Fintech Digest from Autonomous ↻NEXT -- They Huffed and Puffed and Blew the Crypto House Down; Worst Roboadvisor Performance; Tokenizing AI Messengers

Hi fellow futurists -- here are our top 3 favorite thoughts:

They Huffed and They Puffed and They Blew the Crypto House Down. 

Cryptocurrencies most threaten those jursidictions where residents want to pull currencies out of the economy into international havens. Think Russia and China. And so we see the Eastern sovereigns trying to wrangle control of the crypto-economy, like the media companies that had tried to fight digital piracy. Except countries have the power to jail people for promoting Initial Coin Offerings. Just over the weekend in China, the ICO market hasbeen put on ice by China's Central Bank, which has sent Bitcoin tumbling from nearly $5,000 to below $4,400. But the community believes this to be a temporary measure for controlling the market and protecting the population from fraud, rather than a permanent moratorium.

Russia, on the other hand, has been sending out mixed signals. First it was reported that the Moscow Stock Exchange was introducing crypto for qualified investors. Then this news was denied by the exchange, claiming that many options are on the table but none have been implemented. Further, Ethereum is likely to be behind a Russian crypto-ruble, either to be controlled by the nation or perhaps via a proxy bank or a foundation. You can see a great run down of these events at Token Economy. And while in the West, blockchain companies are primarily outsourced Fintech R&D for incumbents, in the East the cryptoeconomy is a way for people to have a free banking system and movement of money. Maybe not for much longer.

We'd be remiss not to mention the governance attempts from inside the community itself. Countries and regulators may try to shut down unlawful activity, but the best hope in our view is from the community itself. To that end see these independent efforts to beef up ICO launches with a diligence framework: (1) Cryptoassets: A crowd sourced evaluation & due diligence framework, (2)  Independent SRO, The Financial Commission, Extends Fintech Certification to ICOs, and (3) The ICO Governance Foundation: Cleaning up the ICO market. A lot of folks in this decentralized world trying to own stuff.

 Source: Autonomous NEXT, Figures through August 15

Roboadvisor Performance Benchmark . 

Back to a simpler time -- roboadvisors. Research firm BackenDBenchmarking opened up portfolios across the usual digital wealth suspects in the United States to see how their investment performance stacks up over the last 12 months. The portfolios were intended to seek a moderate asset allocation of roughly 60% stocks and 40% bonds, and the results can be seen in their chart below. The average return was 10.6% for the year, with Schwab's service reaching 11.94% and Acorns coming in last at 7.4% per year. Betterment outperformed Wealthfront, and Vanguard beat Personal Capital.

More telling are the efficiency ratios -- how much did holders pay for their units of Return with units of Risk? Nothing too fancy, just a Sharpe Ratio. Here, Acorns does noticeably horribly, coming in at nearly half of best performer E*Trade. FutureAdvisor also had a meager performance, which is surprising given their BlackRock affiliation. 

So are these numbers at all useful? Not really -- they are the wrong way to look at digital wealth management. In the world where brokers sell investment product, this type of horse-race about which portfolio has the best return may make sense. But that world is a decade gone. Humans using roboadvisors care about fulfilling their financial goals and having a non-stressful user experience, not just raw returns. To that end, the useful metrics for these services should be around customer satisfaction, net asset flows, engagement and education, asset retention during crises, and the avoidance of behavioral biases. Selling digital wealth as net investment performance only hurts industry participants, as it optimizes them around metrics that are not the primary motivator for consumers of the service.

Source: BackenDBenchmarking, WealthManagement.com

Tokenizing the AI Messenger. 

Let's connect two data points and make a trend. First, Canada-based chat platform Kik is working on a $125 million token sale, which will embed a cryptocurrency into the messaging network itself. No need for Paypal, ApplePay or other shenanigans. The network itself becomes the payments mechanism by giving literal value back to its participants. Can this happen to WhatsApp, Facebook Messenger, Telegram and create a Western version of WeChat? What is payments but a derivative of communication?

Second data point. Tech giants are partnering -- in retail, it's Amazon vs Google and Walmart. And in voice interfaces and AI, Amazon Alexa is now working with Microsoft Cortana to take on Google and Apple. In a spectacular Quora post, Brian Roemelle walks through how the audience resulting from this partnership is immediately 200 million (if not bigger). So what we have is a multi-purpose artificially intelligent agent that mass-personalizes products and software across ecosystems. This thing that will live in our smart speakers, autonomous cars, VR headsets and neural implants (thanks, Elon!).

So let's connect the data points. A messenger with 300 million users is creating financial liquidity for its community through tokens. The attention economy is evolving its own economic power, outside of financial services. But remember, messaging and conversation will be not only between (1) humans, but between (2) humans and machines, and (3) machines and machines. There are only a few billion people, and far more software and hardware agents, which thanks to Amazon/Google can now talk to us directly. Voice-first is not just a front-end upgrade, it's an economic vector. It is human intent with machine money attached. 

Source: Activate Media

Featured

We had an awesome reponse to the crypto hedge fund survey, with many in the community coming forward to flag new investment vehicles. If we are still missing funds, please reach out at next@autonomous.com and we'll add. We're also tracking traditional asset managers building crypto products, so companies like Hargreaves, REX and CBOE. Here's last week -- 

(56) Base58, (57) Bitfin Capital, (58) Blackchain , (59) Blockweather , (60) CryptoLifeCapital, (61) Iterative Capital, (62) Kryptonite1 PLC, (63) MTDigital Assets, (64) NextBlock Global, (65) Protos Cryptocurrency Asset Management, (66) Shuttle Fund, (67) The Crypto Fund, (68) Vergio

NextBlock is interesting. In addition to being run by Alex Tapscott, it has an unusual structure -- a venture capital firm that invests in blockchain startups that plans to raise $50 million via an Initial Public Offering on the Toronto Stock Exchange. Sounds like a lot of fees.

Source: Blockchain Revolution

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