Lifeboat Foundation

The future of the legal industry is being reshaped by a number of rapidly advancing technologies and the disruptive ideas they enable. Today’s lawyers are being advised to learn to code, develop an artificial intelligence (AI) application, and outsource discovery to machines. Of the many new technological drivers impacting law firms is the secure information exchange platform known as blockchain. Some see it as a the basis for the reinvention of economies while others simply see it as means of secure and incorruptible information exchange between counterparties. This cloud-based distributed ledger technology provides a source of irrefutable record of every transaction. In legal it is enabling fully automated self-executing “smart” contracts, and has the potential to help attorneys provide new services and create new value for clients and law firms. Blockchain is known as the structure underlying Bitcoin and other digital currencies, but its applications in the legal sector are still evolving. This article provides an overview of the technology, highlights example applications and case studies, and presents a possible timeline of future developments over the next decade or so.

Overview: Blockchain and Bitcoin

Blockchain and Bitcoin have gained notoriety lately as a potential solution to an outdated and burdensome system for managing financial transactions between counterparties. Today most financial transactions between counterparties are settled via financial intermediaries which adds time and cost to the settlement process. Blockchain offers a distributed ledger model whereby the parties settle directly with each other, the transactions are recorded, secure, and immutable, and the counterparty identities remain anonymous. The goal is to enable a simplified and trustworthy financial ecosystem- but these digital peer-to-peer networks, also challenge the authority of institutions (banks, regulators, and governments) and are thus creating disruption.

According to its advocates, the decentralized nature of blockchain and Bitcoin will cause much-needed disruption, with reverberations far beyond the financial realm. There is an element of social revolution in blockchain, thus it is often portrayed as a conduit for challenging the status quo. Though Bitcoin, a digital currency, is an explicitly financial innovation (i.e., for payments, transfer of funds) blockchain is far less specific. Blockchain serves a critical role in the administration of Bitcoin, and that of other digital currencies, but it can actually be used to complete other objectives and track the movement, transfer, and ownership of all sorts of things besides money (examples include luxury goods, education credits, property titles, and patents, to name a few). Though blockchain is structured like a traditional accounting tool—it’s fundamentally a ledger that tracks deposits in and payments out, and maintains a running balance—its uses go far beyond counting coins.

Continue reading “Blockchain, Bitcoin, and Law: A Distributed Disruption” »

(Originally posted March 7, 2019, on the Crowdfunding Professional Association’s website.)

The purpose of this memo is two-fold:

• To highlight the possibility of risks to banking and finance sectors arising from new financial instruments based on blockchain technology; primarily from novel financial accounting methods and products called “stablecoins,” digital tokens, and cryptocurrencies.
• To encourage regulators and policymakers to engage blockchain thought leaders, product developers and the community in general to better understand the economic and policy implications of public, private and permissioned blockchains; their application to banking and finance regulations; and how innovation may be encouraged in a safe, sound and responsible manner.

Like any technology, blockchain can and may be used to improve a variety of operational, identity, security and technology challenges that the future of digital banking, business and society face. Blockchain technology is also poised to create new and increasingly clever methods and economies for value, commodities, assets, securities and a slew of yet-to-be discovered financial instruments and products. However, no leap in technology and finance is ever made without risk. As policymakers and stewards of the current and future digital economy and ecosystem, we have an obligation to our constituents and the global banking and finance community to guide the growth and adoption of emerging fintech technology in a safe and sound manner.

To that end, three areas that have the potential for regulatory and compliance issues as companies such as JP Morgan Chase, embrace and develop blockchain technologies to leverage digital tokens, cryptocurrencies and novel accounting systems such as the so called “JPMCoin,” are highlighted:

Continue reading “Acknowledging Risks in Institutional ‘Stablecoin’ Cryptocurrencies and Fractional Reserve Banking” »

Join me for a quick review of the spikes & dips in the Bitcoin exchange rate. This time, it’s all about one very simple chart…

The chart below shows a history of BTC price spikes, dips and recovery. Click to enlarge, then start at the top—and move down.

• Consider the percent-pullback after each spike (red label)
• Think about the stellar rebound after each drop (green label)

This is why I do not get too worked up over the plunge in the BTC exchange rate. There are no fundamental flaws in Bitcoin math or mechanisms. The market need for the benefits conveyed by Bitcoin is terrific, and the most popular arguments against Bitcoin are severely flawed. Skeptics and Critics typically say something like this:

“Even if blockchain currencies are beneficial and inevitable, Bitcoin can be displaced by another, better cryptocurrency.”

Continue reading “BTC Plunge: Why I don't worry” »

Join me for a quick review of the spikes & dips in the Bitcoin exchange rate. This time, it’s all about one very simple chart. _{[continue below graphic]…}

The chart below shows a history of BTC price spikes, dips and recovery. Click to enlarge, then start at the top—and move down.

• • • Consider the percent-pullback after each spike (red label)
    • Think about the stellar rebound after each drop (green label)

The table at right illustrates why I do not get too worked up over the plunge in the BTC exchange rate. There are no fundamental flaws in Bitcoin math or mechanisms, the market need for benefits conveyed by Bitcoin is terrific, and popular arguments against Bitcoin are severely flawed. Skeptics and Critics typically say this:

Continue reading “BTC plunge: Why I don’t worry” »

The question asked in the title has been edited from what was asked today at Quora, the Q&A forum at which I participate as expert columnist. The original question was a bit more ambiguous: “Which is better? — a digital bitcoin wallet or a physical one?” I have included the original question, to better distinguish products and terms. All bitcoin wallets are all digital—even a paper wallet, whether a character string or a QR code. Conversely, an exchange may use “physical” wallets to host client assets, individual application wallets, or they may simply keep records of client assets that are stored, collectively, in their own master wallet. To complicate matters, Bitcoin is never really “stored” by you or an exchange service. It is stored on a public blockchain, where assets and transaction history can be traced through time by anyone. Therefore, all forms of user access are “digital”. What the reader really wants to know is “Which form of access control is better? — custodial or personal?” Type 1: Custodial Wallets are Managed by a Trusted Party They hold your assets. You view a statement balance—just like a bank account.

At Quora.com, I respond to quetions on Bitcoin and Cryptocurrency. Today, a reader asked “Will we all be using a blockchain-based currency some day?”.

This is an easy question to answer, but not for usual Geeky reasons: A capped supply, redundant bookkeeping, privacy & liberty or blind passion. No, these are all tangential reasons. But first, let’s be clear about the answer:

Yes, Virginia. We are all destined to move,
eventually, to a blockchain based currency.

I am confident of this because of one enormous benefit that trumps all other considerations. Also, because of flawed arguments behind perceived negatives.

Continue reading “Will we all be using a blockchain currency some day?” »

Maria Bustillos is founder of the blockchain supported publication, Popula. I stole the title of this post from her essay at Medium.com (linked below).* I hope that Maria considers it a tribute rather than title-plagiarism. Her article is blocked by a pay wall, so allow me to explain a concept that confounds even a Nobel Prize winning economist. My take on the issue is somewhat different than Ms. Bustillos.

The difficulty understanding or appreciating Bitcoin boils down to a misconception that the dollar is backed by something more tangible, such as gold, guns or the promise of redemption. Not only is this an illusion, but Bitcoin is backed by something far more tangible, intrinsic and durable.

The illusion that “real” value emanates from government coupled with a robust consumer economy has been woven into our DNA for millennia. But, the value we attribute to a Dollar, Euro, or Yuan is a result of conditioning rather than any intrinsic value. That same conditioning has led us to believe that there is something sane and inherent in a nation that controls its money supply and its monetary policy.

Most public works projects—power generation, space ships, or the telephone network—were controlled by government in the past. If not, they were regulated as a licensed monopoly. This creates a choke point, a lack of competition, and a gaping opportunity for inefficiency, mismanagement or graft. It defies a free market economy and it concentrates power in the hands of politicians. But, at one time, it seemed necessary.

Continue reading “You don’t understand Bitcoin because you think money is real” »

Kudos to WallStreet analyst and advisor, Ric Edelman. He drank the Kool-Aid, he understands a profound sea change, and he sees the ducks starting to line up.

Check out the clearly articulated interview, below, with Bob Pisani at the New York Stock Exchange and legendary Wall Street advisor, Ric Edelman, (Not my term…That’s what CNBC anchor, Melissa Lee, calls him). Read between the lines, especially the last words in the video, below.

Ric Edleman has just joined Bitwise as both investor and advisor. This lends credibility and gravitas to the organization that created the world’s first cryptocurrency index fund. Bitwise benefits from Edelman’s affiliation, because the US has been slow (some would say “cautious”) in recognizing the facts on the ground: Cryptocurrency is already an asset class.

Edelman fully embraces a strong future for Bitcoin—not just as a currency or payment instrument, but as a legal and recognized asset class; one that is at the starting line of a wide open racetrack. He explains that the SEC sets a high bar for offering a Bitcoin ETF, but that this will be achieved. It will pave the way for large institutions, pension funds, etc to allocate a portion of money under management for blockchain products.

Continue reading “Ric Edelman: Bitcoin will be an asset class” »

The Disruption Experience this Friday in Singapore is a blockchain event with a difference. With apologies to the Buick commercial, this is not your grandfather’s conference…

I know a few things about blockchain conferences. I produced and hosted the first Bitcoin Event in New York. My organization develops cryptocurrency standards and practices. We help banks and governments create policy and services. And as public speaker for a standards organization, I have delivered keynote presentations at conferences and Expos in Dubai, Gujarat India, Montreal and Tampa, New York and Boston.

Continue reading “Disruption Experience Nails It” »