Real Asset Securitization On The Blockchain: Eliminating Risks And Enhancing Efficiency

Blockchain technology has transformed the entire landscape of financial transactions. Despite being riddled with controversies over its decentralized and autonomous format, blockchain is here to stay. In a span of just a decade, it has found immeasurable uses in various spheres.
One of the areas that blockchain provides great benefit is in securitization of real assets. Ethereum and various other alt coin tokens help in converting real assets into digital token on the blockchain. This is a tremendous breakthrough in securitization as moving real time assets without disturbing the basic characteristics of the assets opens up endless possibilities.
The need for blockchain securitization of real assets
The various different assets of illiquid type found in the financial market such as oil, real estate, lithium, Co2 emission credits, stocks etc. are difficult to transfer between participants or to subdivide. Thus investors choose trading papers to represent the assets. This method has several drawbacks such as prolonged time for tracking, auditing and exchanging legal agreements and papers.
Thus the process has substantial operational risk. Block chain with its seamless traceability and transparency offers the ideal solution for eliminating the potential risks connected with real asset ownership transfer. Ethereum smart contracts, an important technology for enabling block chain applications is apt for securitization of real assets.
Blockchain smart contracts promise
Securitization life cycle stands to benefit a great deal with the introduction of block chain technology and smart contracts. Block chain technology has several advantages such as
• Streamlines processes
• Lowers costs
• Faster transactions
• Boosts transparency
• Improves security
The above advantages can impact each and every aspect of securitization lifecycle including trustees, regulators, investors, sponsors, originators and rating agency servicers.
Thus blockchain has the power to reduce risks in securitization markets. This potential will attract more investors resulting in improved volume, spreads and prices. With the block chain technology enabling transparency in access to information, it is easy to ensure regulatory compliance. Inherent risks in the market will be reduced markedly.
Making transactions faster and more secure
While conventional systems take several days for clearance and final payment settlement, particularly when done outside working hours, it is not so with blockchain. Transaction time is reduced to minutes and processing is done 24/7. Further its capability of high quality data that is accurate, consistent, complete, and widely available makes it easy for traders. Market participants are united by one central platform where information sharing is very simple.
Since changes in block chains are transparent and viewable by all concerned parties, any changes leave behind an indelible audit trail. This enables a robust security structure. With just a single true information source available to all participants, it is easier to arrive at forecast and analysis that have better predictability.
Meeting the challenges in securitization
Since securitization presents a crucial asset for the financial sector as well as the economy, changes in its structure especially in the technology that supports the main infrastructure and security should be done with caution.
Some of the risks that should not be ignored when contemplating blockchain include
Privacy and data security
Although blockchain is a decentralized network without any failure points and is capable of withstanding malicious attacks, it is still vulnerable. The various cryptocurrency hacks in recent years such as Mt. Gox are standing proof. The huge amounts of information the platform can hold make it a big lure for hackers. If a cyber-attack is successful, the resulting destruction could be unimaginable.
Another issue with blockchain is its privacy structure. Since the distributed ledger system of block chain stores and shares sensitive information on several nodes there is high risk of privacy breach.
Evolving technology
Being a new technology, blockchain has not reached the level of completely strong reliability although many of the technological applications have shown good track record. Several smart contracts as well as other block chain applications however are yet to prove their longevity and reliability.
Not regulated completely
Blockchain technology has not yet been regulated completely. Many of the global regulators are yet to accept the application in securitization. This includes verifying, entering and securing data. Newer and more effective monitoring of the platform is needed if its full potential is to be tapped. It is also important for regulations to be in place for integrating block chain in the regulatory reporting.
Despite the inherent risks, securitization of real assets with block chain would result in high cost reduction as the process is highly automated without the need for intermediaries. There is little or no human intervention in the various processes involved in securitization including arranging loans, buying securities and more. With complete and accurate data record that is traceable and transparent, there will be a rise in trading volume, fall in spreads and improved prices. With stable securitization supply will increase lowering credit cost. The elimination of fraud and poor documentation with the immutable data feature would further help the industry gear up for any type of eventualities.

Mattan Lurie

The Market Impact Of Segwit2X

Should be known as the year of Segwit. The cryptocurrency community was introduced to this new system during the year and thus far has felt the impact twice with the promise of a third hard fork looming for later in November. We take a look at 2017 and what the market impact of Segwit2X has been – the good and the bad.

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Background of Segwit2X

Segwit2X is a result of the New York Agreement that was formulated in May 2017. The agreement was drafted by miners and developers and aims to increase the Bitcoin blockchain from 1MB to 2MB. Ever since its introduction to the world in 2014, Bitcoin has grown to such an extent that the blockchain is failing to keep up with the demand for the golden standard of the crypto world. Transaction delays and consequent congestion has forced the crypto community to come up with a solution to the problem. Remember that Bitcoin has open source software and even though Segwit2X may solve a lot of problems the community are currently experiencing, there is no way of telling what the future holds and if a soft fork may be required at a later stage. One can look at a hard fork as a way of upgrading a system’s software in order to accommodate more transactions and to ease the process.

What is the purpose of Segwit2X?

As previously explained Bitcoin is experiencing scaling issues such as slow transaction speeds, high transaction fees and more. In order to make dealing with Bitcoin more convenient, a group of miners and developers decided to implement Segwit2X. In a nutshell, Segwit2X proposes a 2MB hard fork and the activation of a segregated witness at a threshold of 80%.

What is Bitcoin Gold?

During the previous hard fork that took place in July 2017, all holders of Bitcoin were given free Bitcoin Cash. This time around Bitcoin holders received Bitcoin Gold, if their Bitcoin was held on certain exchanges who granted their customers the new crypto. Bitcoin Gold is a way of Bitcoin to improve itself. Bitcoin Gold is ASIC resistant and works through a proof-of-work change or Equihash. The aim of this is to encourage a ‘decentralized mining ecosystem.’ Even though many investors are skeptical about the implementation of these new systems, there is still hope as Litecoin previously incorporated these systems successfully. With Litecoin, miners can mine blocks every 2.5 minutes as opposed to Bitcoin’s block that takes 10-minutes to produce. Bitcoin Gold is a branch of Bitcoin and does not differ that much from it, besides from its PoW protocol. For this specific reason, a lot of people in the crypto community do not support Bitcoin Gold. The other reasons why they are not supporting Bitcoin Gold will be discussed later.

Segwit2X and the New York Agreement – What does the future hold?

The New York Agreement (NYA) was introduced by Barry Silbert, who now owns the Digital Currency Group and was meant to regulate Bitcoin trading in the U.S. At that stage the key role players in the crypto world were Bitmain, Coinbase exchange, and BitPay. The final part of the NYA is now drawing closer and the crypto world is likely to see another hard fork some time in November this year that will increase the size of the Bitcoin blockchain.

Why some are not supporting Segwit2X

Though a lot of people consider Segwit2X as the answer to the Bitcoin scaling issue, there is a rather large group who disagree. Pretty soon, the Bitcoin community (miners and developers) will have to agree whether or not Segwit2X has been successful or not. Should a part of the group disagree, Bitcoin could be split into two networks. Some believe that Segwit2X’s system does not implement the benefits of a hard fork split that should increase capacity of the block chain. They also believe that the split may take control of the coin away from its holders. Thus far, a lot of exchanges have jumped onto the band wagon and listed both Bitcoin Cash and Bitcoin Gold. But one must remember that these companies or exchanges have thus taken control of client’s Bitcoin, which is directly the opposite of what Bitcoin stands for. So, these companies should, therefore, give customers the ability to withdraw these coins that resulted due to the split. There is also the possibility that miners could ignore all of this and continue mining as before. This could have severe repercussions as it could encourage the crypto community to follow suit. The community has become opposed to third party mingling and aiming to control the system, which is meant to be decentralized. Only time will tell.

The problem with Segwit2X

Segwit2X hopes to lead to a decrease in transaction fees. But what will the impact of this be in the long run? One blogger argues that due to the increasing demand for a blockchain, fees are likely to increase. This will happen regardless of the size of the blockchain. Further concerns with Segwit2X and in particular Bitcoin Gold is that it does not provide adequate protection against replay attacks. This is a hack threat that may occur during the implementation of a hard fork. It is very important that Bitcoin holders be in control of their own private keys and never give these keys to strangers. Various exchanges who did not give their customers Bitcoin Gold gave the following reason: The code is not open sourced and have not been tested yet.

Segwit2X in November

It has been a bit of a roller coaster ride for the crypto community in the last couple of months. The price of Bitcoin went down when China announced that it may block Bitcoin transactions. However, Bitcoin quickly recovered from this upon the introduction of Bitcoin Gold and reached a record high of more than $6 300. November may see another hard fork but from the looks of it, this may not occur as a large crowd of Bitcoin role players are opposing the suggestion. This is mainly due to its replay protection issues. On the other hand, should another hard fork occur, it will eliminate all possibilities that Bitcoin can be dethroned as the gold standard of cryptocurrencies.

 

 

 

 

 

What is C2C?

Overview

C2C stands for Customer to Customer exchange platform which allows users to buy and sell bitcoin or cryptocurrency. C2C mechanism is similar to the P2P model. In order to avoid real life meet ups among traders and to hedge related risks, market makers (merchants) would be introduced to facilitate the exchanges.

Why Market Markers (Merchants)?

C2C is known as a decentralized arbitration system.  Users are able to exchange bitcoins with a peer without the need of a centralized trusted third party such as an exchange. With multiple merchants on the C2C platform, the C2C cryptocurrency exchanges are vivid examples of the decentralization philosophy. Meanwhile, security deposits which protect buyers and sellers are one of the requirements for qualified merchants. Users are able to buy and sell bitcoins in insured environment.

Market makers (Merchants) would definitely enhance the liquidity and therefore increase the efficiency of every transaction. When an individual wants to buy Bitcoins, he looks for a satisfactory deal from the market makers (merchants). On the other hands, if an individual wants to sell Bitcoins, he looks for the offer made by the market markers. Market makers could maintain a faster and safer trade.

Buyer is an individual who purchases Bitcoin from the Market Maker (Merchant) by using fiat currency.

Seller is an individual who sells Bitcoin to Market Maker (Merchant) in exchange of fiat currency.

What is the advantage of having Market Makers (Merchants)?

As such, market maker mechanism could serve a large number of crypto enthusiasts and hence support a high trading volume. OKEx examines every merchant on the C2C platform.  Every merchant on the platform needs to declare their digital assets which must exceed OKEx requirement in order to get qualified and to trade. Besides, every qualified merchant is required to place security deposit with OKEx before they start trading.

Unlike banks and stock trading, Bitcoin exchange is unregulated by most countries, although this is changing as its popularity increases. Just like trading a stock, Bitcoin exchanges charge transaction fees, which range from 0 to 1%.

For C2C trading, both buyer and seller enjoy zero transaction fee for using the platform and have a faster and safer trading experience.

Happy Trading!

Maison de Cheri

 

 

Top 7 Cryptocurrency Categories

Ever since Satoshi Nakamoto published his controversial paper titled ‘Bitcoin: A Peer-to-Peer Electronic Cash system’ in 2008, a whole new ecosystem consisting of cryptocurrencies/ digital assets / tokens in their thousands emerged under the global spotlight.  There are literally new tokens being released everyday so how can any sane investors keep track of all the new ideas and information that are poured into the internet? Don’t worry, let us do the heavy lifting and summarize the most common token categories for you as suggested by Joshua Nussbaum from the New York- based venture capital firm Compound.

**Please note that many tokens are not black & white and might span across a few categories.

Currencies

In general, the purpose of setting up these projects is to develop a better currency for a wide range of use case scenarios including as a tool to store value, a medium of value exchange and as an accounting unit.  Since Bitcoin is the first and most prominent example in this category it also inspired a lot of new initiatives. Many projects are designed solely to improve some aspect of the Bitcoin Network or to make the protocol suitable for a particular use scenario.

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Developer Tools

Projects belonging to this category are mainly used by developers as modules for building decentralized applications. In order to allow users to experience a smooth interface, many of the current underlying designs need to be validated in large-scale environments. Protocol Design expansion and interoperability are actively researched in several areas and will become an important aspect of the Web3 development stack.

This is one category worthy of attention from an investment stand point. In order for many blockchain applications such as a fully decentralized autonomous organization or a Google alternative that accumulates user data to work, the underlining development tools / infrastructure must be robust and adaptable to constant growth.  Many of these projects are designed to do just that.

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Fintech

This category is fairly simple. If you use different blockchain protocols and applications (such as the “Developer Tools” example above), many may have their own native encrypted currency (cryptocurrency), resulting in the creation of multiple new crypto economies. In these economies, there will be a need for tools to convert one currency unit into another, facilitate lending, accept investment, and so on.

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Sovereignty

Over the past decade, we have seen great technological advancement from desktop application that is running locally to cloud-based applications that store user data on a remote server.  But these centralized services also come with great risk and often becomes the primary target of hackers.
This gave rise to projects aiming to provide solutions so that might never have to rely on any individual or organization to facilitate trust.  With the help of encryption technology, block chain and the right incentive mechanism, their goals might become reality.

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Value exchange

A key design of Bitcoin is the ability to establish trust between different parties where transactions are made with its’ information shared in an immutable way. This can greatly impact how individuals conduct exchanges; it no longer requires a third party to establish trust within trades.  Through block chains and cryptographic economic principles, the time and complexity of building trust is eliminated. Projects in this category strive to replace this need for trust in traditional value exchange, leaving the middleman out and reducing the overall cost for users to exchange goods and services.

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Shared Data 

An example is when network contributors of Data Sharing companies collect all aspects of data from more than 30 countries: from the consumption of certain foods / beverages to the materials used in specific areas. The company uses machine learning to gain insight and then sell these data sets to their customers.

The goal is to allow anyone to contribute and share, annotate and create different analytical models on certain data sets. Effectively eliminating the need to hire a specific individual(s) to get the job done.  Contributors can earn tokens as a compensation to their effort and companies will acquire tokens to buy the data sets and insights; creating a demand for tokens. Theoretically, this leads to more contributors and increases the quality of data sets.

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Authenticity

 Ultimately, cryptocurrency are only digital assets which are recorded on a specific blockchain.  However, it doesn’t link with actual, tangible assets in the ‘real world’.  Projects in this category strive to provide the linkage between digital and ‘real world’ asset.  The immutability and transparency of blockchain provide the much-needed assurance for counterparties to be convinced that ‘real world’ assets can indeed be represented in a digital manner.

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Others

Lastly there are also those projects which doesn’t fit into any categories and are generally in a league of their own.   However, this category also includes ones with vague goals, poorly structured whitepaper, malicious intent and with the sole purpose of raising quick funds from investors of FOMO (fear of missing out) mentality.

As a general reminder, one’s choice of what to invest needs to be made carefully. And remember: never invest, what you can’t afford to lose.

Happy Trading!
~Anonymous Elephant~

What is ETH

When we talk about cryptocurrency, most people can only think of Bitcoin. In fact, there is a “rising star” in crypto space – Ethereum (ETH). ETH is the second most valuable form of digital money after Bitcoin and many investors forecast ETH could surpass Bitcoin by the end of 2018.

Where did it originate?

ETH is the cryptocurrency used in the Ethereum Platform – which is an open sourced software platform based on blockchain technology that enables developers to build and deploy decentralized applications.
The platform offers technology such as Smart contracts to help store, secure and execute data effectively removing the need of third parties.

Basic statistics of ETH

• Issue date: 30 July 2015
• Abbreviation: ETH
• Total supply: Not Applicable
• Initial price: around $1.23 USD
• Record high: reached $393 USD per token in mid-June

The pros and cons of ETH

ETH.png

How is it used?

The most fundamental function of ETH is to be used as “gas” or “fuel” on the Ethereum platform to facilitate the processing of transactions via smart contracts for Dapps.
If you would like to know more about ETH, please refer to the official website below:
https://ethereum.org/

What is BTC

“Would you like to pay with cash or credit card?”
“Neither, what about Bitcoin?”
The emergence of Bitcoin (BTC) has profoundly changed the concept of ‘money’ and it has became the most popular digital asset in recent years, following an increase of coverage by media globally.

Where did it originate?
Bitcoin is a digital currency created in 2009. It follows the ideas set out in a white paper by Satoshi Nakamoto. It offers the promise of lower transaction fees than traditional online payment mechanisms and is operated by a decentralized authority illustrating a digital currency dictated by a Peer to Peer model.
Unlike traditional currencies, BTC doesn’t rely on an organization to issue its’ currency but instead relies on ‘miner’ to solve specific mathematical algorithm which generates BTC once every 10 minutes. BTC economy uses a distributed database formed by multiple nodes in a P2P network to confirm and record all transactional activities. Additionally, it uses cryptography design to ensure the security of the currency in circulation.

Basic statistics of BTC
• Issue date: January 3, 2009
• Abbreviation: BTC
• Total supply: 21 million
• Initial price: around $13.36 USD
• Record high: reached $5,808 USD per token in mid-October

The pros and cons of BTC

BTC

How is it used?
BTC is the most popular and highest trading cryptocurrency. If you are new to the crypto market, you could start with purchasing a BTC. First of all, you have to choose a reliable exchange such as OKCoin as the gateway to purchase your first digital asset. After you sign up, you could connect your bank account with the exchange for the conversion between fiat currency and BTC.
BTC will be stored in the hot wallet of your chosen exchange once transaction is complete and you could sell it or convert it back into fiat currency anytime and anywhere. Happy trading!

If you would like to know more about BTC, please refer to the official website below:
https://bitcoin.org/en/

What is BTG?

Bitcoin Gold is a hard fork of the bitcoin protocol devised by Lightning ASIC which is a Hong Kong based mining firm led by Jack Liao, CEO. To combat the mining centralization problem, the BTG developers are implementing a different mining algorithm altogether that will be resistant to ASIC chips called Equihash. Thus, Bitcoin Gold will be mined using GPU’s. Bitcoin Gold is a proposed digital asset. Bitcoin Gold intends to perform a wallet balance snapshot at Bitcoin block 491,407 but the actual Bitcoin Gold network will launch on October 25, 2017.

BCG

Where did it originate?

Bitcoin Gold is a fork of the Bitcoin blockchain that will occur on October 25, 2017. At the predetermined block height, Bitcoin Gold miners will begin creating blocks with a new proof-of-work algorithm, and this will cause a bifurcation of the Bitcoin blockchain. The original Bitcoin blockchain will continue on unaltered, but a new branch of the blockchain will split off from the original chain. The new branch is a distinct blockchain with the same transaction history as Bitcoin up until the fork, but then diverges from it.
Basic statistics of BTG

• Issue date: October 25, 2017
• Abbreviation: BTG
• Total supply: 21 million

The pros and cons of Bitcoin Gold

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How is it used?

Like money, cryptocurrencies including BTG can be used for trading goods and services. Blockchain-based transactions are more secure, transparent and efficient.
If you would like to know more about BTG, please refer to the official website below:
https://btcgpu.org/faq