Fintechs and blockchain start-ups: competition or coexistence?

It was not so long ago that the Fintechs were said to be making life difficult for banks and traditional financial service providers. The digitalisation of the financial sector is becoming an obvious necessity, as there is an obvious innovation backlog when one looks at the development of the banking houses.

But what happens to the non-blockchain fintechs when crypto financial service providers storm the Bitcoin secret?

Trapped in old structures and a regulatory Bitcoin secret corset that is not exactly conducive to innovation, it is almost inviting to be comfortable and conservative and leave everything as it was explained in this review by onlinebetrug. Until the financial crisis of 2008, this credo set the tone and even ten years later, not much has happened. What has changed, however, is the pressure on margins and the realization that it will not be possible to survive in the long run as before. Some Fintechs, who started five to ten years ago, now explain to the banks how things are going. The bankers go to school and are informed by digital ambassadors what financial solutions should look like today.

The disruption by Fintechs has already taken place. The disagreeable regulation and high licensing requirements have meanwhile become a saving bastion for the “old”, procuring time and holding back the young and wild.

However, the “old” do not have much time left – more and more people are switching to hip digital banks such as N26, Holvi or Revolut. Young people in particular are increasingly questioning why many financial services are so cumbersome to use. Despite bureaucratic hurdles, there has to be more to it, especially representatives of Generation Y think, and change banks like a few sneakers. Gone are the days when a banking relationship lasted monogamously until the end of one’s life. It is precisely this change of heart that creates the conditions for the crypto economy.

Is the Fintech sector now being disrupted by crypto start-ups?

So far, most of these changes have taken place without crypto start-ups. The crypto-fintechs are still in the start-up phase and must first create the necessary conditions to be able to survive on the free market in the future. But it won’t be long before the first accounts of crypto-fintechs are issued. The Berlin blockchain start-up Bitwala, for example, proves what such a thing can look like. In cooperation with a partner bank, the legal framework has been created to be able to issue fully-fledged accounts in the near future. Accounts that are covered by the European deposit guarantee scheme in the same way as bank accounts with Sparkasse or Commerzbank. Banking goes crypto is becoming more and more tangible as the convergence of “oldies”, fintechs and crypto start-ups continues. A few fall by the wayside, a few others merge, and in other places completely new market leaders emerge, some already today, but above all tomorrow.

The Fintechs play an important role in this by breaking up the old structures just like crypto start-ups and at the same time creating interfaces in order to embed blockchain technology in a flexible, modern IT infrastructure. The higher the level of digitization, the more likely it is that there will be blockchain use cases.

Crypto start-ups and fintech complement each other rather than cannibalizing each other. There is a market for both centralized and decentralized solutions. Rather, customers are given the opportunity to choose whether they prefer to live by the motto “Be your own bank” and take full responsibility for their financial transactions themselves, or whether they prefer to opt for a non-crypto financial service provider. Of course, there will also be Fintechs at one point or another whose business model is threatened by crypto start-ups. The majority, on the other hand, benefit more from synergies and greater openness to innovative financial services in society and on the corporate side.

What have you personally invested more in the news spy? Bitcoin or Gold?

This varies greatly depending on the market situation. Currently in gold. As soon as Bitcoin has stabilised again, the exchange is worth it again. Unfortunately, I personally don’t have much time to act on my own. But on our platform, trading programs can also be connected via interface, which can trade themselves according to certain parameters.

What do you think about the news spy?

Do you think the Lightning Network will be successful? Scaling and low transaction fees are the news spy. At the moment there are many rumours that the Lightning Network will centralize Bitcoin, but Bitcoin is quite central at the moment if you analyze the mining. We believe that the lighting network will become a central part of the news spy. SegWit has already done the groundwork and Lightning is building a secure fast transaction structure that is very useful for various applications but not for others. We are currently working on a test implementation, but the security of our customers’ assets is a priority. Lightning must pass several tests before we can activate it.

In analogy to gold, do you see the crypto currency Bitcoin only as a value retention system or also as a currency system with a clear payment transaction task?

Clearly, crypto currencies will modernize payment transactions in the future. But this can only be successful if the interfaces are right. If I send someone 1,000 Euro “value” to Japan, I personally don’t care what the recipient receives his value in, whether in Yen, Bitcoin or Gold. The blockchain will play a central role in securing these transactions. It remains to be seen whether Bitcoin is suitable for value retention. Because that does not only depend on the functionality. Gold is also not practical in itself, but over the millennia it has had to maintain its status as a store of value. Due to the speed of our platform, gold is now becoming a kind of means of payment: You can sell gold in milliseconds and buy something with the Bitcoin you receive in this way.

What are your goals for 2018? What projects are on the agenda?

In Vaultoro we see a multi-asset trading platform with a lot of potential. We want to enable access with other crypto currencies and also the purchase of other precious metals. At the same time we want to give traders better tools like a better API and charting tools to make better decisions. This will all come in 2018. For customers who only want to save in gold, our new product Bar9 is in the starting blocks, a simple gold wallet with a precious metals portfolio. First, we offer the classic saving of gold for the European market, accessible with SEPA credit transfer. With the feedback of our customers we will then build the Bar9 Wallet parallel to Vaultoro.

Bitcoin news: Dutch central bank in front of largest blockchain experiment

The central bank of the Netherlands is preparing an ambitious experiment. It aims to investigate whether an entire financial market can be built on the blockchain.

Many of the so-called smart contract applications of the blockchains can be replicated using existing technologies. However, the man who is now responsible for a series of experiments at De Nederlandsche Bank says that the decentralised nature of the blockchains could lead to new financial market infrastructures (FMIs).

According to Bitcoin news these new structures are much more difficult to hack

As with the Bitcoin news network itself, this experiment aims to explore how to distribute the internal operations of an FMI to participating nodes of the network. To challenge the system – and break the financial market infrastructure – an attacker would need to have more than half the computing power of the entire Bitcoin news network.

News about the course of the experiments is scheduled for the end of the year. The current efforts are a reaction to the attacks by hackers, who now see themselves increasingly exposed to financial market structures. At the beginning of the month, the Board of the Bank for International Settlements (BIS) went so far as to call for direct action in the search for a solution.

In an interview with Ron Berndsen, market infrastructure manager at De Nederlandsche Bank, he explained how the blockchain could be the key to resisting more frequent attacks.

Berndsen explained CoinDesk: “If hackers did the work of shutting down two or three data centers, they would also be able to shut down financial market infrastructures. With the blockchain you would distribute everything to the nodes and you wouldn’t even know where you are.”

In order to find out whether an FMI can be built on a blockchain, Berndsen once again uses a team that he had already used for earlier experiments at the central bank.

Berndsen said that his seven-member team came about through conversations at the coffee machine and email invitations. It was important to him to get to know the Bitcoin enthusiasts within the bank.

The academic and banker is a rare image in the world of global bankers. In 2013 he started to launch a Bitcoin Full-Node for the Bitcoin network and from then on he was mining the digital currency. He said he had never received a Mining Reward, but that he had bought Bitcoin and other digital currencies. He wanted to investigate the advantages and disadvantages of each currency.

Lessons for central banks

Because of this familiarity, Berndsen was able to expand his experiments.

Last month it was announced that the central bank will use the open-source Bitcoin software to simulate the conditions of the network foundation in 2009. From this a model shall be created, which shows the system in the year 2140. Then the last Bitcoin is said to have been mined.

“As a university graduate, it is obvious to first simulate the extreme points of the system,” said Berndsen. He also teaches as a professor for FMIs and systemic risk at Tillburg University in the Netherlands. He also holds a doctorate in economics. But he considers this test to be unique in the world.

“I thought every central bank had already done that,” he said.

“I’m on many central bank committees and I really expected them to do all this, but they don’t seem to be there yet.

One of the many lessons learned from the experiment is that the bank was able to mine coins much faster when the start reward was set at 1 million. The team created a so-called DNBcoin for this purpose. The rate at which DNBcoins were dug increased, in addition to the initial reward of 1 million DNBcoins, the reward was halved every two minutes.

It should be noted that even if the team were to set the max money parameter to 21 million coins – as with Bitcoin – they would be able to mine 10 billion coins.

They have also “proven” that the network can run on fees alone when the Bitcoin reward is terminated, Berndsen said.

High stakes
According to Berndsen, the third experiment will now focus on the areas of financial market infrastructures.

The definition of an FMI was set out in a report by the Bank for International Settlements in 2012: “a multilateral system of participating institutions, including the head of the system, to record clearing, settling or payments, securities, derivatives or other financial transactions”.

In his speech, Berndsen presented the results of the first two E

Exclusive: This is what the Blockchain elite says about the current crypto challenges

In the context of the Blockchain-Cruise-Conference the participants of the panel Pain and fears in 2018 discussed the “Big Picture” of the crypto economy. It was also a question of what needs to change in order for crypto adaptation to progress successfully.

Miko Matsumura started by emphasizing how important it is that the crypto market has had to make many painful experiences in recent months. Now it is a matter of learning from the mistakes and doing it better in the future. Hartjej Sawhney expressed himself much less diplomatically when he generalized that (most) users behave like “idiots” and underestimate the risks, which is why the focus should be on cybersecurity in particular.

Olga Feldmeier referred to the good news in order to brighten up the mood

The ecosystem is developing splendidly and in particular the adaptation in the financial sector gives great hope for a positive development in the near future. With institutional investors and banks jumping on the crypto bandwagon, however, answers to regulatory questions are becoming increasingly important, warned Jonathan Galea. At the same time, however, he admitted:

“At its core, decentralization cannot be regulated, but only the framework around it.

The inventor of the Domain Name System (DNS), Paul Mockapetris, took up the topic of decentralization to outline a problem inherent in decentralization:

“When I invented DNS in the ’90s, the network was very decentralized. However, as scaling increased and everything became larger, centralization began. These centrifugal forces were valid at that time with the Internet like today with Blockchain. To oppose this is a difficult task.”

Private Keys, Quantum Computers and the Role of Crypto-Education

Of particular concern to all panel participants was that users must learn to store their private keys themselves and not leave them to centralized exchanges or hot wallets. Miko Matsumura shook his head in this context because he could not understand why users could not learn from the countless hacks.

“Several hundred million US dollars are regularly burned by stock market hacks and nobody is interested.

Litecoin founder Charlie Lee also agreed with Miko and stressed the need to educate people about how the crypto economy works:

“The problem is that, for the first time, people are responsible for their own money and no longer have to entrust it to a third party, such as a bank. This leads to the convenient use of hot wallets or central exchanges. There is always a trade off between usability and security; but it is getting better and easier to keep one’s coins safe with e.g. hardware wallets.”

Paul Mockapetri sees quantum computers as a further risk factor. BTCC co-founder Bobby Lee replied that it was wrong to portray this as a purely block-chain-specific risk. Quantum computers endanger the entire Internet infrastructure and blockchains can help to reduce the dangers through their further development. Accordingly, block-chain technology can rather be seen as an opportunity to enable a secure network infrastructure despite quantum computers.

Miko Matsumura concluded the discussion with a few words:

“It’s not just about quantum computers, regulation and institutional investors. We have to ask ourselves as individuals and as an industry what we can do to further develop the blockchain adaptation”.