Category: apps

Layer 1s versus Ethereum

On By mehranmuslimiblogIn apps, DeFi, Ethereum, Solana, UncategorizedLeave a comment

Last year, the networks that set out to compete with Ethereum for a slice of decentralized applications proved to be profitable. These blockchain networks, also known as ‘Layer 1s’, include Solana, Polygon, Avalanche, Polkadot and Cosmos amongst others.

These protocols are masters of decentralized computation, something that can power any type of software, but is “particularly apt for digital scarcity, property rights and provenance,” writes Lex Sokolin at Coindesk. And as last year showed, they proved to be increasingly profitable for investors. However, they only remain valuable if they are used by the developers who make apps.

They also require users. As Sokolin says, “if there are users in your platform, developers value that as a distribution channel in addition to a technology enabler.” He refers to this creating a viral loop “that can create positive network effects, which allow certain equilibria to hold, and others to collapse.” He adds, “So layer 1s do both – they provide the computational unit as well as the market context in which that computational unit is generated and executed.”

Yet Ethereum is still holding the biggest slice of the market. It is true that its dominance has declined. For example, in September 2020, Ethereum had 90% of the assets on the market, and today it has about 50%. How and why has that happened?

Let’s take Avalanche as an example. It is launching a $290 million incentive program to grow the applications built on its technology. Its market cap is around $30 billion, so this expenditure on platform growth and customer acquisition is only one percent of its cap. And last year, Polygon, targeted DeFi growth with a $100 million ecosystem fund, which worked for it, as you will find quite a number of DeFi projects on its blockchain.

Ethereum by contrast was boosted by Consensys, which “played the role of ecosystem fund in the early days, eventually generating sufficient building and adoption by the community.”

These ecosystem funds are a really important element in the rise of Layer 1 solutions. Success and sustainability comes from spending on marketing, growing your adoption against others, building in profitability and using profitability to grow your market share. Ultimately, it should have been easy for Ethereum to hold onto the lion’s share of the market, but it didn’t factor in investors’ appetite for. As Sokolin says, “there’s a lot more risk capital out there wanting to recreate a layer 1 investment return profile,” which is good news for those protocols.

The Black Wall Street App: A Road to Financial Inclusion

On By mehranmuslimiblogIn apps, DeFi, Innovation1 Comment

Consensus 2021 is always a fount of new ideas and initiatives, and the Black Wall Street App is one of them. As Jordan Muthra writes at Coindesk, it aims “to increase access to financial education in Black and other communities of color.”

The project from Hill Harper and his team states on its home page, “You can’t be free if the cost of being you is too high.” Not only is this the world’s First Black-Owned Digital Wallet, it has also been built and designed by the Community, with the Community and for the Community.

Last week, Harper told CoinDesk’s Consensus 2021 event, ““When you really, actually peel back the onion, 90% to 95% of the financial products and services that have historically been offered to Black, brown and marginalized communities have been either predatory on their face or hidden predatory.” Perhaps this is an aspect of finance you haven’t considered, or to say it as Black Wall Street app does – Black Cash Matters™.

Muthra points out, “We are entering a phase of increased collective consciousness but not without a wide wealth gap, institutional racism and proud racists surfacing.” What is more, as he says, we have become jaded “by the widespread evidence of prejudice due to the proliferation of social media,” and this has a tendency to stop us thinking about the many facets of prejudice and how they are intertwined.

It is systemic prejudice that is behind Muthra writing the following, “As a community, Black folks have always strived to own and operate both infrastructure and the means of production but have been continually held back by structural inequality and attacks from extremists and the government alike.” If it didn’t exist, this would not be a necessity. Nor would the existence of the Black Wall Street app be necessary, but it is.

I’ll leave you with this thought: Black Americans hold only 1% of US wealth, and are systematically refused access to the financial system. With this app, people can learn about financial wellbeing and investing, invest in cryptocurrency, start building wealth and send/receive cash and crypto with community members. Being in charge of your finances and understanding the system, as well as making it work for you, is a necessary step on the road to freedom at a bearable cost.

Banks oblivious to clients’ app-led, shadow financial lives

On By mehranmuslimiblogIn apps, Banks, FintechLeave a comment

Information gleaned by Cornerstone Advisors in its recent study reveals “Much of consumers’ day-to-day financial lives take place “off the radar” of the traditional financial institutions that they work with.” Whilst the study carried out in October 2020 is American, it seems likely that the results are echoed in other countries and regions.

To start with, 76% of smartphone owners use fintech-created mobile apps to manage their finances, from companies such as Robinhood, PayPal, and Credit Karma.

The generational differences in use are predictable: “93% of Gen Zers and Millennials (21 to 40 years old) use mobile financial apps, 81% of Gen Xers (41 to 55 years old) are fintech users, and even 56% of Baby Boomers use at least one mobile app to help them manage their financial lives,” the study states.

Banks unaware of new customer behaviour

However, the research does throw up some surprises. It points out that although traditional banks are aware of the growth of consumer use of fintech products, they are much less aware of the ways in which this impacts them. Banks have lost some business to fintechs, but they also share customers with fintechs, and this appears to be something they are blissfully unaware of. Ron Shevlin in Forbes says, “ They think that because customers have an account with them that they’re the only bank their customers do business with.”

That is certainly not true. Consumers “don’t close out and switch accounts—they simply add another account,” the study says, and “Challenger banks – Chime, most prominently – are gaining market share among consumers and are rated extremely highly by consumers on the value they provide.” As a result, a quarter of a trillion dollars annually is flowing through payment mechanisms outside of those provided by traditional financial institutions.

Shevlin also cites the story of HNWI behaviour. One bank CEO urged a client to diversify his $5 million investment account. The client’s response was “you have my funny money—my play money. The majority of my holdings are with a different investment management firm.” This is called a ‘shadow financial life’ that is defined as “Financial behaviors and activities that evade observation from the other financial institutions they do business with.” Mobile apps play a major role in helping to create clients’ shadow financial lives.

For example, , 30% of Americans with an investment account (25 million) also have an account at a digital brokerage or robo-advisor, e.g. Robinhood, Acorns, or Stash. Furthermore, one-third of JPMorgan clients and 27% of Merrill Lynch clients have an account at a digital brokerage or robo-advisor – and the big guys don’t know anything about it.

Another factor in shadow financial lives is the adoption of digital bank accounts as a second string. About 1 in 6 Americans have second bank accounts with digital-only challenger banks, and amongst consumers with three checking accounts, 30% of the third account are at digital banks.

How does this impact on the traditional banks? First, Americans with more than one checking account keep a lot of their money in their additional accounts, as much as 35% of their total deposits. And those with three accounts, keep an even larger amount of money in their secondary accounts. The second and third accounts are also preferred for making payments by 1 in 4 consumers.

Digital banks are not completely immune from shadow banking. Among consumers who consider a digital bank their primary bank, 42% have more than one account—and half of them have that second account with a traditional bank.

Shadow finances change banking scene

One consequence of the emergence of consumers’ shadow financial lives, largely enabled by financial mobile apps, is that the function of a current/checking account has dramatically changed. It also means that the banks with  ‘primary’ account status no longer have the same opportunity to deepen customer relationships, as the customer is now more interested in “best-of-breed features, not accounts,” Shevlin says. Consumers now want the new savings apps, because they don’t want a savings account – the want to save more money, a service the apps supply. Laslty, banks still believe that marketing accounts, savings and other types of accounts are the most important focus, whereas the truth is that for everything they offer, the consumer replies, “There’s an app for that.”

Can Google Plex win over banks and consumers?

On By mehranmuslimiblogIn apps, Banks, FintechLeave a comment

It’s only a matter of days since I wrote about the relaunch of Google Pay. Now I turn my attention to Google Plex. With a beady eye on the way traditional banks are lagging in the mobile banking stakes, it has come up with a solution that enables the old boys to keep pace with the fintech challengers, or at least that is what it appears to promise.

Ron Shevlin quotes some observations from the Snark Tank, such as this summary of the Google Plex pitch: “You’re lagging in technology. Your current vendors are years behind. Consumers think you’re irrelevant. We’re hip, we’re cool, we have all the latest technologies, and boy have we’ve got data! Come partner with us on our new checking account!”

And to some extent the potential customers are buying it. Shevlin says “three big banks, four community banks, two credit unions, and two digital banks” have announced that they have formed partnerships with Google to use the Google Plex checking account tech in 2021.

Now let’s go back to Google Pay. Google Plex will be integrated into the app, which now has three new components.

First, it has a P2P and retail payments component that essentially mimics the Venmo model. This will allow users to, “Set up group payments, put multiple people in a chat and let them send and request money from each other. It will also track who has and hasn’t paid their share and let you tap a button to pester them,” according to The Verge.

Users can also use tap-to-pay, which is pretty old hat now, except that Google has added two new features – ‘Get gas’ and ‘Order food’. Apparently the latter refers to a food ordering system that will work with more than 100,000 restaurants. And consumers will be able to use the ‘get gas’ tab to pay for gas and parking via the app in 30,000 locations.

The ‘Explore’ feature will allow Google Pay app users to browse aggregated merchant offers, and they can receive merchant offers based on their spending activity. It sounds a little like Google ads and Facebook advertising all over again.

There’s also an ‘Insights’ tab which is described by Shevlin as “Google’s version of a personal financial management (PFM) tool,” similar to those available on other digital banking platforms.

Why is Google likely to win over banks to using Google Plex: It’s quite simple: Google has access to more data than any bank; Goggle has more merchant relationships, and it has more tech resources.

Of course, while the traditional banks might see Google’s offer as the fast and easy way to catch up with digital challengers, there is one critical factor to consider: will the consumer want a Google checking account?