could be significant beneficiaries. In the short term, opportunities to manage the delivery of credit into the economy have exploded for digital in- novators, whether through challenger banks, digital credit providers or crypto-asset lending platforms. Giv- ing people access to cash is the pre- eminent initial opportunity. In medium term, we foresee that the shifting capital flows in recovery phase will create opportunities in three areas: accelerated investment in blockchain and digital finance busi- nesses, particularly infrastructure; an accelerated shift into cryptocurren- cies as part of a balanced investment portfolio; and the opportunities aris- ing from improved regulatory flexibil- ity in facilitating change. Whilst some are happy to bet on ris- ing equity markets, it may be reason- able to see that accelerated inheritances and transformed risk atti- tudes may align more capital towards value preservation and diversification. This will undoubtedly be one of the drivers to the acceptance of digitalised alternative assets, including real estate and closed end funds. Given the critical importance of emerging fintech and blockchain businesses for the world-leading UK, it is imperative that the existing busi- nesses be given the cash support they need whilst the venture markets are closed to new finance. The current CBLIS initiative in the UK is inadequate to achieve this. WHAT’S AHEAD Financial services innovation is likely to be a major competitive advantage for na- tions in the new post COVID-19 world, and therefore it behoves governments to protect their fragile innovators at this time of crisis so that they can be major drivers of the economic recovery. Phil Mochan, Co-Founder and Head of Strategy and Corporate Development of Koine, in conversation with James Bowater. Koine is a provider of segregated, institutional custody and settlement services for digital assets. For further information visit https://www.koine.com I n the broadest terms, Investment Banks take our deposits, go and speculate on a project - and when it all works out, keep the Aston Martin and Bentley dealers busy. That’s fine: we all know the rules. But how can we get closer to their rich seam of opportunities? Well, that’s a bit harder... until now. ‘Physical Gold Streaming’ is a type of financing where a mine sells a right to a certain percentage or amount of future production, typically at a discount, in exchange for financing. Now, Commodity Financing Tokens allow investors to partake in streaming - in much smaller sums than previously possible - and so invest in projects that until now have only been accessible to IB’s and specialist funds. Digital RFQ Limited – the London-based OTC digital asset broker - has worked with the team of a gold mining company, PhiGold, the owner of the Barobo gold mine in the Philippines to structure, deliver and launch the PGX token. PhiGold is placing 15,400 OZ out of its total proven reserves of 272,000 OZ to fund the 100th/OZ tokens for sale at USD$10 each, raising $15,400,000 with which PhiGold funds its mining operations. The gold extracted from the mine is refined and sold to the Central Bank of The Philippines, 50% of the cash flow is used to purchase London Bullion Market Association (LBMA) gold bullion held by an independent Trust in London. Once 16 TUESDAY 31 MARCH 2020 FEATURE CITYAM.COM 17 TUESDAY 31 MARCH 2020 FEATURE CITYAM.COM We foresee increased demand for new safe haven assets, such as digital versions of World Parity Unity (a basket of 12 cur- rencies), meeting the demand for non- USD denominated safe havens to augment the current role of CHF. These new assets will serve multiple commu- nities of interest, including family of- fices, corporates and commodity traders, not just as a store of value but also as a medium of exchange, and will grow sub- stantially larger than the existing crypto- currency market within a couple of years. RECOVERY LED BY FINANCIAL SERVICES INNOVATION In the last week or so, statistics show that 3.28 million people filed for unemploy- ment insurance in the US, and there were 477,000 new UK benefit claims. These record breaking shock numbers are likely to continue for several weeks. What will the recovery look like? Some like Bill Ackman, the US hedge fund manager who made $2.6bn bet- ting on COVID-19, believe the recovery will be a swift V-shaped model. Others are sceptical. Yes, the potential is there for a V-shape recovery if govern- ments enact policies which keep busi- nesses alive, but effective policies are hard to conduct at scale and perma- nent capacity will undoubtedly be lost. In our view the initial pandemic crisis will lead to an economic and policy cri- sis creating the agenda for more rapid innovation, and the financial services industry and blockchain technologies T he COVID-19 pandemic contin- ues to send shockwaves around the world. As the global market- place attempts to come to terms with what impact this will have, Phil Mochan, Co-Founder and Head of Strategy and Corporate Development at Koine, a provider of digital asset post- trade services that meet conventional market norms, talks about what this means for the future of digital finance and blockchain technologies. The world is, quite literally, in a state of flux. The stock market has responded to the COVID-19 pandemic with unpre- dictable levels of volatility, and the true economic cost, whilst unknown, will un- doubtedly be huge (we predict 10%+ of global GDP). The unprecedented response by gov- ernments and central banks to ensure that the pandemic shock does not be- come a substantive permanent loss of wealth, has led to implementation of for- merly controvertible policies which might not have occurred in a decade or more (such as UBI and helicopter money). This enforced policy innovation reframes the strategic opportunity in digital finance and blockchain technolo- gies in a potentially very positive manner. VALUE PRESERVATION Bitcoin, as well as other cryptocurrencies, has proven resilience in the current mar- ket. If you only read the headlines on dig- ital currencies, you’ll read of wild price swings and severe price volatility. How- ever, if you had held Bitcoin, rather than US equities (S&P500) over last 12 months, you would be up 51.1%, rather than down 9.6% [16 Mar 2019 – 16 Mar 2020]. This continued proven resilience in a crisis will surely make it an increasing component of every portfolio, particu- larly when the market infrastructure model is normalised as we expect this year. INFRASTRUCTURE RESILIENCE With the notable exception perhaps of popular stock-trading broker Robinhood in USA, it would seem that the majority of the existing market systems and post- trade infrastructures did work well, in- cluding the use of circuit breakers to dampen excess volatility. Whilst it doesn’t yet conform to the conventional model, the digital assets market has demonstrated its ability to deal with high volatility and dramatic trading volume increases. Therefore, it makes sense that traditional capital mar- kets are likely to shift to the emerging digital market infrastructure on an accel- erated basis once it follows normal mar- ket models. CRYPTO IS RISK-OFFSET We are now in a situation where helicop- ter money is flowing out of Central Banks to keep our economies going. We know that this is devaluing fiat curren- cies. The fixed known supply of the ma- jority of crypto-currencies such as Bitcoin will likely prove positive as a hedge against this massive depreciation. ACCESSING SAFE HAVEN ASSETS In a crisis situation, there is a flight to so called safe haven assets such as US Treas- uries and reserve currencies. But they’re not straightforward to access for every- one in the world and transaction costs can be high. We can therefore predict that digi- talised US treasuries and regulated digital fiat currencies will, through the new dig- ital distribution models, be accessible to greater numbers of individuals and or- ganisations globally who do not have ac- cess to the historic capital markets infrastructure with its high relative costs and the exclusionary principals built into its “club rules”. In association with CITY A.M.’S CRYPTO INSIDER Crypto A.M. shines its Spotlight on PhiGold PGX @CityAm_Crypto E: [email protected] JAMES BOWATER PARTNER CONTENT Our series on AI, Blockchain, Cryptoassets, DLT and Tokenisation CRYPTOCOMPARE MARKET VIEW T hat’s right. Loyalty programs don’t need blockchain. Loyalty programs are designed to lock people in and to keep them, well, loyal. Yet there are dozens of companies working to create loyalty programs underpinned by blockchain technology. The thinking goes like this: Consumers are tired of accumulating points that they can only use at the merchant where they earned them or within a closed network of merchants. Wouldn’t it be great if consumers could take their points and use them anywhere - or even better - convert them to cash through an exchange?! Consumers would love this. Let’s build it. The problem is: This is the exact opposite of why merchants create loyalty schemes. Merchants don’t want consumers to spend their points with other merchants or their competitors. And they don’t want them to convert their points to cash. Merchants want consumers to come back and spend more and to use their points as part of spending more. A single company or a loyalty network operates from a centralised database. Each of the merchants in the network uses the same database to determine if a consumer has sufficient points for a transaction and to deduct those points once a purchase is complete. The network could deploy distributed ledger technology (DLT) to allow for easier reconciliation and faster processing. Still, it would be a private permissioned network with a central control - and thus not blockchain. Also, immutability wouldn’t be of real value and instead would slow things down. A genuinely decentralised blockchain for loyalty points would allow for easy tracking of balances as well as ease in spending or exchanging points for cash - or even for other cryptocurrencies - and that’s the last thing that merchants want. The best blockchain solutions have a solid business case for ALL stakeholders. Get in touch with us [email protected] / Twitter @igetblockchain token at $1000/oz. An attractive yield curve that the IB’s would like to achieve - so why isn’t an IB financing this deal? Size matters here - smaller operations like PhiGold do not have the scale or demographics to make them fit an IB model. Instead of relying on funding from traditional sources, PhiGold is able to disintermediate middlemen, and raise the capital needed directly from investors, more economically and with greater flexibility. The PhiGold PGX token provides an avenue for both institutional and retail investors to directly engage in an area of investment from which they may otherwise have been excluded. Digital RFQ can both provide finance to a mine and syndicate the financing to a diverse group of investors via the issuance of digital tokens. From 12:00am 31/03/2020 AAX Exchange in Hong Kong launches the secondary trading of the PGX token, meaning investors can enter or exit at any point during the streaming’s lifecycle. This project is the first in a series of tokens in the Digital RFQ pipeline. You can sign up for updates on these at www.digitalrfq.com. As for the PGX Token, full details and due diligence of the mine business, geological reports, costings and team can be found on the company website and White Paper at www.phigold.com the amount of gold held in the Trust fully backs each PGX token, holders can redeem tokens directly at the Trust. LBMA gold at the time of writing is trading at over $1600/oz, with the effective price of gold for sale via the A s we all adjust to this COVID-19 period of self- isolation, it is great to see how people and businesses alike are positively adapting - none more so than my colleagues and partners at City A.M. Whilst the last printed edition was distributed eleven days ago, CityAM.com has been flourishing with a significant increase in traffic over the last 7 days - the website is now recording up to 2.9m unique users every month. Crypto A.M. has also had to adapt and I’m very pleased to announce that www.CryptoAM.io has been launched today on www.Cityam.com - in association with BEQUANT Group. It is new and we will grow the site organically over the next three months, adding more sections and data, as well as promoting this online to the wider City AM audience - as always I would very much welcome feedback as we develop these pages via [email protected] Turning to the crypto market since last week’s edition at the time of writing, BTC was trading up at US$6,425.51 / GB£5,419.20; Ethereum (ETH) is at US$134.72 / GB£108.57; Ripple (XRP) is at US$0.1753 / GB£0.1411; Binance (BNB) is at US$12.26 / GB£9.91 and Cardano (ADA) is at US$0.02983 / GB£0.02405. Overall Market Cap is at US$176.76bn / GB£142.38bn (data source: www.CryptoCompare.com) Positive news from the crypto insurance sector, I caught up with Sharon Henley of Coincover (https://www.coincover.com) which is aiming to be the market leader in Crypto security. She explained that Coincover as of today has entered into a partnership with Civic (https://www.civic.com) which is best known for its Blockchain based identity management. The partnership will provide a ‘First-of-its-Kind’ Crypto Hot-Wallet With a $1 Million Protection Guarantee ensuring customer funds are safe yet fully accessible, even online. A major milestone was reached last week by Cardano who launched Ouroboros Hydra, it's off-chain scalability protocol. I spoke with my friend Charles Hoskinson, Founder and CEO of IOHK, who explained that Hydra users can connect to the network and simultaneously create ten “heads” and that each head creates a “lane” of throughput for transactions and data which will enable up to one million transactions per second, a level at which will support the most complex financial transactions and outperform most incumbents including VISA. Finally, I’d like to update you on my local community effort for Canary Wharf / Isle of Dogs. As I mentioned last week the effort is focused on helping the elderly and vulnerable – quite scarily, speaking with Sister Christine Frost, I found out that some elderly people have become identified who have fallen out of the system and are going hungry. I’m very grateful to team members at BABB (Bank Account Based Blockchain) headquartered at Level 39, One Canada Square who have personally kickstarted the effort with £2,500 of their native BAX token which will be converted to sterling when withdrawn for distribution. It would be great if other Crypto / Blockchain / Fintech companies would like to get involved in helping my campaign and anyone else who wants to donate can do so via: www.bit.ly/IoDFoodCare PROVEN RESILIENCE; FINDING A NEW FUTURE Designed by Phill Snelling, Bowater Media Demand for Gold-backed Cryptocurrencies Grows as Bitcoin Moves Sideways L ast week the price of Bitcoin traded within a $6,000 - $6,800 range as most top cryptocurrencies, including Ethereum and Bitcoin Cash, remained relatively stable. Over the same period, the S&P 500 recovered slightly, while oil dropped to a 17-year-low. While demand for bitcoin seems not to have grown, gold-backed cryptocurrencies have seen demand surge. The top two cryptocurrencies backed by the precious metal, Paxos Gold (PAXG) and Tether Gold (XAUt) are both backed by one ounce of gold stored per token, and entitle investors to redeem the gold. As investors move to gold and gold-backed cryptocurrencies, the cryptocurrency community has formed the Crypto COVID-19 Alliance, raising funds to help fight the coronavirus pandemic. The Alliance has been growing as more cryptocurrency firms donate to support nonprofits. The United States last week charged Venezuela’s President Nicolás Maduro and other senior officials in the country with “narco-terrorism,” alleging that Maduro used cryptocurrency to conceal transactions related to an illicit drug ring. The Department of Justice claimed Maduro and 14 other officials in the country are working with the Colombian Farc rebel group in a multibillion-dollar cocaine trafficking ring. While the cryptocurrencies used are not mentioned, Venezuela has also launched an oil-backed crypto, the Petro. Coinbase Commerce, the retailer payment portal of the San Francisco-based cryptocurrency exchange, has to date processed over $200 million worth of cryptocurrency payments, through its network of 8,000 retailers accepting digital currency alongside other payment streams. Last week also saw leading exchange Binance announce the launch of a crypto- backed Visa debit card that will allow its users to pay with cryptocurrency anywhere Visa is accepted. The card can be topped up with Bitcoin (BTC) or Binance Coin (BNB) and is set to launch in Malaysia before rolling out to the rest of the world. Mike Greenacre, Director of Digital RFQ LOYALTY PROGRAMS DON’T NEED BLOCKCHAIN Troy Norcross , Co-Founder Blockchain Rookies The PhiGold PGX token provides an avenue for both institutional and retail investors I n the world of blockchain and cryp- tocurrency DeFi has become synony- mous with borrowing, lending and trading using public blockchains and smart contracts. DeFi saw incredible growth in 2019 (~140%) and is what blockchain enthusiasts will remember most about the year. Within this growth, DeFi protocol MakerDAO saw the value of their currency DAI (a stablecoin linked to USD) locked-up within the ecosystem jump by over 997% (Source: DeFi Rate). On 12 March 2020 or ‘Black Thursday’ the markets crashed and Ether, the collateral used by MakerDAO, suffered a 30% loss causing chaos across the network. This sud- den crash unveiled a flaw in MakerDAO’s system for generating and then liquidating collateralised debt positions (CDPs) which allowed roughly $4 million of collateral to be bought up for almost nothing. This left the network in debt and under collater- alised. Additionally, DAI was trading at a premium and becoming increasingly illiq- uid due to sudden increases in demand for ‘safe’ cryptoassets caused by the loses of Bit- coin and Ether. This was not the first crash MakerDAO has endured. Formed in 2015 they were presented with issues when the price of Ether crashed by roughly $1,000 (or ~70%) in the first months of 2018. However, these issues were very different when compared to the fallout from ‘Black Thursday’. DAI was trading below the $1mark, predomi- nately due to a decrease in demand but the liquidation of CDPs had occurred largely without issue. In response, MakerDAO’s community increased the Stability Rate, which is the interest paid to DAI holders, nearly 40-fold, from 0.5% to 19.5%. This move perplexed many in the wider com- munity but by increasing incentives to hold DAI the $1 mark was retaken and changes proved a success. The current issues MakerDAO faces, roughly $4 million of debt and an illiquid market for DAI, are no small problems to overcome. One of the solutions that has been proposed and voted in by the com- munity is a series of auctions for Maker- DAO’s native token, Maker (MKR). Auctions lots, with 250MKR at a time, will take place until the debt has been recouped. This will dilute the supply of MKR but will maintain trust in DAI and MakerDAO as a whole. These auctions took place on www.flop.live and have proved an innovative solution to address the debt created. An additional so- lution, also proposed and voted in by the community, is to utilise USD Coin (USDC) as another form of collateral for generating CDPs. This in turn will lead to the creation of more DAI and stabilisation of the price through the creation of market making opportunities; mainly due to USDC being a stablecoin pegged to the dollar but hav- ing one key difference, it is centralised. Through its innovation, MakerDAO is ad- dressing all of these issues. However, some solutions are inherently different from others. Both the vote to alter the incentives for holding DAI and the MKR auctions to recover debt were laid out in the original whitepaper. In other words, they were risks which MakerDAO had addressed and tabled solutions long before the problems arose. Showing one of the reasons Maker- DAO holds the DeFi crown. The need, however, to add a centralised stablecoin to stabilise the value of a decen- tralised stablecoin, doesn’t sound quite as impressive. Although many would say it was simply a ‘quick fix’ for a complicated problem and MakerDAO has proven their worth. When the ethos of DeFi is that it is ‘open to all’ and can ‘bank the unbanked’ the addition of a stablecoin whose issuer “reserves the right to “blacklist” certain ad- dresses and freeze associated USDC” could challenge the crown that MakerDAO hold. Charles Adams, Blockchain Marketing Consultant at www.ZeroCarbonProject.com Have MakerDAO proven their worth in DeFi? CRYPTO A.M. INDUSTRY VOICES
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could be significant beneficiaries.In the short term, opportunities to
manage the delivery of credit into theeconomy have exploded for digital in-novators, whether through challengerbanks, digital credit providers orcrypto-asset lending platforms. Giv-ing people access to cash is the pre-eminent initial opportunity.
In medium term, we foresee that theshifting capital flows in recoveryphase will create opportunities inthree areas: accelerated investment inblockchain and digital finance busi-nesses, particularly infrastructure; anaccelerated shift into cryptocurren-cies as part of a balanced investmentportfolio; and the opportunities aris-ing from improved regulatory flexibil-ity in facilitating change.
Whilst some are happy to bet on ris-ing equity markets, it may be reason-able to see that acceleratedinheritances and transformed risk atti-tudes may align more capital towardsvalue preservation and diversification.This will undoubtedly be one of thedrivers to the acceptance of digitalisedalternative assets, including real estateand closed end funds.
Given the critical importance ofemerging fintech and blockchainbusinesses for the world-leading UK, itis imperative that the existing busi-nesses be given the cash support theyneed whilst the venture markets areclosed to new finance. The currentCBLIS initiative in the UK is inadequateto achieve this.
WHAT’S AHEADFinancial services innovation is likely tobe a major competitive advantage for na-tions in the new post COVID-19 world,and therefore it behoves governments toprotect their fragile innovators at thistime of crisis so that they can be majordrivers of the economic recovery.
Phil Mochan, Co-Founder and Head ofStrategy and Corporate Development ofKoine, in conversation with James Bowater.Koine is a provider of segregated,institutional custody and settlement servicesfor digital assets. For further information visithttps://www.koine.com
In the broadest terms, Investment Bankstake our deposits, go and speculate on aproject - and when it all works out, keep
the Aston Martin and Bentley dealersbusy. That’s fine: we all know the rules.But how can we get closer to their richseam of opportunities? Well, that’s a bitharder... until now.
‘Physical Gold Streaming’ is a type offinancing where a mine sells a right to acertain percentage or amount of futureproduction, typically at a discount, inexchange for financing.
Now, Commodity Financing Tokensallow investors to partake in streaming -in much smaller sums than previouslypossible - and so invest in projects thatuntil now have only been accessible toIB’s and specialist funds.
Digital RFQ Limited – the London-basedOTC digital asset broker - has worked withthe team of a gold mining company,PhiGold, the owner of the Barobo goldmine in the Philippines to structure,deliver and launch the PGX token.
PhiGold is placing 15,400 OZ out of itstotal proven reserves of 272,000 OZ tofund the 100th/OZ tokens for sale atUSD$10 each, raising $15,400,000 withwhich PhiGold funds its miningoperations.
The gold extracted from the mine isrefined and sold to the Central Bank ofThe Philippines, 50% of the cash flow isused to purchase London Bullion MarketAssociation (LBMA) gold bullion held byan independent Trust in London. Once
16 TUESDAY 31 MARCH 2020FEATURE CITYAM.COM 17TUESDAY 31 MARCH 2020 FEATURECITYAM.COM
We foresee increased demand for newsafe haven assets, such as digital versionsof World Parity Unity (a basket of 12 cur-rencies), meeting the demand for non-USD denominated safe havens toaugment the current role of CHF. Thesenew assets will serve multiple commu-nities of interest, including family of-fices, corporates and commodity traders,not just as a store of value but also as amedium of exchange, and will grow sub-stantially larger than the existing crypto-currency market within a couple ofyears.
RECOVERY LED BY FINANCIALSERVICES INNOVATIONIn the last week or so, statistics show that3.28 million people filed for unemploy-ment insurance in the US, and there
were 477,000 new UK benefit claims.These record breaking shock numbersare likely to continue for several weeks.What will the recovery look like?
Some like Bill Ackman, the US hedgefund manager who made $2.6bn bet-ting on COVID-19, believe the recoverywill be a swift V-shaped model. Othersare sceptical. Yes, the potential isthere for a V-shape recovery if govern-ments enact policies which keep busi-nesses alive, but effective policies arehard to conduct at scale and perma-nent capacity will undoubtedly belost.
In our view the initial pandemic crisiswill lead to an economic and policy cri-sis creating the agenda for more rapidinnovation, and the financial servicesindustry and blockchain technologies
The COVID-19 pandemic contin-ues to send shockwaves aroundthe world. As the global market-place attempts to come to termswith what impact this will have,
Phil Mochan, Co-Founder and Head ofStrategy and Corporate Development atKoine, a provider of digital asset post-trade services that meet conventionalmarket norms, talks about what thismeans for the future of digital financeand blockchain technologies.
The world is, quite literally, in a state offlux. The stock market has responded tothe COVID-19 pandemic with unpre-dictable levels of volatility, and the trueeconomic cost, whilst unknown, will un-doubtedly be huge (we predict 10%+ ofglobal GDP).
The unprecedented response by gov-ernments and central banks to ensurethat the pandemic shock does not be-come a substantive permanent loss ofwealth, has led to implementation of for-merly controvertible policies whichmight not have occurred in a decade ormore (such as UBI and helicoptermoney). This enforced policy innovationreframes the strategic opportunity indigital finance and blockchain technolo-gies in a potentially very positive manner.
VALUE PRESERVATIONBitcoin, as well as other cryptocurrencies,has proven resilience in the current mar-ket. If you only read the headlines on dig-ital currencies, you’ll read of wild priceswings and severe price volatility. How-ever, if you had held Bitcoin, rather thanUS equities (S&P500) over last 12 months,you would be up 51.1%, rather thandown 9.6% [16 Mar 2019 – 16 Mar 2020].
This continued proven resilience in acrisis will surely make it an increasingcomponent of every portfolio, particu-larly when the market infrastructuremodel is normalised as we expect thisyear.
INFRASTRUCTURE RESILIENCEWith the notable exception perhaps ofpopular stock-trading broker Robinhoodin USA, it would seem that the majorityof the existing market systems and post-trade infrastructures did work well, in-cluding the use of circuit breakers to
dampen excess volatility.Whilst it doesn’t yet conform to the
conventional model, the digital assetsmarket has demonstrated its ability todeal with high volatility and dramatictrading volume increases. Therefore, itmakes sense that traditional capital mar-kets are likely to shift to the emergingdigital market infrastructure on an accel-erated basis once it follows normal mar-ket models.
CRYPTO IS RISK-OFFSETWe are now in a situation where helicop-ter money is flowing out of CentralBanks to keep our economies going. Weknow that this is devaluing fiat curren-cies. The fixed known supply of the ma-jority of crypto-currencies such as Bitcoinwill likely prove positive as a hedge
against this massive depreciation.
ACCESSING SAFEHAVEN ASSETS In a crisis situation, there is a flight to socalled safe haven assets such as US Treas-uries and reserve currencies. But they’renot straightforward to access for every-one in the world and transaction costscan be high.
We can therefore predict that digi-talised US treasuries and regulated digitalfiat currencies will, through the new dig-ital distribution models, be accessible togreater numbers of individuals and or-ganisations globally who do not have ac-cess to the historic capital marketsinfrastructure with its high relative costsand the exclusionary principals built intoits “club rules”.
In association with
CITY A.M.’SCRYPTO INSIDER
Crypto A.M. shines its Spotlight on PhiGold PGX
@CityAm_CryptoE:[email protected]
JAMES BOWATER
PARTNER CONTENT
Our series on AI, Blockchain, Cryptoassets, DLT and Tokenisation
CRYPTOCOMPARE MARKET VIEW
That’s right. Loyalty programs don’tneed blockchain. Loyalty programsare designed to lock people in and
to keep them, well, loyal. Yet there aredozens of companies working to createloyalty programs underpinned byblockchain technology.
The thinking goes like this: Consumersare tired of accumulating points that theycan only use at the merchant where theyearned them or within a closed networkof merchants. Wouldn’t it be great ifconsumers could take their points anduse them anywhere - or even better -convert them to cash through anexchange?! Consumers would love this.Let’s build it.
The problem is: This is the exact
opposite of why merchants create loyaltyschemes.
Merchants don’t want consumers tospend their points with other merchantsor their competitors. And they don’t wantthem to convert their points to cash.Merchants want consumers to comeback and spend more and to use theirpoints as part of spending more.
A single company or a loyalty networkoperates from a centralised database.Each of the merchants in the networkuses the same database to determine if aconsumer has sufficient points for atransaction and to deduct those pointsonce a purchase is complete. Thenetwork could deploy distributed ledgertechnology (DLT) to allow for easier
reconciliation and faster processing. Still,it would be a private permissionednetwork with a central control - and thusnot blockchain. Also, immutabilitywouldn’t be of real value and insteadwould slow things down.
A genuinely decentralised blockchainfor loyalty points would allow for easytracking of balances as well as ease inspending or exchanging points for cash -or even for other cryptocurrencies - andthat’s the last thing that merchants want.
The best blockchain solutions have asolid business case for ALL stakeholders.
Get in touch with [email protected] / Twitter@igetblockchain
token at $1000/oz. An attractive yieldcurve that the IB’s would like to achieve -so why isn’t an IB financing this deal? Sizematters here - smaller operations likePhiGold do not have the scale ordemographics to make them fit an IBmodel.
Instead of relying on funding fromtraditional sources, PhiGold is able todisintermediate middlemen, and raise thecapital needed directly from investors,more economically and with greaterflexibility.
The PhiGold PGX token provides anavenue for both institutional and retailinvestors to directly engage in an area ofinvestment from which they mayotherwise have been excluded. DigitalRFQ can both provide finance to a mineand syndicate the financing to a diversegroup of investors via the issuance ofdigital tokens.
From 12:00am 31/03/2020 AAXExchange in Hong Kong launches thesecondary trading of the PGX token,meaning investors can enter or exit at anypoint during the streaming’s lifecycle.
This project is the first in a series of tokens inthe Digital RFQ pipeline. You can sign up forupdates on these at www.digitalrfq.com. Asfor the PGX Token, full details and duediligence of the mine business, geologicalreports, costings and team can be found onthe company website and White Paper atwww.phigold.com
the amount of gold held in the Trust fullybacks each PGX token, holders canredeem tokens directly at the Trust.
LBMA gold at the time of writing istrading at over $1600/oz, with theeffective price of gold for sale via the
As weall adjust to this COVID-19 period of self-isolation, it is great to see how people andbusinesses alike are positively adapting -
none more so than my colleagues and partnersat City A.M. Whilst the last printed edition wasdistributed eleven days ago, CityAM.com has beenflourishing with a significant increase in traffic over thelast 7 days - the website is now recording up to 2.9m unique users everymonth. Crypto A.M. has also had to adapt and I’m very pleased toannounce that www.CryptoAM.io has been launched today onwww.Cityam.com - in association with BEQUANT Group. It is new andwe will grow the site organically over the next three months, addingmore sections and data, as well as promoting this online to the widerCity AM audience - as always I would very much welcome feedback aswe develop these pages via [email protected]
Turning to the crypto market since last week’s edition at the time ofwriting, BTC was trading up at US$6,425.51 / GB£5,419.20; Ethereum(ETH) is at US$134.72 / GB£108.57; Ripple (XRP) is at US$0.1753 /GB£0.1411; Binance (BNB) is at US$12.26 / GB£9.91 and Cardano (ADA)is at US$0.02983 / GB£0.02405. Overall Market Cap is at US$176.76bn /GB£142.38bn (data source: www.CryptoCompare.com)
Positive news from the crypto insurance sector, I caught up withSharon Henley of Coincover (https://www.coincover.com) which isaiming to be the market leader in Crypto security. She explained thatCoincover as of today has entered into a partnership with Civic(https://www.civic.com) which is best known for its Blockchain basedidentity management. The partnership will provide a ‘First-of-its-Kind’Crypto Hot-Wallet With a $1 Million Protection Guarantee ensuringcustomer funds are safe yet fully accessible, even online.
A major milestone was reached last week by Cardano who launchedOuroboros Hydra, it's off-chain scalability protocol. I spoke with myfriend Charles Hoskinson, Founder and CEO of IOHK, who explainedthat Hydra users can connect to the network and simultaneously createten “heads” and that each head creates a “lane” of throughput fortransactions and data which will enable up to one million transactionsper second, a level at which will support the most complex financialtransactions and outperform most incumbents including VISA.
Finally, I’d like to update you on my local community effort for CanaryWharf / Isle of Dogs. As I mentioned last week the effort is focused onhelping the elderly and vulnerable – quite scarily, speaking with SisterChristine Frost, I found out that some elderly people have becomeidentified who have fallen out of the system and are going hungry. I’mvery grateful to team members at BABB (Bank Account BasedBlockchain) headquartered at Level 39, One Canada Square who havepersonally kickstarted the effort with £2,500 of their native BAX tokenwhich will be converted to sterling when withdrawn for distribution. Itwould be great if other Crypto / Blockchain / Fintech companieswould like to get involved in helping my campaign and anyone elsewho wants to donate can do so via: www.bit.ly/IoDFoodCare
PROVENRESILIENCE; FINDING A NEWFUTURE
Designed byPhill Snelling, Bowater Media
Demand for Gold-backedCryptocurrencies Grows as Bitcoin
Moves Sideways
Last week the price of Bitcoin tradedwithin a $6,000 - $6,800 range as mosttop cryptocurrencies, including
Ethereum and Bitcoin Cash, remainedrelatively stable. Over the same period, theS&P 500 recovered slightly, while oildropped to a 17-year-low.
While demand for bitcoin seems not tohave grown, gold-backed cryptocurrencieshave seen demand surge. The top twocryptocurrencies backed by the preciousmetal, Paxos Gold (PAXG) and Tether Gold(XAUt) are both backed by one ounce of goldstored per token, and entitle investors toredeem the gold.
As investors move to gold and gold-backedcryptocurrencies, the cryptocurrencycommunity has formed the Crypto COVID-19Alliance, raising funds to help fight thecoronavirus pandemic. The Alliance hasbeen growing as more cryptocurrency firmsdonate to support nonprofits.
The United States last week chargedVenezuela’s President Nicolás Maduro andother senior officials in the country with
“narco-terrorism,” alleging that Maduroused cryptocurrency to conceal transactionsrelated to an illicit drug ring. TheDepartment of Justice claimed Maduro and14 other officials in the country are workingwith the Colombian Farc rebel group in amultibillion-dollar cocaine trafficking ring.While the cryptocurrencies used are notmentioned, Venezuela has also launched anoil-backed crypto, the Petro.
Coinbase Commerce, the retailer paymentportal of the San Francisco-basedcryptocurrency exchange, has to dateprocessed over $200 million worth ofcryptocurrency payments, through itsnetwork of 8,000 retailers accepting digitalcurrency alongside other payment streams.
Last week also saw leading exchangeBinance announce the launch of a crypto-backed Visa debit card that will allow itsusers to pay with cryptocurrency anywhereVisa is accepted. The card can be topped upwith Bitcoin (BTC) or Binance Coin (BNB)and is set to launch in Malaysia before rollingout to the rest of the world.
Mike Greenacre,Director ofDigital RFQ
LOYALTY PROGRAMS DON’TNEED BLOCKCHAIN
Troy Norcross, Co-Founder Blockchain Rookies
The PhiGold PGXtoken provides an
avenue for bothinstitutional andretail investors
In the world of blockchain and cryp-tocurrency DeFi has become synony-mous with borrowing, lending and
trading using public blockchains andsmart contracts. DeFi saw incrediblegrowth in 2019 (~140%) and is whatblockchain enthusiasts will remembermost about the year. Within this growth,DeFi protocol MakerDAO saw the value oftheir currency DAI (a stablecoin linked toUSD) locked-up within the ecosystem jumpby over 997% (Source: DeFi Rate).
On 12 March 2020 or ‘Black Thursday’ themarkets crashed and Ether, the collateralused by MakerDAO, suffered a 30% losscausing chaos across the network. This sud-den crash unveiled a flaw in MakerDAO’ssystem for generating and then liquidatingcollateralised debt positions (CDPs) whichallowed roughly $4 million of collateral tobe bought up for almost nothing. This leftthe network in debt and under collater-alised. Additionally, DAI was trading at apremium and becoming increasingly illiq-uid due to sudden increases in demand for‘safe’ cryptoassets caused by the loses of Bit-coin and Ether.
This was not the first crash MakerDAOhas endured. Formed in 2015 they werepresented with issues when the price ofEther crashed by roughly $1,000 (or ~70%)in the first months of 2018. However, theseissues were very different when comparedto the fallout from ‘Black Thursday’. DAIwas trading below the $1mark, predomi-nately due to a decrease in demand but theliquidation of CDPs had occurred largelywithout issue. In response, MakerDAO’scommunity increased the Stability Rate,which is the interest paid to DAI holders,nearly 40-fold, from 0.5% to 19.5%. Thismove perplexed many in the wider com-munity but by increasing incentives tohold DAI the $1 mark was retaken andchanges proved a success.
The current issues MakerDAO faces,roughly $4 million of debt and an illiquid
market for DAI, are no small problems toovercome. One of the solutions that hasbeen proposed and voted in by the com-munity is a series of auctions for Maker-DAO’s native token, Maker (MKR). Auctionslots, with 250MKR at a time, will take placeuntil the debt has been recouped. This willdilute the supply of MKR but will maintaintrust in DAI and MakerDAO as a whole.These auctions took place on www.flop.liveand have proved an innovative solution toaddress the debt created. An additional so-lution, also proposed and voted in by thecommunity, is to utilise USD Coin (USDC)as another form of collateral for generatingCDPs. This in turn will lead to the creationof more DAI and stabilisation of the pricethrough the creation of market makingopportunities; mainly due to USDC beinga stablecoin pegged to the dollar but hav-ing one key difference, it is centralised.
Through its innovation, MakerDAO is ad-dressing all of these issues. However, somesolutions are inherently different fromothers. Both the vote to alter the incentivesfor holding DAI and the MKR auctions torecover debt were laid out in the originalwhitepaper. In other words, they were riskswhich MakerDAO had addressed andtabled solutions long before the problemsarose. Showing one of the reasons Maker-DAO holds the DeFi crown.
The need, however, to add a centralisedstablecoin to stabilise the value of a decen-tralised stablecoin, doesn’t sound quite asimpressive. Although many would say itwas simply a ‘quick fix’ for a complicatedproblem and MakerDAO has proven theirworth. When the ethos of DeFi is that it is‘open to all’ and can ‘bank the unbanked’the addition of a stablecoin whose issuer“reserves the right to “blacklist” certain ad-dresses and freeze associated USDC” couldchallenge the crown that MakerDAO hold.
Charles Adams, Blockchain MarketingConsultant at www.ZeroCarbonProject.com
Have MakerDAO proventheir worth in DeFi?
CRYPTO A.M. INDUSTRY VOICES
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