i3 - November/December 2017 - 23

SECURITY

VALUE

REGULATION

SPECIALIZATION

The underlying open-source
software is controlled by
a secure computer algorithm.
These blockchain technologies
enable "smart contracts," decentralized cloud storage and dozens of other secure transaction
features that have attracted
immense attention from financial
technology (fintech), retail,
health care and other industries.

Nearly 1,000 cryptocurrencies are available for purchase
via the internet. The market
value of the 10 largest companies was more than $116 billion in September, although
volatility - and fear of a bursting investment bubble - has
caused enormous market
swings during the past year.

Regulators worldwide are
perplexed about how to deal
with cybercurrency, including
decisions on whether it is
a security (subject to investment regulation) or an asset.
The frequent introduction of
new Initial Coin Offerings (ICOs)
is adding to regulators' concerns
about how to handle them.

Although bitcoin is the largest
cryptocurrency, many specialized providers are emerging,
some in collaboration with
established financial institutions
focused on specific industries.

process by comparing it to the unregulated, intangible transactions for airline
miles. "We have given them value and we use them for transactions that matter, although they have no tangible presence," she says. "Cryptocurrencies have
many layers and levels to understand, so most big companies and countries
are exploring and studying before they roll out applications, products or, in
the case of governments, regulations."

INVISIBLE BUT QUICKLY EVERPRESENT

Another venture, the Centra Card and
Centra Wallet app enables the conversion of
all the cryptocurrencies that they support
(currently eight of the largest ones) thus letting customers spend assets in real time at any
location worldwide that accepts Visa or
Mastercard. Separately, the Rivetz Token has
been developed to integrate cybersecurity into
blockchain transactions. It uses hardware
security to protect private keys and assure
transactions are conducted as intended.
To complicate the fiscal landscape, there
are also "virtual currencies," which are
unregulated tender, usually issued and controlled by developers and accepted among
members of a specific virtual community.
These value-transfer systems are useful as
in-game reward structures.

Blockchain and cryptocurrencies have attracted all sectors of the digital,
financial and retail worlds. Much of the initial focus has been on supply
chain management and ways to streamline the complex network that
involves producers, brokers, distributors, processors and retailers.
For example, Walmart, working with IBM, recently ran a blockchain
experiment to track two mangos through its food distribution system.
The blockchain tracked the shipping history in two seconds, compared to
the standard inventory monitoring method, which took six days, 18 hours
and 26 minutes. The project was driven by the company's recognition of the
need for fast response in case of a food safety incident, but it
showed how any retail item could be tracked from its origin
to the customer.
At the transaction level, shoppers can transfer "value" from
2018
their account to a merchant. "Digital tokens," which are a string
of characters that authenticate the buyer, are used to create
2018 CES
entries on the ledger, which is the blockchain. In the process,
DIGITAL MONEY
value is transferred to the seller's account. Tokens or "coins"
FORUM
come in several varieties, including "intrinsic" and "assetFor a one-day whirl through
backed." Both versions have alternative names. Intrinsic (also
the future of digital currency,
known as "native" or "built-in") tokens of blockchain are called
the third annual Digital Money
"BTC" on the bitcoin blockchain, "ETH" on Ethereum (another
Forum at CES 2018 will exampopular cryptocurrency), "XRP" on Ripple and other names
ine cryptocurrencies, mobile
payments, the Internet of
on different platforms. The asset or property-backed versions
Paying Things, robo-advisors
can be converted to currencies (such as dollars or Euros) or to
and peer-to-peer exchange.
precious metals (gold or silver); and recently, collections such
The Tuesday, January 9, sesas diamonds and art have been used as assets on ledgers.
sions at The Venetian feature
As new types of cryptocurrency emerge, now alternative
experts from the financial,
coins, called "altcoins" (not bitcoin or Ethereum) are popping
technology, blockchain and
up, seeking to differentiate from the earlier cybercurrencies.
security industries, who
For example, Litecoin intends to speed transaction confirmawill examine the competition time, and Ripple is being used by Merrill Lynch, UBS
tive landscape, "frictionless
(Union Bank of Switzerland) and RBC (Royal Bank of
commerce," competitive
Canada), to enable settlements among different currencies
challenges and the impact
on retail operations.
and payment systems.
C TA . t e c h / i 3

SECURITIES VS. ASSETS

Financial regulators worldwide
are taking a deep look at how to
deal with cryptocurrencies. The
U.S. Securities and Exchange
Commission says it will apply
existing financial laws to the
crypto market. In an investor
alert, the SEC warned about the
promotion of initial coin offerings (ICOs). Existing cryptocurrency companies fret that
regulators' approaches to cryptocurrencies will affect the value of
existing cryptocurrencies.
Separately, regulators in
Japan, China, Singapore and
Australia have taken actions on
blockchain technology. In particular, China has clamped down
on bitcoin trading, starting in
September when it banned commercial exchanges from trading
NOVEMBER/DECEMBER 2017

23


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i3 - November/December 2017

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