What Are Synthetic Crypto Assets?

Like NFTs, one of the new hot topics in the DeFi space is synthetic crypto assets or tokens. We will introduce these new players in a quick and efficient way, explaining why there is so much buzz behind them, and tell you the important things you need to know about this promising digital asset sector.  

DeFi Is Here

Decentralized finance (DeFi) is turning the financial and monetary worlds on their heads. While many DeFi products and services appear familiar, such as exchanges, borrowing, lending, and swaps, blockchain tech’s transparent and open nature means that we can move into a completely novel terrain.  

When we look at the lending space, we are able to see how DeFi is bringing a financial paradigm switch in the form of synthetic assets. These novel creations, which are sometimes referred to as “synths,” are blockchain-based cryptocurrency derivatives. Synths act and feel like traditional derivatives but are not at all ordinary.  

What Are DeFi’s Synthetic Crypto Assets?

Even with their futuristic-sounding name, synthetic assets are not a difficult concept to understand.  At their core, synthetic assets are just derivatives set up on a blockchain.  

Imagine that a particular derivative’s value is tied to another asset’s value via a contract. In this case, we can trade the movement of the derivative’s value using financial products such as futures or perpetuals.  

How do synths differ from traditional derivatives like futures?

Synths are possible because of smart contract technologies. Rather than using contracts to create the chain that binds an underlying asset with the derivative product, synthetic assets will tokenize the relationship. Tokenization means that the synthetic asset can impart exposure to any asset no matter what it is and no matter where it is, all from within the crypto ecosystem via a smart contract.  

In short, a synthetic asset is just a tokenized derivative that mimics the value of another asset. Smart contract tech allows developers to create these synthetic assets and then trade them on blockchains. Synthetic stocks represent shares that generally trade on the Nasdaq or NYSE, but synths can trade on a blockchain-based exchange.

Imagine you want to trade in Saudi Aramco stock which is only on the Saudi stock market and has restrictions for foreign ownership. Only the most significant foreign investors may buy Saudi stocks directly, so non-billionaires can only find exchange-traded funds (ETFs) focused on Mideast investments. 

Using a synth, you could trade $sSAR (synthetic SAR) instead, which behaves like its underlying asset, tracking its price with data oracles like Chainlink. Oracles are entities connecting blockchains to external systems, providing accurate data, thereby enabling smart contracts to operate efficiently. 

Synthetic’s Advantages

Derivatives were a groundbreaking change to finance, with their ability to unlock additional value through volatility. However, blockchain-based synthetics could take liquidity access to a new level.

Here are the primary advantages that synthetic assets can provide to the markets beyond traditional derivatives. 

Issuable by anyone. Crypto-based synthetic assets can be minted by anyone through open-source protocols like Synthetix or Mirror. Synthetix already has over $289 million in assets locked in its protocol.

Source: https://synthetix.io

Global liquidity. Synths could be traded on any crypto exchange, including the unregulated, decentralized exchanges.

Borderless transfers. Synthetic crypto assets are similar to ERC-20 tokens on the blockchain, and you can send or receive them with standard cryptocurrency wallets.  

Frictionless exchange. Owners are able to switch between synthetic equities, synth metals, and other digital assets like NFTs without having to hold the underlying asset.  

Liquidity pool farming. Synth securities can participate in yield farming, or the ability to generate a yield on a synth position by contributing a quantity of the native crypto to liquidity pools. A liquidity pool is a quantity of cryptocurrency locked in a smart contract.  

In general, synthetic assets allow for much more liquidity between global exchanges, swapping between protocols via bridges.

The Tokenization of Anything 

The closer we look at synthetic crypto assets, the more pronounced their power becomes. They can be utilized to represent anything, not just traditional equity assets. 

Any asset can be represented as a synthetic asset token and then be brought to the blockchain space.  This ability to tokenize anything means that synthetic assets can unlock an infinite number of pools for global liquidity. Beyond the simple trading of synthetic assets, synths can create possibilities for a wealth of new markets. 

A Novel Synth

A synthetic asset token can be created to track the corporate CO2 emissions found in an industrial zone. When the emissions rise, the token holders (city officials, outside speculators, locals living close by) will profit as the offending companies issue CO2 tokens. 

However, if the emissions decrease, then the companies will benefit by retaining their tokens. In the long run, this incentivizes companies to continually reduce their CO2 emissions. This is just a simple example of how synthetic asset-based markets that are not currently in place can expand the opportunities for new types of value creation.

Understanding the Mirror and Synthetix Protocols

Synthetic crypto assets are already trading in ways most would find familiar, making these new assets more approachable to anyone with experience trading equities or cryptos.  

Synthetix.io. This is the most well-known decentralized synthetic asset exchange protocol. Users can mint, exchange, and provide liquidity to a vast array of new assets.  

Mirror.finance. Despite its start by a centralized company, Mirror is a decentralized synthetic asset protocol capable of creating and exchanging fungible tokens that follow and cross chain assets’ prices. 

Users of Mirror and Synthetix trade stocks like Amazon, Apple, Tesla, and Twitter as easily as they could on any centralized trading platform, such as WeBull or Robinhood. But users can do much more than what is possible with those platforms. 

Oracles provide real-time data. The target asset price is provided by an oracle enabling the synthetic asset to track the underlying asset’s value accurately. 

Users mint (create) new assets. They will deposit collateral in the form of SNX for Synthetix and UST for Mirror. This collateral is used to back the newly minted asset with a tangible value.  

Users trade synthetic assets. Traders can utilize the liquidity pools of Synthetix or Mirror to trade synthetic asset derivatives such as mETH (mirrored Ethereum), sUSD (synthetic USD), or popular equities like mGME (mirrored Gamestop). These are trading pools that are always open. There is no blocking of stock purchases or short sales, like what happened with Robinhood and Gamestop.  

Minters gain liquidity creation rewards. These are provided through the exchange-traded assets that a minter creates. Meaning, they are paid in the native asset for the protocol (i.e., MIR or SNX).

New Synthetic Asset Exchanges

The synthetic trading space is expanding quickly, though Mirror and Synthetix are the oldest and the market leaders. There are several up-and-coming exchanges throwing their hats into the ring. 

UMA is creating synthetic assets for Web 3.0. It calls itself an “optimistic oracle and dispute arbitration system” intended to securely bring arbitrary types of data on-chain.  

Linear Finance calls their synths “liquid assets,” having the same value as other assets simulating commodities, cryptos, and other digitally structured products.

Balanced DAO is the finance system found on the ICON network backed with ICX tokens.

Deus.Finance is the marketplace of decentralized financial services providing synth trading infrastructure on Ethereum. They have also created a “Version 2” that includes minting DEI, or a cross-chain stablecoin.

Closing Thoughts

When looking at the world of finance, cryptos comprise only a tiny portion. Synthetics are able to tap into the broader market and provide services that the traditional stock exchanges cannot. These assets are growing in popularity, and in the United States, they remain highly regulated. 

This growth is being led by “Synth Funds” that follow ETFs, such as an S&P 500-following ETF. The possibility of additional liquidity and borderless transferring makes these new products highly sought after. They have the potential to permanently change the financial trading landscape.

Disclaimer: The author of this text, Jean Chalopin, is a global business leader with a background encompassing banking, biotech, and entertainment. Mr. Chalopin is Chairman of Deltec International Group, www.deltecbank.com.

The co-author of this text, Robin Trehan, has a bachelor’s degree in economics, a master’s in international business and finance, and an MBA in electronic business. Mr. Trehan is a Senior VP at Deltec International Group, www.deltecbank.com.

The views, thoughts, and opinions expressed in this text are solely the views of the authors, and do not necessarily reflect those of Deltec International Group, its subsidiaries, and/or its employees. This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service, or offering. It is not a recommendation to trade.

Web 3.0: Infrastructure and Cross-Blockchain Transfers

Currently, most online data “transfers”–communicating with friends and family, working with colleagues and clients, purchasing goods and services, and reading articles and social media are all facilitated with Web 2.0 infrastructure. This means that Web 2.0 is the foundational technology of our economy and society. So what about Web3, or Web 3.0?

One of the issues of the Web’s current iteration is that it is centralized. Centralization results in several limitations: being owned and controlled by a few central systems, it is vulnerable to hacking, corruption, and nefarious manipulation. There is a lack of data protection, and the data that is owned by that central authority usually belongs to big tech or the government.

Web 3.0 has grown from an imagined concept of a digital world starting in the mid-2000s to one that is possibly decentralized in the mid-2010s. In the current decade, the tech industry has begun to acknowledge the vast potential possible with an online ecosystem built from a decentralized Web 3.0.  

This shift would require the complete replacement of the current internet architecture we see with Web 2.0 and replace it with blockchain-based infrastructure. 

The result would be more democratic, with a shift to decentralized data ownership, peer-to-peer exchanges of data and assets with no intermediaries, protection from bad actors, and information that has guaranteed, blockchain verified sources. This shift to a decentralized Web 3.0 would fundamentally change how our businesses, financial systems, and societies are run for the better.

Web 3.0 Is Already Happening

There are already several projects working on designing the foundation of a decentralized Web 3.0. They are the Layer One foundation that is sitting at the base of Web 3.0, and they are designed to support the next iteration of the digital world. 

Many prognosticators have a vision of Web 3.0 with an open-source technology stack, with their code available for anyone to review, improve and build upon, creating an even better end-user experience in the long run. Ethereum, Polkadot, Avalanche, Cosmos, and several others are trying to do just that. 

All of the named blockchain projects already have decentralized applications (Dapps) live and running, providing their users with ways to communicate, share stories, transfer data and assets, and nearly all of the other general tasks we conduct on current Web 2.0 versions.  These new projects are the bridge that is forming to shift us to Web 3.0.

The Current Blockchain Networks Remain Siloed

Even with the progress that this new class of decentralized Layer-One blockchain networks is making, they remain siloed from each other to their detriment. These are like independent fiefdoms utterly separate from each other with their own social and economic activities and opportunities. 

They, however, have few if any pathways that connect them with each other. These are like hermit nations that have walled off the rest of the world. In the long run, this isolationist policy reduces the power of the projects that would gain from the total network effect possible by joining them together.  

The Need for Connection

There is a growing need for this connection–a unified, seamless, decentralized method for sharing assets and information between blockchain projects, building a combined ecosystem that will benefit all the constituents and their users. 

This need is based on overall liquidity and the volatility that results. Without a global connection, these projects’ economic structures will have digital assets with low liquidity, high volatility, and poor ways to unload the assets. By having a lack of interoperability and cross-chain communication, every project will have a more difficult time gaining traction and becoming successful.  

Imagine if our current Web was divided into 12 parts, required the use of 12 different browsers, and you needed to have separate banking facilities for each to make a purchase? 

Each had its own content and services, but you could not take that data from one and use it easily on another. That is the current state of a siloed blockchain network.

If these issues are not resolved, the migration to a decentralized Web 3.0 will be impossible, and we will be stuck with an edited VR/AR version of Web 2.0 run solely by big tech.

Moving Past the Issues

The acknowledgment of the problems resulting from a siloed industry of individual blockchain projects has resulted in the different protocols allocating a significant amount of time and money into building their own bridges that will allow users to share their data and assets between multiple protocols.  

There are so many DeFi Dapps that are running on Ethereum that there has been a need for bridges to be built between Ethereum and Polkadot, Binance Smart Chain, Avalanche, and others over the years since their inception. 

These bridges require dedication of time, money, and other resources to build and require diligence to maintain. Still, these bridges provide nothing more than a way to send specific assets between two smaller branches of the ecosystem, not the full spectrum of data and assets.

Beyond the resources needed to build and maintain these single-use bridges, they are often centralized. They are built, and operated by a single entity that is an intermediary working between the protocols, but are bottlenecks between the systems and have the sole authority to decide which tokens are supported and to which networks are worth connecting. 

Therefore, these intermediaries are exactly what decentralization is designed to prevent, a central authority with control over assets and information that increases security concerns due to potential corruption and a single point of failure. 

A second impact that results from a siloed blockchain space is the choice needed to be made by developers and thought leaders—choosing what protocol to use for their Dapps. If they are only able to run on one network, they will have several disadvantages. 

Their potential user base is immediately limited, which means that a single network’s Dapp success and mass adoption will also be limited. For a developer to deploy a Dapp across multiple networks, they will have to devote more resources to their apps, fragmenting their liquidity across the various network-specific applications. 

Interoperability Is the Web 3.0 Solution

The drain on resources and struggles that we see with the one-off bridges between networks means that a universal interoperability solution is the best way forward for the industry. 

Blockchain tech is one of the most innovative sectors in the world today, with talented programmers who should prioritize the requirements of universality, accessibility, security, and decentralization all on equal footing when considering interoperability. This strategy is the only viable solution to the problems that Web 3.0 faces today. 

To build such ubiquitous connectivity, there is a need to develop open protocols that provide standard pathways, which will require industry collaboration. An industry where protocols compete against each other is now history. Protocols should evolve for their own use cases, but they need to assume that interconnection is a requirement to reach scale.

Like our fiefdom’s analogy, projects must create their goods and services, but to thrive and gain from the other projects–they should communicate, exchange, and grow from the mutual knowledge and skills of the neighboring cities.   

Much of what is going on in the blockchain space focuses on blockchain infrastructure and interoperability. Achieving the purest form of interoperability means that both users and developers must be able to operate seamlessly across multiple blockchain platforms, not realizing there was even a change. 

When we use the current Web, we do not think of the protocols behind an email, text, or video conference. The same must be demanded of Web 3.0 for it to be successful.  

Interoperability is becoming a focal point for several protocols that have realized that cross-chain communication is required to protect their futures. Cross-chain communication empowers developers to utilize the network that best fits their needs while knowing that the new application can be accessible to a user on any platform. This structure allows a network to focus on the applications native to its protocol, optimizing its infrastructure instead of devoting the resources to building individual bridges.

The Path to Web 3.0

2021 saw the seeds of digital assets’ potential planted in the minds of consumers, institutions, governments, and their regulators. The movements of big tech into the metaverse, the rise of the NFT market, the creation of Central Bank Digital Currencies (CDBCs), and the moves toward the regulation of crypto in several sectors proved this change was manifesting. 

Moving forward, we are in the position to capitalize on the achievements that have been made to date and build on them with a scalable and efficient system. We cannot get caught up focusing on what is best for a single protocol while neglecting the big picture. Interoperability underpins Web 3.0 and must remain the objective for the near future.

Disclaimer: The author of this text, Jean Chalopin, is a global business leader with a background encompassing banking, biotech, and entertainment. Mr. Chalopin is Chairman of Deltec International Group, www.deltecbank.com.

The co-author of this text, Robin Trehan, has a bachelor’s degree in economics, a master’s in international business and finance, and an MBA in electronic business. Mr. Trehan is a Senior VP at Deltec International Group, www.deltecbank.com.

The views, thoughts, and opinions expressed in this text are solely the views of the authors, and do not necessarily reflect those of Deltec International Group, its subsidiaries, and/or its employees. This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service, or offering. It is not a recommendation to trade. 

​​Self-Paying Crypto Loans

When we have assets and debts, there are two conflicting things going on. Our assets are growing in value while our debts are accumulating interest. Enter: self-paying crypto loans.

Imagine if loans had no interest. Instead, the appreciation of your assets is automatically going to pay off your debts. Your mortgage payment is automatically paid off by your stock portfolio’s growth, and a car payment is paid by the funds of your high yield savings account. Your credit cards are paid off by your real estate portfolio, and all along the way, you don’t have to sell any assets to make the payments.

This may seem odd at first, but we are closer to this kind of entwined monetary system than most may think. There are new DeFi protocols that are attempting to allow anyone to borrow against their future asset yields, meaning they are creating self-paying crypto loans. 

Alchemix is the most advanced of these platforms, where you can deposit crypto assets, borrow against them, and then have the future yield of these assets automatically pay off your debt. This system creates a loan where its value only goes down, and the collateral that you provide is never liquidated. The idea of self-paying loans is certainly an interesting one and may change how we think about money.

What Are Self-Paying Crypto Loans?

The concept is a new financial tool at its foundation. It’s blending both aspects of a lender and a savings account into one. You earn interest on your deposits even when you are also borrowing against them. 

The interest that you earn is automatically used to pay down the loan amount, ensuring that the amount never increases, and because you are borrowing the same asset that is being used as collateral, your assets will never be liquidated.  

How Self-Paying Crypto Loans Work

In the case of Alchemix, to use it, you must first deposit funds into the Alchemix account in the form of the popular stable coin DAI, or other assets like ETH or USDC. Dai is an Ethereum network built by stablecoin pegged to the US Dollar. The DAI that you purchase will immediately go into what Alchemix calls its “Vault,” immediately earning interest. 

Image courtesy of Alchemix

When funds are deposited, the account owner can immediately borrow up to 50% of deposited funds as alUSD. alUSD is also a stablecoin that has been created by Alchemix and is pegged to the USD. From there, you can take the alUSD and use it how you wish. You could cash it out as fiat USD, or you could buy another crypto such as Bitcoin or Ethereum.

Once you have your amount of capital deposited in Alchemix, and you have half of this value available to be borrowed in the form of alUSD, the thing that makes Alchemix special is that the loan amount never increases: It can only go down. Instead of the interest going to increase your deposits, it pays off your debt.

Why Are Self-Paying Crypto Loans Better?

It is easier to understand with a simple example. Let’s say you have $10,000, and the current interest rate is a fixed 10%. Let’s also assume that repayment is flexible and there will be no additional money entering the system.  

With Alchemix, you can take your deposit of $10,000, and you can borrow $5,000 against it.  You are earning 10% interest on the $10,000, which is $1,000 a year. The interest that you are earning on that deposited amount is going to directly pay down the loan, which is NOT accumulating interest. This means that after one year, you still have $10,000 in assets in the Vault, and the debt is only $4,000, so the total is $6,000.  

Alternatively, with a traditional institution, you could deposit that same $10,000 and borrow $5,000 against it. After a year, you would have $11,000 in assets but also have $5,500 in debt (due to the 10% interest on the loan). This total would only be $5,500, not $6,000, and a 9% lower return than if the loan was obtained with Alchemix.

How Is This Possible?

The protocol is taking advantage of the larger supply of capital to pay down the smaller liability. The effective interest rate gets doubled by directly paying down the debt with the earned interest. This is similar to reducing costs for a business. Cost reduction is a more efficient way to increase the profit margin than expanding the business’s revenue.  

The idea gets even better when you consider that TradFi (traditional finance) interest rates paid on assets are near-zero (or 7% using average S&P returns), but Alchemix has historically offered 10 to 20% interest on DAI (we will discuss why so high shortly).  

Let’s investigate a few examples of how this can fundamentally change our relationship with money. To do so we will assume that the interest rate is a flat 10%.  

Self-Paying Mortgage

Let’s assume that you are buying a home to be your primary residence, which costs $300,000. You qualify for an FHA loan that charges 4.5% interest, and you are required to pay 3.5% down. For this loan, you will only need to provide $10,500 for the down payment, but you have $25,000 in cash. You are debating whether to put all of it down or to put the sum in Alchemix.

If you put the $25,000 into Alchemix and use a $12,500 loan for the down payment, you have covered your down payment, and you have the $25,000 in Alchemix earning interest, and you can borrow against the interest. Every month you would be able to borrow an additional $208 from the debt that is being automatically paid. 

This $208 could be going toward your monthly mortgage costs. At a 4.5% interest rate, you would be paying $2,091 a month. With a Vault deposit of 251,300, you could be making earned interest to cover the entire mortgage.  

Self-Paying Auto Loan

If we are in the market to buy a used car and debating whether to pay for it with $10,000 in cash or put the money into Alchemix and get a car loan, we can use the following parameters.  A credit score of 660 to 780 (considered Prime), a $2,000 down payment, an interest rate of 5.5%, and a term of 36 months.  

Data courtesy of cars.com

If you deposit the $10,000 into the Vault and borrow $2,000 for the down payment, you are earning $83 a month while having to pay $242 a month toward the car loan. This is a net cost to you of $159/month. Since you have an additional $3,000 left, you could continue to draw out the $159 a month for the first 18 months (nearly 19) months before having to pay anything for the car out of pocket. And you will have your $10,000 in the Vault earning interest.  

Digital Nomad Lifestyle

After working in the banking industry for years, you have saved $150,000 and want to take a year sabbatical to work on your masterpiece. You chose to put $150,000 in Alchemix. You check out possibilities and find that you can live in Buenos Aires for $862 a month.

Data courtesy of Nomadlist

This is significantly less than the $1,250 that you can safely withdraw. This way, your savings are completely covering your new lifestyle. What’s more, every month, you’re adding to the top line of Alchemix, so the monthly allowance is also going up. This can help account for inflation, increase your standard of living, or build a fund that supports your lifestyle.

How a Self-Paying Crypto Loan Scheme Works

Alchemix gets a slightly better rate due to their volume, but Alchemix also has a bonus DAI treasury in its “Transmuter” which also earns interest on Yearn and this interest goes to Alchemix. The Transmuter was initially used to convert alUSD back to DAI, but because Alchemix has gained popularity, the Curve pool for alUSD has also gained popularity with over 68 million alUSD, providing sufficient liquidity for Alchemix users to skip the Transmuter step entirely. 

The Transmuter provides an essential service ensuring that the alUSD maintains its $1 peg, but it can do so effectively while earning interest on about 124,000,000 DAI in its current stores. This has meant that even with the recent crypto crashes, including the near-death of Terra, alUSD has stayed solid, briefly falling to $0.96 and climbing back.

This was a great test of the Transmuter’s ability to maintain alUSD’s peg and continue earning interest.

A comparable strategy is when companies earn interest on their float. Money that they can claim but do not currently need, and they are able to invest while unused. 

Prepaid gift cards are an example. The current balance for Starbucks prepaid cards is at $1.4 billion. Customers could use that at any time, but Starbucks already has this cash available and they are using it to make money through investments or business expansions.  

Likewise, Alchemix is putting the money to work, but the depositors are getting the upside, rather than Alchemix (or Starbucks).

Alchemix is making a profit because they are getting a higher interest rate than they are paying to their depositors. Ten percent of the profits that Alchemix earns for users is stored in the treasury and is used for paying the Alchemix team in addition to solving any bugs or issues that have come about

This system aligns Alchemix’s incentives with those of its customers. They are only paid when providing good returns for users and are therefore incentivized to find the correct balance of return and risk. 

It is deceptively simple:

1.     Deposit DAI (or other allowed coins)

2.     Borrow alUSD

3.     Debt is repaid with Yearn Interest (now Saddle is available too)

This simple model shows how DeFi can provide new projects that are built upon each other.  Alchemix is built on Yearn and Yearn on Compound, AAVE, and other apps, all of which are built on Ethereum.  

Risks of Self-Paying Crypto Loans

The strength of Alchemix comes from the leveraging of other DeFi protocols. Specifically, the intelligence behind building a new lending protocol that is automatically repaid and cannot be liquidated. 

However, failures of the parts below Alchemix (Yearn, Saddle, Compound, AAVE, Ethereum) in the stack could easily cascade to harm Alchemix, and there is not much Alchemix could do to fix this. Alchemix has created security systems to protect their users’ funds in an emergency event, and they have proven reliable with crypto market crashes.

Alchemix has been audited, and its V2 version has a continuous auditing system. Security is clearly a priority for the project.

Closing Thoughts

Self-paying crypto loans represent a new era of finance that will potentially bring massive changes. It gives us reason to think of money differently. 

The latest projects will likely attract those willing investors who may well make great returns. This novel style of lending and borrowing opens new doors. Particularly, it opens the relatively unexplored avenue of using variable returns to pay down low- or zero-interest loans. 

Disclaimer:  The author of this text, Jean Chalopin, is a global business leader with a background encompassing banking, biotech, and entertainment.  Mr. Chalopin is Chairman of Deltec International Group, www.deltecbank.com.

The co-author of this text, Robin Trehan, has a bachelor’s degree in economics, a master’s in international business and finance, and an MBA in electronic business.  Mr. Trehan is a Senior VP at Deltec International Group, www.deltecbank.com.

The views, thoughts, and opinions expressed in this text are solely the views of the authors, and do not necessarily reflect those of Deltec International Group, its subsidiaries, and/or its employees. This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade.

IoT and Its Applications in Reality

What do we mean by IoT? We can turn on the plug sockets in our houses from a chair in a remote workplace. Our refrigerator’s built-in cameras and sensors allow us to track our food and know when it’s about to expire. The temperature in our home can be set to the perfect condition based on our preferences, ready for when we return

These sentences are not extracts from a fictional dystopian future. They are just a few of the millions of frameworks that make up the Internet of Things (IoT) that are now in use.

IoT has changed how we connect, communicate, and go about our everyday tasks. The network of gadgets is making our society more innovative and more efficient, from homes to maintenance to cities.

In the early 2000s, IoT was just a notion, but as we approach 2022, statistics demonstrate that this technology is here to stay. According to reports, 35.82 billion IoT devices will be installed globally in 2021, and 75.44 billion by 2025.

This article discusses what IoT means and provides some typical real-world applications.

What Is the Internet of Things?

All physical items that link to the internet and other devices are referred to as “things” in IoT. 

The phrase “internet of things” is evolving incrementally with increased use to describe devices that interact and “talk” to each other, enabling efficiencies in our lives.

IoT devices are characterized by their capability to accumulate data about their environments, exchange that data with other electronic devices, and, consequently, assist us, the ultimate users, in obtaining information, resolving a problem, or completing a job.

As a simple example, most of us have walked into a room where the light has turned on by itself. An IoT sensor detects your movement and connects to the light fitting, turning it on. Perhaps the most popular devices are Amazon Alexa, Google Home, and other intelligent equipment that many people use to connect everything they own. 

How Does IoT Work?

Sensors are a critical component of IoT, as they allow linked devices to communicate with one another. These sensors detect temperature, pressure, motion, sound, and light. IoT is made possible by intelligent sensors that measure, assess, and collect data. Following the collection of these events, cloud-based apps are used to analyse and communicate the data supplied by the sensors.

Source: https://www.embitel.com/blog/embedded-blog/how-iot-works-an-overview-of-the-technology-architecture-2

Because data is stored in the cloud and not a physical server, users may access it through applications at any time and from anywhere.

Applications of IoT in 2022

Several industries are benefitting from IoT in 2022. 


Integrating IoT technologies into agriculture can enhance productivity and keep it in sync with the global population boom. Precision farming–the use of analytical data to understand soil moisture levels, climate changes, plant requirements, and so on–can come from IoT applications, boosting productivity, and encouraging resource efficiency.

For example, having adequate knowledge of climates is pivotal for optimizing the quantity and quality of crop production. IoT allows farmers to monitor weather conditions in real-time through sensors placed in the fields. Environment data will enable them to select the best crops that will grow and sustain in the climate conditions. The need for a physical presence is eliminated, which is particularly important in areas with unpredictable situations. 

Smart Homes

Smart home technology automates our lives using sensors, connected devices, IoT, AI, and machine learning. The devices are controlled through apps, laptops, or other technology that is connected to the internet. For example, the Nest Thermostat learns user behaviour and controls the temperature in the home according to their preferences. 

There are countless smart home devices available on the market at affordable prices in 2022. The three main functions they carry out are:

·       Monitoring and controlling smart homes remotely

·       Making decisions based on user behaviors and preferences

·       Providing users with real-time data from anywhere

The products are primarily designed to save users time, money, and be innovative. For example, smart sprinkler systems can be controlled remotely to save water. Refrigerators can moderate temperature and reduce energy consumption. Cleaning robots can vacuum the floor autonomously to save you time. Name a task, and there is probably a smart device out there that can do it. 

Supply Chains

Following the Covid-19 pandemic and its impact on supply chains, IoT is more essential than ever within logistics. The likes of Amazon already track the delivery of goods, but there are other ways that IoT can influence supply chain efficiency. 

Source: https://www.zetes.com/en/technologies-consumables/iot-in-supply-chain

Using sensors, companies can understand attributes such as the condition, location, and environment of goods in transit. Real-time access to data keeps you informed, allowing better decision making and the opportunity to take corrective actions should something be wrong. IoT removes manual processes such as emails or phone calls, negates the likelihood of blind spots, and provides complete chain transparency. 

Some organizations are taking this a step further and combining IoT with blockchain technology. For example, IoT sensors can detect a problem with a product in transit, such as being stored at the wrong temperature. Imagine a smart contract is set up on a blockchain that guarantees a specific temperature between the two parties. As soon as that term is broken, it activates the blockchain and alerts all parties that the contract has been breached. 

Autonomous Vehicles

Toyota, Volvo, Tesla, and Ford are a few examples of significant automobile manufacturers aiming to deliver completely autonomous vehicles to the mainstream market. Tesla already has a car with self-driving capabilities.

Self-driving cars operate using IoT. For example, the vehicle is connected to an IoT-based technological system that communicates information about the road and the car itself as it is moving. These systems collect an enormous amount of data on traffic, roads, navigation, and more, which is then evaluated by the car’s computer systems to drive itself.

Financial Services

There are many prospective applications of IoT in financial services. First, institutions may use IoT devices to improve the security of their branches. Banking and financial institutions may avoid money losses by installing IoT-enabled devices such as cameras and mobility sensors and connecting them to the internet.

Thanks to constant data collecting facilitated by IoT solutions, attending to consumers’ demands and requirements have become considerably more straightforward. IoT allows businesses to access real-time datasets, providing services almost instantaneously.

In banks, customers may check online to see how long the queues are at the branch or arrange a cash withdrawal and perform the transaction at any nearby ATM.

Businesses use IoT to collect data for credit risk assessment. Asset management organizations can receive relevant data across various industries such as retail and agriculture for better decision making thanks to modern IoT technologies like D2D (device-to-device) communication protocols and sensor installation.


Since the pandemic, the number of devices connected to the internet has soared, and that will continue throughout 2022 and beyond. Going forwards, as technologies such as blockchain, 5G, and edge computing become more prominent, there is a vast amount of scope for enhancing IoT devices. 

IoT technology can offer green solutions for businesses, cities, and communities as the focus on establishing a green economy and mitigating climate change intensifies. These applications, which include lowering energy costs, enabling remote installations, monitoring failure spots, and many more, will quickly transition from niche appliacations to IoT growth drivers. 

Naturally, one of the IoT community’s primary goals should emphasize the incorporation of IoT into any realistic model of a sustainable global economy.

Disclaimer: The author of this text, Jean Chalopin, is a global business leader with a background encompassing banking, biotech, and entertainment. Mr. Chalopin is Chairman of Deltec International Group, www.deltecbank.com.

The co-author of this text, Robin Trehan, has a bachelor’s degree in economics, a master’s in international business and finance, and an MBA in electronic business. Mr. Trehan is a Senior VP at Deltec International Group, www.deltecbank.com.

The views, thoughts, and opinions expressed in this text are solely the views of the authors, and do not necessarily reflect those of Deltec International Group, its subsidiaries, and/or its employees.

How to Value an NFT

Because NFTs are a new type of asset, they have drawn the interest of many new investors worldwide. Usually, members of the art world, the collecting world, and the world of crypto have the most interest. 

Still, as their popularity has grown, NFT prices have shot up, drawing the interest of more people including those interested in NFTs as a speculative asset for potential income.  Because of this interest in potential investment income, the question of valuation becomes much more important. We will discuss the factors that can be used to value NFTs and how this process has been done with data science.

Factors for NFT Valuation

Being new, there are no set of rules used to assess the value of an NFT. The ways that companies and other assets, including art and other collectibles, are valued differently from NFTs and are therefore not directly applicable. One avenue that seems to be somewhat reliable is the payment of the purchase made by the last buyer of the NFT. This is not sufficient because, with NFTs, we have seen significant volatility. It’s hard to guess what the next buyer will be willing to pay just using these estimates from previous purchases. 

Most buyers lack the needed skills and information to logically ascertain an NFT’s value and usually make guesses with little reason behind them. Sellers also have a challenging time determining what kind of price they might receive for the NFTs that they currently hold. In time, much like the value of art, the value of an NFT is driven by perception, and neither the buyer nor seller have any control over this. 

Let’s consider the following: an NFT artwork may be in demand for a particular time with buyers believing it is rare and will produce value in the near term. They then discover that the image is available for free online, and the pool of potential buyer’s dries up.

Renowned artists’ NFTs and tokens that are associated with tangible assets are easier to define their values, but in most cases, investors and traders will have a more challenging time determining the value of the majority of NFTs.  

There are, however, several factors which one can utilize to make a price prediction. And when combined, they produce a much more justifiable and hopefully accurate number.


An NFTs demand is directly proportional to its rarity, but what can we use to determine how rare an NFT is? Artworks from known artists or celebrities or influencers are undoubtedly good examples of rare items. Certain game items and collectible NFTs from the likes of the NBA would also fall into this category. The scarcity factor will add intrinsic value to these NFTs.

These items are numbered, with only a total of up to 99 available. The players are all top stars in the NBA, and NFTs have unique attributes, resulting in their elevated values.

The immutable nature of NFTs gives the holder a sense of value through distinction. Jack Dorsey’s first Tweet NFT would be another example of a scarce NFT giving it added value.


An NFT’s use is also a critical factor in evaluating its value. An NFT must have a real application or utility to add to its value. Take, for example, an NFT that tokenizes a precious metal, security, real estate (real or virtual), or an in-game asset, which will have an intrinsic value for specific buyers. 

When real-world items are tokenized, and ownership is immutable on blockchains, there is a tangible value. The NFT world is just beginning, and as it begins to mature, new innovative use cases will undoubtedly emerge.

NFTs can effectively define ownership and its rights, eliminating fraudulent activities. Their use in a project will influence its value. After it’s minted, an NFT will have value from its built-in characteristics. 

As time passes, the value will accrue at a rate that depends on its utility and the related project. Metaverse tokens from Decentraland that relate to virtual real estate have grown in value due to the strength of the project’s interest. 

Most NFTs with defined use are great for both short-term and long-term trading. NFT event tickets can be a great short-term bet, and those that represent real estate can accrue long-term value.


Like use, a key factor in valuing an NFT is its interoperability, an NFT’s ability to be utilized in more than one application and across blockchains. If a gadget is able to be used in several games, the chance of the token increasing in value also increases. 

How an NFT works on different blockchains will also make it easier to transact. This is a difficult measure, but the breadth of use for tokens and their interoperability across chains is another way to build value and something that developers can strive to create.

Social Proof

One of the most decisive factors that can determine an NFT’s value is social proof of the underlying project or artist. When someone first encounters an artist or project, there is a tendency to rely on cues from those around the project. An NFT’s social proof indicates what people are thinking about the project, and the more buzz, the better.

Checking the minter and the NFT’s presence on social media platforms like Discord, Telegram, Instagram and Twitter can help to gauge the acceptability. If followers are low, it will indicate that there is a missing foundation, and the NFT’s value will be low and may never grow. Social proof of the NFT and the project or person behind are significant factors when building a valuation.  

Provenance (Ownership History)

The identity of an NFTs issuer and its previous owners can affect the NFT’s value. NFTs created by well-known people, projects, or corporations can benefit from an ownership history value. This attribute can be enhanced in an NFT by working with groups or individuals with a substantial brand value when minting their NFTs. 

Reselling NFTs that were held by influencers is another avenue to gain traction as well. NFT marketplaces and sellers can aid buyers in finding information about previous owners of NFTs, providing a simple user interface with tracking. By highlighting investors who have been successful with NFT trading, they help other buyers with valuable insights.


NFTs that have significant liquidity will carry an added value. Secondary markets that have frictionless BSC or ERC standard NFT trades give added access to buyers. Traders will flock to NFTs that have higher volume knowing their tokens can be sold when desired and profits are taken. A token with high liquidity is better able to retain its value even if the native platform is closed.  

Increasing engagement is essential for token economics, and liquidity is one way to enhance engagement. In-built systems that depreciate NFTs for being idle and encourage competition can build a more substantial market. NFT systems should be created to support the liquidity of the emerging NFT market.

Price Speculation

Speculation can be a catalyst for appreciation. We have seen several NFTs, collections, and the market as a whole jump in value by thousands of percent in a short time. While some will oppose speculation as a valuation driver, the desire of humans cannot be neglected.  

The conventional financial system of derivatives bases its values on speculation, and this speculation element should also be included in NFT valuations. Charts of price performance, a project’s assets, and even items beyond fan speculation can drive price speculation in NFTs.

NFT Ecosystem Changes

As the ecosystem of NFTs continues to evolve, additional factors will affect NFTs’ values, which will need to be incorporated to improve price valuation accuracy. Like art, NFTs have subjective values, and this makes valuing an NFT in the future more difficult. NFTs have nearly endless possibilities. Their use and versatility will continue to grow with additional applications and categories. These will need to be applied to future price valuations. 

Valuing NFTs With Data Science

Data science advisor for the London Business School and mentor at Cambridge University’s Judge Business School, Stylianos (Stelios) Kampakis, recently worked on a paper with one of his students that undertook the process of valuing the popular CryptoPunks NFTs using hedonic regression. Here are some examples of these NFTs. 

The highest price for a single NFT in this collection was $24 million, #5822.

CryptoPunk #5822

The paper looked at what attributes could contribute most to valuation, and the author stated that it can be used for a similar system with other NFTs, and the paper showed how it could compare NFTs to more traditional investments. The paper reviewed the “physical differences” between the various artistic attributes of NFT art and found specific physical attributes (a beanie, bandana, glasses, facial hair type), or a lack of which, leading to scarcity were more important in defining value.  

A similar regression could be applied to other NFTs using available price data, and then adding in the various attributes we have outlined above to improve the valuations further. 

Closing Thoughts

When trying to estimate the value of NFTs, we must be mindful that not all of them will be valuable. The vast majority may have 15 minutes of fame and then crash or never even have that 15 minute of fame. 

When valuing, consider all the factors to arrive at a price decision, even new ones that have not been discussed here. Conducting due diligence to make an informed decision should be part of any financial decision, including the purchase and sale of NFTs.

Disclaimer: The author of this text, Jean Chalopin, is a global business leader with a background encompassing banking, biotech, and entertainment. Mr. Chalopin is Chairman of Deltec International Group, www.deltecbank.com.

The co-author of this text, Robin Trehan, has a bachelor’s degree in economics, a master’s in international business and finance, and an MBA in electronic business. Mr. Trehan is a Senior VP at Deltec International Group, www.deltecbank.com.

The views, thoughts, and opinions expressed in this text are solely the views of the authors, and do not necessarily reflect those of Deltec International Group, its subsidiaries, and/or its employees.

The Ethereum Merge Succeeded, What’s Next? 

The hotly anticipated “Ethereum Merge” finally happened, and it was a smooth, almost shocking, success. Proof of work vacated the Ethereum protocol in favor of the energy efficient, possibly world-saving alternative of proof of stake. 

However, the most current five-day price action for ETH (Ether) shows a sharp decline of approximately -21%. The same chart shows a -9% drop for BTC (Bitcoin). So how can we call the Ethereum Merge a success? 

Given the current bear markets and the globally declining macroeconomic environment, speculative assets such as cryptocurrencies slid as investors looked to preserve capital. Called the “crypto winter,” this harsh environment for growth-style investing particularly hurts new asset classes which have not been tested by the global financial crisis, for example. 

Yet in the run-up to the Ethereum Merge, ETH’s price surged from roughly 1,430 USD at the end of August to almost 1,800 by September 10. Meaning, enthusiasts, investors, and other ETH stakeholders traded the sentiment building around Ethereum. This is normal, but the Merge’s ethos remains one of safety, security, democracy, and environmental protection–not short-term profit taking. 

This article delves into the fate of the ETH’s historical miners, the great appeal Ethereum now has to mainstream investors, and the further upgrades slated for the future. 

The Ethereum Merge: Epilogue

Earning an income with Ethereum means to stake what you own, not mine new coins. The current staking reward for ETH stands at 5.02%. With miners no more, the post-merge yield could reach up to 7.5, with 6.9% likely.  

For the sake of example, the current 1-year US treasury rate shows 3.96%. But when central bank tightening slows and the rampant inflation comes to a halt, can we count on the 1-year yield to maintain this height? 

Ethereum understood that while proof of work is “battle tested” and perceived as secure, the hash puzzle method provided an ironic side effect of centralization. As protocols mature, only the most intense computing rigs can solve these puzzles in time and expect to earn an income, such as with Bitcoin. 

In other words, computers from only three mining pools dominated the network hashrate and contributed to an increasing possibility–even if disbelieved–of a 51% attack. This describes the event of when a central, malicious actor effectively takes over the blockchain and purports their own false tale of financial events in a virtual Shakespearean play. 

Thus, it’s not energy use (in solving hash puzzles) that provides security, but returning to the original ethos of cryptocurrency–democracy. By encouraging regular investors with modest to large ETH holdings to deposit (stake) their funds, they become part of an ever-growing ecosystem. 

Where Did the Miners Go?

Sophisticated ETH miners likely would not have simply sold their computing gear, but join other protocols still using proof of work. After all, they can in theory stake ETH and mine other coins in tandem–alongside the global population of retail investors using American or European crypto exchanges

A select few cryptocurrencies surged in the leadup to Ethereum’s Merge, but two in particular stand out: Ravencoin and Flux. 

Source: 2miners.com

The hashrate provides an indication of a coin’s popularity with miners. A greater hashrate equates to faster processing power and more miners. 

However, following the Merge, the prices of both against the USD plummeted by roughly 35-40% each. This reminds us of the speculative nature inherent to lesser-known and less-tested cryptocurrencies. And, it further points to the overdone sell-off affecting ETH’s price.

Surge, Verge, Purge, and Splurge

Ethereum’s co-founder Vitalik Buterin would have us know that Ethereum itself is about halfway complete. The rhyming is intentional. 

Source: Grand Amphi Theatre

Part of Buterin’s success lies in his quest for decentralization–not apparent fame, glory, nor riches. Yet to achieve this end of ultimate decentralization, Ethereum’s Merge is the beginning point which seems to have always required proof of stake. The goal remains to take a processing capacity of “15-20” transactions per second to a staggering figure gyrating around 100,000. 

You read that right. Surge refers to “sharding,” or the process of adding additional layer-2 blockchain “lanes” to bundle transactions. Verge refers to the mathematical proof of “Verkle trees,” in effect eliminating much of the current need of validators hoarding data. In other words, moving data to the cloud. Purge refers to the ability to delete old history data, while splurge represents a catch-all term for all the extras. 

Closing Thoughts

In the current climate of a crypto winter also corresponding to a global economic downturn, growth investing gives way to hard financial analysis. ETH’s price remains relatively subdued despite the historic success of Ethereum’s Merge as the lasting impact of history continues to be not so well understood. 

Yet contrarian investing–buying when others are fearful–consistently finds its way to the top of bear market trading strategies. In that entails the daring art and science of discovering opportunities before others. If Ethereum maintains the momentum of its success and builds a protocol capable of processing 100,000 thousand transactions a second at a minimal energy cost while propagating decentralization, then idealism gives way to a living and breathing new world. 

Disclaimer: The author of this text, Jean Chalopin, is a global business leader with a background encompassing banking, biotech, and entertainment. Mr. Chalopin is Chairman of Deltec International Group, www.deltecbank.com.

The co-author of this text, Conor Scott, CFA, has been active in the wealth management industry since 2012, continuously researching the latest developments affecting portfolio management and cryptocurrency. Mr. Scott is a Freelance Writer for Deltec International Group, www.deltecbank.com.

The views, thoughts, and opinions expressed in this text are solely the views of the authors, and do not necessarily reflect those of Deltec International Group, its subsidiaries, and/or its employees. This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service, or offering. It is not a recommendation to trade. 


With the advent of blockchain, a new space has been created for the world of video games. GameFi has rapidly been expanding into the more traditional video gaming industry since its first appearance with Axie Infinity

Axie attracts gamers to its universe by offering them opportunities to make money while they are enjoying the game. We will be explaining GameFi and the differences between it and the more familiar traditional video games we know, how one can get started on a particular GameFi game, and potential income streams they provide players and investors.

GameFi in Brief

GameFi starts with combining the words game and finance, similar to DeFi for decentralized finance. GameFi refers to a blockchain-based game model that has a play-to-earn feature that incentivizes players. In a GameFi ecosystem, blockchain technologies with cryptocurrencies and NFTs (non-fungible tokens) create a virtual gaming environment for the players.

Players can earn in-game rewards by completing in-game tasks, winning battles with other players, or reaching new game levels. These assets earned during play are owned and controlled by the player and can even be traded on crypto exchanges or NFT marketplaces.

GameFi’s Inner-Workings

GameFi player rewards come in many forms. Anything such as native cryptocurrencies or in-game assets like avatars, avatar features and costumes, weapons, virtual land, and virtual building materials. 

Every GameFi project will create its own different game model and economy built around that model. Generally, a game will create its in-game assets as NFTs running on a blockchain project or sidechain, while in other cases, the in-game assets would need to be converted to NFTs before players could trade them. This second model can be a cost-saving method for the game’s project, putting the fees to create the NFT on the trader.

In-game assets will generally provide a specified benefit to the game’s players, which allows them to make additional rewards. However, some games will feature player avatars and cosmetic changes, which are purely visual and have no impact on either gameplay or the in-game earning.

Depending on the game’s model, players can earn rewards through the completion of tasks, winning battles against other players, or constructing and monetizing structures on their owned plots of land. Some games will allow their players to generate passive income, not even having to play the game. This can be through staking or lending of their owned game assets to other players.  

Common GameFi Features

Let us look at GameFi’s most common features.

Play-to-Earn (P2E)

Nearly every GameFi project will have a Play-to-Earn or P2E model as a novel gaming mode at its core. This P2E model turned the gaming world on its head, which has relied on a Pay-to-Play (P2P) model that started with the video game arcades of the 1970s. 

The Pay-to-Play model requires a gamer to invest before they can begin playing the game, putting money into the Astrids game at Dave and Busters, or nowadays purchasing a Call of Duty license or recurring membership subscription for their Xbox.

In the majority of cases, traditional video games with the Pay-to-Play model will not generate any financial rewards for their players, and any in-game assets that the player obtains are controlled and held by the gaming company only for use by that player. The P2E model, in contrast, will give players complete control over their in-game assets and will also provide them opportunities to make money for their play or passively.  

The economics of the game will depend on the GameFi project’s chosen model. Games built around a decentralized blockchain technology can and should give their players complete control over their acquired in-game assets. However, this is not always the case. Players should understand how the chosen game works, its economics, and who is behind the project before devoting time to any P2E game. 

One notable feature of P2E games is that they can be free to play but still have the ability to generate financial rewards for their players. However, some GameFi projects will require players to purchase NFTs or other crypto assets before being allowed to play. 

Axie Infinity

Axie Infinity has gained the spot of one of the most popular Play-to-Earn games. Axie is an Ethereum-based game with NFTs that has grown in popularity since its release in 2018.  Players can use their NFT pets, called Axies, to earn Smooth Love Potion (SLP) tokens.

Graph courtesy of coinmarketcap.com

These can be earned by completing daily tasks and by battling other players. Players can also get the rewards of another coin, the AXS, if they are able to achieve a defined player versus player (PvP) rank.  

Graph courtesy of coinmarketcap.com

On top of this, Axie Infinity players can use both AXS and SLP to breed new Axies, and these new Axies can be used in-game or traded on the Axie Infinity NFT marketplace.

Beyond buying and selling Axies, players have the ability to lend their Axies to other players, in a process known as scholarship, allowing NFT owners the ability to earn without having to play the game. This model of lending gives the borrowers called scholars the use of the Axies to earn rewards during play without having to pay anything up front.

This passive model is a way for players with strong Axies to earn without investing other than what they made through their own play beforehand. Rewards earned with the borrowed Axie are split between the scholar’s student and the Axie’s owner. 

Ownership of Digital Assets

Blockchain technology allows for digital asset ownership, and this makes it possible for owners to monetize their in-game assets in several ways possible for a project.

With traditional video games, a player can own pets, houses, avatars, weapons, tools, construction materials, and much more. But with GameFi, these assets can be issued in NFT form and minted on the blockchain. With this GameFi system, the player will have full control over their in-game assets. The ownership of these assets can be verified, are transferable, and can be authenticated.

With the rise of metaverse games such as Decentraland, TheSandbox, and a few other lesser-known games, the focus on virtual real estate has grown, and its ownership has grown as well. These games allow players to purchase and monetize their virtual real estate like it was property in the real world. 

The Sandbox allows its players to buy plots of digital real estate and then develop these plots so that they can generate value through revenues. One popular form of development has been the creation of casinos in these metaverses. Some of the developed lands will charge other players to visit when they are the venue hosting content or events like virtual concerts bringing in thousands of visitors all paying to see the event, or they can also rent this customized land to other players who will monetize it.

Applications for DeFi

There are some GameFi projects that provide DeFi features like staking, liquidity, and yield farming. With these GameFi projects, a player can stake their game tokens to earn rewards, unlock special items, or gain access to new gaming levels. 

The introduction of these DeFi elements can make blockchain gaming more decentralized. Traditional game companies will have centralized control of the game and its updates; some GameFi projects allow its community to participate in the game vision process, proposing future updates via DAOs (decentralized autonomous organizations).

Using MANA, the native governance tokens of Decentraland, players can vote on a project’s organizational and in-game policies if they lock their tokens in the DAO. The more tokens they lock, the stronger their voting power. This system allows gamers to have a direct influence on the development of the game they are playing.

Traditional Games and GameFi

With traditional games, a player can earn in-game currency that is used to purchase assets and upgrade characters. However, these tokens cannot generally be traded outside of the game space. They will also not have any value beyond the game’s scope, and even if they do, most games will prohibit players from monetizing and trading the earned/purchased assets in the real world.

Blockchain-based games have in-game tokens and assets in cryptocurrency or NFT form. Some games will use virtual tokens rather than crypto or NFTs. However, players can usually convert their in-game assets into NFTs if so desired, allowing the gamer to transfer their earnings to a crypto wallet and trade the crypto on exchanges and the NFTs on marketplaces. The crypto profits from in-game can be converted via an exchange or marketplace to fiat currency as well.

Joining the World of GameFi

There are already thousands of blockchain games available to play, and each has its own tokenomics system. Players should be careful of fraud projects or spoofed websites.  Downloading a game from the wrong website or connecting a wallet to the wrong site can be detrimental. 

It is best to create a new crypto wallet for the GameFi game and only use funds that can be lost in a worst-case scenario. Once you have found a Game you are confident with, you can begin.

Create a Crypto Wallet

Accessing a game will require a compatible crypto wallet. MetaMask and Trust Wallets are commonly used. 

The chosen game may use a different wallet or connect to a specific blockchain network. Blockchain games on the BNB Smart Chain (previously the Binance Smart Chain) will require that a Metamask wallet be first connected to the BSC network. A Trust Wallet or other supported wallet could potentially be used.

Games running on the Ethereum network can be accessed when you connect your wallet to the Ethereum blockchain. Some games like Gods Unchained and Axie Infinity have built their own wallets, reducing costs and improving performance, so you may need to create one of these. 

Connect the Wallet to the Game

A wallet will need to be connected before gameplay can occur. Connect with the official website only. Find the website and look for the wallet connection option. Most blockchain games will use your wallet as your account username and password, so most games will ask you to sign a user message to your wallet, allowing you to connect to the game.

Check Game Requirements

Most projects will require the purchase of some native cryptocurrency or an in-game NFT to begin. The upfront requirement will vary from project to project, and you should consider this purchase’s earning potential and overall risk before moving forward. Include in this estimate the time needed to get your initial investment back, and any profits that can be obtained.

3 Axies are needed in a wallet to play Axie Infinity, which can be purchased in the marketplace. This purchase will require wrapped ETH (WETH) in a Ronin Wallet. ETH can be bought elsewhere, and the Ronin bridge can be used to transfer the ETH to your Ronin Wallet. If you do not have the upfront funds, you can look for a scholarship program. Allowing you to borrow NFT Axies, but you will share your earnings with the Axies’ owners.

GameFi’s Future

In the past year, GameFi has grown tremendously and will likely continue with the spread of more blockchain projects. In July 2022, DappRadar lists nearly 1750 blockchain games, up from about 1400 in March of the same year–25% in four months. 

There are now popular games crossing multiple blockchains beyond Ethereum and the BNB Smart Chain, including Solana, Polygon, Harmoney, and more. The ability for players to own and earn from their in-game assets is especially attractive in developing countries. With the continued growth of blockchain tech, the GameFi world will continue its speedy growth.   

Final Thoughts

Browser games have hoped to make Bitcoin profits since the beginnings of blockchain tech.  Ethereum was created from a desire of a young man to have control over his in-game assets.  The advent of smart contracts has changed the potential of the gaming world, with decentralized novel experiences and opportunities. 

GameFi can attract gamers, providing an entertaining escape and a financial incentive. The growing popularity of blockchain-based games will continue and will likely be a driving force behind the development of the metaverse.

Disclaimer: The author of this text, Jean Chalopin, is a global business leader with a background encompassing banking, biotech, and entertainment. Mr. Chalopin is Chairman of Deltec International Group, www.deltecbank.com.

The co-author of this text, Robin Trehan, has a bachelor’s degree in economics, a master’s in international business and finance, and an MBA in electronic business. Mr. Trehan is a Senior VP at Deltec International Group, www.deltecbank.com.

The views, thoughts, and opinions expressed in this text are solely the views of the authors, and do not necessarily reflect those of Deltec International Group, its subsidiaries, and/or its employees.

Mining After Ethereum 2.0

In our last article we introduced the Ethereum Merge and its potentially profound impact upon the world of investing–whether for traditional or digital assets. Bellatrix on September 6th paved the way for the final merge to likely happen around September 15th through the second stage–Paris. With this comes the transition from proof of work (PoW) to proof of stake (PoS). What will mining after Ethereum 2.0 look like? 

The proof of work protocol entails two components for its blockchain: “miners” and work. Validators, dubbed miners, work to solve hash puzzles before adding a subsequent block to a blockchain. Each block contains a set of transaction data to be added to the immutable public ledger than is any one blockchain. 

Mining after Ethereum 2.0 actually refers to “staking,” or the practice of validators staking (read: depositing) their assets for the benefit of a blockchain’s protocol. Proof of stake uses a modified form of random selection favoring integrous stakers with larger deposits while not disenfranchising those holding smaller deposits. 

This article delves into proof of stake, Ethereum 2.0, and the larger impact of staking. Let’s get into it. 

Proof of Stake

A younger invention than the proof of work arriving over a decade ago with Satoshi Nakamoto’s Bitcoin, it shifts the onus from energy-intensive work and computation to at-risk deposits and integrity. 

Ethereum’s PoS introduces a complex system focusing on the character of its validators (stakers). To participate, each validator must first deposit 32 ETH (ether) into a smart contract and operate using three different pieces of software: an execution client, a consensus client, and validator. 

Once their validation account is active, validating users receive new blocks from peers operating on the Ethereum network. The blocks’ transactions are “re-executed,” and the validator checks the block signatures to ensure they’re valid. The validator finally sends a vote–referred to as an attestation–in favor of each new block across the network. 

PoS also introduces a unique feature carrying potential benefits for scaling: The timing of adding blocks remains fixed. Simply put, one slot occurs every 12 seconds and an epoch refers to 32 slots. 

The protocol randomly selects one validator per slot, to function as a block proposer. The validator therefore remains responsible for sending out new blocks to the network. And with every slot, a committee of validators–randomly chosen–votes on the validity of the new block.

Source: Finematics

Mining After Ethereum 2.0

In short, mining ceases to exist in favor of staking. PoW ensures validator integrity through the work they must complete in solving the next hash puzzle required for adding the next block. PoS ensures integrity through the extraordinary financial cost in engaging in dishonest behavior. 

PoS validators lose out on ETH rewards if they fail to validate when selected. In addition, their existing stake is up for removal if they behave dishonestly: namely proposing multiple blocks for a single slot or sending contradictory attestations. The penalties increase gradually the longer a validator fails to provide honest attestations–leading to outright ejection from the Ethereum network after 36 days. 

Any attack–even coordinated–would therefore be extremely costly for the criminal party given that the minimum staking amount is 32 ETH.

A 51% attack to propose an entirely separate blockchain of transaction data, feared in the PoW domain, requires billions upon billions in dollar equivalent of staked ETH. However, the Ethereum community would recognize a single bad actor or group of actors trying to propagate this false chain. They could then mount a counterattack by raising alarms, at which point the network would likely destroy all the staked ETH of the false chain. 

Integrity is ensured through the heavy economic cost and the collective voice of honest validators. 

The Benefits of Staking

Previously, we’ve touched upon the environmental benefits of switching to staking in a world ravaged by climate change. Ethereum’s energy usage would decrease by approximately 99.95%. 

However, there are number of additional benefits: 

  1. Passive income. Staking enables retail individuals in securing the Ethereum network, even from a laptop. Staking pools collate ETH and allow individuals to stake without having the required 32 ETH. 
  2. Increased decentralization. Economies of scale happen with PoW as institutions have the cash balances necessary to purchase dedicated, intensive “rigs.” 
  3. Economic security. PoS expressly uses staked (locked) deposits, which are held liable for destructing provided dishonest behavior. 

There are some notes to consider, however, before entering into staking: 

  1. PoS is younger and lesser-known than PoW. 
  2. PoS is complex as it locks the addition time of new blocks and consistently monitors the actions of validators. 
  3. A validator needs to use three pieces of software. 

Closing Thoughts

PoS opens the door to the crypto universe for all individuals or entities, large or small, while removing the economic incentives of bad actors. PoW works from a security perspective while ironically encouraging some centralization and excluding the vast majority of potential validators as it matures. 

Retail investors now enjoy several solid, regulated crypto exchanges for entering into crypto without jeopardizing their security. In tandem, yields from traditional bond investing pales alongside staking’s potential return. This spells opportunity for forward-looking banks embracing tomorrow.  

Democracy and opportunity remain the heart of cryptocurrency. Ethereum’s PoS represents an invention furthering that ideal to anyone with an internet connection.

Disclaimer: The author of this text, Jean Chalopin, is a global business leader with a background encompassing banking, biotech, and entertainment. Mr. Chalopin is Chairman of Deltec International Group, www.deltecbank.com.

The co-author of this text, Conor Scott, CFA, has been active in the wealth management industry since 2012, continuously researching the latest developments affecting portfolio management and cryptocurrency. Mr. Scott is a Freelance Writer for Deltec International Group, www.deltecbank.com.

The views, thoughts, and opinions expressed in this text are solely the views of the authors, and do not necessarily reflect those of Deltec International Group, its subsidiaries, and/or its employees. This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service, or offering. It is not a recommendation to trade. 

When Is the Ethereum Merge?

After some delays and much anguish, the upcoming “Ethereum Merge” is set to happen. Bellatrix, the first stage of this process, happened on September 6th. Yet one question on millions of minds across the world remains: When is the Ethereum merge? 

Paris, the second and final stage, is set to be complete by the next week, likely around September 15th. After this French foray, Ethereum – the world’s second-largest currency following Bitcoin – shall fundamentally change from its very core. Meaning, its blockchain “proof of” protocol shall shift from Bitcoin’s original proof of work to the new, more centralized, and extremely energy efficient, proof of stake. 

The waves of change coming from the behemoth that is Ethereum shall not only shape the future of cryptocurrencies, but of finance itself in a time of “Web3” as retail investors across the world have joined in through massive crypto exchanges like Binance or Coinbase. First, let’s get into the basics of Ethereum, the jargon, and then some of the changes we can all expect. 

How Blockchain Works

When investors and crypto enthusiasts throw around the term “blockchain,” they’re referring to the engine driving a coin itself. It’s an immutable public ledger, decentralized and democratized.

In contrast, a centralized ledger of traditional banks or gambling parlors retained this information, but privately. And therein lies the problem – trust. This method forced consumers to trust an institution’s efficiency, integrity, and infallibility. 

Instead, the block of each blockchain contains records of transactions for time immemorial, decentralized for the benefit and trust of the general public. The same public maintains any blockchain’s integrity through what’s known as a consensus mechanism. 

The Consensus Mechanism

Unlike a centralized ledger, a consensus mechanism follows the tradition of a democratic parliament. A simple majority (51% or more) changes the accepted blockchain, or the blockchain which everyone agrees is true. 

Yet with the “miners” or “stakers” (validators) across the world incentivized to take part in the blockchain’s validation process by way of additional income, a single bad actor would need an absurd amount of energy and processing power. 

This formed the backbone of proof of work’s astounding success, although the energy consumption feels crippling in a time of rampant global warming and record heat waves. Proof of stake solves this issue.

Proof of Stake

This new consensus mechanism requests that crypto holders deposit their own digital assets as collateral for the opportunity to have their transaction record (their copy of the blockchain to date) used by the blockchain as parts of its goings on. In return, the holders of those deposits, or staked assets, receive rewards. 

Proof of stake relies upon mathematical randomness and the power of groups. Stakers are selected randomly, although higher stake amounts add to any one staker’s chances. Therefore, the mechanism requires multiple stakers to verify any one transaction before it becomes blockchain canon. 

When Is the Ethereum Merge?

Bellatrix served to prepare Ethereum for its merge by acting as its “hard fork.” This translates into a radical change requiring all Ethereum actors and users to upgrade to the latest protocol software. 

Specifically, it prepared the consensus layer of the cryptocurrency for a merge with its execution layer. That merge is what we call “the Ethereum merge.” 

Paris occurs when the Terminal Total Difficulty (TTD) reaches 58,750,000,000,000,000,000,000. This figure represents the cumulative total difficulty of all mined Ethereum blocks under the proof of work consensus mechanism. 

After hitting this difficulty, mining, or solving the next hash puzzle for the next block, becomes impossible. And thus proof of stake takes over like a default recourse. 

So to answer the question – when is the Ethereum merge? – predictions suggest September 15th on the dot. 

Bottom Line

Shifting to proof of stake is necessary due to crypto’s increasing regulation in a world suffering from overheating. Critics argue that the difficult hash puzzle remains the most secure blockchain invention to date. However, a stake-based mechanism succeeds in getting the job done while eliminating over 99.9% of the current energy usage and laying the groundwork for a similarly massive decrease in transaction fees through another process dubbed “sharding.”

In our next article we will describe the benefits of staking and the world changing benefits of the second largest cryptocurrency switching to it. These implications stretch from an increased price valuation to the removal of all mediums of exchange consuming far too much energy, be they crypto or fiat. 

Disclaimer: The author of this text, Jean Chalopin, is a global business leader with a background encompassing banking, biotech, and entertainment. Mr. Chalopin is Chairman of Deltec International Group, www.deltecbank.com.

The co-author of this text, Conor Scott, CFA, has been active in the wealth management industry since 2012, continuously researching the latest developments affecting portfolio management and cryptocurrency. Mr. Scott is a Freelance Writer for Deltec International Group, www.deltecbank.com.

The views, thoughts, and opinions expressed in this text are solely the views of the authors, and do not necessarily reflect those of Deltec International Group, its subsidiaries, and/or its employees. This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service, or offering. It is not a recommendation to trade. 

Artificial Neural Networks for Finance

Back in the early days of data science, before it was even called data science, any financial applications handled by programs were called Expert Systems. These were a domain of AI that was developed using the knowledge of a “Human Expert.” The expert’s knowledge was used to create a set of programming rules to assist the algorithm with making decisions. 

At its most basic level, an Expert System would look like this:

If the price of asset “A” when compared to asset “B” exceeds X%, then sell asset A (or buy asset B or do both), or: 

If a prospective borrower has a credit score below 591, do not lend them anything.

Such expert systems have been successfully used in fraud detection, medical diagnosis, and even when prospecting for minerals. However, there is a major limitation to them, which is that they require full information to be provided to them as an input and this fact means that they will either perform poorly or not at all with uncertainty. 

Financial applications primarily deal with the prediction of future events based on the results of past data. This is the reason that Artificial Neural Networks have become so popular in recent times, especially in the finance industry, because they have a better ability to handle uncertainty when compared to expert systems. When we consider various scenarios that involve predictions, we find a few primary areas enhanced by using artificial neural networks (ANNs): 

1.     Predicting the movement of the stock market, both indexes, and individual stocks

2.     Predicting loan application underwriting and repayment success

3.     Finding suitable credit card clients

In this article, we will explain the basics of artificial neural networks and go deeper into the applications where artificial neural networks can be the most successful and beneficial for the financial, banking, and insurance industries. Finally, we will finish with an example outline of an ANN for making credit decisions.

Artificial Neural Networks in Brief

ANNs are designed to mimic the actions of biological neural networks seen in life forms with nervous systems and brains such as humans.  

Image courtesy of Quora

The biologic nerve cell will take the chemical input into its dendrites, and if the signal is sufficient, then it will transfer this signal down its axon to its axon terminals, where it produces its own chemical signal to go to the next nerve cell.  

The artificial neuron (sometimes called a perceptron) will take input and evaluate it with a bias (or summing) function. The bias function decides what to do with the result, sending it on or not, and to what degree the message will be transferred.  

This perceptron was created by Frank Rosenblatt back in the 1950s and was used by the US Navy for image recognition tasks as well as many other applications.  

The ANN expands on the perceptron and consists of many interconnected neurons all performing their summing functions with the data inputs. Each of the following circles is a single artificial neuron.

Image courtesy of techvidvan.com

The ANN is made up of input and output layers, and a network will have at least one hidden layer between these, but can have dozens of hidden layers with numerous neurons in each layer depending on the model. 

The summing functions for each neuron (colored circles above) will have their own weights and use input data coming in from the left and are connected to the next layer to the right, where they send their decision results. Information is stored in the weights of the connections between the neurons. As an ANN is “trained,” the weights are what changes to improve the results that the model is providing as its output. 

This example is a “feed-forward architecture” and the most commonly used in ANN applications. There are other types of neural networks that are used in specific applications where they perform better. 

ANNs give the user the ability to utilize the data available fully and to determine the structure and parameters of a model without restrictive modeling assumptions.  

Artificial Neural Network Applications

ANNs are especially appealing in finance, banking, and insurance because there is an abundance of high-quality data available for these fields. This data means that there are plenty of inputs, and before ANNs, a lack of testable financial models to deal with all this data.  

Predicting Stock Movements

The prediction of stock market indices and specific stock values are handled by ANN using the vast supply of historical data and then predicting based on several parameters. The accuracy of the prediction is enhanced by the choice of the variables and the information that is provided during the training process.

It can be further improved with an ANN structure that has more hidden layers and more training variables. One group attempted to predict the NASDAQ stock exchange movement and found that a network with three hidden layers, consisting of a configuration of 20-40-20 neurons in the hidden layers, the team had an optimized network and a resulting accuracy of 94.08%. 

While there are other types of neural networks, these types of feed-forward networks are the most widely used because they offer generalization abilities and can be implemented easily.   

Searching for Credit Card Customers

Some credit card companies are using ANNs to decide whether to grant credit card applications. The underwriting process uses the analysis of past failures to make current decisions based on the past experience of other card holders.  

All banks that are in the credit card business wish to obtain an ideal customer who will help them remain profitable. If the client does not spend much with their credit card or uses the revolving line of credit, then that customer is not profitable.  This non-profitable customer will have a per card revenue much lower than the per card cost, and the result will be a low breakeven percentage. 

A group of researchers used an artificial neural network to approach this problem and more accurately predict ideal customers. This study used values called eigenvalues to find the lowest error rates for deciding on the best customers. After several rounds of testing, there were 14 eigenvalues that had the lowest error rates identified and settled on when choosing the most suitable customers. 

This process eliminates instances where credit cards are issued to customers who have no credit card needs, and it gives the bank more meaningful questions to ask on a credit application to better identify the ideal customer.  

This is now broadening beyond the yes-no approval decision and expanding to the amount of credit that is being provided to customers who are approved.

Evaluating Loan Applications

Financial institutions will provide loans to their clients for different reasons, and these decisions are based on various factors. ANNs can be employed to aid in the underwriting process, deciding whether to approve or decline the loan application. 

Any loaning institution will want to minimize its default rate for loan applications and maximize its returns on the loans they issue. A research group was able to test the accuracy of an ANN in predicting the success of loan recovery, and they found an accuracy of 92.6%. 

Additionally, their error rates for Type I (making a bad loan) and Type II (rejecting a good loan) errors were 6.5% and 8.2%, respectively. The failure rates that have been seen for loans approved using ANNs are lower than some of the best traditional methods.  

Other Applications

Beyond those applications listed above, ANNs can be applied to several valuable use cases:

·       Forex price predictions

·       Futures movements and pricing

·       Bond ratings

·       Prediction of business failures

·       Assessment of debt risk

·       Predicting bank failure

·       Bank theft

·       Predicting recessions

How an Artificial Neural Network Decisions Works 

To give an example of how an ANN decision can be made, let’s consider an example of what could be used to make a creditworthiness decision.   


·       Age

·       Gender

·       Annual Income

·       Length of time at current job

·       Marital Status

·       Number of Children

·       Number of Children in the home

·       Education level attainment

·       Homeowner or renter

·       Cars owned

·       Address/area

·       Commute distance

·       Credit score

Training and Testing

There will be a large set of clean data created that contains all the inputs to be fed into the ANN to train it with known results (this is called the training set), changing the weighted variables for each neural node to increase the model’s prediction accuracy.  

Once the ANN is trained, a different set of input data is supplied (none of which is present in the training set), and the ANNs “Loan Approved” results are obtained. This second run through of data is a “test set” and can be done using real-time data coming in. 

Based on what was “learned” during the model’s training phase, the accuracy of the predicting ability is refined. The model’s prediction accuracy depends on the various input factors that go into it as well as the addition of hidden layers which are added to the neural network–until the optimum level of accuracy is achieved.

Closing Thoughts

ANNs have continued to improve, and their use has broadened with the decreases in computer costs and the persistent increases in computing power. They will likely be a foundation for financial and economic models but may need to evolve with the likely adoption of quantum computers. 

As we move forward, ANNs will become an even more useful tool to automate service- or data-oriented tasks. The financial, banking, and insurance worlds have an abundance of clean data that can feed into ANNs. 

Care must be taken to ensure that bias is removed from any data going into the model as this can ensure that bias will not come out of the model. Essentially, if we treat the models with care, they will bring us infinite value.

Disclaimer: The author of this text, Jean Chalopin, is a global business leader with a background encompassing banking, biotech, and entertainment. Mr. Chalopin is Chairman of Deltec International Group, www.deltecbank.com.

The co-author of this text, Robin Trehan, has a bachelor’s degree in economics, a master’s in international business and finance, and an MBA in electronic business. Mr. Trehan is a Senior VP at Deltec International Group, www.deltecbank.com.

The views, thoughts, and opinions expressed in this text are solely the views of the authors, and do not necessarily reflect those of Deltec International Group, its subsidiaries, and/or its employees.

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