PCM vol. 3 issue 5

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Thought Leaders Corner How Cryptocurrencies are paving the Future of Finance photo by Zach Copley on Flickr by Eric Larchevêque In October 2015, The Economist ran the headline “Blockchain - The trust machine”. This ignited a strong interest into the technology underlying Bitcoin and started what we could call the “blockchain craze”. Promises of decentralization were sparking everywhere, whilst Bitcoin’s pith and marrow -- the capacity to transfer tokens of values instantly, globally and with a full censorship resistance -- was deemed outdated and almost mocked. Fast forward 18 months. In April 2017, cryptocurrencies are five times stronger: from $5 billion to a $30 billion global market cap. Bitcoin takes of course the lion share with a whooping two thirds, but Ethereum and its $4.5 billion booming economy is getting closer every day. So, what happened exactly? While “Blockchain” was peaking its inflated expectation and began a down slide to the trough of disillusionment, cryptocurrencies were slowly but surely climbing the slope of enlightenment. Many experts discarded Bitcoin as a passing fad, arguing that it didn’t have a killer app. What they fail to understand is that the killer app of Bitcoin is... Bitcoin. Cryptocurrencies in general are a fully fledged self-sufficient and autonomous finance framework, enabling the faithful recreation of all known business models but in a trustless, secure and decentralized way. They exist in an orthogonal realm, oblivious to the legacy financial system and without the possibility of being muzzled. These unique characteristics combined to the dynamism of the ecosystem resulted to the 2016 late Bitcoin price rally and the 2017 massive success of Ethereum. With the exception of the year 2014, Bitcoin had always been the most performing currency in the world. And the first quarter of 2017 already saw a 20% increase. Of course, it hasn’t been without what we could call massive bumps in the road: the hack of Bitfinex (a major cryptocurrency exchange) as well as the DAO debacle reminded everyone how far the road is before achieving real maturity. All these strong (and repeated) performances didn’t however leave investors indifferent. Individuals and crypto-enthusiasts at first, quickly followed by high net worth individuals, family offices and specialized hedge funds. But there is one catch to this apparent gold rush: Bitcoin, and cryptocurrencies in general, are not that easy to invest in. Not only are they not regulated, lacking mainstream investment vehicles, but they are also complex to hold and safeguard. Moreover, their combined cap market is still quite small in the world of finance: taking a large (>100M$) position without strongly moving the market is not really possible. But nature abhors a vacuum, and fintechs are building solutions to onboard investors in the crypto world with the minimum possible of friction. If the road to institutional investment vehicles such as ETFs (Electronic Traded Fund) seems to be particularly hard, hedge funds are already proposing to hold a mix of cryptocurrencies to their customers. 4
Thought Leaders Corner The difficulty of safeguarding cryptocurrency assets lies in the foundation of the blockchain digital identity model. When you own bitcoins, what you are really owning are “private keys”, a critical piece of information used to sign transactions spending the funds. Whoever has knowledge of this secret can dispose of the associated bitcoins. As there is no possible way of cancelling a transaction, private keys are akin to non revocable bearer bonds, very close to physical cash. Managing these private keys on an IT infrastructure is highly critical and must rely on secure hardware ensuring a full isolation of the secrets from the outside world. These data fortresses are the modern equivalent of the bank vaults, and are the backbone on which hedge funds or crypto indexes are built. If the cybersecurity threats are a priority when assessing the risks, assaults and kidnapping are another very important factor to mitigate. Hedge funds managing tens of millions of dollars of assets in the equivalent of easily transportable cash must make sure that an armed gang cannot force the administrators to empty the digital coffers at gunpoint. Multi signature, time locks and rate limiters are now part of the safety models enforced by state of the art security solutions. If executing a transaction requires by design a delay 72 hours (without any possible recourse), the success probability of an armed robbery tends towards zero. Little by little, step by step, the new deal of blockchain based cryptocurrency technology is building an alternative finance platform, totally orthogonal to the legacy system. Attracted by the “innovation without permission” paradigm and by the perspective of really disrupting the existing models, developers and entrepreneurs are flocking to this new eldorado. This in turn attracts investors and speculators, unfazed by the risk of implosion of the system but betting high on the massive returns in case of cryptocurrencies’ adoption success. The prospect of a $100 billion market cap is not remote anymore. Large institutional investors, sovereign funds and even states wouldn’t then have the luxury to pass on owning a chunk of crypto assets for both strategic and competitivity reasons. So, how the legacy system could empower cryptocurrencies in other ways that being in the backseat, reduced to owning a chunk of assets? The major <strong>issue</strong> of cryptocurrencies is that they are not a “real” currency in the legal sense. This prevents mainstream adoption of the technology because no one really wants to hold a <strong>vol</strong>atile currency for an everyday usage. Financial innovations are therefore constrained to a limited scope and the potential of the technology cannot really be fully unlocked. By issuing their national currency through a blockchain (you can think of a cryptodollar or a cryptopound for instance), central banks would create a massive potential for positive financial disruption. As the blockchain would fully be controlled and audited by regulators, there wouldn’t be any energy costs associated to the mining (necessary only to enable censorship resistance, obviously not needed here). Money over IP, harnessed by an economic power. Endless possibilities. Eric Larchevêque CEO at Ledger Eric is a serial experienced entrepreneur and he developed several French and European projects in the IT space. Passionate about the high potential of cryptocurrencies, he founded “la Maison du Bitcoin” in 2013. He’s currently CEO of Ledger, a cybersecurity company aiming to unleash the full potential of cryptocurrencies for individuals, enterprises and industrials. Ledger Ledger leverages encrypted chips technology to build security solutions for cryptocurrencies and blockchains. Hardware Wallets for consumers, Hardware Security Modules for enterprises and Hardware Oracles for the IoT world. Its latest product, Ledger Vault, provides multicurrency, multisignature and time locked solutions to secure large assets with custodian possibilities. The question is not if cryptocurrencies will take over the financial world, nor when they would do it. The real question is who will do it. Will it be Bitcoin and other decentralized cryptos, or will it be China and their already advanced crypto yuan? As we say in French: faites vos jeux, rien ne va plus. 5
Page 1 and 2: Vol 3. Issue 5 | May 2017 YOUR GATE
Page 3: Contents STORIES Amir Abdin Founder
Page 7 and 8: Thought Leaders Corner Revolutioniz
Page 10 and 11: Innovating the Music Industry with
Page 12 and 13: Thought Leaders Corner Bringing Blo
Page 15 and 16: expert interview Expert Commentary:
Page 17 and 18: expert interview more computers and
Page 19 and 20: startup Spotlight “OUR GOAL IS TO
Page 21 and 22: startup Spotlight Snapshot of the W
Page 24 and 25: SPECIAL FEATURE photo by Nick Webb
Page 26 and 27: Hot jobs Hot Jobs PRODUCT MANAGER P
Page 28 and 29: events 16 London, UK This annual me
Page 30 and 31: Payments & Cards Network Driving In

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