Round the World in Markets
President Trump has decided to pull out of the “Open Skies” treaty, an agreement between 35 countries that would allow unmanned drones to fly over the respective nations. The purpose of the deal was to build trust through transparency. Initially proposed by President Eisenhower in 1955, it went into effect in 2002. The reasons given for backing out was Russia not honoring all the terms of the agreement.
South America has become the newest hotspot of COVID-19 cases. Most new cases come from Brazil, which is just behind the US in new infection cases. Brazillian President Jair Bolsonaro has likened the virus to “the flu” and encouraged businesses to reopen as soon as possible. Hospitals are struggling with the new infections as they are close to capacity, as reported by Reuters. The local mortality rate is 6.4%, with a growing infection rate.
Billionaire George Soros has weighed in on the coronavirus in the EU. He stated his opinion in a recent Q&A session, specifically in regards to Italy, “What would be left of Europe without Italy? The relaxation of state aid rules, which favor Germany, has been particularly unfair to Italy, which was already the sick man of Europe and then the hardest hit by COVID-19.”
The remark came as the investor voiced his opinion that the EU needs to issue more bonds to support the countries most impacted by the virus.
South Africa is readying to reopen its economy. The Department of Trade has suggested that the lockdowns have served their purposes. However, it feels it is time to allow businesses to return to business. The World Health Organization has advised that countries should only relax their lockdown as cases consistently decline. COVID-19 cases in the area are still climbing, as per Woldometer.
China has offered less financial aid when compared to other large countries. Ex-Goldman Sachs economist Jim O’Neil has described the response as “timid” in light of the potential impact. The reasoning behind the lackluster economic stimulus appears to be hesitancy in taking on more debt, and possibly reserving resources to combat future infections.
While industries have weathered the storm, there is still a need to support the residential populace. “It seems to me things to support the consumer are almost definitely the most important thing that China needs to do,” Jim stated earlier this week. China has since announced it will release a $500 billion stimulus this year. This comes amidst renewed tensions between China and the US.
A recent cut in oil production by OPEC has allowed the price to recover. Saudi Arabia has agreed to reduce supply in June by one million barrels per day. Kuwait has made a similar pledge to reduce its production further. Goldman Sachs recently published its annual global oil and gas analysis. It concluded that a desire to reach higher profits and reduce the over-supply would mark a return to “a new equilibrium reminiscent of the 1990s.” In other words, Goldman Sachs sees a return of OPEC’s dominance in the market as non-OPEC producers of oil and gas curtail or shut down production.
Op-Ed – Wealthtech in the Age of COVID-19
(Image Courtesy WMToday)
The coronavirus has impacted us all. Social distancing, business closures, and delayed Amazon purchases have slammed the brakes on an otherwise growing and thriving economy. Even after we “Open back up,” the new normal may be significantly different from our previous lifestyles. One sector which has gotten a shot in the arm is the Wealthtech industry.
What is Wealthtech?
Wealthtech is a subsection of Financial Technology (Fintech) and focuses on the intersection of technology and wealth management. Traditionally these roles have been filled with Certified Public Accountants (CPA) or Investment Advisors. Both of these roles offer personal investment services designed to grow or maintain personal capital and assets. While this has been an in-person role, requiring hours of consultation to determine the appropriate investment path, the proliferation of internet technologies has allowed the outsourcing of this job to computer programs and mobile apps called Robo-advisors. These Robo-advisors have taken roles previously filled by humans. They will continue to gain market share as social distancing guidelines persist in the immediate future.
These apps provide a similar level of investment advice through a laptop, mobile phone, mediums with which millennials and zillenials are comfortable interfacing. Robinhood and Acorn are two of the most popular Robo-advisors on the market, with Robinhood surpassing the number of E-Trade users in 2018. The allure of these services is the ability to buy stocks and equities through a friendly interface while offering zero-commission trades. In the past few years, Robinhood has allowed the trading of cryptocurrencies like Bitcoin, allowing the technologically illiterate to participate in this speculative asset.
The future for Robo-advisors is bright. As more people are working from home and turning to the internet to solve their day to day issues, investing will continue to live online. One facet that needs improvement, however, is customer satisfaction. The recent JD Power’s 2019 US Wealth Management Mobile App Satisfaction survey found that consumers are more satisfied with traditional financial services like banks and credit cards. There are several reasons for this discrepancy:
- Banks have decades of data to optimize their user experience
- Users are more comfortable giving personal information to their bank
- Users expect more robustness from a polished app
The Wealthtech app companies know this and are actively working to improve their infrastructure and user experience. The co-founder of Finantix, Alessandro Tonchia, says:
“An engagement platform for wealth management needs to adequately capture information on clients’ preferences, objectives, concerns, and family structures. This information will drive daily health checks, individualized information diets, investment recommendations, along with the style and channel of interactions.”
This constant engagement and data-mining based on clients’ needs is instrumental in defining a consistent and pleasurable experience. Users are more likely to use a well-designed app than one, which is confusing. As in other projects, building a usable platform may be a better path than trying to implement a kitchen sink worth of features.
Stratum v2 – The Epitaph of Hash Rate Centralization
Note – This is an advanced Bitcoin topic
Guest Article by:
The backbone of the Bitcoin network is built upon distributed computing power. Specialized computers worldwide regularly compete for newly issued Bitcoin. Known as the “hash rate,” this computing power has been heavily concentrated within Chinese borders, concentrated with specific hardware. These specialized computers, known as “ASICs,” began dominating mining on the Bitcoin network.
The centralization of Bitcoins hash rate is a concern that commonly surfaces as an obstacle lying in the path of what Bitcoin is trying to achieve: decentralization. An entity or group of entities that can capture over half of the network hash rate can launch what is known as a 51% attack. This would allow the actors to double-spend previously confirmed Bitcoin transactions. Anyone with over 51% of the hash rate could censor or prohibit specific transactions from being processed. The heart of the centralization issue lies with the small number of mining pools that account for the vast majority of hash rate.
Mining pools are entities that purchase hash rates from individual miners to reward them with more consistent payouts. How can Bitcoin be a censorship-resistant and immutable payments network if just a few mining pools colluding is sufficient to blacklist or double-spend transactions?
The Nakamoto coefficient, a number which represents how many mining pool entities could collude to 51% attack the network, fluctuates ominously around the 4-5 mark and has previously been as low as 1. The matter is exacerbated by the fact that Chinese companies control the vast majority of hash rate.
With all major mining pools and mining management companies based in China, the fear of a theoretical takeover by Chinese government authorities is real and has been expressed by industry professionals. However, researchers such as Paul Sztorc and Hasu have highlighted the centralization of hash rate may not be as big an issue as feared.
Firstly, miners invest billions of dollars in ASIC devices, which can only be used to mine the Bitcoin algorithm, so it is nonsensical to act against the health of the network. In most cases, miners will act rationally, and the nature of the mining business closely aligns their incentives to work per the expectations of Bitcoin users and in line with the consensus rules of the network. If a miner were to mine the competing chain, it would most likely cause a net loss due to overhead and opportunity cost.
Furthermore, several mining pools redirecting 51% of hash rate to build a longer chain and execute double-spend attacks would be quickly spotted, and miners would likely redirect to nonmalicious pools. Nonetheless, the fear of centralization of hash rate, Chinese takeovers, and 51% attacks persists and will continue to persist.
Enter Stratum v2
Further distributing hash rate is one angle which can improve how robust the Bitcoin network is against manipulation. This is the angle that is commonly discussed. However, innovators at the forefront of the Bitcoin mining industry have been pushing to implement a mining protocol that could eradicate hash rate centralization concerns.
In November, Braiins, the company behind Slush Pool, released the specifications for a mining protocol that would improve Bitcoin’s decentralization by moving decision-making power away from the mining pools to the miners, which provide the hash power. Under the current protocol, Stratum, the current mining protocol, mining pools presently have complete control over what transactions go into each block and what block is being built upon. The improved protocol specifications, Stratum v2, give miners the option to run a full-node and regain control over transaction selection and what block is being built upon.
Furthermore, the current Stratum protocol is unauthenticated. It leaves the Bitcoin network susceptible to BGP hijacks where the hash rate can be redirected by an attacker who manages to get in the middle of the connection between miner and mining pool. The connection on Stratum v2 will be cryptographically authenticated to prevent such an attack.
However, improving upon design is only one part of the puzzle of implementing a new protocol. The most challenging aspect is overcoming the network effects of the previous protocol. Braiins have put in place measures to help push the transition to Stratum v2.
Firstly, data transfer will be more efficient, providing mining operations and mining pools incentivizing miners to adopt lower-cost infrastructure. Braiins also reportedly has hundreds of thousands of miners using their open-source firmware, and co-CEO Jan Capek previously noted the option to put Stratum v2 as the firmware reference client.
Stratum v2 received another spur during the week when it was announced that Square Crypto awarded a grant to Braiins. Square Crypto, a company that sold the equivalent of 21% of the Bitcoin issued through mining their app users in Q1, has been awarding grants to innovative companies who are working on improving Bitcoin.
Braiins will be using the grant to hire a Rust developer to work on Stratum v2. There is positive momentum behind Stratum v2, but the technology still has a long way to go.
If Stratum v2 is to become the industry standard, it has to be widely accepted by the community. The specifications have yet to be written into code, and miners’ ability to select transactions will require a “template distribution interface” to be added to Bitcoin Core.
Nonetheless, while the crypto world worries about the concentration of hash rate within Chinese borders, the professionals closest to the mining technology stack are working on a solution which could eradicate the overconcentration of hash rate. Co-author of the Stratum v2 specifications, Matt Corallo, previously noted that there could theoretically be just one mining pool that all the hash rate connects to with a protocol like Stratum v2.
(Image Credit Medium)
Before We Can Bank The Unbanked With Bitcoin, We Have To Tell Them About Bitcoin
Guest Article by:
Since 2016, there has been a growing interest in Bitcoin and Blockchain Technology among minority groups.
Why is this?
People of color have long been underserved and discriminated against by traditional finance. For many, bitcoin is a way to get around the banking gatekeepers. For others, they see bitcoin as a haven for their money, which the banks and Wall Street refused to be.
But the road to adoption has been bumpy.
In the time surrounding the 2016-2017 crypto bull run, there were many entities online promoting cryptocurrencies as a get rich quick scheme. Using buzzwords like “blockchain” and “cryptocurrency,” they were selling nothing more than a variation of Multi-Level Marketing or Pyramid schemes.
Unfortunately, many unsuspecting investors found themselves caught up in these schemes. After the crash of 2018, a lot of these scams dried up. The victims were left with nothing more than now-worthless tokens and a mountain of regret.
But, that was not the end of the curiosity. The genie was out of the bottle, and people still wanted to know about bitcoin. Even though 2018 was a bear market, we started to see new groups online investigating blockchain and cryptocurrency.
What made this and groups like this different from the pre-crash versions? These groups spent more time talking about technology and how to use crypto instead of how to get rich. One of the largest online groups is Koinda, formerly Wacoinda. Koinda is a Facebook group founded by Lamar Wilson that focuses on African Americans. The original name Wacoinda was a play on the fictional kingdom from Black Panther.
With a membership of 25,000+, Koinda has gone a long way in educating people of color in how cryptocurrency works and introducing members of the group to their currency: the CJ. This crypto is named after Madame CJ Walker and is the official currency of Koinda.
The CJ can be broken up into smaller denominations called Garveys, named after Marcus Garvey, a Jamaican political activist. To compare, bitcoins are to CJs as Satoshi’s are to Garveys.
But these groups did not stay relegated to online interactions. Across the country, groups and meetups emerged to share bitcoin and blockchain technology.
Since opening on March 9th, 2019. The Blockchain Crypto Plug, founded by Najah Roberts, has provided Inglewood, CA, and surrounding areas, a place to learn about bitcoin.
Another group, South Side Blockchain, was co-founded by Darren Heard, LaTaevia Berry, and Ron Daniels to host meetups in Chicago, IL. South Side Blockchain brings bitcoin to an area not usually thought of in tech. Unfortunately, many of these IRL meetups have had to stop meeting and move online due to COVID-19. They are hosting video conferences in place of physical meetings.
How to get, store, and use bitcoin should be the focus of these meetup conversations, the price being a distant second. In areas overlooked by tech, online groups provide an essential service to the community.
Finally, if bitcoin’s goal is to bank the unbanked, the unbanked must first be exposed to bitcoin.
Oil Volatility Continues
The Oil narrative presses onward. After an unprecedented drop down to zero and negative territory, oil has rebounded with a vengeance.
It seems obvious in retrospect that oil would bounce back up from negative territory as oil literally fuels the world. But a negative oil price put the world as a whole on edge for the few hours it was in that zone.
As the US continues to push businesses to reopen, the fundamental analysis would lead us to believe that oil will continue to rise. Additionally, the US has announced it will be cutting back oil production to reduce the oversupply, which has flooded the financial system. The previous drop in oil price was a result of the inability of oil tankers to unload their supply as warehouses and storage facilities were at maximum capacity.
Conversely, as of Friday, the price of oil slipped 5.6% over concerns of China’s continued economic downturn. In a speech earlier this week, China announced it would not publish a GDP target for the next quarter, the first time this has happened in decades. This move is not surprising as the country continues to deal with one-off COVID-19 flare-ups in Wuhan and reported a drop in GDP of 6.8% for the first quarter of this year.
Further complicating the issue is a possible “Second Wave” of the coronavirus in the US after businesses begin to open up. The infection rate, which is slowly decreasing, could see a sharp spike upwards as markets reopen their doors, which would necessitate another nation-wide quarantine. This would likely result in another over-supply of oil and a drop in oil prices. Below are possible price projections on a daily scale.
To say that future price predictions on oil are “uncertain” is a massive understatement.
This newsletter, analysis, research, and commentary provided by Modern Markets, lead analyst Kaltoro, with contributions from TytanInc and Digital Lawrence. The publication incorporates data from numerous sources including, but not limited to, CoinMarketCap, Bloomberg, CNBC, Lunar Crush, and the team at FomoHunt.
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