Blockchain technology is continuously being compared to internet-technology. Facebook, a company with about 2.3 billion users launches its own blockchain-based currency called Libra. This is a fairly bold move and a lot of thoughts come to mind. When the internet was launched to the public in the 1990s no single company had this many clients or users. In fact, in the history of humanity nobody, not even the largest countries, had this many users for a new currency. This is a unique move in the history of humanity.
Here are a few thoughts about this bold move.
The purpose of this analysis is to execute an objective and quantitative evaluation of the Ethereum network. Why? Ethereum’s token ETH price has been in a spectacular free fall for the past few months. From a high of over $1400 in January 2018 to the May push to almost $800, ETH has now reached lows around $240. This surprising price movement made me want to reconsider my thoughts on Ethereum again from scratch and without emotions.
In addition groups are targeting the Ethereum network with a negative campaign using the same strategy they used against IOTA in the past as you can read here. Therefore I would like to make my own opinion.
What would you rather buy: tokens in a $25mil ICO or a liquid token with a $5mil market cap?
The ICO still must prove itself. The liquid token is already trading on multiple exchanges. The liquid token’s team already hit a few milestones and either has a working ecosystem or is just months from releasing it.
Junk bond market
Around the mid-1980s the junk bond market appeared by leveraging that humans tend to be overly pessimistic. For example, certain bonds that pay 20% interest may have a lower probability of default then the interest would make you think. By picking those bonds certain hedge funds have made very impressive returns in the past.
It is just the beginning of the coin offering market. In this article we, Block X Bank, an investment bank focused on blockchain, will be exploring using the best data available the past, present and future of the Initial Coin Offering (ICO) market.
Total potential market size
Private Equity Assets under management are valued in total to about $2.5 trillion USD. A Private Equity investor is typically locked in for 7 to 10 years. In general, the investment is difficult to value during that time. And the investor receives back their payment at the time that is solely at the discretion of the fund manager.
Imagine a world where most crypto-coins are regulated securities trading on regulated securities exchanges. And shares in companies, cash flows, dividends, interests, notes, and other existing proven financial products back these coins.
Alternative lenders use all sorts of complicated models based on sophisticated algorithms and machine learning in extrapolating data that is never certain or reliable. Cosigning is simple. It relies on a real person with a prime credit score. The equation is reduced to a number and a heartbeat.
To deliver above average returns to investors, online lending startups have been grabbing alternative data from a potential borrower’s email, social media, and even mobile accounts. They are determining risk based on a borrower’s likes, shares, and phone usage. There is a better option to capitalize on the $3.5 trillion consumer loan market: Cosigning.
Here are 5 reasons why online lenders like Backed, Inc., which relies on cosigning, yield superior overall returns than those lenders who rely on algorithms that are overloaded with over 10,000 data points:
Artificial intelligence has been immensely advantageous to the financial sector. The lengthy tedious work which took hours for humans to perform was reduced to seconds by computer software. The use of papers, pens, and abacuses for conventional accounting systems have been transformed into the computerized system of accounting and auditing. Innovation in this field is so powerful that it has elevated the financial auditing process to a higher plane.
Ocrolus is a financial service provider with two powerful AI products: “PerfectAudit” and “MedicaidGenius.” These products eliminate the need to audit bank and credit card statements manually.
The company was founded in 2014 and is headquartered on Wall Street in New York. After testing and polishing, Ocrolus launched officially in January 2016. Its team consists of four executive members–Sam Bobley, Victoria Meakin, Vikas Dua, and Zoheb Sait. There are an additional 15 employees working on the technology and operations side of the business.
Victoria Meakin serves as president of the company. She was also the co-founder and president of PhoneCharge, an electronic payment processing company that sold to CheckFree for around $100 million. CEO Sam Bobley is a young technology entrepreneur who graduated from the University of South Carolina-Columbia. COO Vikas Dua was previously associated with on-demand Series-C startup Handy.
Nigel Morris is a co-founder of Capital One and has led it to emerge as a multi-billion dollar behemoth. During his time at Capital One, he noticed there is a gap between banks and the fintech industry. To bridge this void, his team rolled out QED Investors in 2007 and was able to bring on board some ex-colleagues from Capital One to build QED; this helped him to ensure the team hit the ground running. QED has invested in multiple startups that have not only become unicorns, but have changed the entire landscape of the financial ecosystem in which they operate. Most notable are Credit Karma, SoFi, Prosper, GreenSky, BrainTree, and ApplePie.
Fintech Opportunities and Hindrances
Morris has seen the best and worst of big banking and fintech startups. He has seen that banks have some really important assets that fintech companies lack: low-cost deposits, regulatory access, top-notch compliance, huge customer base, and high profitability. But they are trying to be everything to everyone and this is where fintech companies are gaining ground. Fintech companies, rather than offering everything, offer a specific product or service that banks haven’t developed or cannot develop because that is just not part of their DNA.
Banks are not equipped to lend the way small platforms are, and a lot of platforms are hamstrung by the regulatory environment. Monroe Capital, LLC, launched their specialty lending vertical a couple of years ago to provide funding for other lending platforms. Aaron Peck, managing director and co-head of the Specialty Finance Vertical, said four years ago the company had two specialty finance vehicles designed to meet the needs of those platforms. Now, they have 11, and all of them are current yield.
“That’s rare for a fund,” Peck said, “but we look at performance. A publicly traded vehicle pays 90%, so we are trading quite well. All our funds pay hefty dividends.”
Since 2004, Monroe Capital has been a lower mid-market lender, providing funding for businesses with $3 million to $30 million in cash flow. Headquartered in Chicago, they’ve managed more than $4 billion in assets through origination offices in Boston, New York, Atlanta, Dallas, San Francisco, Los Angeles, and Toronto. Their specialty finance division, however, is not a typical marketplace lending platform; rather, they see themselves as a hybrid model looking for growth capital. Peck is one of nine partners.
Alternative lending start-ups have entered mainstream consumer and SMB lending, but have yet to establish themselves as additions to traditional fixed income portfolios for investors. Marketplace lenders started out as peer-to-peer lenders, but institutional capital and accredited investors are now accounting for the lion’s share of lending capital on such platforms. Direct Lending Investments, LLC (DLI), a growing and active participant in this developing world of private credit, focuses on buying loans and extending loans to alternative lending platforms and other business partners. In particular, the firm provides credit to the growing sectors of the market that are no longer served by traditional bank lending and, more importantly, structures its funding in a way so that the originator takes on default risk.
Inspiration and founding
Brendan Ross, the founder and CEO of DLI, first began investing in marketplace lending personally and on behalf of his clients through Lending Club (LC) and Prosper loans. In 2012, he launched DLI to expand his investment horizon beyond peer-to-peer lending, which he has since moved away from altogether. The firm’s inaugural deal in November of 2012 was with IOU Financial, a SMB loan originator. Since then, the firm has expanded to include receivables as well as real estate and consumer loans in its portfolios, and has grown to over $900 million in assets under management.
The majority of the developing world population makes little use or no use of financial services. Accenture estimates that only 70 percent of microenterprises in an emerging country like India use bank accounts while only 5 percent use products like term loans, and a paltry 1 percent have working capital loans from banks. In similar emerging markets, lenders find it difficult to make credit decisions due to weak coverage of credit rating agencies. On average, only 10 percent have credit scores.
One company that understands the riches lying at the bottom of the pyramid is Entrepreneurial Finance Lab (EFL GLOBAL). EFL helps lenders capture untapped markets by delivering credit scoring technology tailored for such markets.
How EFL Uses Psychometrics to Determine Credit Risk
EFL Global is a pioneer in psychometric credit scoring and was founded in 2010 by Dr. Bailey Klinger and Dennis (DJ) DiDonna. The company is headquartered in Miraflores, Lima, Peru.
Dr. Klinger is executive chairman. Prior to co-founding EFL, he served as a senior advisor and consultant to various government and multilateral institutions. DiDonna is chief strategy officer. Previously, he worked at MCM Strategic Data and Angie’s List as a technology entrepreneur with a background in sales and operations management.