling the bank to move more of the asset transaction lifecycle onto the ledger in the future.

HSBC is hardly going into the blockchain project blind. The bank has been involved with enterprise DLT firm R3 since at least 2015, so it has had time to research and test various blockchain ideas, according to Michela Menting, digital security & blockchain research director at ABI Research.

R3, which began as a financial services consortium and is now governed by more than 70 partner firms, created the Corda open-source DLT platform. R3 claims Corda is not a blockchain platform because it lacks a consensus algorithm that allows participants to validate ledger entries. Like blockchain, Corda is a permissioned or private DLT platform that also enables the creation of dApps for various financial services uses; Corda uses the Java programming language for its dApps.

The use of Blockchain DLT will likely not only speed up HSBC's processes significantly and cut costs related to "middlemen" who engage in the time-consuming process of paper records research, but it will also boost interest and engagement by the bank's clients in securities trading, Menting said.

See:  The 5 Debates That Will Shape Fintech In The 2020s

"This is important for a bank that wants to transform into a more nimble and flexible organization, especially with the increased competition from FinTechs," Menting said.

Stephen Bayly, HSBC's CIO for Securities Services, said the bank is responding to clients who have been requesting real-time visibility into their private transactions so they know when they will receive the coupon on a private debt transaction or to facilitate a records audit.

"Private assets are prime candidates for digitization and we see this platform as a key step on the journey as the model evolves," Bayly said in a statement. "We are preparing for the future, in which the full transaction lifecycle could be stored on a ledger, including issuing digital tokens instead of paper certificates."

This year has seen several high profile projects using blockchain to convert assets into digital tokens, which can then be more easily purchased or traded domestically or across international borders. KPMG recently pointed to a wave of start-ups and established financial services firms, such as Fidelity Investments, launching various crypto products and services for the emerging tokenized economy. The firm suggested that a tokenized economy will likely be one of the more significant innovations enabled by cryptoassets like bitcoin, Litecoin and Ether.

Last month, JP Morgan, IBM, Intel and Microsoft created a consortium to jointly develop a blockchain-based token specification that would enable regulatory-compliant digital currency.

See:  Vanguard Developing Blockchain Platform for $6 Trillion Forex Market

HSBC's deployment of a blockchain digital custody platform is significant for several reasons, including the amount of assets being entrusted to the electronic ledger, as it joins a quickly growing trend in the financial investment market, according Litan.

"Blockchain DLT provides a shared single version of the truth based on immutable data and audit trails, critical qualities in shared financial recordkeeping. This implementation should also prove that the technology can scale to support global bank performance and data confidentiality requirements," Litan said.

Even as HSBC and other financial firms are increasing their use of blockchain, Boston-based State Street Bank reportedly slashed more than 100 blockchain-related developer positions in a move away from the technology.

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NCFA Jan 2018 resize - Can Blockchains Give You Competitive Advantage? The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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The Decade in Blockchain — 2010 to 2020 in Review

ConenSys | Dec 3, 2019

10 years of bitcoin blockchain - Can Blockchains Give You Competitive Advantage?On January 3rd, 2009, in the wake of a global financial crisis that accelerated the growing chasm of inequality throughout world economies, a mysterious figure named Satoshi Nakamoto launched a virtual currency named Bitcoin that functioned atop what s/he called a ‘Proof of Work chain.’

In its ‘genesis block,’ Nakamoto permanently embedded a brief line of text into the data that signaled the inspiration behind the newfangled tech: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.”

It was a rallying cry for a better way. What proceeded over the next decade has been a stratospheric rollercoaster ride for cryptocurrencies and digital assets, alongside the early phases of a total reworking of economic and human systems atop a philosophy of decentralization and democratization of access to value.

See:  How Big Data and Blockchain are enhancing FinTech

There have been inconceivable highs and corresponding lows in the ten plus years since Bitcoin’s genesis block, as development of blockchain technology and awareness of its potential marches ever forward. As this decade draws to a close, it’s an opportune moment to view ten years of blockchain development in retrospective. The technology has grown from a digital currency worth only pennies to an emerging pillar of global economic systems—and it’s still just getting started.

Some context before we begin: As 2009 saw its end, blockchain development was limited. In fact, the first transactions ever to take place on the Bitcoin network were undertaken in December of 2009. The BitcoinTalk Forum, an early hotbed for blockchain developers, went live in November. The blockchain ecosystem was limited to a handful of technologists and developers with only an inkling of the phenomenon that they had already set in motion…

2010

February — The first ever cryptocurrency exchange, Bitcoin Market, is established. The first trade takes place a month later.

April — The first public bitcoin trade takes place: 1000BTC traded for $30 at an exchange rate of  0.03USD/1BTC

May — The first real-world bitcoin transaction is undertaken by Laszlo Hanyecz, who paid 10000BTC for two Papa John’s pizzas (Approximately $25 USD)

June —  Bitcoin developer Gavin Andreson creates a faucet offering 5 free BTC to the public

July — First notable usage of the word “blockchain” appears on BitcoinTalk forum. Prior to this, it was referred to as ‘Proof-of-Work chain’

July — Bitcoin exchange named Magic The Gathering Online eXchange—also known as Mt. Gox—established

August —Bitcoin protocol bug leads to emergency hard fork

December — Satoshi Nakamoto ceases communication with the world

See: Red Cross boosts disaster-prone communities with blockchain ‘cash’

2019

January — Coinstar machines begin selling cryptocurrency at grocery stores across the US

February — Ethereum’s Constantinople hard fork is released, part two of Metropolis

April — Bitcoin surpasses 400 million total transactions

June — Daily Ethereum transactions surpass one million

June — Facebook announces Libra

July — United States senate holds hearings titled ‘Examining Regulatory Frameworks for Digital Currencies and Blockchain”

August — Ethereum developer dominance reaches 4x that of any other blockchain

October — Block.One fined $24 million by the SEC for its unregulated $4 billion EOS ICO

October — Over 80 million distinct Ethereum addresses have been created

September — Santander bank settles both sides of a $20 million bond on Ethereum

November — Over 3000 Dapps created. Of them, 2700 are built on Ethereum

November — Amount of Ether locked in Decentralized Finance apps reaches all time high of 2.7 million ETH.

 

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NCFA Jan 2018 resize - Can Blockchains Give You Competitive Advantage? The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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What Attracts Investors to Blockchain Gaming?

Cointelegraph | Anatol Hooper | Dec 5, 2019

blockchain gaming - Can Blockchains Give You Competitive Advantage?Blockchain is transforming the financial industry right before our eyes, with many market onlookers anticipating a complete replacement of existing payment, trading and banking infrastructures. Blockchain and finance seem like the perfect match, but there are other sectors, for which the technology may play a game-changing role. For one particular industry, the latter adjective isn’t figurative at all, because blockchain can do just that – change the gaming market. This is a unique chance for investors, and it seems like they don’t want to miss it.

During the last few years, the gaming industry has been pampered with several innovations at once – virtual reality (VR), augmented reality and artificial intelligence. But it is blockchain that can have the greatest contribution, bringing more transparency and trust to the gaming space.

Investors don’t want to be simple observers and are jumping on the blockchain gaming bandwagon. For them, the technology has a disruptive potential that can be converted into profitable deals. Thus, they consider this emerging technology to be a breakthrough in the gaming industry.

See:  Podcast Ep27-Mar 1: Blockchain Gaming and Esports with Shidan Gouran

Transforming gaming at all levels

But how can distributed ledger technology (DLT) help both developers and gamers? Blockchain’s capabilities are limitless in terms of use cases, so there are many ways it can transform the gaming industry:

Blockchain can help developers remove grey market trading of in-game assets

Game developers have designed their games to be closed ecosystems, which ensures that any value inputted into the game cannot be extracted. For instance, players were not able to sell their assets for money, use them in other games or trade them for another game’s assets. This led to the creation of grey markets where players could come together to facilitate these types of activities.

Blockchain technology enables publishers to embed rules into their tokenized assets that enforce a transaction fee upon each transfer of the asset, regardless of where that asset is being sold. As a result, users are free to trade their assets as they see fit, and publishers can continue to generate revenue beyond the primary market.

Blockchain enables projection of value to intangible assets

Everyone realized the close interaction between DLT and gaming when CryptoKitties came out on Ethereum. The game allows players to purchase, breed and trade unique virtual kittens with cryptocurrencies. This collectible game uses so-called non-fungible tokens (NFT) since each digital kitty is unique. So far, players have spent millions of United States dollars for the kitties, with the most expensive one being sold for 600 Ether (ETH) — over $173,000 at the time.

Games like CryptoKitties demonstrate the power of DLT through the tokenization of assets. This ensures that each asset can be proved to be unique or rare; it ensures that users have ownership over their digital assets; and it allows these assets to interoperate with other applications outside of their original ecosystem.

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These features all contribute to a greater perceived value by the user, which increases the propensity to spend real dollars within the app. While CryptoKitties showcased the attributes that DLT could bring to gaming, it failed to create an engaging experience that would entice a wider audience. Next generation blockchain-enabled games, like Epics Digital Collectibles, seamlessly integrate DLT with a consumer-centric, captivating and gamified experience.

Blockchain can help with buying, selling and storing in-gaming assets

With DLT, the issuing and trading of in-game assets reach the next level.

Developers can create games that allow players to buy in-game assets with cryptocurrencies, which makes the process easier, more rapid and secure. Also, cryptocurrencies can address the challenge of microtransactions. However, publishers understand that the average consumer is not ready to make a transaction in cryptocurrencies, and thus, they obfuscate these crypto mechanics behind a familiar fiat payment gateway.

Moreover, developers can create specialized frameworks for digital assets used in games. As mentioned, CryptoKitties was built on Ethereum, but there are already blockchain-based standards focused exclusively on gaming. One such example is dGoods, which is a token framework developed initially for the EOSIO protocol.

Mythical Games is one of the creators and developers that has used dGoods for its in-game assets. The company is set to launch its first game, called Blankos, in 2020. Blankos is projected to be the biggest launch of a blockchain-enabled game to date, accessing the wider gaming communities on PC, console and mobile.

Soon, more developers will begin leveraging digital asset frameworks and will collectively improve the operation of in-game assets.

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NCFA Jan 2018 resize - Can Blockchains Give You Competitive Advantage? The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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