Category: Healthcare

Initially, the banking industry ignored the world of blockchain. Blockchain’s origins were in direct opposition to the banking system and the control that banking has over our lives.  

As the blockchain industry gained momentum and investors earned their profits, the banking industry noticed. And when Ethereum and other crypto assets added smart contract functionality, the innovative vanguard of the industry saw massive potential. 

It’s unwise to bet against the banks. Banks operate through their incentives to invest and adapt, and fight tooth-and-nail to keep their customers. While a minority of investors believe that blockchain could lead to a revolution displacing the power of large financial institutions, this is unlikely. 

Prior to Covid in 2018, Deloitte conducted its Global Blockchain Survey and spoke with 1,000 banks. The survey demonstrated how much interest the financial world already had in blockchain technology. More than 95% of respondents confirmed they were investing or planned to invest in distributed ledger or blockchain technology. 

As we move forward into mid-2022, and after wrestling with the pandemic, the initial curiosity seen in Deloitte’s study has manifested into realized projects. 

A Need for Change

Many banking services are costly and slow, while other sectors are moving ahead quickly. They are replacing antiquated products and services with new versions. 

Phones, cars, computers, and even lightbulbs are being reimagined–becoming more functional and efficient. Much of the too big to fail banking system is in no hurry to evolve, mainly due to fees.

As they are for-profit organizations, they want to optimize returns. Banks earn spreads on their deposit interests paid versus the interests collected from loans. Depositors receive low-interest rates (fractions of a percent), but banks lend at higher rates:

• Today’s 30-year Lending Interest Rate = 4.921%*
• Student Lending Interest Rate = 4.5–7.3%*
• Average Credit Card Lending Interest Rate 19.53%*

Rates at this time of writing*

Banks easily found customers because there were limited choices. Debtors rarely complained, accepting their situations. With blockchain, debtors access lower rates from more competitive lenders. 

Retail Banks Circumventing Competition

As blockchain evolved, more users learned that distributed ledger technology enables real-time transfers; no middlemen and no fixed costs.  

Consumer finance players now realize that blockchain projects pose significant threats to their similar services. They understand that they will lose their customers if they fail to evolve.   

How do banks fight back? They create blockchain-based solutions at prices low enough to prevent consumer switching.   

In Deloitte’s most recent Global Blockchain Survey, they found that many organizations were investing in projects across the board.  

Representing only a portion of the industry, financial institutions understand the need to connect with non-financial blockchain projects growing in parallel to them. Defining these necessary projects or solutions and integrating them effectively is crucial.  

The Central Bank Movement Has Started

Globally, even slow-moving governments and central banks are beginning to create or overhaul their digital infrastructures.

The Biden administration made its first public announcement through an executive order recognizing the popularity of cryptos and their potential to destabilize traditional finance. This same order directed the federal government to create a crypto regulation plan, including the creation of a digital dollar.   

Other nations’ central banks are adopting blockchain-based innovations and are overhauling their digital infrastructures to address complex operational challenges. Some central banks have already incorporated these technologies into their daily operations. 

In 2019, the Bank of England undertook a proof-of-concept test determining how real-time gross settlement (RTGS) could evolve with blockchain. RTGS is a funds transfer system allowing for the instantaneous transfer of money and/or securities. 

In 2017, they synchronized the movement of two different currencies across two different real-time gross settlement systems using Ripple. Great Britain has actively researched digitizing its economy’s governance and investigated a blockchain-linked pound sterling.

The BoE’s report says that a number of opportunities for achieving their financial and monetary stability objectives are possible with digital currency.  

Returning Power to Central Banks

With national digital currencies, central banks can counter the dominance of Visa, Mastercard, and others over private networks by lowering transaction costs for users and small businesses. A “Digital Dollar,” “Britcoin,” or the “CDBC” (digital yuan) will each accelerate the creation and adoption of other national digital currencies.  

Beyond Cost Savings

Banks look to blockchains for more than cost savings or improvements to their network efficiencies.  They see blockchains as foundations to RTGS revolutions worldwide. 

Through blockchain’s benefits, banks can increase the security of digital transactions and prevent errors, double counting, confusion, and fraud. Bookkeeping and auditing are examples of industries overdue for disruption by blockchain.   

Distributed ledgers also address the world’s new realities. Global populations, particularly in Asia and Africa, were already reducing their use of cash before the worldwide pandemic. Still, reductions have quickened, and the use digital payments reached $5.4 trillion, growing by 16% year-over-year from 2020.

Much of the growth was seen in Europe and the United States, but they are far from catching up to China, which was almost $3 trillion (over half of all digital transactions) in 2020 and may become cashless soon.  

The Digital Yuan

China is aggressively pushing the use of its “digital yuan” (the CDBC). It has gifted millions of the digital currency to its citizens in order to evaluate the feasibility of going cashless. While the initiative is not a true blockchain innovation as the CDBC is controlled by the central government and not decentralized, it demonstrates an increased use of digital infrastructure within the global financial system.

China’s mission is to ensure that any commercialization inherent to a blockchain-driven digital world matches its political makeup. Through the CDBC, China is playing a bit of a shell game: giving digital currency to users while maintain tight, centralized control. This is not the idea underpinning a decentralized, distributed ledger technology. 

However, democracies want transaction transparency, and more of them are demanding that the costs of transactions be reduced. An open blockchain achieves both objectives as it has the five following traits: 

• Open
• Permissionless
• Transparent
• Provides both finality and immutability of transactions
• Maximizes on-chain liquidity

These features create more intelligent, compelling solutions.

Continuing Evolution

More businesses will utilize blockchain as it continues to evolve. However, not all blockchain projects are the same. Successful winners must meet the demands of excessive data and transaction use.  

Bitcoin presents many solutions. It reduces cost, increases trust, bypasses third-parties, and prevents sources of inflation inherent to centralized, fiat currencies. 

Tall orders, yes, but Bitcoin successfully delivers, albeit with some limits. It suffers from a seven transactions per second limitation. Layer-2 solutions (like its lightning network) add additional throughput and functionality. Other layer-1 solutions however, solve this too. 

Any successful blockchain project must be cost-efficient, stable, and scalable (what layer-1 Bitcoin lacks).  In October 2020, the Italian Banking Association introduced its “Sputna nodes network,” intending it to be cost-efficient, quick, stable, and scalable. 

Sputna integrates most of the country’s banks, quickly processing transactions. This interbank cooperation creates a transparent landscape and standardizes Italian banking sector activities. 

Moving Forward

The current state of blockchain and crypto feels akin to the mid-90’s internet boom. Blockchain is still not fully understood, and there will be a mix of successful (i.e., RTGS) and unsuccessful projects (i.e., Pets.com). 

However, consumer banking must evolve to keep its customer base given the alternatives already presented by blockchain-based solutions. Central banks will have a similar task of creating digital systems balancing governmental desires with those of their citizens. 

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. 

The advent of blockchain, cryptocurrency, and tokenization brings a new world of opportunities for issuing and managing investments. 

The technology behind nearly all cryptos, blockchain, is an immutable distributed ledger. This fits perfectly with the changing financial landscape wanting single assets subdivided into smaller parts, enabling proportional ownership and enhanced liquidity. 

Subdividing provides democratized investing and liquidity to historically illiquid assets, such as art, real estate, digital media, and collectibles. The secret behind the democratization: tokenization. 

It calls for transparent and highly functioning markets. It holds the potential to change every asset class we know. So, what is tokenization? 

Tokenization Explained

The tokenization of assets reflects to the process whereby an issuer creates digital tokens and places them on a blockchain or similar type of distributed ledger. These tokens represent either physical or digital assets.  

The underlying blockchain confirms ownership of assets, matching them with their respective tokens. No authority can change or alter this ownership (its immutable) other than the owner with their private key. It’s explained best with an example. 

Suppose you own a property in Chicago, Illinois, worth $1,000,000. Through asset tokenization, this asset is converted to 100,000 tokens, each representing 1/100,000^th of the property. Let us next assume you have another opportunity and want to borrow $100,000.  

You would rather not sell the property outright because you need a place to live, but you still need the funds. You decide to instead issue tokens on a public distributed ledger, the largest being Ethereum.  

When someone buys a token, they are purchasing 0.00001 of your home. If they were to buy 100,000 tokens, they would be the owner of your home. Since your home’s tokens are on a distributed ledger, which is immutable, no one can erase a buyer’s ownership of your home’s tokens once the transfer is complete. 

Tokenized Asset Types

If we are to focus on how tokenization works, and how tokens are constructed, we find that there are two specific types:

1. Fungible
2. Non-Fungible

Let’s go through the specifics of each.

Fungible (Asset) Tokens

Fungible assets have two primary characteristics. 

Interchangeable. Each unit of a tokenized asset will have the same market value and validity. Our home example is fungible; Bitcoins are all exactly equal and fungible. They have the same market value and can be exchanged freely. Your 0.01 bitcoin (or fungible token) is worth the same as all other 0.01 bitcoin.

Divisible. A fungible crypto or other token can be subdivided into as many parts as was configured during token issuance. For Bitcoin, a satoshi is 1/1,000,000^th of a bitcoin and is the smallest valid denomination available. It has the same value as any other satoshi.  

Non-Fungible Tokens (NFTs) 

NFTs represent the opposite to fungible tokens. 

Unique. They cannot be replaced with tokens of the same type because each one holds a unique value with unique attributes. If you really did sell your house piece by piece, then the front entry tile would be an NFT. 

Non-divisible. NFTs generally are not subdivided. However, there are F-NFTs providing fractional ownership of NFTs, and these are used for fine art investment or for commercial real estate.

Which Assets Are Tokenized?  

With tokenization, the opportunities are endless because tokenization allows for both proof of ownership and fractional ownership. Traditional financial assets such as shares in venture capital funds, commodities, and real estate show only the beginning. 

Exotic assets are now possible with fractional shares of racehorses, sports teams, artwork, and even a celebrity’s earnings. There are four main types of tokens. 

Assets. These are items of value which the owner can divest into cash. Assets are further divided into two smaller classes: 

            Personal: personal assets, including cash and property

            Business assets: those which appear on a company’s balance sheet.

Funds. Investment funds can be tokenized. These tokens represent shares of the underlying fund. Each investor would be provided tokens that, in total, are of equal value to their share in the fund. 

Equities. A company’s (or other entity’s) equity shares can be tokenized. These assets are in the digital form of security tokens and are stored in an online wallet. 

Services. To raise funds or conduct its business, a supplying firm can offer goods or services in token form. Investors can use the tokens to purchase the related goods or services the supplier provides. 

The Benefits of Asset Tokenization

We will break these advantages into two perspectives:

Owner

Liquidity

The owner of a piece of art worth $500,000 needs $50,000 but does not want to sell the work to raise funds. The owner tokenizes the artwork into 500,000 security tokens, each valued at 0.0002% of the total. They sell 50,000 tokens without the selling the art itself, but ensures it is a liquid asset.  

Fair Value

Assets that are not regularly sold have unestablished market prices. When this is the case, a seller needs to provide buyers with various incentives like an illiquidity discount, reducing the asset’s price. With the tokenization of assets, their liquidity is increased because it facilitates fractional ownership and eliminates illiquidity discounts. 

Reduced Management Costs

When the ownership of a unique asset is transferred today, the process requires third-party intermediaries such as lawyers who will handle the paperwork and broker the deal.  This trust-building takes extra time and may not be real if the intermediary is acting in the best interest of only one side of the transaction.  

With the tokenization of the same asset the use of a decentralized blockchain and smart contracts automates several parts of the sale/transfer process, which saves that time and cost.  

Investor

Liquidity Increased

It’s now possible for retail investors to invest smaller amounts of money in a work of art, much like the fractional shares which have become popular on various online trading platforms.  Retail investors can now buy fractional shares of Berkshire Hathaway stock, a transaction that would typically require an investment of over $470,000, but a fractional share is available for as little as $1. 

Tokenization allows these same retail investors to diversify their portfolios into assets like fine art, benefiting from the increased liquidity. They could easily invest a sum of $5,000, which in the past was not possible without significant paperwork raising the cost and time needed for such a transaction.

Shortened Lock-Up Periods

Investors are restricted from selling assets during lock-up periods. The lock-up is usually implemented because the asset is large and illiquid. 

The higher the liquidity of an asset, the more desirable it becomes. Tokenization potentially shortens or eliminates lock-up periods. 

Transparency

Since the immutable nature of blockchain underlies asset tokenization, the history of an asset remains unchanged, preventing owners from making it look more attractive. Investors may the full history of an asset, allowing them to make more informed decisions.

Identity Security

With decentralized identity (DID) and ownership details maintained on a blockchain, the buyer’s public-private key pair is used as a digital signature to ensure their authenticity. This system can also be utilized for KYC/AML processes, and a standardized DID identifier ensures acceptance across different blockchain networks and platforms. 

Tokenization and the Future

Tokenization is transforming finance. 

The investor’s perspective may seem the same even as the investment options presented to them increase. Yet what happens behind the scenes remains revolutionary; that is, democratization through tokenization. 

The primary obstacles standing in the way are regulatory and legal issues, given the variety of its applications. For example, digital trading cards have different hurdles to cross relative to works of art. The legal bridge between an asset and its blockchain requires the cooperation of knowledgeable legal and tax professionals who can solve cross-jurisdictional issues.  

Bringing online other industries and its professional may take longer than expected, yet we expect new solutions to arrive as such fluency issues are resolved. We feel certain that tokenization will change investing for years to come. 

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.

As Bitcoin’s popularity continues to rise, so too does its global count of transactions.

All blockchain technology is at its core a shared database that is “distributed” among the nodes, allowing anyone to see all the transactions recorded on the chain. Transactions that are recorded on a blockchain network are unsurprisingly called “on-chain” transactions.

This builds trust and security. However, Bitcoin suffers from an issue of scalability. It has a limitation to how many transactions it can process in one second and in one block.

The Lightning Network is a potential solution to this problem. We will discuss the Lightning Network, how it solves the scalability issue, a few issues the lightning network itself must overcome. 

What is the Lightning Network?

At its heart, the Lightning Network is a system allowing network participants to transfer their bitcoins between each other without any fees (or with minimal fees) by using their digital wallets. A payment channel is created between the two users (sender and receiver) so they can transact “off-chain” with each other. The Lightning Network is a layer on top of Bitcoin’s blockchain network to process smaller payments between participants. 

This system means that on-chain transactions will be fewer, and the total processing time will be reduced. 

Image courtesy of RAKESH SHARMA

With the Lightning Network, funds are transferred as quickly as the users’ wallets can communicate on the net. When business is concluded, there is a “closing transaction” on the main Bitcoin blockchain (layer 1) to settle all of the transactions.

The Bitcoin blockchain will not know how much each Lightning Network user owes until the bill is settled. Because transactions are generally not between trusted users when payment channels are opened, both sides place deposits of equal to higher values than the transactions themselves.

Is It Safe?

If, at any point, either user of a transaction wishes to back out, they can easily take their deposit and leave without consulting the other party. With such a one-sided withdrawal, the leaving side is required to wait for 1,000 block confirmations (approximately one week) to get their deposited bitcoins back. The party who did not leave will receive their security bitcoins instantly.

There are fraud measures built into Lightning. If one party tries to avoid paying the other, then the former suffers a penalty of forfeiting their whole deposit. 

The Lightning Network also allows users to jump through connected payment channels. These “network channels” allow indirect connections of payment channels through intermediaries. This is how the creation of unnecessary payment channels is avoided as scale increases.   

Ultimately, the lightning network works well for small transactions. Even if there are hypothetically over 1,000 transactions between users, the main blockchain shows only transactions: the first opening the payment channel and depositing money, and second closing it and settling the bill. All the transactions in between were feeless and instant.

Why is the Lightning Network Needed?

The general structure of Bitcoin’s network means that, when a transaction happens, it’s added to the newly created block once verified. The blockchain structure shows us that all its nodes each have a copy of the transactions for the vilification process.

In Bitcoin’s structure, these nodes are miners. Miners can only process a certain number of transactions per block, averaging 1,609, and there is only one block produced every 10 minutes. The network does lag down if the transaction volume becomes excessive. This leads us to Bitcoin’s scalability issue, where the network slow down significantly when it tries to process many transactions simultaneously. 

This also leads us to increased transaction fees, chipping away at a central, founding tenet of Bitcoin. And users can occasionally offer to pay a higher fee to have their transactions processed sooner, similar to traditional wire transfers. Small transactions will suffer greatly from these fees.

The purpose of the Lightning Network is to cut away these transaction fees through scale and enhanced processing capacity. For Bitcoin to compete competing against the likes of Ethereum or Tether, it must improve its scalability.

Problems with Bitcoin’s Lightning Network

However, there are a few issues which the Lightning Network still does not solve.

There Are Still Fees

While Bitcoin’s congestion is one of several factors influencing its transaction fees, the cryptocurrency’s own fee is still a significant component of the Lightning Network’s overall costs. 

There are also opening and closing fees which must be paid. The opening fee and its required deposit must be made on-chain. Once open, users process several transactions between each other or through network channels. But to settle a bill, the closing transaction is resolved on-chain as well. The deposited capital is tied up so long as the payment channel remains open. 

There is also a separate routing fee occurring when there are payments between payment channels via other network channels. These fees are low, and the idea is to have them be low enough to attract more uses, but they are still required. 

Let’s not forget the possible catch-22. If the fees via Lightning are too low, there may not be an incentive for nodes to facilitate these payments. As businesses adopt the Lightning Network, they may begin to charge fees for using it and negate its economic benefit. Some blockchains have already created solutions to this problem, allowing for cheap transactions through master nodes. 

The Lightning Network is Susceptible

While there is cold storage available for use by funds on the Lightning Network, its nodes are required to be online all the time to send and receive payments. The involved parties must remain online and use private keys to sign in. The computer storing the private keys is vulnerable to hacking.

If a user is offline for an extended period, they are also susceptible. As stated above, the leaving side is required to wait for 1,000 block confirmations to receive their deposit. If one side closes the channel while the other is away for eight days or more, this is a fraudulent channel close, and nothing can be done to recover the lost deposit. 

Network congestion due to a malicious attack also renders participants vulnerable to unreturned deposits. A forced expiration of many transactions could result and is a systemic risk recognized in the Lightning Network’s white paper.

A malicious party could overwhelm the capacity of a block by creating numerous channels that all expire at the same time. This situation would give the attacker the ability to steal funds from parties unable to withdraw them due to congestion. 

An Unstable Bitcoin Price

While the Lightning Network is supposed to make small transactions possible, there is still ample room for growth and improvement. The current increase in on-chain transactions is from trading volume. 

The added attention adds growth but volatility as well to the price. This volatility makes using Bitcoin as a payment tool difficult for merchants dealing with static inventory and planning accordingly with suppliers. When a company receives an invoice, it is often given 30 days or less to pay. If Bitcoin’s price drops 17.58% in 30 days, the supplier will be receiving an equivalent of 17.58% less fiat currency for their products. 

Graph courtesy of Google Finance

This could create the need for an entire market of futures for nearly every product, or for a “frozen” market price detailed on an invoice. A similar risk exists for consumers who use bitcoins to purchase goods or service while receiving incomes in other currencies.

The Lightning Network’s Future

As of January 2022, the Lightning Network had a capacity of 3,300 BTC, up from 2,000 in August 2021.  Arcane Research believes that up to 700 million users could be on the Lightning network by 2030.

The decentralized finance industry may help with this acceptance and use. Kraken stated at the end of 2020 that it would be making use of the Lightning Network in 2021:

“We expect to allow clients to withdraw and deposit Bitcoin on Lightning in the first half of 2021, which will allow clients to move their Bitcoin instantly and with the lowest fees.”

There may also be a solution for the automatic fraudulent channel close we discussed earlier in this article. “Watchtowers,” which are third parties running on Lightning Network nodes, could monitor off-chain transactions and prevent such transaction closes.

Summary

The Lightning Network represents a solid solution to a few of Bitcoin’s most significant issues. First and foremost, it encourages smaller transactions and widespread use.

If the security issues and malicious susceptibilities Lightning has can be solved, it will be a great addition to Bitcoin. More work is needed to improve Lightning. Yet it does give Bitcoin the opportunity of operating as a staple currency worldwide.  

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.

Researchers at the Chalmers University of Technology in Sweden devised a system that captures solar energy, stores it for up to 18 years, and then releases this energy in the form of either electricity or heat when needed. 

Solar energy could be available on cold, cloudy, or rainy days – when it is most needed. 

This system is called Molecular Solar Thermal (MOST) Energy Storage and is based on a specifically designed molecule. It changes its shape under sunlight and turns into an isomer that can be stored as a liquid. 

The Swedish research team recently collaborated with another team from China’s Shanghai Jiao Tong University that designed a generator to convert the stored energy into electricity. Since this generator is in the shape of an ultra-thin chip, a vital application of the MOST system is self-charging electronics – namely, smartphones, smartwatches, tablets, and laptops.

Source: https://www.chalmers.se/en/departments/chem/news/Pages/Converting-solar-energy-to-electricity-on-demand.aspx

Researchers at the Los Alamos National Laboratory used machine learning to identify sounds indicating that a fault will soon rupture.  

Earthquakes happen when blocks of earth near the junctions between tectonic plates suddenly slip along fractures. Built-up friction causes this dramatic “slipping,” and the energy is then released via seismic waves. 

The research team’s machine learning algorithm collected large quantities of data from previous earthquakes and identified a distinct sound pattern preceding earthquakes. 

Using the Lab to Save Lives

The team created “lab earthquakes” using steel blocks and rocky materials to recreate the “slipping” preceding seismic sounds. They trained a computer to analyze the seismic and acoustic signals emitted during movements along a fault.  

They undertook to determine whether the experimental fault’s seismic signal contained information about its current frictional state, leading to an understanding of when the quake might occur and at which magnitude. Using machine learning and AI to study the seismic data, they uncovered a quantitative link between the fault’s frictional state and the signal’s strength. 

This method is now being tested in real-world scenarios to ascertain whether the pattern follows for real earthquakes.  

Source: https://www.lanl.gov/discover/science-briefs/2018/March/0320-earthquake-fault-behavior.php