#4 Blockchain & Fund Mgmt., KW 15/10/18

Investments Impacting  and Insightful Events

Big names like Apple cofounder Steve Wozniac, hedge-fund billionaire Steven Cohen and  plastic surgeon/startup investor Kim Byung-gun are all investing and going big in this space! Is the underlying value being felt by the most knowledgeable people?  Interesting times of change.

Traditional players like fidelity are getting in, and coinbase is focussing more on retail. The positioning in this space is starting…

Steve Wozniak Apple cofounder gets into blockchain based VC service

 Steven Cohen goes blockchain

Plastic Surgeon Buys $352 Million Stake in Korean Crypto Exchange

Investment Giant Fidelity Launches Assets Targeting Institutional Investors

Coinbase shutdown large investors index fund

TRON marching into 10s of billions!

Blockchain Security: Bank Perspective

This is the abstract my Deutsche Bank colleagues Riccardo Riccobene and Prof. Wolfgang Hoehnel and I submitted for Industrial Track WI2019.

The threat surface of blockchains can be divided into two parts. Inside the Blockchain and Peripheries of blockchain.

Peripheries are systems that connect to blockchain network from outside. For example, an exchange where different currencies get traded or wallets where users store their own keys. The most of the hacks for example on bitcoin happened on the peripheries of bitcoin network. Especially, the Exchanges and not inside the blockchain. For example, the famous Mt.Gox which was an exchange where in June 2011, 750 thousand bitcoins( More than a 5 Billion USD value today)  were reported to be missing from the exchange to the latest Zaif exchange hack in Sep 2018 where 60 million dollar was stolen. Bitfinex, Bitfloor, Poloniex and Bitstamp all were surrounding system where security breaches happened and not in the blockchain itself.

The Second type of threat surface is inside the blockchain itself.  Smart contracts are code by which blockchain platforms are programmed to execute the needed logic. Example of a simple smart contract would be transfer money X from address A to address B.  If there is a cryptographic error or simple programmable errors, that can be used to abuse the blockchain network.  Here the new networks where the code is still not used for long time, and all bugs are not yet corrected are susceptible. For example, famous DAO project would be a good case. Smart contract Split-Return was used to hack the blockchain network to pay-out large sum of 52 Million dollar.  Weak consensus algorithm and methods of consensus are as well big issues. Many of the smaller projects and non-proof of work suffer from this issue. There are multiple threat vectors but the most important ones to be smart contracts quality and proof of consensus algorithms. To avoid inside chain attacks, it is important to write very clear code and tested from multiple angles and audited by third-parties before live deployment.

Most of the threat you see would be variants of the above two.  Cyber Security teams need to handle both of these threat surfaces.  Most of the work being discussed is in-blockchain security and smart contracts but blockchain becomes more usable by enterprises when end-2-end security including the peripheral systems and applications using them are also taken care from security perspective.

There are multiple methods used to secure end-2-end. But core of all this and fundamental one to all this is cryptography. So End-2-end key and certificate management plays the most important role.  Identity to key mapping and vice versa is also big part of the solution.  It is important to use the typical defence-in-depth security from hardening to penetration testing must be done on the oracles.  Oracles are the gateways through which data is transmitted in and out of the smart contracts in the blockchain. Normally a typical IT system would be GIGO: Garbage In and Garbage out.  In blockchain world, it is GIGS: garbage in garbage Stays.

Last but not the least, we as users are the biggest threats be it outside or inside.  This is the area, where we believe, most of the future research will go into in addition to the privacy and custodianship which are as well very important pillars in Cyber Security for Blockchain.

Take on emerging markets – deciders perspective

As there have been some strong movements in global markets in the last few days, here are my thoughts

For emerging markets: The strengthening of USD and increasing interest rates mean:

  • -> weakening of emerging markets currencies
  • -> so commodity prices in the emerging world shoot up
  • -> so cost to companies increases (for example, the price of oil)
  • -> so lower profits are anticipated
  • -> so Sensex drops.

Some additional observations:

  • Defensive sectors are picking up – healthcare, energy, industrials, utilities: people are moving to safe assets.
  • The American dollar is going up!
  • The gold price has done well in emerging markets.

Mainly notes for myself on investing in emerging markets (these are just thoughts, not advice; take this rants at your own risk):

  • Safe investors: This is the time to be in cash or money markets (it was not sexy, now it is – 2%)
  • Risky investors: If you have the ability to short without a lot of leverage, it might be worth trying small caps that ran too far.
  • Market neutral long large cap, short small caps.
  • Gold is only advisable in emerging markets with conviction.
  • If you want to stay in stocks, rotate to safer sectors like healthcare, utilities.

Preserving your capital is more important than anything else in such times.

#3 Blockchain – Asset mgmt, KW 01/10/18

Most Notable News

There is a forward-forward Indicator for crypto now. Crypto market is highly driven by sentiments and market-noise. It is well-known that growth in google trends is a good forward indicator for crypto world. Google is again going to allow crypto ads, which means that more people going to look into this space and thus more interest over time. Metamask among hot wallet/web wallets has the highest appeal among the Ethereum developers and now with support of Ledger hardware wallet, they have taken the game of wallet/custody to the next level. Stellar Dex is going to definitely induce large scale liquidity to the market as many of their different BAAS project will start using this over time.

  1. Google to allow crypto ads again
  2. Metamask support for Ledger wallet
  3. Stellar launches decentralized exchange: zero fees
  4. Swiss-Based Asset Management Firm to Introduce Metals-Backed Cryptocurrency
  5. Extremely Difficult’ Conditions: India’s Zebpay Shutters Crypto Exchange
  6. Opera Partners With Ledger Capital to Explore Blockchain Applications
  7. Jobs in Blockchain is growing big way: believers time to jump in
  8. enterprise security with AI and blockchain

Most Investment-Related Notables

Custodianship is one of the biggest challenges in market, so here’s a refreshing and bold take by bitgo on custody. The MKR 16z debate was most scintillating this week, and here’s the a16 take on that.

  1. Bitgo: 1 trillion dollar Wallet
  2. Purchase of MKR by a16

Most Interesting Insightful Reads

  1. Mass onboarding on Ethereum: a nice model
  2. Stablecoins discussion
  3. Blockchain Privacy

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