Weekending 26thApril 2019
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Is Nike going to beat Facebook to launch a mass market Crypto currency?
Nike, which is the world’s largest shoe manufacturer and the most valuable apparel brand in the world, has filed a trademark called “CryptoKicks” which could lead to it launching its own Crypto currency. This rather bold claim is on the back of Nike’s trademark application, which states “Financial services, namely, providing a digital currency or digital token for use by members of an online community via a global computer network; facilitation of financial transactions using unconventional currency systems and bartering, namely.”
Interestingly, earlier this year, Nike launched trainers that lace themselves, called HyperAdapt . Therefore, will CryptoKicks support an incentive scheme for people wearing these trainers? After all, Nike apparel with its distinctive logo
is as a form of advertising medium while being worn. So, the more you wear your trainers, the more CryptoKicks you could earn!
Facebook is looking to launch Facecoin on WhatsApp in India, but will Nike beat it and have CryptoKicks up and running before Zuckerberg is out of the blocks?
Nike, like Facebook, has a global audience, who are using their goods and services on a daily basis and both firms need to stay relevant, engaged and keep the attention of their customers while find ways to encourage them to make repeat purchases.
How long before we see other global brands launching their own Crypto currencies for engagement, reward and payment mechanism?
Blockchain $ Billion Babes!
Blockchain technology is impacting our lives in many ways, and while there were lots of headlines in 2017 and 2018 about the price of Bitcoin and how Ripple had risen in value in a12 month period by over 37,000%, large corporates have been busy behind the scenes. Indeed, as the link at the end of this article illustrates, big businesses across the globe have been investing and trialling various projects to ensure that they are not left behind.
Blockchain technology offers a powerful combination of better security, and greater efficiency, reducing costs of transactions and by in many cases, reducing the number of parties which need to be involved in a transaction — and or movement of goods and services. What is interesting is when you look at the list has Forbes have compiled, typically of $ Billion businesses, they are from a wide variety of industries. It is more of a case which business sector is not going to be transformed or impacted by Blockchain technology and, as CB Insights reported, listed 50 different industriesand how they could change as a result of using Blockchain technology.
One way to look at Blockchain is to use a sporting analogy. In a game of rugby or football (soccer for our US readers), a player kicks the ball, then another player passes the ball and then passes to another team member, and then to another before they hopefully score. All these transactions are recorded in real time and all players and spectators can watch the game. Blockchains in effect digitise a series of shipments, transactions and movements in real time, with much greater transparency between the relevant parties in the same video records football match. Once the parties have agreed what has happened (“blocks”) is real, the blocks are linked i.e. chained together -hence Blockchain. Therefore, in effect, it enables the recording of transactions accessible to all parties involved and so no one can disagree or alter the information, such as who did “the throw-in” and who “scored”. At any stage of the game and after it, everyone has an accurate, commonly-agreed picture of every move throughout the match.
Can Blockchain be used in the clothing industry?
The Global clothing market, according to McKinsey is, worth an estimated $2.4 trillion. Given that new designs and fashions change so fast, and competition on the high street (and increasingly on-screen) is so intense, there are numerous ways Blockchain technology can be used. For example Blockchain technology could help to reduce the costs involved in logistics i.e. transport and distribution vary between 15% to 40%of the final sale of clothes.It was estimated that luxury brands lost over $30 Billion due to online counterfeiting in 2017, but by implementing Blockchain technology it is possible to have greater transparency and traceability to quash the counterfeiters.
There are many challenge of how garments are made, in what conditions and by whom, and for this you need to have a reliable system that can track and trace the provenance of goods, so you can trust that child-labour or horrendous working conditions are not being used.
Blockchain technology is able to offer transparency as it can track raw materials as they are turned into wearable clothing and beyond i.e. recycled, so in effect it is possible to create a digital history of items from creation to final disposal.All this information can be traced usinf QRcodes or NFC-enabled labels, and can read using your mobile phone.
China is using the benefits of Blockchain technology, Waltonchainis an authenticity traceability system and joint venture project between Waltonchain and Kaltendin, one of China’s leading high-end clothing brand. It records data from when the garment is made, who made it , where and how it was stored, where it is while it is being shipped and how many times it gets tried on in a changing room (as this indicates how popular an item is) and therefore do more need to be ordered before the shop runs out?
The fashion industry, since 2017, has been running projects using Blockchain’s with London designer Martine Jarlgaard, in collaboration with the Blockchain company Provenance, producing garments with “smart labels”. By scanning these the consumer can see every step in the production process, from raw material to finished product, complete with time stamps and location-mapping for every step. This kind of transparency will likely be a selling point for consumers, who increasingly want to know how and where their clothes are made.
Chinese e-commerce company Alibaba, is developing a Blockchain application to track its products to prevent counterfeiting. Every time a product moves from one place to another, its code or tag will be scanned, recording its location with a time-stamp. Consumers are then able to scan the product and trace its journey from the factory to their front door — and to verify whether a branded garment is the real thing or NOT.
So, it would appear that Blockchain technology is being embraced within the clothing industry and could be used by many garment-manufacturers and retailers. Alongside this there are tokens and incentive schemes that many shops have used for years to track what consumers are buying, and loyalty schemes to encourage customers’ repeat business. For older readers in the UK this is nothing new, as many of you remember collecting Green Shield stamps (which, started back in 1958), while frequent flyers these days collect Airmiles to get upgrades and free flights.
Using Blockchains and creating Digital tokens which can be traded for goods and services is likely to be an increasingly frenetic battle ground as global brands compete for our attention and loyalty. It is not that they want the clothes off your back, but they do want to make sure that you buy clothes from them to put on your back!!
USA looks to increase spending on Blockchain by 1,000%
The USA government has announced that it intends increase the amount it spends on Blockchain technology to $123 Million by 2022, compared to $10.7 Million in 2017, which would be a 1,000% increase!
Meanwhile, US investment into Blockchain technology outside of the government is expected to swell by over $37 Billion by 2025 from $1.8 Billion in 2018, which would be a compound annual growth rate of over 44%.
In Europe, a survey reported that it would spend by 2022, $3.5 Billion on Blockchaintechnology, and it cited as well as (financial services), manufacturing and resources and distribution as the key areas in which it believes money will be invested in.
In spite of the naysayers, who have decried Blockchains and Digital Assets, we are starting to see governments, and multinational commercially-minded corporations investing in this technology and new asset class.
Art market and protecting artists’ IP using Blockchains
It has long been a challenge for artists to protect their intellectual property (IP), and ensure that they are paid fairly for their creations. As we see more and more IP being created and circulated digitally, this has become a bigger challenge. There is now a massive market online, just look at the one Billion people who use Instagram, to post photos and images. Some of these images “go viral” and are re-used globally by individuals and sometimes by corporations for their own marketing purposes, with no fees paid to the original person who posted the image. While the likes of Getty images. which has armies of lawyers to protect its image rights, it is very hard for individuals to take much action for themselves against those who use their own IP.
However, this is beginning to change. Pinterest’s first employee has just started a new business, called Markerplace, to address this very problem. Using Blockchain technology one is able to create, in effect, a digital record so enabling an image to be sold on a limited-edition basis. Another company called File protected, has a Blockchain solution too. This firm has been set up by Andy Rosen, a world-renowned photographer who was deeply involved with punk music in the 70’s in UK and then moved to LA in the States, producing videos for the pop music industry in the 80’s and 90’s. Andy has been in close contacts with musicians and photographers, and his company has built a Blockchain-powered platform which enables IP rights to be transferred securely and transparently, allowing licensing agreements to be created and fees to be monitored using digital files.
This is a growing market as corporations are increasingly engaging with people on Instagram to help promote their products and services, using their photos and endorsements as part of these firms’ digital marketing strategy. There over 8 Million people using Instagramwho have 50,000+ followers and who could potentially monetise their Instagram accounts….
Serena Williams reveals she is an investor in the Cryptocurrency market
Serena Williams, who has won 23 tennis Grand Slams, and has told revealed via her Instagram, (which and has had over 22,000 likes), that she set up a Venture Capital fund in 2014 which has Coinbaseas one of its investments. Coinbaseis a US-based Cryptocurrency exchange which was established in 2012. It has over 13 Million accounts, making it the largest Digital Exchange globally and, following its last $300million fund-raise, was valued at $8 Billion.
However, Serena would appear not to be alone, as there has been an increase in the amount invested in Crypto assets as the chart below indicates:
According to Crypto Fund research there are more than 750 different fundswhich invest in Crypto assets and have been set up as either Crypto Hedge funds, or Crypto Venture capital funds. The value of the assets that these funds managed at the beginning of 2019 was $10 Billion which, despite the poor performance during 2018, was $3.5 Billion more than the start of 2018.
For those wishing for more information on 25 of some of the better-know and larger funds which invest in to Digital Assets this link may be helpful:
China still considering launching its own Crypto Currency
Bloomberg reported last year that The Peoples Bank of China (PBoC) was looking to launch its own Digital currency, which would enable it to have more control and be able to track transactions, be able to reduce the Black market economy and even automatically refuse companies loans who had been black listed. The PBoC has registered 78 patents since 2016, according to Bloomberg. In October 2018, PBoC was looking to recruit staff at its Digital Currency Institute, who have experience in software and encryption law. It would appear that China wishes to create a Digital Currency that is centralised and controlled, so juxtaposed from what was originally planned for Bitcoin when it was created in 2008!
China is looking to launch its own Digital Currencycalled “Digital Currency for Electronic Payment”, and the governor Zhou Xiaochuanof the PBoC, recently was quoted saying its focus would be on “convenience, rapidity, and low cost in a retail payment system while taking into account security and protection of privacy.”
Meanwhile, ahead of a G20 meeting in Osaka in Japan in June this year, the Japanese have launched a manual for Cryptocurrency regulationas it looks to try and coordinate the approach that countries currently take. In some jurisdictions regulation is minimal, while other countries take a more draconian approach.
Are we going to see a wave of token mergers as the world’s first is announced, as well as more Crypto litigation as Crypto prices rise?
Coss and ARAX have announced they are going to merge, which is being heralded by some as the first merger of two firms that had issued utility tokens by carrying out Initial Coin Offerings (ICOs).The combined business will be able to enjoy the economies of scale of bringing together two management teams, and create a much larger utility token for their users.
Coss, which stands for Crypto One Stop Solution, is a Digital Asset exchange based in Singapore, and ARAXis a Digital Asset wallet which supports seven different Blockchains and seventeen Digital Assets and has over 250,000 users.
As the price and the liquidity of Bitcoin and Ethereum (Crypto) have improved, it is now possible for firms that have carried out ICOs to start selling some of their Crypto assets, which potentially could have two consequences. Some of these firms will be sitting on Crypto assets that have become much more valuable in the last few months and are, in effect, “digital Cash shells “,which may be well encourage merger and acquisition (M&A) activity. On the other hand, as these firms now potentially have greater asset value, we could see more litigation. There are a number of firms that carried out an ICOs and raised capital but may have broken different jurisdictions’ regulations. There are also a number of companies that issued tokens and have not done what they said would do in their Whitepaper, so how long will it be before we see the litigation departments in law firms circling potential targets?
The potential for litigation was laid out recently by US law firm Polsinelli LLP, in their paper entitled Cryptocurrency Class Action Lawsuits: A New Frontier”
As we start to see Security Token Offerings (STOs), which potentially will be backed by real assets like publicly quoted equites and bonds, it will not be too long before we see STOs also being caught up in M&A. Then the lawyers and regulators will need to work out how to equitably combine traditional assets with this new asset class…..
Fintech start-ups are a real challenge to Banks
In a recent report from Oracle and Finxtra Research, “Key Drivers, Emerging Trends, and Development in Corporate Banking”,they discussed how Fintech start-ups are increasingly becoming a threat to the status quo that traditional banks have enjoyed for years. One of its key findings was how Artificial Intelligence (AI) and Blockchain technology are able to securely store, interrogate, capture, and validate data, while removing the need for multiple records so improving the efficiency of managing data. As many of the banks’ customers are becoming more global, and as economies are becoming more digital, banks are being asked to provide faster services- whether that be for cash or credit management, while improving the efficiency of money transfers at ever lower transaction costs.
One of the key factors is for a bank to maintain its customers trust and confidence, as banks have traditionally been a place to store cash, borrow money from and carry out transactions. However, in a survey carried out in the USA by Gallop, it has seen since 1979 to 2018 ,that confidence in bankshas fallen from 60% to 30%. Banks’ public image and trust, since the financial crisis in 2008, has been severely challenged as summarised by a quote from The American Banker magazine, “A lack of widespread trust raises questions about banks’ relevance in the digital age and leaves them open to further political attack.
In a report back in 2015 from the World Economic Forum, it stated that it believed, “Blockchain technology, replaces the need for third-party institutions to provide trust for financial, contract and voting activities”. Traditional banks, with their legacy IT systems, are struggling to adapt. FinTech firms that do not have different hard and software systems to maintain and integrate, are able to embrace technologies like Blockchain and AI and offer solutions. This has led to traditional banks moving away from building more in-house solutions and to turning to the more nimbler Fintech firms.
If we look at Know Your Client (KYC) costs, a firm called Consult Hyperion states it can cost a bank between £10 to £100 per clientto carry put these checks which, depending on the riskiness of the client may need to be done every year. While carrying out these checks, vast quantities of personal data needs to be collected and then securely stored which, in itself, creates its own set of challenges. Alternatively KYC checks can be carried out by firms like Blockpass, which can offer KYC services for less than £2 per person, and it does not store the personal data, so does not have the onerous burden and complexities around storing of this information.
In the area of fraud detection, Teradatais an AI firm selling fraud detection solutions to banks. It claim it helped Danske Bank toreduce the bank’s false positives by 60% , and this was expected to reach 80% as the machine-learning model continued to learn. At the same Teradata has increased detection of real fraud by 50%.
Lawyers struggle to find new staff with Blockchain knowledge
As more organisations turn to their lawyers for help and advice, lawyers themselves are struggling to recruit sufficient staff to fill their vacancies. Many of the global law firms have been adding staff as demand has risen for data privacy and security legal expertise.
Mary K. Young, a partner at Zeughauser Group, the law firm consultancy, “don’t focus on the crypto, focus on the blockchain. It will be a game changer.”
In Canada we have seen the launch of a law firm just focusing on CRYPTO, as it believes that companies need help with this new asset class, with a focus on the international challenges, and not to only dwell on national issues.
Lawyers advising on Blockchain technology will be require to have a multi-disciplinary skill, especially those that that are advising organisations in the financial sector. These lawyers will need financial services, data privacy, regulation and technical knowledge to be able to effectively advice their clients.
One wonders that, given the recent price rises in many Digital Assets, (partially fuelled by the rise of BitCoin and Ethereum), a number of firms that issued Initial Coin Offerings (ICOs) are now worth considerably more that they were a few months ago. As we start to see regulators offering clearer guidance like the SEChas recently, will plaintiffs engage the law firms to start action against those organisations who would appear to have broken the law, when they originally carried out their ICO?
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