Connect with us

Business

REVITALISING THE TOKEN MARKET

Published

on

By Gavin Smith, CEO at Panxora

 

With interest rates near zero and fears that whipsawing stock markets are set for further plunges, many investors are turning to alternative markets in the search for returns. Money flowing into cryptocurrency hedge funds and trusts like Grayscale is at all-time highs and the large cap coins seem to be entering a bull phase, but that capital is not trickling down into new token projects. Why are blockchain token projects struggling to attract funding?

 

Seed investor scepticism

Setting aside the reputational issues with mainstream investors, even those educated in blockchain tech are not signing on the dotted line. This is certainly due in part to the hangover from the early token market.

During the heady days of 2016/17, investors could buy tokens during the token sale, and if the project was legitimate – even if the business case wasn’t particularly strong – prices would soar based on market enthusiasm. Early investors purchased at a discount and cashed out almost immediately for a handsome profit – and then repeated the process again. The token sale allowed founders to amass a war chest large enough to finance the entire token project – without having to give up a large chunk of company equity. Everyone got what they needed out of the deal.

Running a token sale is far more expensive today than it was during the boom. Getting the attention of the token buying public in a market where advertorial has replaced editorial is expensive. This coupled with a regulatory framework that requires the advice of accountants, solicitors and information gathering of KYC details for investors all comes with an escalating price tag.

To accommodate the change in cost structure, tokens now need to acquire funding in two rounds. Frequently there is a first round where capital is raised from a few, large investors. This cash is then used to finance setup and marketing the main token sale. The token sale, in turn, provides the capital needed to run the entire business project.

 

Bridging the gap between token projects’ needs and early stage investors

To successfully get a token through the capital raising process, founders must acknowledge the risk assumed by those very early investors and reward them appropriately. And given that tokens may stagnate or fall in price post token sale means that a deep discount in token price is not necessarily attractive enough to get investors to commit.

Many tokens have turned to offering equity in the business in the effort to raise that first tranche of capital. If you look at the number of successfully concluded token sales, the downward trend has continued since Q2 2018, so offering equity is not sufficiently stimulating the market.

 

Two sides of the coin

So, what is the answer? It’s a complex question but one thing is certain. Any solution must be rooted in a deep understanding of what both parties need to successfully conclude the deal.

On the one hand, token founders’ needs are clear: they need enough capital to get the token ready for and through a successful liquidity event that will provide sufficient funds to build the project. The challenge lies in striking the right balance between accruing that capital and making sure not to offer so much project equity that give up either the control or the incentive founders need to drive the project forward.

On the other hand, while the needs of the seed capital investors are more complex, there are two areas of key concern: transparency and profit incentives.

 

Transparency can mean many things, but almost always includes providing more informative cost and profit projections, as well as answers to a whole range of questions, not least the following:

  • What happens to investor capital if the token sale event fails? Token founders must be transparent from the outset. The token market is highly speculative and early investors run the risk of losing their money should the project fail. Therefore, investors require a well-established fund governance process in place throughout the fundraising so they can make informed decisions on whether the project is worthwhile. 
  • How are the assets for the entire project managed? Investors need to know that their money is in good hands and that proper treasury management techniques are being used to manage cryptocurrency volatility risk. Ideally, an independent custodian will be used to hold the funds and limit founders’ ability to draw down the capital – releasing funds to an agreed-upon schedule of milestones.
  • How are the rights of investors protected, for instance in the case of a trade sale? Investors need to know what happens if the company they are investing in is sold. What impact could this have on the value of their stake? Would a separate governance framework need to be established? These are critical questions and investors aren’t likely to settle for any ambiguity in the answers.

Profit incentives are important when it comes to encouraging early participation in a project. Investors need convincing that the proposition will keep risks to a minimum and focus on providing a strong probability of a return. This means that founders need to be able to defend the case for the increase in the value of their token.

But this isn’t the only incentive that matters. Investors can also be incentivised by preferential offerings such as early access to projects and services that might help their own business.

Let’s not forget that investors don’t support just any project. What really matters is that there is something special and unique about the business being underwritten by the token. Preferably something that could be shared upfront and directly benefit the investor – proof that the investment is really worth it.

And that’s what it all comes down to. Ultimately, while token projects are having a hard time finding funds at the moment, if they can prove their worth and provide full transparency and clear profit incentives to ease investors’ concerns, the money is out there. And deals can be done.

 

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Business

Solving the Future of Decarbonisation in Real-Time

Published

on

Jamil  Ahmed, Distinguished Engineer at Solace

 

The energy sector has faced many disruptions and challenges in recent years, from pipeline disruption to the growing demand for hydrogen. However, the most significant of all of these is the global desire to decarbonise. The growing concern over fossil fuels has created intense pressure for businesses to transition towards renewable energy sources and cut carbon emissions. Governing bodies have begun to impose regulations on organisations to force them to cut emissions by 3.4 gigatons of carbon dioxide equivalent (GtCO2e) a year by 2050, which amounts to a 90 per cent reduction in current emissions.

The constant development of markets and digital transformations will only increase the demand for energy in the future across all industries. Therefore, reducing emissions, in reality, is no small feat, however harsh or impressive the targets may be. To make decarbonisation a reality in the near term, businesses must adopt an inward-looking strategy to reduce emissions through their own operations. These are termed Scope 1 emissions and refer to emissions released as a direct result of one’s own current operations. Achieving this requires companies to streamline their operations, and improve their internal visibility to measure and track energy consumption.

 

Detecting emissions

The major challenge companies face in accurately measuring their energy consumption lies in overcoming the mass amounts of siloed data within their system. These data silos not only diminish productivity but also bury these useful insights, compiled into a mountain of data that is hard to identify and analyse. Ultimately, data silos are a result of organisational infrastructure built for a previous era, one with limited technological adoption, and limited pathways for dataflows. Over time these have created complex organisational barriers.

The lack of data transparency in organisational infrastructure is severely undermining businesses’ ability to gain insight from their existing data. This also impacts their ability to share data with external partners in search of meaningful solutions for decarbonisation. The value of data sharing cannot be overstated when searching for innovative solutions. A recent study shows that 45% of businesses in the energy sector see analytics and innovation as critical tools. With the entire energy sector’s ability to effectively decarbonise hinging on data sharing to drive innovation, gaining greater data insights are non-compensatory.

Another major consideration in decarbonisation is power reliability planning when transitioning to renewable energy sources. Solar and wind energy rely on changeable weather factors for operability, the varying levels of power readiness in these energy sources make them difficult to implement into the national grid. This makes reliably planning this an increasingly complex and important part of the decarbonisation journey as the sector must test for long-term stability and the potential for energy transfers and storage. A solution must be found that can address these real-time concerns.

 

Reliability in Real-time

Real-time data is the information that is delivered immediately after collation and enables businesses to respond to information at lightning speed. Real-time data has a host of usages in the energy sector, from alerting major weather changes that may impact power reliability to detecting overheating or electrical wastage in appliances. These information transfers are known as an ‘event’ that requires further action or response.

Real-time capabilities play a major role in overcoming data transparency issues associated with the sector, in its ability to connect interactions across systems and processes could enable energy providers to effectively identify opportunities in reducing energy wastage.

 

Event-driven Decarbonisation

Enter event-driven architecture (EDA), the structure that underpins an organisation’s ability to view event series that occur in their system. EDA decouples the events from the system so that they can be processed and then sent in real-time as a useful information resource. This can then be analysed by resource companies to assist with optimising decarbonisation initiatives.

The strength of EDA is its scalable integration platform, as this allows companies to manage enormous quantities of data traffic coming from multiple data streams and energy sources. From this, energy companies can develop durable systems by aggregating information. This can then be sent to control systems to identify power outages or extreme weather events and conditions.

To achieve this, an architectural layer known as an event mesh is required. An event mesh enables EDA to break down data silos and facilitate the real-time integration of people, processes and systems across geographical boundaries. Implementing an event mesh also upgrades and streamlines existing systems/processes to enable better data transparency in real-time data sharing. It is unsurprising that given the great benefits of EDA both in terms of its scalability, durability and agility that a recent study found 85% of organisations surveyed view EDA as a critical component of their digital transformation efforts.

 

Decarbonising for the future

Regulations on the energy sector are rapidly increasing, most recently the US Senate passed the Inflation Reduction Act (IRA) on August 6th of this year. This Act signals the intense pressure on the energy sector to immediately undertake significant decarbonisation initiatives. It is designed to accelerate the production of greener and more renewable energy sources such as wind and solar. Once nations like the US have begun higher production of the technology that can harness these energy sources, others will follow suit. The only way the large-scale adoption of renewable energy sources will occur is if businesses build real-time capabilities to become event-driven businesses. Only then can the transition to decarbonisation and achieving net zero become a reality.

 

 

 

Continue Reading

Business

Criminal Minds: Account Opening Fraud Tactics put to the Test

Published

on

By

By Raj Dasgupta, Director, Global Advisory, BioCatch

 

The last two years have created a perfect storm for account opening fraud. Many banks and organisations were unprepared to handle an increase in online transactions and the widespread usage of digital services spurred by the pandemic.  Criminals exploited the system by falsely applying online for economic relief packages and then opening bogus accounts to deposit their stolen money into. It has been revealed that account opening fraud in the UK, was at its highest level in more than three years in 2021.

The latest wave may have passed, but there are ripples in the distance. Criminals are opportunistic, and their strategies are continuously evolving.  As highlighted in our recent webinar with the Royal Bank of Canada, it is critical that financial institutions are aware of the latest account opening fraud strategies, finding a balance between decreasing risk and exposure, while providing a great customer experience.

 

New Strategies for Account Opening Fraud: Combining Human and Non-Human Activity

Account opening fraud enables criminals to carry out money laundering. As we saw with economic relief packages, criminals are targeting where the money is — claiming unemployment or stimulus benefits, for example — and opening accounts to deposit stolen funds. They then move the money out to other accounts, often many times over, or buy cryptocurrency to conceal to make it hard to trace the origin of the funds.

Financial institutions that rely on PII or device-based risk assessment to detect account opening fraud are finding that their controls are falling short. Criminals have clean sets of PII data to work with to make their way through the account opening process, and the problem is so commonplace there are even how-to videos on YouTube to walk would-be criminals through the process. Because of the flurry of activity, banks had to act and began investing in new technology, like machine learning-based models, to shut the door on criminals. However, they have continued to adapt.

Criminals have a new MO and are using bots to open accounts at scale. Criminals leverage automated scripts and large caches of stolen PII to submit new account applications in minutes. Because most banks have bot detection technology in place to detect this activity, criminals have modified their attacks to blend real human interaction or introduced time delays on purpose with the intention of mimicking a human.

It’s now an incredibly sophisticated operation, mixing human activity and non-human programs to attack and confuse financial institutions.

 

Risks for Anti-Money Laundering and Fraud Teams

Although account opening fraud is a critical component in the money laundering supply chain, there is room for AML and fraud detection teams to work together on the problem.  Mule account detection is a serious challenge for financial institutions, both at account opening and within existing accounts.

In the world of mule accounts, there are criminals that open accounts with false paperwork or with a stolen or synthetic identity. There are also individuals who will sell their genuine account or multiple accounts to a criminal to make fast money. AML teams’ step in to investigate these accounts when there is a trigger, like a large transaction, that is indicative of money laundering. AML investigations can take weeks, months, or years once suspicious activity is uncovered. However, there are opportunities to prevent money from moving out of these accounts at all, and fraud teams can collaborate with AML teams to achieve this goal.

To reduce risk, we need to blur the lines between fraud and AML teams. One way to do this is by using technology that analyses user behaviour to uncover activity that is out of the norm for a genuine user, either at account opening or later in the customer life cycle.

Someone using an account for money laundering may behave like this:

  • A customer opens an account and uses it like a regular account for awhile
  • A criminal takes over or purchases the account from a genuine user and lays low, leaving the account dormant for a period of time
  • Then, suddenly, there is a host of incoming payments followed by outgoing payments

Technology like behavioral biometrics monitors user behaviour over time to detect these patterns, and can flag the accounts for money laundering activity, preventing money transfers from going through.

 

How to Create an Uninterrupted Account Opening Experience

Despite our best efforts, fraud will never be eradicated. It will change because criminals are flexible. “You have to find a way to balance what is an acceptable level of risk versus a delightful level of experience for the user,” Dasgupta noted.

One way is to layer machine learning and other technologies to “provide that balance between a beautiful user experience with the appropriate level of friction, while at the same time reducing your fraud exposure,” Dasgupta said.

Behavioural biometrics examines user behaviour during account opening to detect signs of illegal conduct. Criminals, for example, frequently employ copy and paste or excessive deletions while filling out a web form. Genuine users know their personal information from long-term memory and thus their typing patterns appear much different than those of a criminal using stolen PII. Because behavioural biometrics also works silently in the background, it does not add friction to the user experience. Instead, the technology identifies tell-tale signs that can build a bigger picture of who’s behind it, how they are behaving, and what is really happening when someone is applying for an account.

There are additional strategies for finding the right balance. First up is choosing controls that pair well with your users and the devices they use. Mobile users are conditioned to provide a second factor, like a thumbprint, but your web banking audience may be less open to extra steps. Second is deciding what transactions are low risk for your organisation and setting priorities for higher value transactions or clients. Financial institutions also shouldn’t cut corners on the measures they have in place to meet compliance requirements.

Banks have to address reputational risk, too. If today’s discerning consumer doesn’t like what an FI does, they can switch apps and go to a competitor.

Banks are vulnerable to account opening fraud, but by stacking smart fraud controls, they may reduce fraud risk while improving customer acquisition and improving the account opening experience.

 

Continue Reading

Magazine

Trending

Business9 hours ago

Solving the Future of Decarbonisation in Real-Time

Jamil  Ahmed, Distinguished Engineer at Solace   The energy sector has faced many disruptions and challenges in recent years, from...

Banking16 hours ago

Resilient technology is the most important factor for successful online banking services

By James McCarthy, Director of Solutions Engineering, NS1   More than 90 percent of people in the UK use online...

Technology16 hours ago

Why anti-spoofing fingerprint technology is essential for the continued growth of digital payments

Anthony Eaton, CTO, IDEX Biometrics   The digital payments revolution is being driven by consumer demand for ever increasing convenience....

Finance16 hours ago

Why Financial Services must ‘Change its Change’ to deliver results

By Hervé Mazenod, Managing Director, Financial Services Sector at Webhelp  You can almost hear the collective sigh of relief from financial...

News16 hours ago

Real-time payments are here to stay and with good reason 

Real-time Payment (RtP) models are here to stay for the foreseeable future alongside traditional payment schemes. But as businesses increasingly...

Business17 hours ago

Criminal Minds: Account Opening Fraud Tactics put to the Test

By Raj Dasgupta, Director, Global Advisory, BioCatch   The last two years have created a perfect storm for account opening...

Business4 days ago

Know Your Business (KYB): Exceeding KYC

Victor Fredung, CEO at Shufti Pro   Money laundering costs the UK more than £100 billion pounds a year, according...

Finance1 week ago

Mini-Budget 2022:

Tax giveaway is a boost for business, but will it drive growth or fuel inflation?   Chancellor Kwasi Kwarteng has...

Finance1 week ago

A zero trust environment is critical for financial services

Boris Bialek, Managing Director of Industry Solutions at MongoDB Not long ago security professionals were still focused on protecting their...

Banking1 week ago

Digital Banking – a hedge against uncertainty?

Ankit Shah, Head of Digital Banking, Apex Group   The story of the 2020’s thus far is one of crisis....

News2 weeks ago

Union Bank of India goes live with RuPay Credit Card on UPI with Kiya.ai as a technology partner

Nitesh Ranjan, ED Union Bank of India with Rajesh Mirjankar, Managing Director & CEO, Kiya.ai at the launch   Kiya.ai,...

Finance2 weeks ago

Anyone Can Become an R&D Tax Expert with the Right Foundations

Ian Cashin is a Customer Success Manager at Fintech company and R&D tax software provider WhisperClaims   For accounting firms,...

Business2 weeks ago

Addressing the ongoing global pilot shortage issue

By Bhanu Choudhrie, Founder of Alpha Aviation   The Covid-19 pandemic brought the aviation industry to a halt, causing vast...

Business2 weeks ago

How exporters can mitigate risks and operate smoothly in stormy, post-Brexit waters

By Morgan Terigi is Co-Founder and CEO of Incomlend   The past few years have presented a series of hurdles...

Business2 weeks ago

From employees to customers, workforce management can benefit the entire banking ecosystem

Michael Cupps, SVP of Marketing of ActiveOps explores the significant impact workforce management can have on the employees and customers...

Business2 weeks ago

Redefining the human touch with digital transformation

Simon Kearsley, CEO of bluQube   It may not be a new phrase, but digital transformation is still inducing anxiety...

Finance2 weeks ago

CFOs – the forgotten ally in the fight against ransomware

Justin Vaughan-Brown, VP Market Insight at Deep Instinct   Ransomware attacks have nearly doubled in the past couple of years....

Technology2 weeks ago

7 cost benefits of cloud accounting software

By Paul Sparkes, Commercial Director of iplicit, an award-winning accounting software developer   Is your accounting software having a laugh...

Business2 weeks ago

How does Identity Access & Privileged Access Management help in PCI DSS Compliance?

Narendra Sahoo is a director of VISTA InfoSec. Introduction The Payment Card Industry Data Security Standard also commonly referred to...

Finance2 weeks ago

Listed private debt deserves a closer look from investors

By Michel Degosciu, Managing Partner, LPX AG Over the past few years, the private debt asset class is attracting serious...

Trending