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Cayman Island-based crypto company Block.one has raised $4 billion via its initial coin offering (ICO), which sold a proprietary token, dubbed EOS. This marks the largest ICO to date, and makes EOS the fifth most valuable cryptocurrency, according to CoinDesk.Investors used 7.12 million Ether to buy EOS tokens, so the total value of the ICO could still shift depending on Ether’s price fluctuations. Interestingly, while Block.one has definitely attracted many investors, it did not have live product during the time it collected investments, meaning it raised this capital on investor confidence alone. Block.one launched its software over the weekend.
Block.one now has to deliver on the enormous expectations it has set.With investors putting so much faith in the startup, it will now be under serious pressure to deliver the technology and returns its backers are looking for. The sky-high valuation is largely down to some investors' assumptions that Block.one will offer a decentralized alternative to current cloud-hosting services, while others think it will be an improved version of Ethereum.
However, Block.one hasn't benefited from entirely smooth sailing — the company's email system was breached last weekend, which allowed hackers to send messages to Block.one’s customers telling them they could buy unsold EOS tokens by handing over their private keys (cryptography passwords used in blockchain solutions). All eyes will likely now be on how well Block.one handles potential snags in the first days of its launch, and how well its technology brings about the efficiency it promises.
Investments in ICOs remain very risky, especially when there aren't many details around the project. Many ICOs don't provide investors with enough information about their projects, or straight up lie to them about what the plan is. This makes the space very risky for investors, who likely very often don't know enough to make an educated investment in a company. While it is possible that Block.one will succeed in delivering on its promises to investors, pouring funds into a startup without a live solution only increases the inherent risk of this fundraising method.
Of the many technologies reshaping the world economy, distributed ledger technologies (DLTs) are among the most hyped. DLTs are most often associated with cryptocurrencies like Bitcoin, but such coverage sidelines the broader use cases of DLTs, even though they stand to make a far bigger impact on the broader the financial services (FS) industry.
DLT's value lies in its ability to centralize record-keeping, while cutting out the need for authorization by an overseeing party, instead allowing a record to be confirmed by multiple parties with access to the database. This means DLTs have the potential to streamline financial institutions' (FIs) operations, boost data security, improve customer relationships, and drastically cut costs. But many FIs have struggled to implement DLTs and reap the rewards, because of organizational obstacles, but also because of issues rooted in the technology itself. There are a few players working to make the technology more usable for FIs, and progress is now being made.
In a new report, Business Insider Intelligence takes a look at what DLTs are and why they hold so much promise for FS, the sectors in which DLTs are gaining the most traction and why, and the efforts underway to remove the obstacles preventing wider DLT adoption in finance. It also examines the few FIs close to unleashing their DLT projects, and how DLTs might transform the nature of FS if adoption truly takes off.
Here are some of the key takeaways from the report:
- DLTs are proving attractive to FIs because of their ability to act as a single source of truth, distribute information securely, cut out middlemen, improve transaction times, and cut redundancy and costs.
- DLTs like blockchain and smart contracts stand to save the FS industry up to $50 billion a year through improved operational efficiencies, reduced human error, and better regulatory compliance.
- The technology is being explored actively across FS, with trade finance, insurance, and capital markets proving especially active. Overall adoption is still low because of organizational and technical hurdles, but these are now being eliminated, promising to boost implementation.
- A few FIs have pulled ahead of the curve and are very close to taking their DLT projects live, if they haven't already. These players can serve as useful case studies for other institutions in getting their DLT solutions live.
In full, the report:
- Looks at what DLTs are, and why the FS industry is working hard to make use of them.
- Gives an overview of the financial segments which are seeing the most DLT activity, and what they stand to gain.
- Outlines efforts being made to make DLT more approachable and usable for the FS industry.
- Examines use cases in which FIs have managed to take their pilots live, and what they can teach their peers.
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