City of Berkeley Moves Forward with Municipal Microbonds Program, Using BlockChain Technology
On Tuesday night, the City of Berkeley took a big step forward in its plan to issue Blockchain based municipal bonds. The long-awaited BlockChain Community Microbond Initiative will now proceed via a Request For Information which will invite the industry to put forth qualified proposals. First introduced by District 3 Councilmember Ben Bartlett, the Microbond Initiative aims to see the city issue bonds as low as $25 directly to community members to invest in public projects.
Although cities have long issued municipal bonds, the $3.7 trillion municipal bond market lacks transparency and involves a slew of fee-collecting middle men, and are often priced out of reach for normal Americans. In lieu of a banking intermediary, Berkeley’s microbonds will be issued directly to investors, thus removing unknown middlemen and lowering prices.
Microbonds are low-cost, interest-bearing instruments, designed to be affordable. Bartlett hopes that Microbonds can be an antidote to extreme wealth concentration, by creating investment opportunities for historically marginalized populations.
“Right now, a staggering 43 percent of Americans are poor or low-income,” Councilmember Bartlett said. “This is because capital is bound up in too few hands. Blockchain Microbonds might offer a way to expand the pie for ordinary people and help short term consumers, become long term investors.”
Cutting costs and removing middlemen allows the City to increase flexibility in the targeting of projects. Combining civic crowdfunding with municipal microbonds secured by a blockchain-based system can democratize capital markets by creating a vehicle for community members to directly invest in their communities.
According to Kevin Dayton, president of the California-based Labor Issues Solutions, one of the advantages of microbonds is that they’re issued in “tiny denominations,” making them accessible for anyone. Bartlett added that because the community can choose to fund different local scale projects, such as parks, public art, and affordable housing, it opens the doors to “community-powered finance.”
While microbonds bring down the traditional barriers for investing in municipal bonds, the blockchain component of the Community Microbond Initiative ensures that consumer information is secure with an automated digital ledger to keep track of transactions, and resistant to concentrated attacks and failures. And the irrevocable nature of the transactions increase the accuracy of records.
“Because of the blockchain technology, [the bonds are] going straight to the consumer,” Bartlett said. “There’s real-time transparency with where it’s going and who possesses it, and payments made in a variety of frequencies.”
Bartlett added that the blockchain technology can dramatically lower the cost to issue, obtain, and administer bonds by “streamlining and automating” transactional processes. He sees the Initiative as a potential template for municipalities similar to Berkeley who seek to empower communities. Bartlett believes that is our civic responsibility to ensure that everyone can invest in their community and share in the upside. “The revolution needs a coin.”
How A Crypto Lending Business That ‘Hates The Banks’ Avoids Exploiting Its Customers
80 percent of profits returned to depositors.
Readers of a certain age will remember a time when banks could increase your wealth, as well as store it. If you’re old enough to remember when Pokemon was just a card game, you might also remember a wise grandparent or uncle telling you to put your allowance in a high-interest savings account, where it could compound at four or even five percent per year. Back then, a meager allowance could become a decent bankroll by the time you reached adulthood.
That advice has gone the way of the bell-bottom, and a decent savings account is about as common as a pre-release Raichu card. My own bank recently offered a magnanimous certificate of deposit paying 2%, provided I deposit $10,000 and leave it untouched. For a deposit of $25,000, they would give me all of 2.15%—which at least would keep ahead of inflation.
There may be several reasons why banking interest seems to have almost disappeared, but Alex Mashinsky believes that he has identified the most salient one.
“They’re stealing your money, basically,” he told Crypto Briefing.
“They’re Stealing Your Money”
Mashinsky is the co-founder of the Celsius Network, a blockchain based lending platform that deals in over a dozen cryptocurrencies. Asked how he became involved in the business of finance, Mashinsky did not mince his words. “I hate the banks,” he said.
For Mashinsky, the disappearance of savings interest is not so much a question of hard times as it is one of voracious monopoly capital, wringing out every penny of profits.
“When you make a deposit at JPMorgan or Citi, they pay you one percent then they turn around and lend me your money on my credit card and charge me 25 percent,” Mashinskyexplained to Crypto Briefing in New York. “So they keep 95% of what they make from it. And they can get away with it, because they have a license and we can’t get around them. They’re just sitting in the middle [being] toll collectors.”
That puts a serious dent in the retirement plans of most Americans, not to mention the rest of the world. “You can’t retire when you make 1% on your savings,” Mashinsky says. “The Fed is screwing all Americans so the banks can put more profit on their balance sheets.”
Average interest rates fell as banks consolidated
Mashinsky is used to preaching to the choir, but at least he has a good sermon. One of the slides in his keynote presentation is a chart showing the number of hundred-billion dollar banks, compared with the average interest rate. As the banking giants absorbed and devoured each other over the course of a decade, the average interest rate steadily ticked downwards.
The Costco Of Lending
That’s what led Mashinsky to launch the Celsius Network, an alternative lending platform which offers interest at unheard-of rates. The platform has recently reached 200 million AUM, thanks in part to the latest surge in market prices.
“We look like Costco,” Mashinsky said. “You walk in, you don’t have to worry about the cost of the orange juice. you know that Costco did the best job they could to bring it to you.” At present, Celsius offers six percent on Dash deposits, 6.10% on Bitcoin deposits, and 8.10% on stablecoins—meaning you can make money on crypto without worrying about volatility.
Here’s how Celsius brings big-box rates to small-time depositors. When members make a deposit, Celsius pools their cryptocurrencies and lends them out to hedge funds and other institutional traders, who borrow Bitcoin and other assets for arbitrage and market making throughout the cryptosphere.
“We didn’t invent a new business,” Mashinsky explained. “We took all the games that hedge funds and institutions are doing on traditional Wall Street and we applied it to crypto.”
This may make the Celsius team itself sound like a wunch of bankers, but Mashinsky insists that his lending model has nothing in common with the banking system. Celsius does not use leverage, thereby protecting users from the risks of fractional reserves. “Celsius always has more on deposit than it lends out so we can cover any withdrawal at all times,” Mashinsky explained.
Also unlike banks, Celsius is fully transparent in how depositors’ funds are used. Anyone can verify the size of the network’s loans against its deposits, Mashinsky explains, and this data will later be encoded on a blockchain to make verification truly trustless.
That could help advance Celsius’ goal of providing the best deals. At present the company delivers more than 80 percent of their loan interest to depositors and that figure is likely to increase. “If we can deliver 7 percent returns,” Mashinsky said, “then people have a chance for retirement, to pay for their kids’ weddings.“
We are beyond excited to announce that the Nexo Wallet is now also available as a mobile app for all iOS and Android devices.
Download the Nexo Wallet app today and make sure to give it your highest rating!
The Nexo Mobile App enhances your crypto banking even further so you can utilize the efficiency, convenience and security of the Nexo experience on the go.
All features are accessible via the Nexo Mobile App with the same uncompromised, seamless user interface.
The Only All-in-One Secure Crypto Banking Account:
Nexo is a licensed and regulated financial institution and as the world's largest and most trusted crypto lender has already securely processed more than $700 million for 200,000+ users around the world, leveraging the only $100 million insuranceon custodial assets in the blockchain space.
To participate in Nexo’s financial success, make sure to purchase NEXO Tokens on Huobi, one of the community’s most popular cryptocurrency exchanges, against BTC andETH, as Nexo shares 30% of its profits with the NEXO Token Holders.
Based on the Ethereum main network, the lending protocol manages to further meet the diversified needs. Under the latest version, the smart contract empowers stable coins (such as TUSD, USDC, PAX, DAI) as collateral with the maximum LTV up to 70%.
The maximum amount of one-time loan increased to the equivalent of 5,000 USD in forms of crypto.
Based on the newly developed database, users can get instant information, including the status about their borrowed loans and funded loans.
The appliance on mobile terminal has been developed and planned to be deployed in the near future, and it will be integrated firstly with the decentralized wallet ImToken.
A new module is planned to be launched for the lenders to initiate loan offers, which has now entered the development state in response to the lending demand for those who holding the digital assets to seek stable income.
View All Loan Offers Page
The borrowers of the KUN product can freely initiate the request, determine the loan terms, and transfer the collateral to the smart contract for safekeeping. At the beginning, the mortgage rate should not exceed 50%. As for mortgages with relatively more stable digital assets (such as TUSD, DAI), the mortgage rate can reach up to 70%. In addition, the financing cost is further reduced by setting a flexible loan term sheet.
The LOTS protocol accepts a loan period as short as one hour, which greatly satisfies the needs of users for short-term position management.
Market Event Review
Zeen, our CEO, traveled to Japan and Beijing this month to communicate with local teams and communities.
As a CEIBS alumnus, he participated in an exclusive sharing meeting of the Huobi Global in Beijing, during which he had a cordial sharing, exchanged with the management team of Huobi Group and his alumni.
Mr. Zhu Jiawei, Chief Operating Officer of Huobi Group, Mr. Yuan Yuming, CEO of Huobi China, Dr. Yu Jianing, Head of Huobi Labs, attended the meeting and introduced the ecological development layout and status of the Group, as well as the blockchain future after being through both the bull and bear market.
During the meeting, Zeen shared his previous working experience, along with the product and technology development of LOTS project. Moreover, he elaborated and discussed the potential cooperation with Huobi Group.
Based on the dual guarantee of blockchain technology and smart contracts, the LOTS platform builds a new financial ecosystem to provide high-quality, transparent and credible digital asset management services for qualified users around the world and explore the diversified wealth management needs of platform users. Through on-chain transformation of transactions and independent pricing, the operational risks of traditional platforms are effectively addressed, and information transparency and symmetry are achieved. Users will get a series convenient and secure digital asset credit services through the platform and tap the time value of assets while retaining the ownership of their existing assets to gain more revenue within the timeframe.
FATF, or the Financial Action Task Force, sets global guidelines for the financial services industry. Over the past several months, it has become apparent that strict new rules impacting cryptocurrency exchanges, issuers and more were coming online. This week during the G20 meeting in Japan, the rules are expected to be approved.
The new rules will compel all platforms to require, name, address, amount, transfer date, etc. with every single crypto transfer. While industry advocates agree with the need for strong KYC/AML rules they also believe that discussion with the industry sector was simply window dressing.
Radoslav Albrecht, founder and CEO of Bitbond, agrees with the importance of regulation in the digital asset sector but that FATF is getting it wrong.
“Cryptocurrencies and virtual assets are different from fiat, so virtual asset transfers should not have the same status as conventional money transfers,” says Albrecht. “Among the main advantages of blockchain technology is the universalness, smoothness, speed, and immutability of transactions. It makes sense to regulate cryptocurrency at the point it interacts with fiat or traditional assets, but to try and limit a decentralised and permissionless infrastructure would inhibit some of the very benefits the technology brings.”
Innovation Killer?
Albrecht says he endorses some level of AML/CTF regulations on businesses that custody user assets or offer financial services, but it is unreasonable to hold service providers creating open-source software to the same level of accountability.
“Creating a clearer and more transparent regulatory framework, that defines which services are held to the same level of account as traditional financial services will help, but regulators should avoid restricting the developments of this industry, otherwise they’ll drive some of the best innovation underground.”
Concurrent with the G20 meeting there is the V20 meeting taking place in Japan as well. Crypto industry advocates, including supportive policy members, will be meeting to discuss a resolution to the forthcoming rules.
Moving Beyond the Ethereum Phase of Security Tokens
The Next Evolution of Security Tokens Networks and Blockchains
One of the existential debates in security tokens is what I often refer to as the generalists versus specialists debate. You’ve heard the arguments before: will we have one cryptocurrency or many? One blockchain or many? Public or permissioned?…The potential answer to those questions are the foundation to different school of thoughts in the crypto ecosystem and they permeate over all sub-segments of the industry. In the case of security tokens, we are starting to see versions of these existential crypto-debate:
· Will we have blockchains specialized on security tokens?
· Will security tokens work on public or permissioned blockchains?
· Should we build specialized security token networks?
· ….
It is extremely rare to see such a small technology market with such fragmented schools of thought. Part of the issue is that the security token market has involuntarily inherited some of those debates from the parent crypto-ecosystem. In the case of security tokens, the fragmentation debate expands across all layers of the ecosystem. Specifically, the digital securities market is venturing into a phase in which we are likely to see the emergence of tier 1 blockchains, tier 2 network in addition to the large number of existing security token platforms.
Blockchains, Networks and Tokens
A simplistic view of a technology market is a two layer structure with an infrastructure tier and an application tier. In that model, the infrastructure tier provides the generic building blocks for applications in the space while the applications tier enables domain specialization. In reality, technology markets are much more complex with several levels of infrastructure needed before we achieve any relevant specialization at the application layer.
In the case of security tokens, the current ecosystem can be modeled in three fundamental layers:
· Blockchains: The infrastructure that provides the consensus, transaction validation and ownership transfer protocols for security tokens.
· Networks: Tier 2 infrastructure block that abstract the interaction between relevant parties in a specific digital securities transaction.
· Tokens & DApps: Specific security tokens or applications that leverage the other infrastructure tiers.
While security tokens started mostly as a variation of the Ethereum ERC-20 tokens, in just a few months we have seen aspiration projects like PolyMesh and Ownera evangelize the need for a security token blockchain and efforts like Provenance gain some traction for the implementation of security token networks. If that trends continues, we are likely to see an increasing level of fragmentation across different areas of the stack. Even though we are in the very early days of the digital securities markets, some of the fragmentation is already visible and has open the door to interesting possibilities in the near future:
Ethereum for All
The most adopted approached among security token technology providers is to leverage Ethereum as the main blockchain runtime. Ethereum brings numerous advantages to digital securities including programmability, a rich ecosystem of protocols and tools and a growing developer community. However, leveraging a public blockchain for regulated securities introduces serious challenges in areas such as privacy, access control and scalability.
Many Blockchains, Generic Security Token Platforms
As security tokens evolved, we are witnessing an increasing interest of Ethereum competitors to enter the space. Public blockchains such as Cardano, Algorand or Tezos as well as permissioned alternatives such as Quorum or Hyperledger Fabric have slowly started initiatives related to digital securities. In that setting, we can envision security token platforms that enable blockchain-specific protocols but provide a consistent tooling and token lifecycle management stack. Consistency might be a strong advantage of this model. However, there is only so much that you can abstract from different blockchains without sacrificing functionality which might be the biggest drawback of this approach.
One Blockchain, Many Networks
The concept of security token networks such as Provenance or Ownera built on top of tier 1 blockchains seems to be gaining some traction although we still need to see in practice at a decent scale. This model seems to be more applicable to permissioned blockchain architectures such as Hyperledger Fabric or Quorum. If we assume that there will be a dominant blockchain for security tokens powering several networks for different digital securities products. The domain-specialization of security token networks makes it an interesting approach for creating long-tail network effects for security tokens. However, security token networks are still dependent on the dynamics of the underlying blockchain which introduces interesting challenges from a technical standpoint.
Many Blockchains, Many Networks
The previous model can evolve into a scenario in which we have many tier 1 blockchains and tier 2 security token networks across the entire ecosystem. This model inherits of the challenges of the previous approach in an even more fragmented ecosystem.
Hybrid Security Token Networks
I am very intrigued by the concept of security token networks that operate cohesively across public and permissioned blockchains. Similarly to the hybrid cloud model in cloud computing platforms, this approach could have nodes in a security token network operating in public blockchains like Ethereum or in permissioned alternatives such as Quorum. The clear advantage of this model is the combination of the privacy and access control capabilities of permissioned blockchains with the wide access and programmability of public blockchains.
A Security Token Blockchain
The idea of a blockchain specialized in digital securities is as intriguing as it is questionable. In the past, I’ve written several articles about the arguments in favor and against a security token blockchain. Regardless of which side of the argument you sit on, we can all agree that security token blockchains might become a step in the evolution of the market.
The Capital Access Challenge
Most of the topologies outlined in the previous sections remain highly theoretical exercises without a viable path to market. Access to capital remains one of the biggest obstacles for the next phase of the infrastructure in security tokens markets. The implementation of security token blockchains and networks is a capital intensive exercise from both the technological and go-to-market standpoints. Until venture money starts flowing into the security token space, the infrastructure efforts will be led by a handful of companies that have better access to capital markets. Similarly, if venture investments in the digital securities space continue to be this moderated, the early infrastructure building might be able to gain a significant competitive advantage that will be really hard to disrupt.
By now, its pretty clear the we are moving beyond the Ethereum phase in the security tokens market. The next iteration of the market will bring Ethereum competitors in the ecosystem as well as the implementation of the first set of security token networks and blockchains. However, with limited interest from the venture community, those efforts might remain constrained to a small number of well capitalized companies.
