Cities on the blockchain

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Is it possible to run an entire city using blockchain technology?

Dubai seems to think so. The business and airline hub of the Middle East has set itself the challenging task of being the “first blockchain-powered government in the world by 2020.”

It might sound outrageous right now, but the concept of ‘smart cities’ running on the blockchain is actually not as outlandish, nor as difficult to achieve as you may think. The question really is; where do we start? There are so many millions of possible uses for blockchain in a city, but there are undoubtedly some bigger areas where it will have the most dramatic effect.

IoT devices

Already a number of cities are using IoT devices to do a number of jobs, like monitoring traffic and air quality. Thos IoT devices can be connected to the blockchain. That also applies to any city system that collects data — it can all go on the blockchain. In fact, by putting it all on the blockchain, it will provide an upgrade to the system, and make the information easier to manage and access. Basically it will get rid of all kinds of inefficiencies where officials, such as the police, have to go through X number of other organisations to get a vital piece of information.

Better public safety

Data sharing can have a positive impact on public safety. The blockchain can provide a secure system for sharing sensitive data. One example is working on preventative measures, such as analyzing crime statistics and planning police patrols around that information. Yes, there are issues to be ironed out regarding citizen’s rights to privacy and how much information a government can track, but people are at least having a conversation about it.

Efficient transport

Public transport is vital in most major cities and they don’t work without it. The blockchain offers a lot of potential here, especially for the way passengers pay for their transport. If commuters have a blockchain wallet on their smartphone, they could pay for any transport pass, loyalty programme, or purchase tickets without a card.

Citizen incentives

If you put the public transport payment system on the blockchain, you can also offer customers some incentives. For example, if a city wants its residents to use transport rather than drive, there is a way to incentivise that. When the smartphone wallet shows a citizen has been using public transport for a specific period of time, it is possible to offer them a ‘free ride’ or a discount on an electricity bill. In a smart city, an incentive should push people toward more ethical and sustainable living choices.

And that is what a smart city should be — sustainable and more habitable with fewer issues and inefficiencies. If Dubai achieves its goal, it will have created a blueprint for others to follow.

Have Bitcoin futures done crypto a favour?

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Yukio Noguchi, a very famous Japanese economist and advisor to Waseda University’s Business and Finance Research Centre, claims that Bitcoin’s price will not see another massive surge, because we can now trade in Bitcoin futures.

Noguchi is not against Bitcoin. In fact, he sees the current Bitcoin price as a ‘good thing’, because it brings makes it cheaper than bank transactions when used as a system of payment and this is something he welcomes. Japan, of course, offers more opportunities for people to spend Bitcoin than any other country, so Noguchi is more familiar with this practical aspect of the Bitcoin use case than others who only have a theoretical knowledge.

Bitcoin futures trading caused price drop

His argument is that the introduction of the futures market at the end of last year, when Bitcoin’s price skyrocketed to almost $20,000, is the instrument that caused the drop in value to about a third of what it was in early December 2017. He started talking about this back in January, when he said, “Bitcoin prices were a bubble, to begin with, and now we’re seeing a return to normal values,” and the San Francisco Federal Bank backed his thinking.

Federal Bank backs Noguchi theory

He uses a paper published by the Federal Reserve Bank of San Francisco, “How Futures Trading Changed Bitcoin Prices“, authored by Galina Hale, Arvind Krishnamurthy, Marianna Kudlyak, and Patrick Shultz as support for his claim, and quotes this passage in particular:

“From Bitcoin’s inception in 2009 through mid-2017, its price remained under US$4,000. In the second half of 2017, it climbed dramatically to nearly US $20,000, but descended rapidly starting in mid-December. The peak price coincided with the introduction of bitcoin futures trading on the Chicago Mercantile Exchange. The rapid run-up and subsequent fall in the price after the introduction of futures does not appear to be a coincidence. Rather, it is consistent with trading behavior that typically accompanies the introduction of futures markets for an asset.”

The Japanese economist also believes that the market is moving towards a situation where traders will be able to short-sell Bitcoin futures and that this will contribute to keeping the price down even more.

Bitcoin price drop is a blessing in disguise

However, all this doesn’t mean that he sees a decline in the popularity of Bitcoin. The answer is a resounding no, because as mentioned above he believes its boosts the practical use case for Bitcoin. Noguchi says that as the Bitcoin price drops it becomes a more attractive way of sending money and quotes costs based on Japanese banking.

According to his calculations, sending money via Mitsubishi UFJ Bank costs you 432 yen ($3.90) for any amount above 30,000 yen ($271). But with the current value of Bitcoin, it’s cheaper to send via a regular bank transfer than BTC, unless the value of BTC falls to 675,000 yen (that’s $6,000 today). Noguchi claims that when BTC returns to that level, it will finally be trading at what in his estimate is a normal value.

If we don’t see any further surges in Bitcoin price, will this dramatically change the way people start to look at Bitcoin and its use case? Last year, people bought it to make money, but perhaps we will soon see people view Bitcoin as an alternative currency for payment that is cheaper and more efficient than fiat currencies. Perhaps that is the change of perception that Bitcoin needs to mature.

Bermuda is banking on the blockchain

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Something unusual has just happened in Bermuda, the Caribbean island paradise, retreat for the rich and offshore haven — the government has told the island’s banks that they are just not moving fast enough into the cryptocurrency market. It’s a rare occurrence, because most governments are taking a cautious approach to cryptocurrency and none seem to be insisting the conventional banking industry adopts a crypto-friendly approach.

A new class of bank for crypto

In fact, Bermuda is going even further. It is making amendments to its Banking Act so that it can establish a new class of bank that will be able to serve the crypto community, fintech startups and any other type of business that is blockchain based.

The local banks have only themselves to blame for this radical move. They have been denying service to crypto companies, citing fears about risk and regulatory concerns as the reason for shutting the door in potential clients’ faces.

Government supports fintech growth

The government takes a rather different view: Bermudian Premier and Minister of Finance David Burt said that the banks’ stance “cannot be allowed to frustrate the delivery on our promise of economic growth and success for Bermudians.” It appears that Bermuda wants to emulate the successes of jurisdictions like Gibraltar and Malta in becoming safe havens for blockchain explorers, and they all share the characteristic of being relatively small in terms of population, but big on financial services that serve the whole world. Of course, this is perfectly understandable: if you don’t have the environment to be a manufacturing or agricultural economy, financial services are the best way of ensuring that your economy thrives, especially if you keep introducing innovations that attract companies or individuals who can’t find a banking home elsewhere.

David Burt also said in parliament: “The fintech industry’s success globally depends on the ability of the businesses operating in this space to enjoy the necessary banking services. In other jurisdictions, banking has been the greatest challenge and for us in Bermuda, it is equally so and therefore it must be resolved.”

Bermuda welcomes Binance and Shyft

He clearly sees that Bermuda’s future must not be held hostage by the banks’ fear of the blockchain. This year Bermuda has already signed deals with Shyft network, which will reportedly provide $10 million on blockchain technology education and economic development on the island, and Binance is on Bermuda to establish funding for educational programmes related to fintech and blockchain. It has said it wants to build a “global compliance base” on the island.

It’s a smart move by the Bermuda government and is yet another step forward in opening up the banking sector worldwide to the reality that businesses operating in the crypto sector need forward-thinking banking — and that they’re going to grow in strength rather than disappear. Ignore them at your peril.

What game is Facebook playing?

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I can tell from a quick review of the main crypto press outlets online this morning that I’m not the only one puzzled by Facebook’s decision to reverse its crypto advertising ban. Why now and what is Facebook up to with this latest announcement? It seems like progress, even though advertising ICOs or binary options is still prohibited.

The Facebook crypto ban confusion

Going back to January 30th when Facebook announced its ban, because of “misleading or deceptive promotional practices,” we were somewhat confused then. On the one hand, Facebook had imposed a blanket ban on any cryptocurrency and/or ICO advertising, yet Mark Zuckerberg made public statements pointing to his personal interest in them. He said: “There are important counter-trends to this — like encryption and cryptocurrency — that take power from centralized systems and put it back into people’s hands […] I’m interested to go deeper and study the positive and negative aspects of these technologies, and how best to use them in our services.” I think the key element of what he said then is “how best to use them in our services,” suggesting to many onlookers in the crypto community that Facebook’s ad ban wasn’t quite so much “for the greater good’ as for “the good of Facebook.”

And now we’ve been taken by surprise with this latest announcement. (No doubt, Twitter and Google will follow, since they followed the FB ban.) It may have a positive effect on the crypto markets, which have been taking a battering for several months now and who can forget that Bitcoin’s price took a hit right after Facebook announced the ad ban. That’s one possible positive that might come out of this — at least it will be good for cryptocurrency owners.

Crypto ban lifted — just a little

So now we are in a situation where cryptocurrencies can be advertised again on Facebook, but not ICOs. And before we all jump for joy, look at what Facebook also says in its on-site statement — only pre-approved advertisers will be ‘admitted’.

Facebook says: “Advertisers wanting to run ads for cryptocurrency products and services must submit an application to help us assess their eligibility — including any licenses they have obtained, whether they are traded on a public stock exchange, and other relevant public background on their business.”

Facebook is still in control

Therefore, Facebook still has all the control. And it hasn’t explained why it has made this U-turn on crypto advertising. Consequently, theories about what the media giant is really up to are sprouting like daisies. Carlos Grenoir, CEO of Olyseum suggests Facebook’s ad ban reversal could be selfishly motivated: “The reasons for Facebook reversing its decision to ban crypto ads are not clear, but the motivation could have something to do with its own strategy regarding the evolving crypto space.”

Others, like WhalePanda, a respected voice in the crypto markets, believe it has more to do with Facebook losing advertising revenue. Cointelegraph, a company that suffered the effects of the ban reports, “The posts which have been put forward for review by Cointelegraph have become stuck, and are not being confirmed, nor denied by Facebook, during the ban as well as after the ban was ‘reversed.’” Basically, it is still a confusing space for advertisers who want to boost posts.

We don’t know what Facebook’s vetting process and while it looks like a positive move from the crypto community perspective, Facebook needs to come clean about what exactly they are doing, because for the moment it looks like it is playing a game, and one that it hopes to win by any means.