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Protocol | Fintech
The people, power and politics of fintech, every Tuesday and Friday.
October 12, 2021
What fintech trend is most troubling for you?
Hello and welcome to Protocol | Fintech! This Tuesday: which crypto platform will win over developers, the dangers of "buy now, pay later," and the bitcoin's energy use revisited.
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The Big Story
The battle to take down Ethereum
If you want to build a crypto application, from NFTs to decentralized finance, you're probably going to build it on Ethereum. But should you?
Truth is, Ethereum has some big issues for developers, most notably slow transaction speeds and high fees. Fees tend to rise particularly when congestion is high — a plague of popularity. The cost of an Ethereum transaction rose to nearly $70 in May before dipping over the summer, then rising to almost $60 in September.
- For developers, crypto isn't a speculative asset class but a platform on which they can build software that sets the rules for transactions known as smart contracts. Blockchain evangelists see smart contracts as key to crypto moving beyond just a store of value or a token for trading.
- Blockchain can in theory unlock some of the many long-promised uses of the technology — cheap and fast payments, decentralized finance applications, even consumer products like games — but not if the underlying technology effectively prohibits development.
Ethereum's problems have left an opening for a number of upstart blockchains that offer faster and cheaper transactions. We've taken a close look at the contenders, which include Solana, Cardano, Polkadot, Celo, Avalanche, Flow and others. While it may be too early to say they are "Ethereum killers," they have shown signs of taking market share from Ethereum, especially for certain uses.
For many, speed and cost rule. Developers seeking to build real-time business products or consumer-friendly applications want a platform that runs faster and cheaper than Ethereum does now.
- Solana, launched last April, is claimed to process 50,000 transactions per second, compared to Ethereum's 15 to 30 per second, with costs of $0.00025 per transaction. The project was built to focus on optimizing hardware that crypto software runs on, not just the software, said founder Anatoly Yakovenko, CEO of Solana Labs, who previously worked at Qualcomm. Jump Trading, Virtu Financial, Cumberland DRW and Genesis Global Trading have all signed on to Pyth, a decentralized real-time financial data network built on Solana that provides stock, crypto and fiat currency prices.
- Also of note: Avalanche, which launched last September and is claimed to handle 4,500 transactions per second. DeFi projects such as DeFi exchange SushiSwap, oracle network Chainlink, and DeFi protocols Aave and Curve have used Avalanche. Topps recently launched NFTs on Avalanche.
Specialized uses are also growing, which look at the technology in whole new ways.
- Celo has targeted mobile uses for blockchain, trying to make crypto more accessible, particularly in emerging markets. The system essentially turns phone numbers into something like public crypto keys that can accept cryptocurrencies via a Celo wallet. It has received backing from the likes of Andreessen Horowitz and Deutsche Telekom.
- Flow has become popular for NFTs, particularly with large brands. Dapper Labs, the company behind Flow, built the blockchain specifically for NFTs. NBA-licensed NBA Top Shot was built by Dapper Labs, and the NFL is also launching NFTs built by Dapper Labs on Flow. Game developer Ubisoft and Dr. Seuss Enterprises also have products in the works on Flow.
And the technology plays a big role for many developers. "We saw there were a lot of developers that just really wanted a different set of tools," said Solana's Yakovenko. "They wanted to write high-performance code. They wanted to effectively kind of get close to the metal and have tools that are more standard."
- Solana's Yakovenko touts Solana's use of the programming language Rust, which has been voted the favorite language among programmers, while Ethereum uses Solidity.
- Some investors and developers debate the merits of Ethereum competitors in terms of their compatibility with Ethereum. Avalanche has touted its Ethereum Virtual Machine, which allows developers to port over smart contracts from the popular blockchain. Solana's Yakovenko, however, said its break with Ethereum brings more original projects to Solana.
But don't count Ethereum out. It still has the widest reach, biggest network and the security and decentralization that attract crypto enthusiasts.
- At last count there were more than 3,000 decentralized apps running on Ethereum. It also has momentum from its longstanding position, which results in things like a larger user base and a larger library of code for developers to work with.
- And Ethereum 2.0, a faster version, is coming, though it's not clear when.
- Ultimately, the rival blockchains may not "kill" Ethereum, but instead cause a splintering of uses across different blockchains.
A MESSAGE FROM ASANA
This fall, as enterprises everywhere decide whether to return to the office, continue working remotely or establish a hybrid working model, collaborative technology platforms will be more important than ever. Asana COO Anne Raimondi shares advice with business leaders as they move into the next productive work phase, whatever shape that may take.
From Protocol | Fintech
Oportun drops its bank charter application. The move came after the Consumer Financial Protection Bureau launched an investigation into the company for its lending practices.
Global payments: challenge and opportunity
Business is more global than ever, but cross-border payments remain mired in older systems. Can new technologies leapfrog the past? At an event on Oct. 20 at 10 a.m. PT, Protocol | Fintech will bring together experts in consumer and business payments to discuss the challenges and opportunities ahead. RSVP here.
- "Just bought my first NFTs ! I'm learning so much. Would love to know about amazing women creating NFTs. Talk to me cryptotwitter." —Reese Witherspoon is jumping on the bandwagon.
- "I personally think that bitcoin is worthless." —JPMorgan Chase CEO Jamie Dimon still isn't convinced.
- "I personally think Jamie Dimon is worth more to bitcoin." —Square CEO Jack Dorsey responding to Jamie Dimon's comment.
- "I think this article's subheadline says it all." —Ripple CEO Brad Garlinghouse on a New Yorker piece that claimed: "The S.E.C. has yet to set clear rules on cryptocurrencies, leaving the industry guessing. Maybe that's just how the agency wants it."
- "Bitcoin uses a lot of energy, but if it's a use of energy that would otherwise be going to waste then it's not really a problem." —Alex de Vries, a data scientist who created the Bitcoin Energy Consumption Index, thinks there are some sustainable approaches for crypto.
3 Questions With …
Steve Berneman, co-founder and CEO, Blueprint Title
What fintech trend is most troubling for you?
BNPL. Don't get me wrong, I'm a huge fan of "buy now, pay later" — it's a win-win-win for consumers, retailers and fintech. My concern is that the growth of the industry multiplied by the bottleneck of series B/C/D investments will force BNPL competition into an unhealthy, aggressive marketing competition. The subprime mortgage fiasco taught us that there's a fine line between consumer responsibility and corporate manipulation. Debt is debt, except, you know, when we're told it's instant gratification.
What fintech company — besides your own — have you been most impressed with this past year?
Toast. There are a number of fintech companies who get credit for exploding during the pandemic; Toast boomed in 2019, cut 50% of staff in 2020, figured out how to pivot to takeout, re-boomed, pushed out new product and helped to buoy the entire restaurant industry in the process. That's an incredible 18-month turnaround.
What problem would you like to see a fintech company solve?
Health insurance knowledge and confidence. There are dozens (hundreds?) of fantastic insurtech startups focused on health care, but I haven't found one yet that would give me confidence as a consumer. Despite really trying, I'm embarrassed/angry to say that I don't really understand my healthcare coverage. My wife just started a new job, and it took us three hours to figure out if we should put the kids on her insurance or mine. Please help me understand my benefits, risks and real-time determination of cost.
Need to Know
- Bakkt formed a partnership with Google. The digital-asset marketplace will integrate its debit card into Google Pay to allow customers make purchases. Crypto assets will be converted to regular money for transactions.
- Goodlord is acquiring Acasa. The property tech company is buying the household bill-splitting app, but didn't release financial details.
- Riyaz Faizullabhoy and Nassim Eddequiouaq are joining Andreessen Horowitz. Eddequiouaq will serve as chief information security officer of the venture capital firm's crypto division, while Faizullabhoy will be its chief technology officer. The pair were previously top Facebook engineers that helped create the crypto custody infrastructure for the company's Novi wallet.
- Brian Shroder was promoted to CEO of Binance US. He was previously president; the move comes after Brian Brooks' quick exit.
- Philip Hammond has joined Copper.co. The former U.K. chancellor is joining the cryptocurrency trading company as an adviser.
- Bernie Li has joined Antler. The co-founder of Pure Energies will join the global venture capital firm as a partner in its Toronto office.
- Crypto startup MoonPay raised at a $3.4 billion valuation. Tiger Global and Coatue co-led the investment in the payments startup.
- Slice is reportedly close to raising more than $100 million. The Indian card-issuing startup is reportedly in talks with Tiger Global for a major funding round.
- Cryptocurrency analytics firm Elliptic raised $60 million. SoftBank and Wells Fargo Strategic Capital were among the investors.
- Mono raised $15 million. The Nigerian financial services startup's series A round was led by Tiger Global.
- Crabi raised $4 million. The Latin American insurance tech company's seed funding was led by Kaszek Ventures.
Total assets of U.S. banks are up from $22.19 trillion as lending drops to a new low.
Thanks for reading — see you Friday!