Carbon Emissions, Ozone, Green House Effect, Global Warming - In One Pic

The earth is bombarded with harmful UV rays from space. 

The ozone (O3) layer, found high up in the stratosphere, protects the earth from the space UV rays. 

The green house gasses (which contains ozone), found down low in the troposphere, retains heat on earth to keep it nice and warm.

But too much trapped heat, known as the green house effect, causes global warming.  The trap heat is caused by carbon CO2 emissions, such as pollution from cars.

Separately, ozone depletion,  is the lack of ozone that happens over the the Antarctica. The depletion is caused by human made chemicals, such as CFC, eating away the ozone.

 

To reduce green house effect, which will reduce global warming, carbon emissions must be reduced.

SWIFT - the CENTRALIZED payment rail used by global banks

Russia is amassing troops on its border with Ukraine. There is fear that Russia might invade Ukraine. Some countries want to find a way to dissuade Russia from potentially invading Ukraine.

One way to dissuade Russia from potentially invading Ukraine is via financial means.  The plan is to "kick" Russia out of the SWIFT. What is SWIFT? SWIFT is a payment network that connects global financial institutions, such as banks across the globe. Meaning if Russia is not on the SWIFT global payment network, money outside of Russia cannot flow into Russia.

SWIFT is an example of a CENTRALIZED network. Meaning that SWIFT the entity control how money flows around the globe. It is governed by a board of 25 members, mostly from the prosperous nations and populous nations. Depending on your point of view, centralized is either good or bad. In this case for Russia, this is bad. This situation calls for the need of a DECENTRALIZED network - where no board members can assert influence on its network members.  This is where blockchain enters.  BLOCKCHAIN can provide the technology for this. The consensus mechanism in a blockchain determine how the network is used. The consensus algorithm is predetermined up front, where machines vote - instead of humans or nations.

 

 

The answer to a centralized network is to create alternatives to it. Russia created "SPFS", an alternative messaging and payment system to SWIFT. Currently SPFS supports payment transference WITHIN Russia.  China also created its own version of SWIFT called "Cross-border Interbank Payment System"  CIPS. All this to hopefully replace SWIFT so that payment can flow into Russia and China respectively. The value of a network is who is on it. If Russia has its own SPFS, and China has its own CIPS, one might argue that they should have joined together and created a true alternative to SWIFT. Maybe "DSNM" Decentralized SWIFT with No Meddling.

Interestingly, cryptocurrency such as Bitcoin, can be an alternative payment method, instead of using SWIFT. Maybe Ripple XRP?

Google : At The Center of the Metaverse - Live Longer, Better, More Fulfilled

Google strategy for Metaverse  - the super data lake that can feed the Metaverse to make our lives longer, better, and more fulfilled.

 

 

Input : Google collects information on its users. Hard information. Soft information. External information.

 

Output : monetize for ads (bad), help users (good), allow users to contribute, build the Metaverse

 Google strategy

Financial Services - Capital Markets - A Basic Guide on how Blockchain/DLT fits

Capital markets in the financial services industry, per Congressional Research Services, is an place where businesses that need money (aka capital) for a long term can find sources of money from investors. The agreement between those who provide the money and the business that needs to money is called a security. Typically the security is either a debt (loan that is repaid at the end, with interest), bond (loan with periodic payments), or equity (stock). 

 

To see the connection between those with money, businesses that need money (capital), and the medium that allows this to happen, here is a simple chicken scratch.

 

People with Money : in the upper left corner, individuals earn money, have extra money that they can save or invest.

Companies that need Capital : in the upper right corner, businesses have several ways to acquire capital (money), via bond, equity, loans.

Capital market : in the middle where those with money (investors) can provide money to companies that need money (capital)

Capital markets infrastructure has played a critical role in global finance. For the past decades, it has silently been providing the transaction backbone for both capital and financial markets. But it is also antiquated – where a single transaction must traverse siloed system via messaging passing that is currently subject to errors, delays, and cost. Distributed ledger technology (DLT) can help to fix that, by providing a significant paradigm shift in the conception of financial market infrastructure as it can enable instant, authorized access to capital market actors “on a need-to-know basis” regarding several types of data, including asset reference data, asset ownership data and owner identity data. Current financial market infrastructure use cases that can benefit from DLT include: corporate actions, clearing and settlement, collateral management, and bond issuance. The DLT solution must also be enterprise grade to meet the rigors of regulators and compliance – including security, privacy, resilience.

Vaccination : a proxy battle between 1) public good and 2) personal freedom?

My neighbors live right next door to me. They are a hoot to live next to. I am always invited to their parties, where they serve fantastic home made food. But this comes at an indirect cost to the public good. Here is how:

1) Saturday 7:30AM : they start a huge fire BBQ in their backyard in preparation to roast a pig for the party. The smoke enters and exits via the open windows in my bedroom upstairs. I leave the windows open because I love the fresh morning air.

2) Saturday 11:30PM : they exercise their personal freedom to enjoy music, played loudly in their backyard. Not only is my household bothered, the sound radiates for nearly the entire block. My other neighbors want to call the police, but hard to when you just was attending that same party.

In these cases, the public good, as defined by a reasonable person,  seems to be "diminished" - smoky air, loud music - because a family chooses to exercise their personal freedom do as they deem fit.

Extrapolating from this, COVID vaccination might be a battle in a similar vain : a personal choice NOT to be be injected by this untested mRNA experiment - versus the public good that vaccination will stop the spread and make you less sick. Are the two cases - 1) neighbor wants to BBQ and blast music vs 2) a person refuses vaccination - the same?  (Note : I am 50-50 on this, so there is no bias here).

To put some thinking around this, I propose a simple framework. 

Definition of public good, responsibilities, and expected : roughly stealing from wikipedia, public good is "shared benefit for all". An example of public good is clean streets. So as an individual,  1) expectations as a public good consumer : clean streets  2) what am I expected (responsibilities) to do to uphold the public good  : don't litter 3) do laws enforce public good.

Definition of harm to the public good: I define this as anything person/thing/law that diminishes the benefits of public good. So if clean streets is a public good, someone littering is harming the public good.

Definition of personal freedom: I am entitled to enjoy my God given life, and no public good shall  mess with that!

Overlap causes conflict: This is the root of the problem - personal freedom of one (I want to play loud music) intersects with public good good another ( I expect peace and quiet from any loud music - especially rap/grunge rock/classical music).

A framework to resolve conflict: maybe it should be to determine 1) who every came first gets to set the rules - "hey I was here first" 2) majority rules 3) an elected central committee decides.

Defi : What Is It, And What Does Blockchain Do?

What is Defi (vs Centralized Finance)?

Defi is short for Decentralized Finance. What does this mean? Let's start by looking at the definition of  the two composite words. First word is finance - which is the management of money. Currently done through an intermediary. You can borrow money from a bank to pay for a car,  you have a mortgage on your house from a local bank,  from save your paycheck in a bank, loan your savings to another person via a bank to earn interest, you can  invest you savings in the stock market through your brokerage, pay your tennis fees to your friend  using Paypal, buy a Sony PS5 by paying with your credit card. The second word is decentralize - which is a control concept, where decisions are made by peers via voting, instead of a central authority. Defi's enemy is centralized finance, which is today's traditional method of finance (which is through intermediaries). Centralized because all financial activity needs these two intermediaries 1) government for fiat currency & identification 2) financial intermediaries / institutions such as banks to store your money safely and stock brokerage to store your certificates safely. This is bad because it is 1) slow (think T+2)  2) expensive (think 2.5% credit card fee) 3) limits new financial services.

How Can Blockchain Help Defi?

The basic concept behind defi is having a way (say platform) to provide traditional centralized finance - but without a government and financial intermediaries. An implicit assumption that the government and financial intermediaries provide is trust.  Trust that data entered is good. Won't be altered. Always accessible. Will be honored. So basically defi needs to get rid of the government and financial intermediaries - but still retain trust. Blockchain can provide this : a single source of data, public, and trusted. That is why most defi platforms are built on Ethereum - which is blockchain. What makes Ethereum good to replace centralized finance? Recall that the enemy of defi is centralized finance, which requires 1) government fiat currency and identification 2) financial intermediaries / institution. So how will we replace fiat currency, identification, and a financial intermediary / institution?   Ethereum can, which has 1) ledger 2) smart contract 3) native currency / token called ETH 4) ERC-20 standard for people to create their own token (fungible ) on Etheruem . For identity, an Ethereum public address will serve as your psuedo-annonymous identity (psudeo-anonymous because all public addresses and transactions to/from that address is visible to the public, but the public won't know WHO is behind that public address). The Ethereum ledger will serve as the trusted bank ledger. ETH will serve as the currency, but now digital/crypto instead of fiat. And ETH is NOT backed a government.

Hype vs Reality of Defi : FOMO?

What are some of the motivations to participate in defi? 1) defi provides to you (as a consumer) a service that you can't get from today's centralized financial services 2) defi gives you (as an entrepreneur)  a way to provide a service that tradtional centralized financial services can't provide  3) you (as a person on the sidelines) want to dabble in this hype due to FOMO 4) you (as an enterprise) want to create a buzz and want to dabble and hedge in defi - just in case it takes off.  CNBC lists Mark Cuban dabbling in defi, so does that make it legit?

 

Australian Stock Exchange (ASX) CHESS+ stock trading system modernization using blockchain/DLT

 

The Australian Stock Exchange (ASX), based in Sydney, is one of the top 20 largest stock exchange in the world. For reference, the NYSE and NASDAQ stock exchanges are the top two.

Stock exchanges basically allow stock brokers/dealers to execute, settle, and clear stock trades. Clearing and settlement is also called post-trade.

ASX will act as a CENTRAL COUNTER PARTY to be a trusted middleman between the stock seller and the stock buyer.

Stock trade EXECUTION, that is to buy or sell, happens in real time. So that the market price of the stock is captured. Let's do the deal now and figure out details later.

But stock CLEARING and SETTLEMENT happens later - in non real time. Also known as batch processing. T+2 phenomenon.

Stock trade clearing is the step to ensure match buy order from the investor and sell order from the issuer, and that the seller does own the stock, and that the buy does have the funds to buy the stock.

Stock trade settlement is the step to transfer the stock from the seller to the buyer and to transfer funds from the buyer to the seller.

 The actual stock certificate is held in a CUSTODIAN (bank). It does not need to be handed physically from the seller to the buyer.

ASX's system to clear and settle stocks trades is called Clearing House Electronic Subregister System (CHESS).

It was put into operation in the 1990. Its main goal was to DEMATERIALIZE/DIGITIZE stock trades.

Stock trades have typically been physical paper based. 

Dematerialize turns physical paper documents into digital form.

CHESS has worked well, but in need of modernization. Speeding up post trade (clearing and settlement) from T+5 down to T+2.

But CHESS is now 25 years old. Time to update or replace it. The system to replace CHESS will be called CHESS+. 

CHESS+ will use blockchain/DLT from VMware, and the Daml smart contract programming language from Digital Asset.

VMware Blockchain will provide the blockchain DLT platform that will serve as 1) storage - single source of truth 2) compute - to execute smart contract programs. The smart contract programming lanauge

What is driving the modernization? Pain point (T+2, unify systems into single record). Vision driven (jump on DLT). Want to differentiate (be the 1st to DLT).

A stock exchange will have multiple participants, on both sides of a trade. The seller can be an ISSUER of a stock (as part of an IPO). The buyer can be an INVESTOR.

So for CHESS+ to be successful, its participants (investors, issuers, etc) must be able to connect and interact successfully with it.

As of December 2021, CHESS+ is anticipated to go live April 2023. Before going live, it has to be tested. Testing will be performed in two phases. In the first phase (happening now), called ITE1,  the ISV software providers be testing CHESS+. In the second phase, called ITE2, user participants will join in its testing.