Who’s in the Forbes Blockchain Top 50?

The Forbes annual Blockchain 50 is on its second outing. It lists the companies making the biggest strides in blockchain, and most of them are valued in the billions of dollars. Indeed, to appear on the list, Forbes says, “To qualify, Blockchain 50 members must be generating no less than $1 billion in revenue annually or be valued at $1 billion or more.

There are some surprising names that turn up in the Blockchain 50, if only because on the face of it they have little to do with blockchain.

For example, De Beers is on the list. The diamond giant’s new software, Tracr, follows diamonds through the supply chain as they are mined, cut, polished and sold and tens of thousands of stones are being registered per month.

Foxconn makes the iPhone trade-finance venture, Chained Finance, pays more than 20 electronics suppliers using digital coins minted on the Ethereum blockchain. As a result the costs have dropped from annual percentage rates as high as 24% to a mere 10%.

Dole Foods is another blockchain adopter. It is using it across all vegetable processing, for millions of pounds of lettuce, spinach and coleslaw. Customers at Walmart can now check where their fruit comes from by scanning a code used by farmers. It is soon expanding this use of blockchain to its fruit.

LVMH, the luxury goods brand, is using blockchain technology for traceability and proof of authenticity. Among its brands, Louis Vuitton is already tracking millions of its products in an effort to reduce counterfeiting.

The United Nations, a 75-year-old organisation is using a number of blockchain initiatives, including one that is intended to combat warlords who steal aid using pilfered ID cards, the UN has over the past two years disbursed funds to 106,000 Syrian refugees in Jordan, using blockchain-verified iris scans instead of ID cards.

As Forbes says in its introduction to the Top 50, “Blockchain started as a way to move bitcoin from point A to point B, but it is now being used by a host of big companies to monitor and move any number of assets around the world as easily as sending an email.”

From the instantaneous settlement of German government bonds to verifying the provenance of diamonds mined in Africa and bringing liquidity to a small supplier of sliding shower doors in Zhongshan, China, this year’s members have largely moved beyond the theoretical benefits of blockchain, to generating very real revenues and cost savings.

A New Fashion In Fintech Investment

Investment follows fashion in a sense. In the last few years venture capitalists have been pouring money into neobank startups thus creating a trend for other VCs to follow. However, John Detrixhe says,

“Questions are being raised about whether this fintech craze is another quixotic quest for market share that burns cash but doesn’t generate much profit in return.”

The most ambitious neobanks, namely N26 and Revolut, want, he suggests, to be the Amazon of finance, and they are proving to be very successful at picking up new customers. According to Accenture, digital-only banks operating in the U.K. could amass a total of 35 million customers globally within the next 12 months — up from 13 million today — based on current growth rates. The report also says, “Digital-only banks are also reaping the rewards of improving the customer experience as they gain an average Net Promoter Score of 62 compared to just 19 for traditional banks.”

Naturally, they are having to face the incumbent banks, which can’t offer the same service. But, we should be wary. As Detrixhe says, if you look at Uber and WeWork, for example, “these have shown that rapid growth and high valuations are far from a sure sign of success.” Furthermore, it is impossible to say if customers will continue to use them as niche providers of peer-to-peer payments or travel spending or fully embrace them as a one-stop-shop for financial services.

Some investors are now looking beyond the neobank buzz and are moving onto another fintech sector. For example, on hedge fund founder, Steve Cohen, thinks traditional banks won’t be disrupted by the unicorns. But, he does think the banks will have to learn some new tricks. He suggests “Older lenders need things like cloud-hosted software and systems that make it easier to sign up for a new account.”

And that is where the new investment opportunity lies; in software for digital account openings and machine learning systems to make recommendations to customers. It’s not quite as sexy as investing in a startup neobank, but these software startups could help traditional banks leap into the 21st century, and in that respect they could serve as neobank killers.

Stablecoins: Cop Out Or Compromise

I would call myself a cryptocurrency purist. The reasons why digital assets appealed to me in the first place are their decentralized nature and the fact that the blockchain is ‘trustless’. Furthermore, it is a riposte to the banking community, which for a very long time has controlled us all unchallenged. And then they caused a financial of the collapse of such proportions that stability was ripped away from the average citizen. People lost their jobs, their homes, and there were even worse tragedies.

So when the Bitcoin whitepaper was published in 2009, it felt like a way forward. One of the problems was that the early Bitcoin believers were perceived as being anarchic hackers and the techie equivalent of punk rockers. And yes, some of them were, but there were also technology entrepreneurs like myself who embraced its possibilities.

In the early days, the buzz suggested that the crypto revolution would be an easy process, but of course, we have discovered that it is a rocky road and we are nowhere near mass adoption a decade later. Much of this is attributed to the price volatility, the lack of opportunities to spend crypto and the opposition of regulatory bodies in numerous global jurisdictions.

Along Came Stablecoins

And then along came stablecoins. If cryptocurrency was a sport, the purists were all shouting ‘foul’ and ‘cheat’. What I want to consider in a calm way is this: are stablecoins a cop-out, because they are ‘fake’ crypto’ to some extent? Or are they a compromise that could ultimately open the floodgates to mass adoption of all forms of digital assets?

In respect of a compromise, I’d compare stablecoins to the trainer wheels on a child’s first bicycle. They help the child get used to the idea of balancing on two wheels. Eventually, these ‘stabilisers’ can be removed and the child can progress to the reality of riding a bike without them. Now, even as a purist, I can see the potential advantage of this. I recently met an economics student, a Generation Z crypto enthusiast, who is invested in a small way in digital assets. He happily extolled what he believed would be the benefits of Facebook’s Libra, as just that kind of ‘trainer crypto’ that would enable mass adoption. I don’t put this forward as a conclusive argument for this view of stablecoins, but only as anecdotal evidence about possible public feeling, especially amongst Millennials and Gen Zers.

How else might stablecoins benefit us? I looked up some expert opinion on the topic.

MakerDAO says,

“A successful stablecoin implementation would be a major catalyst for disruption to global financial infrastructure, challenging weak governments and mismanagement of national economies. Furthermore, stablecoins allow for decentralized insurance, prediction markets, transparent credit and debt markets, and create a level playing field between small and large businesses in global finance.”

If MakerDAO is correct in their assertion, then isn’t it the case that stablecoins are performing the same kind of disruptive element crypto purists believed Bitcoin would deliver?

Stablecoin As Cop Out

As you know, stablecoins are tied to fiat currencies such as USD, GBP, Euro, etc. And there are those who believe that is their fatal flaw. What they are saying is that stablecoins are only as good as the asset they are tied to, and the way in which the two assets are tethered. This is a more complex debate. But, if I can simplify it at all, I’d say this: the core problem purists see with stablecoins is that they are still centrally controlled, they can be manipulated by market forces, and they are certainly not ‘trustless’ in the same way that BTC, ETH or LTC are. Some, such as Ben Prentice argues that stablecoins will simply lead us into the same trap as the old order of fiat currencies. He writes, “I believe inflationary fiat currencies where monetary policy is decided by few individual humans is not a sound form of money.”

So, I ask you — what do you think? Do stablecoins have the potential to help people slowly adapt to the decentralized digital assets, or are they a cop out intended to ensure that fiat currencies, controlled by a global elite according to some, remain dominant in the way we make all of our financial transactions?

Cuban and Congress gang up against Libra

Just a few days before the Congressional hearings involving David Marcus, Facebook’s head of the Libra project, Mark Cuban, the billionaire co-host of “Shark Tank”, echoed President Trump’s tweets when he told CNBC that he “wasn’t a big fan” of Libra.

Libra is a gift to despots

There are seemingly quite a few people who agree with Cuban. He referred to the Menlo Park-based social networking company’s foray into distributed ledger tech as a “big mistake.” Most particularly he took aim at what he sees as Libra’s potential to further destabilise unstable economies and political situations worldwide. He said, “Some despot in some African country that gets really upset that they can’t control their currency anymore.” This doesn’t actually make much sense, but these days nobody seems bothered about rational statements.

Yes, Facebook is targeting the 1.7 billion unbanked people worldwide, a factor that David Marcus repeated several times during his first day of giving testimony to US Congress. The Libra Association’s white paper states: “All over the world, people with less money pay more for financial services. Hard-earned income is eroded by fees, from remittances and wire costs to overdraft and ATM charges… When people are asked why they remain on the fringe of the existing financial system, those who remain “unbanked” point to not having sufficient funds, high and unpredictable fees, banks being too far away, and lacking the necessary documentation.”

Cuban takes issue with this: he believes that Libra will unleash “reactionary impacts of extending financial access to the underrepresented.” Presumably he’s referring to that African despot again.

David Marcus is calm and collected

Meanwhile, in Washington, David Marcus looked cool as a cucumber as he took questions from a succession of senators. The primary issues for the lawmakers were those of privacy and trust. Senator Elizabeth Warren, who is crypto-unfriendly, asked about Facebook’s willingness to allow data portability: “If a Facebook user wishes to use a wallet other than Calibra, will you make it easy to allow the export of other data?” Marcus unequivocally replied, “Yes,” although he was noticeably more hesitant to respond so forcefully when asked about Messenger and Whatsapp data. Sen. Warren got her knife in some of the way when she concluded her remarks by saying, “what Facebook’s been really good at is figuring out how to monetize people’s personal data […] I am not reassured by your statement that you can not see any reason right now why there would not be any data sharing between these platforms.”

Nobody hammered bitcoin

On the bright side for crypto enthusiasts, Congress appeared to be very careful not to attack bitcoin. As Coindesk remarks, “Bitcoin was barely mentioned during the two-hour session and most of the lawmakers seemed far less concerned with the technology than with who was planning to leverage it: Facebook.” Indeed, Sen. Pat Toomey (R-Pa.) sounded bullish on blockchain in general, saying, “We shouldn’t prevent what can be a tremendous financial innovation. There is a big potential in blockchain technology.”

How’s the score looking for Facebook’s Libra as the Congressional interrogations resume today? It looks like most news outlets agree that it has the advantage, although they don’t say that in so many words. Congress appears to be more focused on the fact that it is Facebook (and Mark Zuckerberg) who is leading this project than the real potential of Libra. If another company had launched this project, perhaps Congress would be a lot less interested.