Tag: investments

The Construction Sector Badly Needs Blockchain, and is Likely to Get it Soon

The recent history of the US and EU construction sectors can be summed up in two sentences. First, there was a construction and mortgage boom. Then the boom became a bust, leading to the global financial crisis that began with the bankruptcy of Lehman Brothers 10 years ago. Since then the global construction market has recovered, reaching $10.6 trillion in 2017. It is currently expected to hit $12.7 trillion by 2022. It could be developing faster, but digital technologies and new investment are badly needed. The lack of each of these has created a crisis of confidence in the last few years. Now though, the construction sector - that for decades was the backbone of economic growth - is seeing technological adoption to rival some of the most innovative industries. According to Jones Lang LaSalle Inc, in the first half of 2018 investors poured a record-high $1.05 billion into construction-technology startups.  It is no longer an option to invest in technology, it’s an imperative, says Jones Lang LaSalle. The construction sector is getting used to 3-D printing, augmented reality, drones and…blockchain. Using blockchain and smart contracts will help to streamline processes in project development, eliminate the need for intermediaries or third parties, and reduce expenses. Every time a smart contract is fulfilled - the architect has completed his plans and designs, construction workers have built the first (or the last) floor and electricians have installed the necessary infrastructure - the operations are verified by the smart contract itself and the relevant sum of money is transferred automatically from wallet to wallet. The project manager pays only for the work that has been completed and his contractors and sub-contractors receive their wages without delay. Meanwhile there is no paperwork for any party and no need to pay intermediaries to facilitate the necessary transactions. Blockchain will also help project managers hire better sub-contractors and suppliers, quickly. The market is currently short of sub-contractors, and finding the right ones can delay work from being carried out and increase costs. However, companies whose sub-contractors' work were to be accounted for daily and paid for instantly would enjoy a competitive advantage. Some sub-contractors may also enjoy receiving tokens for their work, the value of which could increase in future. A number of organizations are already taking their first steps along this path. For example, the Dubai Land Department (DLD) is implementing a blockchain network to interface with all digital and manual processes across more than 200 combined projects in different stages of development. Blockchain technology should facilitate seamless exchanges between investors, buyers and developers - thereby reducing unnecessary time, effort and financial costs.  In the near to medium term, blockchain will help DLD to eliminate paper documents and introduce smart contracts to secure and simplify property transactions. On a longer time horizon DLD hopes to implement blockchain technology in even more spheres, from selling parking tickets to land & title deeds. Manhattan has gone even further. The East Village contains 12 condos, and each has been tokenized on the Ethereum blockchain. One of those luxury condos has recently been valued at $30 million. This gives those who cannot afford to buy a luxury condo the opportunity to invest in a small portion of one instead. To do this, investors need to buy a certain amount of tokens, which is much easier than using traditional bank financing. Tokenization is a win-win both for buyer and sellers because it saves them heaps of money and effort, according to managers of the East Village.

Articles/October 23, 2018

When will Institutional Money enter Crypto?

Bitcoin Exchange Traded Funds (ETFs) are seen by many as an important step along the way toward maturity for the cryptoasset space. At the top of the bull market as we entered 2018, one of the leading market narratives was that institutional money was just around the corner, sitting on the sidelines waiting to enter the market. This narrative led many to invest deep into January 2018, at what we now understand was the top of the market. As it turned out, it's clear that this narrative wasn't true. However, it's also clear that when institutional money does enter the market, it will be a clear sign of maturation of the space. Prices are likely to see new all-time-highs. It's important for individual investors to understand the biggest developments that are in the pipeline for crypto, and to keep up-to-date so that they can make decisions about when and how to invest. This post will focus on trying to understand when institutional money may enter crypto, and what needs to happen first. So, what's it going to take? An ETF, is a marketable security that tracks an index, a commodity, bonds, or a basket of assets, and trades on a stock exchange. ETFs are a type of fund that owns underlying assets (shares of stock, bonds, oil futures, gold bars, foreign currency, etc.) and divides ownership of those assets into shares.  ETFs typically have higher daily liquidity and lower fees than mutual fund shares, making them an attractive alternative for individual investors. Many, including the Winklevoss twins, are developing ETFs in the belief that many institutional investors will be more likely to be open to exposure to crypto through something like an ETF, as opposed to direct ownership. In short, a successful ETF application would pave the way for institutional money to enter crypto, and would likely be hugely positive for existing cryptoasset owners. ETFs serve as a good proxy for where the space is at in relation to institutionalization. Unfortunately, it would seem that we may be quite far away. The SEC recently issued a flat rejection of all 9 pending ETF applications in one fell swoop, proving that we've still a way to go before Wall Street truly gets involved. Why did the SEC reject all pending ETF applications? In short, the SEC said that Bitcoin remains too at risk of manipulation and fraud. To take the rejection of the Winklevoss' ETF application as an example, the SEC believes: Bitcoin markets are not inherently resistant to manipulation To guard against manipulation, crypto-exchanges need to develop a 'surveillance-sharing' agreement with a regulated market of significant size - this essentially means that an ETF must price Bitcoin in line with trades that are occuring in a regulated market where the identity of market participants is known None of the Bitcoin ETFs filed for application so far have managed to do this, and many think it'll be a while before they do. This is a step back for Bitcoin in many ways. For now, it seems unlikely that institutionalization will be the narrative that drives the next bull market. Investors should stay up to date with the progress of things like ETF applications, Bitcoin and Ethereum futures trading as well as the noises that traditional institutions are making about the space. The next bull market will come, and Bitcoin will lead it. What exactly it will be driven by is unclear - will there be a killer DApp that introduces decentralization into the hands of millions of people? Will it be institutional money entering the market? The only thing that is clear is that the focus of the individual investor must, for now, remain learning and education. Executing trades can wait, for now.

Articles/October 9, 2018