Big Data and FinTech

In the Fintech industry, Big Data can be used to anticipate customer behavior, but also to create strategies and protection policies for banks and financial institutions around the world. Every day, around the world, approximately 2.5 quintiles of bytes of data are generated. And this rate is expected to grow even more in the future. All of this data can be used in a number of valuable ways, with the help of appropriate tools and algorithms. But how can Big Data be used in the banking and financial technology sectors?

Customer Segmentation

Financial technology companies are well known for being customer focused, and customer segmentation is one of their areas of interest. The financial sector focuses on dividing its customers according to age, gender, online behavior, economic status, and geographic coordinates. In this sense, fintech companies can easily analyze consumer habits, depending on age, sex and social class. They can also easily customize their alternative banking services and products to meet the demand and needs of each segment. The most valuable customers, that is, those who spend the most money, can also be identified - which will generate higher levels of customer satisfaction.

Fraud detection

Another advantage of using Big Data in the financial sector is the prospect of fraud detection. Obviously, with the increase in online banking transactions, companies in the industry and their customers are more likely to be victims of fraud. Big Data helps banks and other financial institutions better understand each customer's consumption habits, but also their online standards. In this case, when an unusual activity is detected by the company, the account holder can be easily contacted and informed about a transaction that seems suspicious.

Custom Services

In banking and finance, like many others, offering personalized services is one of the best marketing tools available. Financial technology companies, such as the Contis Group, say that more and more customers are looking for customized services and packages. Banking institutions have begun to use the services of fintech companies to improve their services and offer more personalized packages, but also a better, more comprehensive and faster infrastructure that contributes to creating a personalized and easy experience for the final consumer. Not only can Fintech companies identify spending patterns to make bank recommendations, but they can also use them to help the end user save more money. Unlike traditional banking institutions, fintech companies focus more on creating customized financial services that meet very specific consumer demands, and that is where Big Data comes into the discussion.

Better compliance features

Companies that offer financial services always need to follow specific rules. This requires frequent audits and compliance controls to meet industry-specific demands for security, privacy, data, and finance. Big Data contributes to providing these companies with valuable information in terms of consumer needs and expectations in relation to them. Using cloud-based data, these companies can now use analytical packages and integrate them into their systems, allowing them to take a more actionable view in that regard. In addition, fintech companies offering customized financing options can now analyze and detect where a financial crisis is most likely to occur and adapt their strategies to follow some precautionary measures.

The financial technology industry is evolving at an accelerated pace, and from the Internet banking services, companies in the industry have increased their capabilities and the financial services offered. Machine learning and artificial intelligence seem to open new avenues in all sectors, and the alternative financial sector also seems to benefit greatly from this. Ultimately, this translates into better and more personalized services for B2B and B2C consumers.

(Text from https://www.smartfinance-news.com/data-and-analytics/big-data-and-its-role-in-the-evolution-of-fintech)

What is Ripple?

Ripple is a real-time gross settlement system, currency exchange and remittance network created by Ripple Labs Inc., a US-based technology company. Released in 2012, Ripple is built upon a distributed open source protocol, and supports tokens representing fiat currency, cryptocurrency, commodities, or other units of value such as frequent flier miles or mobile minutes. Ripple purports to enable "secure, instantly and nearly free global financial transactions of any size with no chargebacks."

The ledger employs the decentralized native cryptocurrency known as XRP, which as of September 2018 was the second largest coin by market capitalization. Ripple has been adopted by banks and payment networks as settlement infrastructure technology. Ripple relies on a common shared ledger, which is a distributed database storing information about all Ripple accounts. The network is "managed by a network of independent validating servers that constantly compare their transaction records." Servers could belong to anyone, including banks or market makers. Ripple validates accounts and balances instantly for payment transmission and delivers payment notification with very little latency (within a few seconds). Payments are irreversible, and there are no chargebacks.

For its creation and development of the Ripple protocol (RTXP) and the Ripple payment/exchange network Ripple Labs was named as one of 2014's 50 Smartest Companies in the February 2014 edition of MIT Technology Review. A scientific study made by two researchers from Stanford and Stockholm University that studied the money production from an energy consumption point of view and a macroeconomic level stated that running a server on Ripple was comparable to the energy needs of running an email server.

Ripple was conceived by Jed McCaleb and built by Arthur Britto and David Schwartz who then approached Ryan Fugger who had debuted in 2005 as a financial service to provide secure payment options to members of an online community via a global network. Fugger had developed a system called OpenCoin which would transform into Ripple. The company also created its own form of digital currency referred to as XRP in a manner similar to bitcoin, using the currency to allow financial institutions to transfer money with negligible fees and wait-time.

Ripple Labs continued as the primary contributors of code to the consensus verification system behind Ripple, which can "integrate with banks’ existing networks." Since 2013, the protocol has been adopted by an increasing number of financial institutions to "[offer] an alternative remittance option" to consumers. By December 2014 Ripple Labs began working with global payments service Earthport, combining Ripple's software with Earthport's payment services system. The partnership marked the first network usage of the Ripple protocol. On December 29, 2017, XRP briefly became the second largest cryptocurrency, with a market capitalization of US$73 billion.

A class-action lawsuit was filed against Ripple in May 2018 "alleging that it led a scheme to raise hundreds of millions of dollars through unregistered sales of its XRP tokens. [creating] billions of coins 'out of thin air' and then profited by selling them to the public in 'what is essentially a never-ending initial coin offering'."

(text from Wikipedia https://en.wikipedia.org/wiki/Ripple_(payment_protocol))

What is Hyperledger?

One of the projects you will inevitably stumble upon when you visit blockchain conferences and follow blockchain news is Hyperledger of the Linux Foundation. But while it is relatively straightforward to understand what cryptocurrencies like Bitcoin and even Ethereum are, it is more difficult to get your head around the Hyperledger initiative. But if you do, you’ll find some exciting projects for non-currency, industrial blockchain applications.

Let’s start with what Hyperledger is not: Not a company. Not a cryptocurrency. Not a blockchain. Not an IBM blockchain coin. Hyperledger is rather something like a hub for open industrial blockchain development. On its website Hyperledger explains:

“Hyperledger is an open source collaborative effort created to advance cross-industry blockchain technologies. It is a global collaboration, hosted by The Linux Foundation, including leaders in finance, banking, Internet of Things, supply chains, manufacturing, and Technology.”

Hyperledger does not support Bitcoin or any other cryptocurrency. But the platform is thrilled by blockchain technology. Not since the Web itself, the website tells, “has a technology promised broader and more fundamental revolution than blockchain technology.” Blockchains has the potential to “build a new generation of transactional applications that establishes trust, accountability, and transparency at their core while streamlining business processes and legal constraints.”

So we have a lot of promises – and we have Hyperledger. With it, the Linux Foundation aims to create an environment in which communities of software developer and companies meet and coordinate to build blockchain frameworks. The Linux Foundation founded the platform in December 2015. In February 2016 it announced the first founding members, in March 2016 ten more members joined.

Today Hyperledger has an impressive list of more than 100 members. The list covers a wide scope of well know industry leaders. It includes mobility tech giants like Airbus and Daimler, IT-companies like IBM, Fujitsu, SAP, Huawei, Nokia, Intel and Samsung, financial institutions like Deutsche Börse, American Express, J.P. Morgan, BBVA, BNP Paribas and Well Fargo, as well as Blockchain startups like Blockstream, Netki, Lykke, Factom, bloq and Consensys. A lot of the world’s largest companies in Tech and Finance meet at Hyperledger with some of the hottest blockchain startups.

Relatively early in the history of Hyperledger, the project had to make an important decision. Executive Director Brian Behlendorf was asked if there will be an “Hyperledger Coin”, a monetary unit running on the Hyperledger blockchains. Behlendorf answered that the Hyperledger Project itself will never build its own cryptocurrency.

“You’ll never see a Hyperledger coin,” he said, “By not pushing a currency, we avoid so many political challenges of having to maintain a globally consistent currency.”

This decision strongly shaped the strategic goals of Hyperledger to build industrial applications of blockchain technology and sharply separating it from the get-rich schemes usually evolving from currency based blockchains. This might be more boring, but also more straightforward to the technology.

Blockchain and Machine Learning

Machine Learning (ML) can be described as software that changes when it learns from new information. As the software is self-adaptive, it’s not necessary to add new rules manually.

A great example of how this works is spam detection where the software continuously improves its own ability to identify junk emails over time. It does this by studying the construction of algorithms to learn and make predictions on the data.

When Artificial Intelligence (AI) and blockchain converge, the latter can benefit from AI’s ability to accelerate the analysis of an enormous amount of data. In fact, putting the two together can potentially create a totally new paradigm.

By using ML and AI to govern the chain, there’s also an opportunity to significantly enhance security. Further, as ML loves to work with a lot of data, it creates an opportunity to build better models by taking advantage of the decentralized nature of blockchains (that encourage data sharing).

Sometimes when all the data from silos converge, you might end up with a qualitatively new data set that’s also a better data set. As a result, it will lead to the creation of a qualitatively new model where you can derive new insights which, in turn, can provide new opportunities for building cutting-edge next-generation business applications.

This can be a game changer for the finance and insurance industries as it could be used as a tool to identify fraud. It can also benefit other industries far beyond finance and insurance because of a shared ledger system with two patterns of ML use cases:

• Model chains that address the whole chain or a segment;
• Silo ML and predictive models to address a specific segment of the chain.

The predictive model or silo ML isn’t any different from what we currently do with available data. However, model chains are far more complex and should be able to quickly learn and adapt given the chain dependence.

(an excerpt from text on https://medium.com/@Intersog/what-happens-when-you-combine-blockchain-and-machine-learning-2afafc9654d2)

Digital Banking in UK

Britain's thriving fintech start-up scene has resulted in a number of digital banks setting up in the UK, aiming to challenge the “big four” banks.

Gone are the days of queuing up in a bank branch to deposit a cheque as a number of digital banks in the UK have popped up – making it as easy to transfer money or get a loan on a smartphone as it is to post a picture on Facebook.

Britain is one of the global leaders in this space due to a thriving fintech sector and a regulatory landscape that encourages challenger banks to break up the dominance of the so-called “big four” through the government’s open banking initiative.

A recent study by the Competition and Markets Authority (CMA) found these banks – Barclays, Lloyds Banking Group, HSBC and The Royal Bank of Scotland Group – retain a 70% share of current accounts.

But online and app-based banks are now aiming to disrupt this market, with GlobalData research showing that 28% of UK respondents – and 35% globally – are now willing to use a digital-only bank.

For example, Monzo is one of the most high-profile digital banks in the UK

Monzo was founded in 2015 by Tom Blomfield, Jonas Huckestein, Jason Bates, Paul Rippon and Gary Dolman, originally under the name Mondo. The five founders first met while working for Starling – another digital-only bank.

Monzo was granted a banking licence in April 2017 when it launched its first current account. The bank recently registered its one millionth customer but despite £2bn being spent through Monzo so far, the company is yet to post a profit.

The app gives real-time updates on spending and features different tools to monitor personal finance. It also allows users to send instant payments to friends and users can withdraw up to £200 abroad free of charge.

Other, high-profile digital bank in UK is  Starling Bank which offers both a digital-only current account and business banking for its customers.

The London-based fintech company was part of the first wave of disruptor banks in the UK and was founded in 2014. Like Monzo and N26, Starling cards use a globally-accepted exchange rate when spending abroad and doesn’t add any charges.

At the close of the bank’s financial year in November 2017, Starling had a total of 43,000 personal current accounts open with the bank. This total increased to 210,000 current accounts in 2018 and has monthly transaction volumes of £200m.

(excerpt from longer overview of digital banks in UK, found on 

https://www.compelo.com/digital-banks-uk-challenger/)

Basel Committee and Cryptocurrencies

The Basel Committee on Banking Supervision, a group of international banking authorities, has warned that the growth of cryptocurrencies poses a number of risks to banks and global financial stability.

The committee – part of the Bank for International Settlements (BIS), widely considered the central bank of central banks – published a statement on Wednesday, saying that potential risks for banks include liquidity, credit and market risks, operational risk (including fraud and cyber risks), money laundering and terrorist financing risk, and legal and reputational risks.

Although banks currently have “very limited” direct exposure to cryptocurrencies, institutions should still “at a mimimum” carry out extensive due diligence and disclose any exposure to crypto assets to minimize the risks, the committee said.

Banks should further have a “clear and robust” risk management framework to deal with the “high degree” of risk posed by cryptocurrencies.

The risk management framework should be “fully integrated” into banks’ overall risks management processes, including those relating to anti-money laundering (AML),  combating the financing of terrorism (CFT) and evasion of sanctions, the committee said. A “comprehensive” assessment of the risks should be incorporated into their internal capital and liquidity adequacy assessment processes, it added.

Additionally, supervisory bodies should be informed of actual or planned cryptocurrency exposure, along with assurance that the institution has fully assessed and mitigated the risks.

Finally, the committee said that it is working with other global standard-setting bodies and the Financial Stability Board (FSB) to arrive at guidance on “prudential treatment” of banks’ exposure to cryptocurrencies in order to “appropriately” reflect the risks.

Last June, BIS said in its Annual Economic Report that it’s hard to see if cryptocurrencies solve any specific economic problem yet. “Transactions are slow and costly, prone to congestion, and cannot scale with demand,” it said at the time.

(text from https://www.coindesk.com/https-www-coindesk-com-cryptocurrencies-pose-risks-to-banks-and-financial-stability-warns-basel-committee)

Can Blockchain Be Used in Agriculture?

Today, it’s no longer news that blockchain technology is taking over many industries. Yes, we’ve seen it disrupt the financial sector, hospitality, healthcare, real estate, logistics, online advertising and more. But hey, do you know that this revolutionary technology can also transform agriculture? 

Yes, with the right applications, blockchain can deliver real value to growers. For the most part, blockchain can provide a single, unalterable source of truth about the condition of your farm, inventory, and contracts. So yes, as a farmer, you may no longer have to use countless apps, spreadsheets or pen and paper to record important data. 

In a nutshell; blockchain technology can reduce inefficiencies while saving time and energy in the agriculture value chain. With blockchain’s ability to improve automation, digitization, and food tracking, there’s no doubt that the technology is a must for modern agriculture.

For starters, blockchain technology can improve traceability of crops and deliver better outcomes. Essentially, with a blockchain ledger, you’ll get to know the status of your crops right from planting to delivery. And the good thing is, every information will be secure and available in real time. As most growers already know, today’s consumers are more interested in organic foods. And of course, the chances of meeting their expectations are higher if farmers can provide proper documentation of the supply chain involved in those foods. So basically, food safety is a must.

Let’s face it; the process of monitoring the quality of crops (right from harvest to delivery) has never been easy. It’s basically a huge challenge for farmers and growers throughout the world. But of course, the good news is, the power of blockchain technology can be harnessed in this regard. 

Interestingly, IBM is already working on IoT that makes it possible for growers to monitor soil quality, irrigation, and pests in a precise and highly efficient manner. It’s also good to point out that there are initiatives to leverage sensors to track the quality of stored crops over time. Of course, the ultimate goal of these applications is to automate and digitize just about everything that has to do with record keeping and quality control.

The good news is, most of these incredible innovations are presently happening in modern-day agriculture. For the most part, these sensors can gather data automatically in real-time. And of course, provide quick and easy access to growers who need the information to perform various farm operations.

(excerpt from text on https://www.kryptographe.com/applications-blockchain-agriculture/)

Blockchain in Advertising Industry

Blockchain, best known at this point in the context of financial markets, is the technology underpinning Bitcoin, with many innovative uses. Blockchain is an immutable, distributed ledger or record of transactions between a network of participants. The entries in the ledger are governed by pre-defined rules and validated by the network. The network can be public like bitcoin or private with only select participants.

What are the benefits of blockchain in the media and advertising space?

• Given the complex nature of the digital advertising supply chain, blockchain technology can offer greater efficiency, reliable and high-quality data.

• Blockchains can create a more efficient medium by which two or more completely anonymous or semi-anonymous parties can complete various types of transactions potentially at a low cost.

• Since blockchains are decentralized peer-to-peer networks, there is no single point of failure and no single access point for malicious hackers. Thus, it enhances safety and security for data.

• This ability to keep a fully verifiable and immutable ledger or database that is available to all members of the blockchain provides a layer of trust and transparency that isn’t always available within media and advertising processes.

• While blockchain will not cure all of ad tech’s problems, it can be beneficial in situations where there is censorship and both sides of the supply chain (i.e. publisher and advertiser) are disadvantaged by not having access to that information.

What are some potential use cases for blockchain in media and advertising?

While synonymous with crypto-currency, new transactional use cases are emerging for blockchain such as:

• buying and selling digital or advanced TV ad inventory, 

• fraud prevention, white listing authorized sellers of inventory, 

• campaign reconciliation, 

• enabling use of smart contracts to simplify the IO process, 

• validating advertising assets, etc.

(excerpt from text on https://www.iab.com/blockchain/)

Blockchain in Insurance Industry

Insurance companies face a number of challenges as it relates to complex compliance issues, limited growth in mature markets, fraudulent claims activity, third party payment transactions and handling huge amounts of data. With the onset of connected devices and the ever-growing amount of data generated by the Internet of Things (IoT), insurers have to sift through the data that matters in order to deliver tailored services and products. Insurers must also evolve from a focus on purely financial-loss compensation to a mode of physical-risk prevention in order to compete effectively with disruptors in the space. This can only be achieved if they have visibility into their data.

While blockchain might not be the end-all-be-all to problems faced by insurers, it does provide foundational technology that promotes trust, transparency and stability. Blockchain is in the early stages of adoption, but there are already a handful of ways that insurers are leveraging the technology to mitigate the abovementioned challenges:

·  Security: Through its use of public ledger, blockchain can potentially eliminate suspicious and duplicate transactions by logging each transaction. Through its decentralized digital repository, it can verify the authenticity of customers, policies and transactions by providing historical records. This makes it more difficult for hackers to corrupt and steal files.

·   Big data: More connected devices are being used every day, which is causing a spike in the amount of data insurance companies need to handle. Blockchain can properly manage, share and monetize large amounts of data. The benefit is that the technology can store static records and/or data without central coordination and the data can be viewed by all parties. Data is registered on the blockchain by creating a digital fingerprint using a date and time stamp which provides both security and transparency. Streamlined data can also make risk assessment timelier and more accurate.

· Third-party transactions: Blockchain can handle the increase in third-party transactions and claims made through personal digital devices. Blockchain helps reduce administrative costs through automated verification of claims/payments data from third parties. Now, insurance companies can quickly view past claims transactions registered on blockchain for easy reference. This promotes higher degrees of trust and loyalty between the insurer and customer.

· Smart contracts: Personalized contracts are beginning to emerge in the insurance industry. These contracts connect real-time information from multiple systems across physical documents and activities which trigger processes like claims, payments and reimbursements faster and with greater accuracy. This saves the insurance company time and money while providing the customer with a better experience.

·  Reinsurance: Within the reinsurance space, blockchain can provide accurate reserve calculations based on current contracts. This helps property and casualty (P&C) insurers who need to know how much money is available as they pay claims. Blockchain can ensure that they are rebalancing their exposures against specific risks. Insurance companies can now feel confident in their daily business operations.

(excerpt from text on https://www.cio.com/article/3301163/how-blockchain-is-disrupting-the-insurance-industry-for-the-better.html)

 Picture by courtesy of FinMag https://finmag.ir/

African Blockchain Startups

Despite cryptocurrency markets experiencing a bear market since the start of the year, African blockchain startups are focusing on implementing distributed ledger technologies as they look to solve everyday challenges with this innovative new technology.

In this short review, you will discover four high-profile blockchain startups that are spearheading innovation in Africa.

BitPesa

BitPesa is a blockchain startup that focuses on cross-border business-to-business  and bitcoin exchange services. The company was founded in 2013 by Elizabeth Rossiello, with the aim of providing an alternative payment system to consumers that would surpass legacy systems and reduce the cost of money transfers. BitPesa incorporates blockchain technology to hasten payments by utilising its peer-to-peer nature for transactions and relies on bitcoin (BTC) as a transactional currency.

Golix

Golix is a Harare-based cryptocurrency exchange that was founded in 2014. Formerly known as BitFinance, the local exchange aimed to offer digital currencies as an alternative to alleviate the economic woes brought about by Zimbabwe’s failing monetary system. In 2018, Golix set its sights on the broader African market and announced a token sale.

Wala

Wala is a blockchain startup that offers remittance services and payments using an Android app. Launched in 2017, the company aims to offer financial services to the un(der)banked through strategic partnerships with banks and financial institutions and at low cost. The goal is that Wala users will be able to open bank accounts, apply for credit, access remittance services, purchase value-added services and transact with retailers and merchants.

CentBee

CentBee is a cryptocurrency wallet provider and offers payment processing services for merchants. The South Africa-based blockchain startup was founded by Lorien Gamaroff and Angus Brown, and its vision is to allow users to make payments for products using bitcoin cash (BCH) and settle payments in digital currency at accepted retailers.

(excerpt from longer review on https://bitcoinafrica.io/2018/12/14/african-blockchain-startups/)

Picture by courtesy of FinMag https://finmag.ir/

What is TARGET TIPS?

TARGET Instant Payment Settlement (TIPS) is a new market infrastructure service launched by the ECB in November 2018. It enables payment service providers to offer fund transfers to their customers in real time and around the clock, every day of the year. This means that thanks to TIPS, individuals and firms can transfer money between each other within seconds, irrespective of the opening hours of their local bank.

TIPS was developed as an extension of TARGET2 and settles payments in central bank money. TIPS currently only settles payment transfers in euro. However, in case of demand other currencies could be supported as well.

As a response to the growing consumer demand for instant payments, a number of national solutions have been developed, or are under development, across the EU. A challenge for the Eurosystem is to ensure that these national solutions do not (re)introduce fragmentation into the European retail payments market. TIPS aims to minimise this risk by offering a service that can help ensure that any bank account holder in Europe can be reached.

There are two features of TIPS that will help it achieve reachability across the whole of Europe. First, TIPS is based on the SEPA Instant Credit Transfer (SCT Inst) – a scheme for pan-European instant payments, expected to be used by a large number of payment service providers across Europe. Second, TIPS was developed as an extension of TARGET2, which already has an extensive network of participants across Europe.

TIPS offers final and irrevocable settlement of instant payments in euro, at any time of day and on any day of the year. Participating payment service providers can set aside part of their liquidity on a dedicated account opened with their respective central bank, from which instant payments can be settled. It is only possible to add funds to TIPS accounts during TARGET2 opening hours.

As settlement in TIPS takes place in central bank money, participation in TIPS depends on being eligible to access central bank money. For this reason, in order to open an account in TIPS in euro, an institution needs to fulfil the same eligibility criteria as for participation in TARGET2.

(excerpt from the text on 
https://www.ecb.europa.eu/paym/target/tips/html/index.en.html)

Picture by courtesy of FinMag https://finmag.ir/

Crowdfunding and FinTech

Began by President Obama’s JOBS act which encourages the funding of small businesses in the United States, crowdfunding has developed into a huge benefit for startups. By definition crowdfunding is “the practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the Internet”. Thus, crowdfunding has become the champion of small businesses, allowing them to have a chance to succeed by showing their innovate business models to the world.

Crowdfunding may seem as a childish game, but in reality it’s a way to validate one’s ideas before they become a reality. It involves preparation and readiness to protect the idea and convince others that it’s worth their investments. One of the most important tools to gather an audience that will evaluate the idea is social media. All successful crowdfunding projects have been extremely active on social media, customizing the promotion for each particular channel and reaching a wide scope of people. Some projects even choose to use videos as tools to attract more visitors. As interest in the project grows, one has to keep the communication with investors and interested visitors constant and provide updates. Yes, the investments are the goal of crowdfunding, but the communication with all interested should be kept personal without a every-day mention of money. Thus, one can not only succeed in gathering funding, but also build a customer base from which the product can have its start. 

The most obvious benefit of crowdfunding for entrepreneurs is the funding. With so many startups on the market, it is hard to gather the money needed to bring ideas to life. Through crowdfunding, ventures can gain support at the very beginning. Crowdfunding provides a way for innovate ideas to be presented attractively, so it can be launched. Moreover, a crowdfunding platform can help successful entrepreneurs to validate their product which can then help with gathering the Series A funding. It makes validation faster and more scalable. Additionally, a crowdfunding platform allows entrepreneurs to get insights from their future customers and experts in the startup field while building awareness for the idea.

Entrepreneurs, however, are not the only ones benefiting from a good crowdfunding platform. Investors are allowed to take a deep look into their investments before they risk money. On top of that, networking on crowdfunding campaigns allow for investors to have an easy approach to entrepreneurs. It lessens the preparation that goes into investments because of the more personal feel of crowdfunding.

Crowdfunding does seem like a great option for entrepreneurs with innovate ideas, but it does have some drawbacks. Yes, it is an easy way to raise awareness, but at the same time, it involves an enormous amount of work with months in preparation to build a good relationship with investors. One thing to remember, however, is that the entrepreneur does not choose his investors which leads to unclear boundaries in the process. In addition, depending on the platform, entrepreneurs have to pay out between 8% and 12% of their raise which has to be budgeted in. Moreover, crowdfunding platforms usually require through reporting and disclosure procedures that are strictly followed, making every step of the entrepreneur difficult. Due diligence is also absent as investors can contribute very small amounts, so are not particularly concerned with it. Finally, the low percentage of success in crowdfunding is the main disadvantage. About 60% of campaigns do not make it. From those who do, only half make more than 10% over their goal. If the campaign is not successful, investors usually get their money back. With its unclear boundaries between investors and entrepreneurs, much regulations, lack of due diligence, and most importantly low success rate, crowdfunding does have its disadvantages.

(text found on https://www.finleap.com/insights/fintech-trends-crowdfunding/)

Picture by courtesy of FinMag https://finmag.ir/

Blockchain in Music Industry

Music piracy is considered one of the biggest factors in the downfall of the music industry over the past two decades. Piracy in the music business is estimated to cost the U.S. economy:

• $12.5 billion in total output
• 71,060 jobs
• $2.7 billion in earnings (in the sound recording and retail industries)

Indeed, it is incredibly easy to find pirated music free to download online. Ever since Napster started offering content for free in the 1990s, pirated music has become the normal way most people get hold of their tunes. Individuals don’t need to look much further than YouTube to find blatantly illegal music to listen to, and if they want, they can even convert the video into an MP3 file and download it.

If the industry can take back control over pirated music, it will be a lot stronger economically and, in turn, the people who work for the industry will be paid more fairly for the work do. Blockchain technology can halt piracy in several ways.

Blockchain technology can be used to establish who owns the intellectual property rights of creative items by using a distributed ledger. A distributed ledger is an open-source ledger that holds all records of all transactions within a blockchain. However, not all blockchains allow all people to view this information.

In theory, blockchain technology can be used as clear evidence of ownership and used in court if necessary. This is particularly useful for the music industry to help prevent legal battles between studios and artists, for example. The music industry is known for its complicated laws on ownership – from ownership of the audio itself to specific lyrics within a song, and that’s just the tip of the iceberg.

It also can make the process easier if using blockchain technology becomes the standardized way to establish ownership because different companies and institutions may state ownership in different ways, with different wording, requirements and even formatting, some of which may be manipulated as loopholes.

Blockchain technology can also:

• smooth over any issues involved in purchasing the rights of music (if, for example, one music company wants to buy the music rights from another music company)
• help other companies such as film studios pay for rights to use music
• be used to trace the history of those rights, as users will have a transparent record of its history

Smart contracts can be particularly useful in this area as well. Smart contracts are basically pieces of code that hold the complex agreements that are made on a blockchain and fulfilled when certain conditions are met. It is incredibly hard to manipulate them, and they are growing in popularity. By utilizing smart contracts, artists and studios can ensure that intellectual property agreements are met by other parties.

(An excerpt from the text on https://www.singlegrain.com/blockchain/will-blockchain-technology-be-a-music-industry-savior/)

Picture by courtesy of FinMag https://finmag.ir/