Kate Baucherel's Blog, page 3

Live from the FTX meltdown

This is but a snapshot of the events and lessons in the ongoing FTX meltdown. By the time you read this (or even before I finish posting), something new will have emerged about this crazy situation, but it’s worth checking on the top five takeaways to date.

1. What’s FTX?

FTX is – was – the largest decentralised crypto exchange (DEX), based in the Bahamas. All exchanges act like the counter at your international airport. One enables you to exchange what’s in your wallet for the currency of a different country, the other the cryptocurrency of a different blockchain.
Some exchanges are centralised (CEX) such as Coinbase, Binance, Gemini and others. These allow you to exchange your country’s currency for crypto, and as such they are regulated. For example, in the UK the FCA requires that consumers and their sterling deposits are protected by strong Know Your Customer and Anti-Money Laundering processes and an e-money licence.
A decentralised exchanged (DEX) is not regulated and only deals in cryptocurrencies. All the transfers between cryptocurrencies are automated, making fees much lower and more attractive to users.

2. Why does FTX have people’s money?

In order to use any exchange, you start by adding funds to your account. For convenience, regular users and traders will often keep their money in the exchange account rather than transferring backwards and forwards to wallets on individual blockchains. It’s easier and cheaper, but it means that the exchange has custody of your money. This is not necessarily a good thing, as the collapse of FTX and others before has shown.

3. Not your keys, not your crypto

This is a mantra of the crypto world. Successive failures of exchanges including Mt Gox in 2014 and Quadriga in 2019 (dramatised on Netflix as “Trust No-one: The Hunt for the Crypto King“) reinforce the message that when someone else has custody of your crypto, you have no control if that person or organisation does not take care of it. By contrast, if you have the private keys to your on-chain wallet then you are in full control. Of course, that means that if you lose the private keys (also known as seed phrases), you lose the money. If holding your own crypto, do ensure that the keys are safe, backed up, and accessible by your nearest and dearest in case of disaster.

4. So what happened to FTX?

In a nutshell, it appears that FTX used customer deposits as a loan to founder Sam Bankman-Fried’s core business, Alameda Research. This was in violation of FTX’s own terms of service for protection of all funds in their custody. The transaction was spotted on the blockchain (the gift of transparency!) and worried depositors started to withdraw their funds in a classic “run on the bank” scenario similar to the 2008 failure of Northern Rock.

5. Where are we now?

As of Friday 11th November, depositors are finding ever more tricky and innovative ways to extract their funds from FTX. Around $50m worth of assets was extracted using a loophole in the FTX NFT platform. An agreement with TRON briefly enabled holders of certain tokens to move their funds. FTX is still stumbling along, hunting for investors to help its liquidity after an initial offer of help from Binance was withdrawn, and the latest news reports indicate that TRON may be stepping in to help. Alameda Research has been closed.

The story keeps moving, but the key takeaways don’t change:

Poor business decisions and unethical behaviours can happen in any sectorRegulation to protect consumers is increasingly importantNot your keys, not your crypto. Stay safe out there!

The post Live from the FTX meltdown appeared first on Kate Baucherel.

Celebrating the Ethereum Merge

It took 17 seconds to change the landscape of cryptocurrency. At a fraction before 6.43am UTC on 15th September, block number 15537394 was confirmed by a staking pool, not by a miner. The Ethereum Merge, also known as the Paris Network Upgrade, was complete. Celebrations all around.

But what does this actually mean? Let’s go back to the basics. Crypto gives us a way of moving assets – coins and other digital value – from place to place without having a bank in the middle keeping a record of the transactions. As there’s not trusted bank, we need to be sure that we can trust the system. To do this, a random member of the network is assigned to effectively “sign off” a list of transactions, closing the block and opening a new one in the chain.

The original solution proposed by Satoshi Nakamoto for the creation of Bitcoin was to set an algorithmic puzzle for network members to try and solve using CPU power. This is the Work that is done to secure the chain – Proof of Work. The first correct calculation wins the right to close one block, claim the reward, and open a new block. It’s elegant and reliable and has stood the test of time, but unfortunately all of these CPUs, running 24/7, use a lot of energy and emit a lot of CO2. It’s been described as a game of Hungry Hippos, with all the miners competing to grab that block reward. Ethereum was created in 2015 and used the same system until earlier today.

From the outset, the Ethereum founders wanted to find a new way of randomising that sign-off that was sustainable and energy efficient. Over the past seven years new cryptocurrencies have emerged and experimented with different methods, and the technology and understanding have evolved rapidly. Ethereum settled on Proof of Stake, enabling anyone holding Ethereum, having a stake in the network, to be chosen. This means that the system invites random members of the network to close each block, rather than everyone battling for the honour and the reward. That cuts the energy consumption of the network at a stroke.

A marathon effort

The switch from Proof of Work to Proof of Stake happened without fanfare. Block 15537393 was confirmed by a miner. At the next block, the running total of difficulty passed a pre-set threshold and a smart contract created the Merge Oracle Triggerer, inviting a member of the staking network to do the honours for 15537394.

Simple. Yes, about as simple as replacing the foundations of a skyscraper, as BBC’s Joe Tidy neatly explained. The Ethereum Merge is the culmination of years of work, research, development, testing, parallel running and gradual upgrades under the hood. The effort has been extraordinary. It’s reminiscent of the work that went in to managing the Y2K (Millennium) bug. When the clock ticked over, everything was fine. People assumed it would always have been so, without necessarily acknowledging the huge amount of time and skill that went into delivering the result. The developers who have pulled off the Merge are to be congratulated.

What now?

Sustainability, Security and Scalability are the three watchwords of the Ethereum Merge. It removes, at a stroke, a key reservation that people had over using the Ethereum blockchain. On 14th September, a single transaction used around 200 KwH of energy, (source: Digiconomist). From the point of the Merge, this will drop by at least 99.95%.

Developers believe they have also ensured the longevity of the technology, improving its security and scalability. The Ethereum blockchain ecosystem is vast, and recently has been so overloaded that it has become expensive and slow to use. As capacity rises and costs fall, adoption becomes easier. It’s a huge milestone and a historic moment in crypto. I’m definitely celebrating.

The post Celebrating the Ethereum Merge appeared first on Kate Baucherel.

Inside Axie Infinity

Axie Infinity is hitting the headlines. This germ of an idea that emerged in 2017 has now reached a $30 billion valuation and sees activity on a par with mainstream games, according to Forbes. During the pandemic it became a lifeline for many people in the Philippines who earned enough from play to replace their lost incomes, and the global community is growing rapidly. In December 2020 I spoke to Axie co-founder Jeff Zirlin about the history and the vision of this extraordinary phenomenon.

This interview was first published in What’s Hot in Blockchain and Crypto – Volume 1 (Dec 2020).

The Play to Earn Revolution

Created in 2017 by Trung Nguyen and his childhood friend Tu Doan, Axie Infinity has evolved into the flagship of the play to earn revolution. Players are already being rewarded for their time and skills with in-game earnings, asset liquidity, and a share of the platform itself. I spoke to Growth Lead Jeffrey Zirlin (better known on Twitter as @Jihoz_Axie) to learn more about the Axie story.

Trung Nguyen was inspired by the concept of a blockchain game that he had stumbled across through Cryptokitties, which was an early proof of concept. Games have always led the adoption of complex new technologies, and Axie was created with the goal of introducing it to everyday people through approachable IP and addictive gameplay. Pokémon is probably the most powerful IP in the world, attaching blockchain to something with that kind of viral energy could help get it into every household.

Jeff joined the project in March of 2017. “The community was still very, very small,” he tells us. “I’ve always been interested in disruptive new technologies and I wanted to create a new market rather than improving an existing paradigm. Originally, I wasn’t really interested in blockchain because it was primarily financial stuff, but I met Trung (CEO) and Aleksander (COO) while playing Cryptokitties.”

Fun, beauty, and sound economics

The Cryptokitties game drew together a community of people who saw the revolution that blockchain could bring to gaming. As Jeff explains, Axie grew organically from the people within the community who said, “Hey, this is cool. What does the future look like? What is the evolution of this concept?” Axie evolved from the desire for a blockchain game with lots of fun baked into the assets and sound economics, a real understanding of supply and demand in the NFT (Non-Fungible Token) market, and ways to apply monetary principles.
“Axie needs to be fun and it needs to be beautiful,” says Jeff. “We have game design, art, but also elements of economics. At the beginning all you could do was just look at your Axies, so we built from that point with the community. I think one of the reasons that our community is so strong and so devoted to the game is because they’ve really seen it grow from just an idea and a concept into something that’s tangible and working and helping.”

Sound economics within a game is music to our ears. It is often a criticism of collectibles that supply and past sales history lack transparency and data availability. Because everything here is on the blockchain, that inherent transparency really adds to the game. With crypto collectibles, transparency increases the availability of public data. For example, with crypto art you can use the blockchain to figure out the average prices of sales for a particular artist. If you try to do that in the conventional art market, you’re going to have to pay a huge subscription fee to access that data.

Jeff has checked out the situation in the real world first-hand. “I pretended I wanted to buy a Picasso just so I could go through the steps to get the data,” he says. “I kept running into dead ends where I had to pay. Data availability in physical collectibles and the physical art market is very sparse and sporadic. Having price provenance and data is a real benefit to everyday users and collectors and a very basic benefit of blockchain.”

The importance of community

The Axie team started to tap into the more complex benefits of blockchain by sharing the value of the platform through a governance token, AXS. The first AXS were issued to players in the community in November 2020. This is a more complex and relatively unproven strategy, but Jeff thinks this is going to move the needle more.

“The idea is that the intersection of blockchain and games will lead to the development of these kinds of fully digital nations,” he says. “These nation states will be complete with real economies, money, complex social structures and even governments.” Jeff studied military and economic history at Yale and wrote his thesis on Alexander Hamilton. “I’ve always felt like I missed my chance to lay out the economic principles of a nation, but games will be kind of a Petri dish for these digital nations. There are already jobs developing, people hiring other people with contracts to play the game and earn tokens using their assets. Social structures are emerging with Guilds and governance. The last step is that we want Axie to be the first game that shares the entire value of the platform with the community that plays it. Until now we have basically been a rent-extracting middleman within this universe, taking marketplace fees and selling things directly like land and Axies. That was necessary at the beginning to kick start the engine, but over time we want to be core developers within the system owning a small slice of a huge pie, rather than a huge slice of a very small pie.”

Scaling and growing

AXS is the vehicle to share the value of the network with players, content creators, and community developers. The Axie core team retains roughly 20% of the tokens so that they are still incentivised to add value and take a long-term approach but sharing more and being more generous with the community is the way to scale. This may feel counter-intuitive, as it turns traditional financing models on its head.
Jeff goes on to explain, “The likes of PayPal and Uber effectively handed over massive amounts of money to scale their networks. They were bleeding money because they understood that in order to build something of huge value you need to build a huge network and harness that network effect. Games are becoming networks now.”

If the game can create value and share that value with users for playing, in a way that makes sense, the network and the game can scale in the same way. Until now, games have tried to scale by being really fun and having massive funding for marketing and other tricks and treats, but blockchain provides a new way for games to scale. Rather than spending money on traditional marketing, you’re sharing value with players when they play the game. It’s all about harnessing the value of the community.

AXS tokens were initially distributed to existing players in the community, and it can be bought on the open market (“An underrated distribution mechanism,” says Jeff). They will also be distributed through players, for example as prizes on the leaderboard in competitive PvP tournaments. There will be an ecosystem fund so people can make grant proposals, for example for community marketing or for content creators. Players can also farm it from land by building structures or harvesting different resources.

Axie is not just one game, one application. Axie group battles are just one mini game, whereas the team is looking to build many different types of experiences on top of these assets, either themselves or through an SDK (Software Development Kit) for community builds, as you see with Pokémon and others.

“The power of AXS coupled with the power of blockchain, allows all of those experiences to be woven together through a common thread of shared ownership. Everyone who’s building on top of Axie uses AXS as a common denominator, so everyone is adding value to the ecosystem. In cases where they’re really helping the ecosystem, we can provide funding.”
A lot of the group come from the open source community. Open source projects have never really found a way to incentivise full time contributions from developers. Now, blockchain and cryptocurrencies can solve that problem. If you create something that represents part of an open source project, people can hold that asset and add value to it through their own voluntary contributions.

Crypto pets and new experiences

Ownership of assets is a key aspect of blockchain games, something that is specifically enabled by the technology. This leads Axie down a new and unexpected path – disrupting the pet industry.

Jeff explains, “Once you give people real true digital property rights over their Axie, over their digital pet, it really becomes more like a real pet.” As he knows from experience, people can find it difficult to have physical pets when living in urban societies with restrictions on animals in properties or moving around the world with work commitments. “I think the next evolution of pet ownership is having them on your phone,” he says, “and then if you have a pet you should be able to monetise it if you want. If people start to see Axies as real pets, then they’re willing to spend some money to make their Axies look cute and beautiful. A lot of people see us like Pokémon, but we see Axies like Tamagotchi too. We want to take pet ownership to the next level, doing things other than just buying and selling.”

Life will find a way

We talk a lot about the future of work in every society. One thing that really interests us is how Axie Infinity is already making a difference to people’s lives and providing income in this difficult year. We’re seeing the nature of work changing fundamentally and irreversibly. We’re spending more time indoors and in front of screens. When you’re looking into a screen it becomes your universe. Naturally, new types of work and new opportunities will arise. We’re seeing the rise of digital nations, digital economies, and digital work that’s accessible to anyone anywhere in the world. Axie is a very early example of this, which is really exciting.

There are a few missing pieces in the jigsaw, though. Identity is one – how do you know there’s one person for one account? The Axie team also has to manage the communities – it’s very easy to have a tight knit small community, but it’s very hard to have a tight knit large community. There are some questions around scaling. AXS will help but they still need to focus a lot on more fun and more accessible gameplay. However, one of the fascinating issues here is that simple gameplay opens up abuse from bots. Exploitation by AIs is a new dimension to consider in the play-to-earn economy. If you’re building a mechanism for people to earn their living, then you don’t want to be fleeced by a machine.

“One of the secrets about Axie is that it’s a little bit complex,” says Jeff, “but that complexity is a defence against AI. Everyone always talks about onboarding barriers, but we created even more steps than the usual. We’ve been able to grow because we have a concrete benefit. We’ve always believed in benefits-driven messaging, benefits-driven product development, so as long as the benefit is strong enough then people will find away – like in Jurassic Park: life will find a way.”

A vision for society

Jeff’s vision goes further. “I believe that in the future, non-profits will use games as a way to distribute basic incomes, because then you create some dignity of work. Governments may also seek to use them for UBI (Universal Basic Income), making people feel like they are accomplishing something even if it’s just going through a game to earn. We’re calling this revolution play to earn, but I think it offers a market-based solution to the concept of UBI. I believe that we will need to find ways to replace income for many people over the next century, creating new ways to earn money just by being a human. Adding value to platforms that require users for network effect means every human should be able to earn a living.”

Enabling every human to earn a living. This is an extraordinary message of hope for the future, and it’s exciting to be part of an evolving society.

The post Inside Axie Infinity appeared first on Kate Baucherel.

Unpacking El Salvador’s Bitcoin Rollout

Today’s the day that El Salvador officially recognises Bitcoin as legal tender. For the first time, a public, decentralised cryptocurrency is being adopted by a sovereign nation. What does this actually mean for the people, the economy, and crypto?

Anyone can use Bitcoin

Although El Salvador makes its use official, there is nothing to stop people from using Bitcoin and other crypto currencies, whatever country they live in. Crypto is not the easiest thing to use, although this is becoming much more straightforward thanks to modern applications providing good interfaces with the different blockchains. Use may be limited by infrastructure challenges such as power outages or lack of internet connectivity, but there are plenty of reports of people using things as simple as SMS messaging to transact, settling on the blockchain next time they are able to connect. Local laws in some countries may aim to restrict use, but decentralised cryptocurrencies are not under anyone’s control.

Cryptocurrencies are providing economic opportunities to people that they may not have had before. At the most basic level, they provide a place to store value, particularly for citizens whose local sovereign currency is highly inflationary and considerably more volatile than the likes of Bitcoin. In the last few years, crypto has spawned a whole industry of decentralised finance (DeFi), providing the things we take for granted, such as access to loans and trade finance, to people and businesses who have previously had no such financial stability.

El Salvador’s leap into crypto

Why would a small South American country decide to adopt a currency it can’t control? In stable economies, the sovereign currency is part of the toolkit to maintain monetary stability, to control inflation and keep the country’s economy ticking. El Salvador, however, scrapped its sovereign currency in 2001 in favour of the US Dollar. This means that they already have a currency they can’t control, and furthermore one that is manipulated to manage the huge US economy. Choosing to add into the mix currency that is not controlled by anyone dilutes the effect of US monetary decision making on the El Salvadorean economy.

There are other considerations. Cross-border remittances – people sending money home to their families from jobs abroad – make up a fifth of the country’s revenue. Cryptocurrencies can make this process faster and cheaper, and having crypto as legal tender ensures that the recipient can buy bread and pay taxes without having to convert back to dollars. Access to digital financial services, something we take for granted but others do not have, is being introduced through the government’s crypto wallet. There is also a potential payoff for the government. Access to geothermal energy, the ultimate zero carbon source, has given rise to plans for Bitcoin mining. This could provide a new income stream for El Salvador’s troubled economy.

The elephant in the room

There is local resistance to the introduction of Bitcoin. It’s new, unfamiliar and notorious, and outside the test bed of El Zonte adoption has been slow. This is in part due to the lack of a reliable energy and connectivity, outages dropping access to the network at a moment’s notice. In this situation, paper dollars win.

There are also concerns about the environmental impact of Bitcoin adoption. The transactions themselves use the Lightning network, fast and cheap channels sitting above the Bitcoin blockchain. They barely touch the Bitcoin ledger, in the same way that the likes of Visa and Mastercard run millions of transactions on their networks and settle in bulk with the banking system. The low carbon mining nodes that are planned will also have minimal impact. However, Bitcoin has an odd network effect. As its value rises, so do the profits of miners who have invested in hardware to validate transactions. The battle to mine the next block hots up as more and more miners come on stream for the prize, and cheap fossil fuel energy earns them as much money as renewables and geothermal sources. This is a challenge that has to be addressed.

A bright future?

El Salvador’s move to use a decentralised cryptocurrency appears to have been born of good intentions. It could well fulfil its promise of detaching the monetary system from the dominant US Dollar, stimulating the economy, and helping citizens to access digital financial services, as long as the infrastructure and support for citizens is in place. Only time will tell, and the world is watching.

The post Unpacking El Salvador’s Bitcoin Rollout appeared first on Kate Baucherel.

NFTs and digital fine art – a love match

Artist James Atkins launched his first crypto art collection on Valentine’s Day 2021. As at 1st September 2021, 99 digital fine art pieces had been sold to thirty different collectors around the world, and the hundredth piece, the signed complete set with unlockable content, is up for auction. How did James hit the ground running with such success in the highly competitive NFT marketplace?

The simple answer is that NFTs – Non-Fungible Tokens – solved a real problem for him. As a trained fine artist with a preference for digital media, James needed a way to define ‘the original’ for collectors and connoisseurs. Why should an original always be physical? NFTs put digital originals on the same footing at the physical for the first time. They give us a way to prove that a digital work has been created by a particular artist, to timestamp its creation, and crucially to allow ownership to pass from one person to another. (You can read more about NFTs here.) James also used his experience to ensure that the digital originals he produced formed a coherent body of artwork. This is his story.

A journey in art, design and tech

James showed a talent for art at school and followed in the footsteps of his former art teacher to study at the prestigious Camberwell College of Arts in London, one of the world’s foremost art and design institutions. “I had an equally great and terrible time,” he laughs, “and came out of there, unfortunately, never wanting to paint again. But this was the late 1980s so the digital design world was kicking off. There was a whole desktop publishing revolution, using computers for typography and typesetting, which I absolutely loved.” James started working with design agencies and freelancing for clients in London and saw first hand a paradigm shift in the industry. “I was always battling against the attitude of, ‘you’re an artist, you’re not a designer’,” he says. “And I was thinking, well, no, in the future, there’s going to be this whole thing where you’re both, and you need to know technology.”

He spent a lot of time teaching designers how to use the emerging technology, but realised design agencies were not moving fast enough. “They were stuck in the old drawing board way,” he says, “with three people doing one job. I just found it ridiculously backward.” It was time for a change, and this is where the next piece of the crypto art jigsaw slots into place.

“I worked at the Financial Futures and Options Exchange,” says James. “I wasn’t actually trading in potato futures or bond options or anything like that, but I was designing for the market. We did publications and literature and branding stuff. That’s fed into this whole crypto world. I understood it straight away from years ago. I never thought that having worked at that place would be useful in my life, but here we are.”

Designing for the World Wide Web

In 1995, as the World Wide Web opened up the internet to all, James moved to join one of the first web design companies in the UK. “There were two,” he recalls. “There was us in Cambridge, and then one in London. Any projects in London, they tended to get. Anything outside of London, we tended to get.”

The demand was huge and the tools available were minimal. “They just couldn’t find enough designers,” he says. “We were using HTML 1.0 and Times New Roman or Arial, a grey screen and blue links, and having to make a brand with that. I absolutely loved it, because it was something completely new. It was tech and design and art. And it was a whole new wave, of course. We had one advert in the back of a web magazine and the phone fell off the hook. It was BP ringing us on a Tuesday afternoon, ‘Can you do us an intranet?’, or BT asking for a global website. It was just ridiculous, but it was a really exciting time. I learned so much, so quickly.”

Websites were all very well, but James still wanted to work with branding and print, so in 1997 he set up his own business. 24 years on, this led him to the world of crypto art.

Digital fine art created by the same hand

Despite his claim that he never wanted to paint again, James kept his hand in with art. “I would draw, I would carry a watercolour kit around,” he says, “but about twelve years ago, I decided that I wanted to properly paint again. I started oil painting and making stuff. I didn’t want to question it, and it didn’t matter exactly what it was. I thought, if I just make things for a few years, then at the end a logical creative thread will emerge. Whether it’s figurative, abstract, portrait, or it’s constructing stuff in the garden, it didn’t seem to matter. I did that for a few years, buying oil paints, stretching canvases, and all the traditional stuff.”

However, after thirty years of using digital tools, paint was no longer the right medium.

“It just felt so alien,” he says. “I could still do it, but it wasn’t enough. It didn’t occupy my tech side and the creative side of my brain. There was something missing.” As a very early adopter of tech, he picked up one of the first iPads and started drawing on it. “I’d used tablets and pens,” he explains, “but with those tools you’re not touching, there’s a disconnect. Drawing directly on the screen made all the difference.”

Invited to exhibit, he printed the work. “I printed giclée on massive Epson printers with beautiful quality paper, incredibly vibrant and framed. People were looking at these prints, saying, Well, which one is the original? There isn’t one. It exists digitally, and that’s a printout. So when I first came across NFTs, I thought, that’s it. You don’t need to print them, and if you do print, the vibrancy of a screen or a retina display just gets lost. I often used to think about pictures on walls. When was the last time you actually studied a picture on the wall? You walk past it as decoration. If Leonardo was around now, he wouldn’t be messing around with paint or charcoal on paper. He’d be working at CERN and his art would be embracing technology.”

A hundred kisses

With his introduction to NFTs, everything clicked into place. “I thought I could bring something to the community that was based on a pure fine art education,” says James. One of the key elements of this is the importance of a body of work and the continuity and longevity of making art. “Art is not something that appears like magic out of thin air. There’s a big difference between making art and designing to a brief for a client. A true artist is not just somebody who makes art, but who finds a way to carry on making art. You’re only as good as your last piece. I have a need to make stuff. Whether it’s painting, whether it’s NFTs, I love the fact that the passion goes back to me from 35 years ago.”

The collection that has attracted so much attention is ‘10×10 Xs’, a series of digital kisses released in ten batches of ten. They were deliberately conceived as collectibles with a consistent element. “I wanted to have some rigour to it,” says James. “Collectibles have parameters and rules. The more I made, the more productive I became, and themes started arising. It reminded me so much of painting in that intense period of those three or four years of art school, just by learning things, just purely by creating art.” The first few Xs were picked up by friends and family, but on the back of a tweet from a collector, every piece sold. “It was incredible,” says James. “It’s a new world.”

NFTs have inspired and enabled a world of digital consumption, for the generations who don’t have walls for art but have devices to enjoy the vast range of different things that meet all our varied tastes.

The auction for the final piece in this collection is being held on Opensea and ends on Friday 4th September.

Author’s disclaimer: Image shows 10×10 Xs #09, 60, 78 from my collection.

The post NFTs and digital fine art – a love match appeared first on Kate Baucherel.

Central Bank Digital Currencies gather steam

Central Bank Digital Currencies, or CBDCs, are gathering steam. The years since the 2008 financial crash have seen both the emergence of cryptocurrencies and a rapid rise in the use of digital forms of payment. The Bank of England published their second discussion paper on CBDC a few days ago, and Governor Andrew Bailey told the Association of Corporate Treasurers conference that digital currency is “part of what a Central Bank is all about.” I was recently invited onto BBC Radio 4’s Moneybox to talk about CBDCs, what they mean for us, and what cryptocurrency means to the wider world.

Why we need CBDCs

In a recent speech, Sir Jon Cunliffe, Deputy Governor (Financial Stability) of the Bank of England explained the distinction between public and private money. People rarely realise that the money in our traditional bank accounts is not the same as a bank note. Rather, it is private money issued by the individual banks, although it can be exchanged freely for cash, public money, at ATMs. This is why there is so much regulation around banks, for example the bank deposit guarantee scheme in the UK that covers (currently) personal deposits up to £85k in the event of the failure of one of these private banks.

That means that all of the electronic banking that we do, moving money by fast payment or paying by chip and pin or contactless card, is private money. You can’t do anything digital with public money, bank notes, right now. However, the overarching stability provided by their very existence, their promise to ‘Pay the Bearer on Demand’,  is the glue that holds the monetary system together and helps the Bank of England to keep inflation low and our day to day costs steady. In this country, you don’t go to the store wondering whether your bread will be one pound or five today. That is not the case for every economy.

If monetary stability relies on confidence in public money issued by a central bank, then that money needs to stay up to date and be made available in a digital format alongside physical cash.

There’s a more pressing concern for central banks around the world, too. A cryptocurrency like Bitcoin or Ethereum sits on a public ledger, rather than inside a bank. Cryptocurrency is public money in the same way that bank notes are public money.  Can large economies risk the population turning to crypto, whether traditional or issued by big tech firms, and making non-digital public money obsolete?

Bitcoin as legal tender?

One country that has jumped straight into public crypto is El Salvador. This is an interesting case to mention because they have passed legislation to make Bitcoin legal tender alongside the US Dollar. Neither of these currencies is under the control of the state, so there is no impact on monetary stability, other than, perhaps, reducing reliance on the US Dollar. In terms of financial stability, they hope to take advantage of the borderless nature of Bitcoin to improve the flow of remittances from ex pat El Salvadorians, a sum estimated to make up 20% of the country’s GDP. Whether this bold step helps to improve digital as well as financial inclusion remains to be seen, and it will be very interesting to see how the adoption progresses and whether other countries in the same position also take action.

Risks and opportunities

Most of the risk of using any type of digital currency comes down to the effectiveness of your cybersecurity practice. The scams and malware that have always circulated in an attempt to part us from our hard earned cash are designed to target not just traditional deposits but crypto too. Phishing emails capture logins and plant trojans on computers, malware sneaks in through older devices that are out of date for security updates, and convincing scam calls persuade the unwary to move money from A to B, never to be seen again. Public cryptocurrencies are also susceptible to the classic human error of forgotten passwords and lost access. Central Bank Digital Currencies would protect us from ourselves, to some degree.

Programmable money

Digital currencies make the machinery of payment run more smoothly, giving us cheaper payments and faster settlement. As they are software, they are also programmable. Public digital currencies are programmed to execute transactions on their individual blockchains, for example. Other ‘coins’ – NFTs – act as certificates of identity or ownership, enabling us to track the movement of everything from Durian fruit to fine art. If digital money can be programmed to have specific roles or even to collect data, would you rather the central bank was in control, or a global tech firm like Facebook?

Sustainable crypto

Finally, what about the environmental impact? There are valid concerns around the energy use and carbon emissions of Bitcoin. It’s important to say that Bitcoin was the first cryptocurrency, a successful proof of concept, and the energy-hungry Proof of Work consensus that allows the ledger to be maintained was the best available option at the time. There is a lot of work underway to incentivise the use of sustainable energy sources, and El Salvador has suggested using geothermal energy from its volcanoes to power Bitcoin mining. As the adoption of crypto accelerated, developers looked for new ways to manage consensus and improve sustainability. Ethereum, the second major cryptocurrency, made it a goal in 2015 to move to a Proof of Stake consensus as soon as this was technically possible, and may deliver on the promise this year. Newer currencies, including CBDC, are developed with sustainability in mind, and signatories to the Crypto Climate Accord are aiming at net zero operation by 2040.

A future of digital money

There are a handful of CBDCs running right now, notably the Bahamian Sand Dollar and the Digital Yuan in China, and central banks globally are on the road towards their implementation. If you want to help shape the UK’s version of digital cash, you can respond to the discussion paper here. What the final form will take is uncertain, but it is very likely that when CBDCs roll out, most of us won’t even notice it happening.

 

Glossary: Crypto and CBDC jargon

Bitcoin, Ethereum and other pure, public cryptocurrencies are borderless, censorship resistant, transparent and immutable, but notoriously volatile in value. What does all this mean?

Transparent : Anyone can go to the public ledger and look at a transaction. It won’t be written out in longhand, but you can confirm that a sum of money or a digital asset (like an artwork) moved from the ownership of one person to another.

Immutable : You may be able to see the transaction, but you can’t change it thanks to the way the ledger is designed. Transactions are held in a chain of blocks that all refer back along the chain. To change one thing means changing everything that came after it. This is not a private database or a spreadsheet that could be manipulated, adjusted or deleted.

Borderless and censorship-resistant : There is no national body controlling these cryptocurrencies, and they are global. Anyone who has access to the internet (even intermittently) can have access to a cryptocurrency. This is important because it gives people who do not have the luxury of our banking infrastructure the chance to transact across borders, keep an honest ledger of payments and receipts, and even access decentralised financial services such as loans.

Volatile : The Bank of England is tasked to keep inflation in the country under 2%, and this involves planned, regulated monetary policy. As public cryptocurrencies are not part of any nation’s policymaking or control, confidence can wax and wane and they can appear highly volatile against a stable currency. Against an unstable currency with no discernible monetary control, Bitcoin and others are by contrast safe havens. To avoid untethered volatility, Central Bank Digital Currencies are designed as stablecoins with the same value as cash. This isn’t a new concept, just a new technology, as the Bank of England’s Christina Segal-Knowles explained recently. Private stablecoins have been part of the crypto world for several years.

The post Central Bank Digital Currencies gather steam appeared first on Kate Baucherel.

CryptoPunk 7523 and original digital art

Hearing the hammer fall on CryptoPunk 7523 at Sotheby’s on Thursday 10th June, 2021, was a breathtaking moment. The price was one thing, jumping from a bid of $1.8m straight to the winning bid at $11.8m (4520 ETH), but the occasion was more significant. In the traditional art world, the value placed on a unique and sought-after piece in a recognised body of work can be seen again and again in high profile auctions. Banksy’s “Love is in the Air”, for example, sold for $12.9m in a Sotheby’s auction just a month earlier. The CryptoPunk 7523 sale, and the rest of the pieces in the Natively Digital auction that together sold for another $5.4m, put digital art on an equal footing with other artistic media.

Drawn by the same hand

Why is this important? Artists and other creators see digital as just another medium for expression. As an author, I write my books on a computer. Is my manuscript less valuable than one written longhand on paper? From the high value, thriving market in handwritten manuscripts from the pre-digital age, it would appear so. My earnings come from sales of the books themselves, of course, but what about that digital original?

The question is more pressing for fine artists. Recently I spoke to artist James Atkins who has travelled the road from physical media at Camberwell College of Arts to digital art as it emerged and evolved. When his digitally-created art was recently exhibited, people struggled with the idea that the original was not an oil or a watercolour or a sculpture. “I printed giclée on massive Epson printers with beautiful quality paper, incredibly vibrant and framed,” he says. “People were looking at these prints, saying, Well, which one is the original?” There isn’t a physical, tangible original. “It exists digitally, and that’s a printout,” he told them. “It’s done on an iPad, but it’s still my hand drawing it.”

Digital Provenance

This is a market where originals command the highest value and prints come a poor second. The Banksy original of Love is in the Air may have sold for $12.9m but a print of a version of the same work sold for ‘only’ $163,800 in a sale in April. If artists are to be properly rewarded for their creations, then the digital original has to be raised to the same standard as the physical.

Blockchain, and specifically the development of Non-Fungible Tokens (NFTs), has given us a way to prove that a digital work has been created by a particular artist, to timestamp its creation, and crucially to allow ownership to pass from one person to another. Not only this, but NFT provenance and ownership transfer have significant advantages. The provenance can be checked and verified by anyone on the transparent blockchain ledger, and conditions of transfer of ownership can be programmed into the ‘token contract’ that defines the properties of the NFT. These include sending the original creator a percentage of the resale of their work, enabling artists to benefit from the vagaries of the market once the artwork is out of their hands. Some token contracts even send money to charity. Ubisoft’s Rabbids tokens send the proceeds of every ownership transfer to Unicef.

Digital originals are as valid as physical originals, and the sale of CryptoPunk 7523 has brought digital art into the mainstream. This was the intention behind the work that owner @SillyTuna put in with Sotheby’s and the other sale artists to make it happen. It’s worth noting that in the spirit of a responsible NFT, the creators, Larva Labs, and earlier owners were involved in the work and were there in the virtual room when the hammer fell. A proportion of the sale proceeds have also been donated to charity.

We now have the technology to support digital originals. I expect that in the future physical originals will also be backed by a token contract to take advantage of the benefits that these confer. It’s an exciting time.

 

The post CryptoPunk 7523 and original digital art appeared first on Kate Baucherel.

NFTs through the looking glass

What’s an NFT? As crypto assets leap into the headlines, the race is on for people to understand the blockchain and crypto world, and a new series of bite sized guides is helping newcomers to do just that.

Whether we’re going ‘down the rabbit-hole’, as they say in crypto, or through the looking glass, Wonderland awaits. Unlike Alice’s discovery, this technology is not fantasy but real and it’s delivering tangible benefits to people around the world.

‘What’s Hot in Blockchain and Crypto – Volume 2’ leads the reader through the looking glass on a global journey to the cutting edge of a transformative technology. It brings you news of accelerating crypto adoption, insights from scifi fandom into the importance of NFTs in protecting intellectual property, and using the same NFT approach to preserve and enhance museum pieces. It takes a global perspective on tech, featuring tales from Europe, Africa, the US and Asia about innovation and the regulation that surrounds it. Fifteen carefully curated interviews provide a snapshot of real applications of blockchain and crypto, awakening interest in new readers and drawing them into this realm.

Frances Liddell’s work on the digital lives of cultural objects is one unusual application featured in the book.

“I was thrilled to be interviewed about my work with NFTs,” says Frances. “Blockchain technology has given us a way to embed rich, lived experience into museum artefacts. It’s a truly fascinating area.”

This second volume also includes discussions with Lewis Cohen of DLx Law, who navigated the regulatory chessboard for the Kraken exchange and Pocketful of Quarters; Ethan Vera of crypto mining company Luxor Tech who explains the background to the emerging market for hash rates, and Hartej Sawhney of Zokyo, auditing smart contracts and improving security. We also hear from Devina Paul of Zumo, Laura Bailey of Qad:Re, Ethan Pierse of the CryptoAssets Institute and Morten Rongaard of Doctor Who Worlds Apart.

Lavinia D. Osbourne, Host and Founder of Women in Blockchain Talks, says, “You cannot help but be entertained, awed and excited by this space… This is an experience of individuals sharing their passion and the real-life solutions they are creating.”

The series is the brainchild of Ash Costello, a privacy and blockchain lawyer who advises international entities on privacy for blockchain and cryptocurrencies. She wanted to know about the latest emerging projects in blockchain technology and realised there was a gap in the market. Ash met established emerging technology author Kate Baucherel through women in blockchain network The Bigger Pie, and the two have begun a series of collaborations on the ‘hot’ projects in the blockchain and crypto industry.

‘What’s Hot in Blockchain and Crypto – Volume 2’ and ‘What’s Hot in Blockchain and Crypto – Volume 1’ by Ash Costello and Kate Baucherel are now available on Amazon Kindle worldwide.

##ENDS##

Notes to Editors
Vol 2:
Universal link: http://mybook.to/WHBC2
Amazon ASIN: B08ZT49Q4P

Vol 1:
Universal link: http://mybook.to/Whats-Hot-1
Amazon ASIN: B08PTK9869

For enquiries and review copies please contact:
Email: kb@katebaucherel.com / ash.costello@gdprdesigners.com
Phone: +447711 674819 / +353833154687
https://www.linkedin.com/in/katebauch...
https://www.linkedin.com/in/ash-coste...
‘What’s Hot in Blockchain and Crypto (Vol 1)’ by Ash Costello and Kate Baucherel, 2020
‘What’s Hot in Blockchain and Crypto (Vol 2)’ by Ash Costello and Kate Baucherel, 2021
A Discovery Node Publishing book
Cover artwork by Neil O’Driscoll

The post NFTs through the looking glass appeared first on Kate Baucherel.

Harvey Duckman Presents… celebrates its fiftieth author

Writers around the world are finding a home for their fantastic fiction in North-East England’s very own Harvey Duckman series of scifi, fantasy, horror and steampunk short story anthologies.

And the latest volume marks a milestone for Billingham’s Sixth Element Publishing. The series was launched in 2019 to help new authors get their first foothold in publishing, and with this edition there are now 58 ‘Harveys’ whose work has been chosen for the series.

The nine books so far (seven volumes and two themed specials) feature 137 tales from brand new and established authors who hail from Teesside, London, Manchester, Birmingham, New York, New England, Germany, Australia, Japan, and India.

For many of the contributors, Harvey Duckman is their first time in print, their stories sitting alongside tales from established and award-winning authors. The team at Sixth Element works hand in hand with new writers to bring their unique voices to the collection. The oldest contributors are in their seventies, and the youngest only twelve. More than a third identify as women, and several are autistic or dyslexic.

Gillie Hatton, editor and partner at Sixth Element, says, “We love our Harvey Duckman series. It’s brilliant to see such a talented bunch of writers come together to help support and promote each other, and give readers a regular helping of fantastic, original stories to enjoy.”

The goal is to publish at least 100 unique authors under the Harvey Duckman banner by the end of 2022, and new editions are already in the pipeline. Aspiring writers are invited to check out the submissions guidelines at www.harveyduckman.com. Authors who are chosen for the series earn a share of the Harvey Duckman royalties and retain the rights to their individual work.

Released this weekend, you can find the brand new volume of the Harvey Duckman Presents series on Amazon, in paperback and Kindle ebook, at mybook.to/HDP7

Notes to Editors
For more details on Harvey Duckman Presents and Sixth Element Publishing, call Gillie Hatton on 07970 065628

The post Harvey Duckman Presents… celebrates its fiftieth author appeared first on Kate Baucherel.

Lockdown sparks international collaboration on blockchain book

Two blockchain advocates have come together to produce the first collection in a new series of inspiring success stories from around the world.

‘What’s Hot in Blockchain and Crypto’ takes the reader on a global journey along the cutting edge of a transformative technology. This first collection of seventeen tales includes interviews with Genevieve Leveille of AgriLedger, whose work is transforming the lives of farmers in Haiti; Jeff Zirlin of Axie Infinity, the game which is providing real incomes for players in the Philippines; Charlie Northrup, architect of the Universal Framework of Things; and Walid Al Saqqaf whose initiatives in conservation with Re:Gen are reinforcing the concept of blockchain for good.

Former Blockchain Chamber of Commerce President and CEO Linda Goetze said, “This is an inspiring glimpse behind the hype, showing us how businesses are embracing the opportunities of blockchain and cryptocurrency to create new business models and solve real problems.”

The series is the brainchild of Ash Costello, a privacy and investment funds lawyer who advises international entities on privacy for blockchain and cryptocurrencies. She wanted to know about the latest emerging projects in blockchain technology and realised there was a gap in the market. Ash met established emerging technology author Kate Baucherel through women in blockchain network The Bigger Pie, and the two collaborated to launch the book in time for Paris Blockchain Week, 8-9 December.

‘What’s Hot in Blockchain and Crypto – Volume 1’ by Ash Costello and Kate Baucherel, with a foreword by Linda Goetze, is now available on Amazon Kindle worldwide.

##ENDS##

Universal link: http://mybook.to/Whats-Hot-1

Amazon ASIN: B08PTK9869

For enquiries and review copies please contact:

Email: kb@katebaucherel.com / ash.costello@gdprdesigners.com

Phone: 07711 674819

https://www.linkedin.com/in/katebauch...

https://www.linkedin.com/in/ash-coste...

‘What’s Hot in Blockchain and Crypto (Vol 1)’ by Ash Costello and Kate Baucherel, 2020

Edited by Sixth Element Publishing

Cover artwork by Neil O’Driscoll

The post Lockdown sparks international collaboration on blockchain book appeared first on Kate Baucherel.