Saturday, May 23, 2015
The Millennial Generation: Banking’s Big Problem, and It’s a Good Thing (Op-Ed)
FinTech Digest: Clinkle Implodes, Stripe Valued At $5B, Square Opens in Australia
Digital Payments Overtook Cash Transactions in 2014 in the UK
Friday, May 22, 2015
Bloomberg Special Report Highlights Current Trends and Issues in the Bitcoin Space
Bloomberg Brief has published a Special Report about Bitcoin. Written as an introduction for financial professionals and busy investors with little previous knowledge of Bitcoin, the report gives far too much space to marginal aspects such as price swings, scams and bankruptcies. However, while the depth of the analysis doesn’t match that of recent reports by Goldman Sachs and other top financial institutions, the Bloomberg report offers interesting insights and opinions that highlight current trends and issues in the Bitcoin space.
Barry Silbert, founder and CEO of the Digital Currency Group and creator of the Bitcoin Investment Trust, the first Bitcoin investment vehicle publicly traded in the United States, focuses on the price of bitcoin and hopes it will increase. “People will get excited about bitcoin when they believe its price will rise, which will create a flywheel effect of increased adoption, velocity, trading, etc.,” he says. “Bitcoin can live up to its promise, but it will only be possible if the price and liquidity are a lot higher than they are today.”
Taking the opposite view is Stony Brook University finance professor and Bloomberg columnist Noah Smith, who is persuaded that bitcoin becomes more useful as a currency the more its price drops. Currencies and investment vehicles like stocks and gold are very different, and Smith considers the currency aspects of bitcoin as more promising and important than the investment aspects.
“The sooner people give up the hope that bitcoin will skyrocket in price, the sooner they will be willing to spend bitcoins in everyday life, the way they now spend dollars,” he says, and adds that the quicker bitcoin as an investment dies, the quicker bitcoin as currency can come to life.
Jerry Brito, Executive Director of Coin Center, argues that utility will be the best barometer of success. As examples of useful applications, he mentions both new applications to micropayments and the Internet of Things (IoT) and new, cheaper and more agile business models for existing applications.
Ron Hose, co-founder and CEO of Philippines-headquartered Coins.ph, focuses on the impact of cheap and efficient bitcoin remittances.
“Think of how Skype lowered the cost of calling overseas a decade ago,” he says. “Bitcoin can have the same effect on the remittance market.“
Gil Luria, managing director for financial technology research at Wedbush Securities, mentions cross-border remittances and micropayments as “obvious places where the [bitcoin] technology can radically reduce friction,” and notes that the provision of banking-like services to underbanked populations around the world is likely to have a high impact.
However, Luria thinks that Bitcoin is still a research area, and not ready yet for widespread operational use in mainstream finance. More technical and especially operational development is needed, and traditional payment operators have a role to play, he believes.
“The legacy service providers are not asleep,” notes Luria. “They will undoubtedly come up with their own ways to utilize digital currency and the blockchain.”
In recent news that support Luria’s take, MasterCard Introduced fast bitcoin-like personal payments
The Bloomberg report includes a summary of Goldman Sachs’ recent report on the future of finance, focused on emerging electronic payments. As online and mobile banking evolves, bitcoin and other online currencies could gain more traction.
Most contributors to the Bloomberg report consider regulations in the Bitcoin space a positive trend.
“[Bitcoin] is an experiment being done outside of the controlled environment of a laboratory,” says Boston University’s Mark T. Williams. “As a result, there need to be controls around it, which means stronger regulation. There are many risks still to be addressed.”
Williams is persuaded that the pseudo-anonymous nature of Bitcoin must “go away.” On the other hand, Luria thinks that Bitcoin will actually make it harder for bad actors to hide. “[E]very transaction in bitcoin is tracked and, eventually, traceable,” he says. “It seems counterintuitive, but using bitcoin actually makes it much easier to catch the bad guys.”
Image via the Bloomberg Bitcoin Report.
Hong Kong Shaping up to Become the Next Fintech Hub
Plug and Play Tech Center Hosts Retail and Fintech Expo for Startups
Bringing together more than 40 startup pitches on both the retail and fintech verticals at the consortium, the Plug and Play Tech Center Expo day included three keynotes from the founder of Plug and Play Tech Center Saeed Amidi, Managing Director of Citi Ventures Debra Brackeen and founder of the Lending Club Renaud Laplanche.
Saeed Amidi started the day off with remarks summing up the mission of Plug and Play to bring together software for two industries and create a matchmaking haven where corporations could come to find solutions to their vexing technological problems, understand emerging markets and nurture and mentor the next generation of technological advancement.
Debbie Brackeen was excited to describe Citi Ventures fund as a proving ground for startups for early validation of their models. Startups benefit from Citi’s treasure of data and knowledge every step of their growth while Citi strives to “bring the outside in” in integrated value chains.
Citi Ventures is focusing on being an internal acceleration fund that manages funding alongside the incubator as an integrated network. Her remarks touched on Citi Ventures exploration of blockchain technology in its nascent stages to test the potential for solving problems for their partners.
Citigroup has been focused on financial technology that puts consumer experience first in security, analytics, commerce and payments.
Renaud Laplanche focused on how Lending Club innovated on the existing financial framework by bringing together the lending and the banking side and employing network effects to give investors confidence in their model. Remarkably, he said his company’s biggest turning point was becoming a Facebook app which allowed them to get series A funding and hire top executives: “People are your greatest asset and your founding team has to be top notch.”
Scott Robinson who heads the financial technology vertical for Plug and Play described the marriage between retail and financial software as one born out of necessity as distribution rails turn to mobile and security issues need to be addressed.
Security was the common denominator on both sets of pitches. Notable startups such as Sparkling Logic give actionable advice on fraud prevention, Behaviosec logs and analyzes data such as keystrokes to run real-time authenticity tests, with the U.S. government already as a paying customer, and Debitforward (also known as Pinn) allows users to use a mix of social media data, GPS and the Internet of Things to seamlessly pay for their purchases without ever pulling out a wallet.
Funding is exploding as large companies seek to partner with fledgling startups to innovate in the rapidly changing Fintech atmosphere. Startups along the spectrum of growth face remarkable challenges proving their business model, finding partnerships, proving value to gain funding and getting their big break.
Organizations such as Citi Ventures allow companies to survive in the “lean startup” world by validating the commercial models, consumer pain points and solutions with data and coaching. Plug and Play has produced one “unicorn” with Lending Club and this next wave of startups is looking for their big break, too.
The next round of applications for startups to join Plug and Play are due June 15th.
5 Freelancers Who May Use Bitcoin-Powered Streamium to Cut Out Middlemen
The launch of Streamium was announced via Reddit yesterday.
The new application from Manuel Aráoz and company was created to build a direct connection between video streamers and their viewers. Video streaming is dealt with on a peer-to-peer (P2P) basis via WebRTC, and payments for viewing a stream are made possible through the use of bitcoin and payment channels.
A stream of small, off-chain payments are made to the broadcaster every second as the viewer continues to watch a stream, and all of those micropayments are then combined into one larger payment that is made via the bitcoin blockchain.
The P2P nature of the Streamium platform has the potential to disrupt many different types of video streaming businesses currently found on the Internet due to the fact that it is now much easier to broadcast directly to an audience rather than going through a middleman.
Still, there is still plenty of work to be done when it comes to scaling the software up to handle larger audiences. For now, a broadcaster is limited by his or her own available bandwidth. In any case, here are five types of people who could benefit from trying out Streamium for the first time.
- Cam Girls
The most obvious area where Streamium can be helpful is in the adult entertainment industry, especially when it comes to live cam shows. The adult industry has faced financial censorship from both PayPal and the legacy banking system, which is why many adult entertainment sites have turned to the blockchain for payments.
Live cam sites can sometimes take a large percentage of a performer’s profits, which is why the direct payment from the audience to the entertainer on Streamium could be rather helpful. Of course, it would also make sense if the viewers were able to also tip performers for certain requests.
- Live Sports Pirates
Bitcoin isn’t necessarily entirely about illegal activity, but those sorts of profit opportunities seem to be where new technologies take off first. Most sports fans are familiar with free online streams that are usually hosted by shady individuals at a rather low resolution.
Viewers are usually bombarded with advertisements when viewing these unlicensed streams, and it also feels like viruses and malware are right around the corner on these kinds of sites. Due to the P2P nature of Streamium, new streaming sports pirates may decide to offer a premium version of sporting events in higher quality without all of the downsides currently found in the black market industry.
- Doctors, Lawyers, and Other On-Demand Professionals
A variety of “professional-on-demand” services have popped up over the past few years. These are the kinds of websites or apps where you’re able to talk to a doctor (Doctor on Demand), lawyer (LAWfone) or some other professional for a flat fee.
Although these services were a move in the right direction when it comes to cutting costs, they aren’t completely necessary in a world of Streamium and social media. Closely associated with this sort of 1-on-1 streaming activity is also the ability to be a freelance consultant on basically any topic without a middleman. Of course, it should be remembered middlemen still have value in these sorts of freelance operations for marketing purposes.
- Professional Gamers and Gaming Personalities
The magnitude of online video game streaming may not have become apparent to the general public until Twitch was bought by Amazon for nearly $1 billion, but the large number of young people turning to the video game streaming platform for full-time employment is now becoming hard to ignore. Professional gamers and gaming personalities could use Streamium in a few different ways to improve their overall profits.
Although completely replacing Twitch may not be in the cards, streamers could turn to Streamium as a vehicle for pay-per-view events. Whether it is two famous CS:GO teams playing a friendly game or a training session with one of the best StarCraft players in the world, there are a variety of ways in which pro gamers can use Streamium to their advantage.
- Teachers
Private teachers already exist, but what if those teachers were also able to livestream their lectures to outsiders at a fixed rate?
“Teacher” is also used as a rather broad term here as it could be anyone who is able to explain a specific topic to someone else. For example, well-known bitcoin evangelist Andreas Antonopoulos could start a class that can be viewed by anyone via Streamium. Perhaps there would also be a small fee for asking a question at the end of a lecture or presentation.
Streamium could allow new students to attend a class without doing anything else besides showing up and opening a payment channel (assuming that they already have some bitcoin.) Perhaps the platform would also be useful for 1-on-1 tutoring sessions between students.
Long Story Short
In reality, no one really knows how people are going to end up using this new platform. Like many other innovative applications, it is up to the users to figure out how to best use this new tool. Perhaps we’ll see bitcoin conferences or video podcasts on Streamium in the future, but the team behind this new project will need to figure out how to scale the technology – perhaps through webtorrent – before there are any mass events streamed with it.
Goldman Sachs CEO: ‘Burdensome Regulation’ Protects our Business from Startups
Bitfinex Hot Wallets Hacked, More Than 1,400 Bitcoin May Be Stolen
Hong Kong-based bitcoin exchange Bitfinex announced around 5 a.m. EDT today the startup’s hot wallets were compromised and some bitcoin were stolen. The exchange also advised its users to immediately stop depositing bitcoin to old addresses in their Bitfinex account.
It is unclear how much has been lost in the hack, but according to a company statement, the hot wallets held only 0.05 percent of the exchange’s bitcoin holdings. Though still unconfirmed, Redditor gowithBTC followed a string of transactions on the blockchain to what he believes is Bitfinex’s hot wallet. If correct, it would put the amount of bitcoin lost in the hack just more than 1,400 or around 0.06 percent of the company’s total holdings.
Bitfinex said that any losses experienced by users would “be fully absorbed” by the exchange but did not give any specific timing as to when they would be reimbursed or how victims could notify the startup of their damages. The company currently is creating a new hot wallet and will update the public on the situation within the next several hours.
BitcoinTalk hacked as well
Yesterday, the popular Bitcoin forum went offline due to a social engineering attack, which led to website’s servers being compromised. Targeted at the forum’s ISP, NFOrce, the attacker tricked the ISP into handing over passwords, emails, and other security sensitive information.
The owner and operator of BitcoinTalk, who goes by the pseudonym Theymos, said the hacker got access to the website’s servers for 12 minutes, “so he probably wasn’t able to get a complete dump of the database.” He also advised users to consider that their email and passwords were compromised and act accordingly.
It is unclear whether the two incidents are related, and how Bitfinex was hacked is unknown as well.
We will update this developing story as we learn more.
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Breaking: BitFinex’ Hot Wallet Hacked, Bitcoins Stolen
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