Cryptocurrency Archives - Random.Musings

How can we navigate a low-interest environment?

September 16, 2020 No Comments

The Federal Reserve recently indicated that they will be keeping rates near zero at least until 2022 to help the US economy recover from the Coronavirus economic shock. Along with maintaining the pace of quantitative easing the Fed is doing through the increase in Treasury and mortgage-backed securities. The Federal Reserve balance sheet is at US$7.1 trillion for the week 8th June 2020, increased by US$3 trillion in the last 3 months.

While this situation isn’t unique only to the US, government across the globe have adopted aggressive stimulus plan to cushion the economic shock caused by the Coronavirus. So how would such actions affect the general population?

At a basic economic level, the interest rate set on savings account deposits is determined by the relationship between how much banks value receiving extra deposits and how much savers value the services of a savings account. Those valuations are manipulated by how governments and central banks target interest rates in the economy.

So for the average citizens whose, a large portion of their financial assets are kept with the banks, earning minimal interests over a long period of time will put themselves in a precarious position whereby their asset value will decrease over time due to inflation.

So what shall we do in a low-interest rate environment?

Cryptocurrency, Fintech, Regulation

How blockchain can prevent Fraud through the decentralization of information

February 20, 2019 No Comments

Greed is the excessive desire for more than is needed or deserved — not for the greater good but for one’s selfish interest, and at the detriment of others and society at large.

Bad actors with the intention of committing fraud to one’s selfish interest will design an elaborated scheme to have full opacity within the organization.

In private companies, full internal controls are very often not in place which might be due to the nature of the industry where the company needs to be nimble.

This gives rise to opportunities for bad actors to plot fraudulent schemes at the expense of the company.

As actions are not verified, third parties and information are not readily available due to the nature of the system, where only decision makers hold all the information.

This creates an obvious point of failure, with severe information gaps between employees of an organization, resulting in the lack of transparency, therefore, allowing fraudulent activities occurring.

Cryptocurrency, Fintech, Regulation

The Economics of Blockchain

October 27, 2017 No Comments

Blockchain was first introduced in October 2008 through the white paper released by Satoshi Nakamoto describing how a virtual currency (Bitcoin) could potentially work. Blockchain by design is a decentralized technology, where information held on its network reconciled to the database regularly. The blockchain database isn’t stored in any single location instead, it is spread across nodes on the blockchain network. Similar to a peer to peer network, transactions are broadcast, database hosted by a network of computers accessible to the public with no centralized storage, making it impossible for hackers to manipulate. Blockchain technology is unique in the way that it brings together existing technology of peer to peer network, cryptography, along with game theory (providing rewards through competition) to establish a secure medium where functions can take place without a centralized entity.

Cryptocurrency

ICOs déjà vu of the dot com bubble?

September 20, 2017 No Comments

History doesn’t repeat itself, but it does rhyme as Mark Twain famously quoted. The current climate as observed in cryptocurrency certainly bears a striking resemblance of the 2000s dot com crash.

374 Initial Public Offering (IPOs) (US$84.63billion*) and 541 IPOs (US$111.78billions*) were sold in 1998 and 1999 respectively, prior to the dot com crash in 2000. Currently, 46 Initial Coin Offering (ICOs) (US$96millions) and 139 ICOs (US$2.1billions) were sold in 2016 and 2017 (as of 31st August 2017) respectively. Witnessing a huge increase in coins offering for a wide variety of uses. This inevitably draws our attention to ICOs and its underlying technology. *values as of 2017, adjusted for inflation

ICOs have been around for a couple of years now, most notably with Ethereum raising funds through the sale of Ether to fund the development of the Ethereum platform. This has all been good, where developers with exceptionally good ideas raise funds to build out their product. However in recent years, ICOs are getting lots of attention from entrepreneurs and opportunists as an alternative form of raising capital, bypassing traditional financing methods (equity/debt financing). With 867 cryptocurrencies and counting (as of 31 August 2017), each advocating on a big idea that would revolutionize an industry. From coins for data storage to payments for writers, cryptocurrencies were introduced into the market and funding crowdsourced from both sophisticated and non-sophisticated investors through intense marketing campaigns. This presents real risks to the startup/investing community as traditional financing not only provides capital to new companies, but stringent due diligence will be conducted and terms are incorporated into contracts to ensure the viability of their business models and instill discipline to entrepreneurs running their businesses. With fundraising bypassing these investors and to the wider community (crowdfunding) the lack of insight and due diligence towards the companies raising funds, while also being misled by the marketing materials produced, retail investors are not in the position to make informed decisions with their investments.