Enterprise Ethereum Launch, Microsoft Azure on Cryptlets, The Great Bot Splintering — Autonomous NEXT

Hi fellow futurists -- here are our favorite 3 recent developments. Big news week for Ethereum, and all of us geeks that like it. If you enjoyed this newsletter, please share with others!

Enterprise Ethereum Emerges.  A new blockchain consortium has been announced consisting of JP Morgan, CME Group, BNY Mellon, Banco Santander, Microsoft, Red Hat, Cisco, Wipro and British Petroleum, among others, reports Coindesk. The list of participating blockchain startups is even longer, including ConsenSys and Tendermint. This is big news. Right now, there are a few core camps in blockchain: IBM Fabric, R3 Corda, Chain Core, Digital Asset's DAML dominate the news. They are all connected to Hyperledger, an open source repository for core code. Ethereum is another direction -- a public blockchain for computing, that can now be applied to industry use cases. We see this as a splintering of power between top-tier investment banks for who will control the next-gen infrastructure. Read more.

Microsoft Azure on Cryptlets. So this one is a bit hard to parse, but 100% worth it. Above we just established that Ethereum's open source infrastructure could be an alternate smart contract language to many of the well-funded startups. But even more so, Microsoft Azure, the enterprise cloud, is coming pre-installed with ready-to-go Ethereum infrastructure that makes the creation and deployment of these apps much easier to manage. Microsoft then could be in a pole position to be the massive hosting repository for financial data, period. The concept of Cryptlets is the tech firm's approach for separating the data layers, business logic layer and presentation layer of the tech using APIs. Read more.

Source: Microsoft 

The Great Bot Splintering. Many banks (Barclays, Societe Generale, USAA, Bank of America, BBVA and Capital One) plan to leverage chatbots over the next several years, and there are already different options from which to pick. Startups Kasisto, North Side, Personetics and Teller are discussed in this article, with a distinction around talking broadly about financial education, answering specific account questions, and taking an actual action with account consequences. We were surprised that only 13% of banks surveyed did not plan to have a chatbot. Read more. (Personetics just received an investment from Santander Innoventures, as part of its push into artificial intelligence)

Source: American Banker, Personetics. 

Deeper curation of our core themes is below. This week’s artist excerpt is Gerard Richter. 

Best,

Lex Sokolin

Digital Wealth Management (Roboadvice)

• Shareholders Services Group, custodied on Pershing, has selected Invesco's Jemstep to deliver roboadvisor technology to its 1,500 RIA firms. Big win, if there's big adoption. Read more.
• Robinhood, a trading app differentiated by a Millennial mobile experience and free trading, has reached a million users and traded over $30 billion on behalf of clients in 2016. The firm makes money on margin and interest from cash balances, paying for costs with substantial venture funding. Eyebrow is raised, but breath is also being held. Read more.
• Will the delay of the DOL fiduciary rule hurt roboadvisors? Nope, say roboadvisors. Read more. And according to Cerulli, advisors plan to allocate even more assets to passive strategies, decreasing assets to variable annuities and actively managed mutual funds.Read more.
• Edward Jones, which has nearly a trillion in assets and 15,000 advisors, plans to steer clear of a dedicated roboadvisor channel (unlike Merrill, Schwab, and everyone else). We do expect that they will leverage parts of roboadvisor technology to reinvigorate advisor dekstops down the line, perhaps avoiding the robo moniker. Autonomous was interviewed for the story here.

Blockchain and Digital Ledgers

• The world is a bizarre. A company that wants to introduce financial sentiment analysis to the trading of cryptocurrency has raised money through an Initial Coin Offering, selling, you guessed it, their own cryptocurrency. Read more.

Source: Santiment 

• Next up in Blockchain is smart identity management and authentication. These can be applied across services and aggregate personalized data. Great industry map in this article by LTP. Read more.

Source: Let's Talk Payments

• Austrian utility Wien Energie is working with Ernst & Young and startup BTL Group (i.e, Interbit) on blockchain energy trading. They're not the only ones. Read more.

Artificial Intelligence

• Progress of artificial intelligence marches on, using a method call probabilistic programming, which combines learning with structure. A system developed by startupGamalon learns from just a few examples, rather than the millions required by deep learning. Read more.

Source: Gamalon

• Nearly 250,000 public sector workers could lose their jobs to automation in the next 15 years, reports think-tank Reform. Yikes. Say thanks to that neat graph above, showing AI approaching human effort. Read more.

Neobanks & Challenger Banks

• Interbank payments platform, SWIFT, connects 11,000 banks for international B2B payments. Over the last several months, it has been rolling out a Global Payments Innovation initiative, which is meant to enrich its network with richer data and messaging, reports Coindesk. Participating banks in the pilot include Bank of China, BBVA, Citi, ING and Standard Chartered. Upgrading the SWIFT infrastructure makes sense, to enable it with APIs and the ability to store transaction status and history. But noticeably absent is any adoption of blockchain technology, which fits the use-case fairly well. Read more.

Source: Coindesk, SWIFT

Financial APIs & Banks as a Service

• Big bank JP Morgan is partnering with fintech startup Roostify for digital mortgages. Won't the big bank just build this themselves, said the venture investor at the pitch meeting? Read more.

Source: Roostify

Chatbots, Conversational Interfaces

• Is Apple falling behind in digital assistants to Google and Amazon, while also leading with Apple payments? That contradiction must be resolved for Apple to benefit from the coming switch to voice-OS. Read more.
• Chinese tech giant Huawei is also planning to jump into the digital assistant market with a native offering. The voice-powered service will communicate in Chinese languages, and target domestic users. This hurts Google and Apple in one of the world's fastest growing markets. Read more.

Democratization, Regulation and Crowds

• Overall Fintech investment in 2016 went up 11% to $17 billion according to Innovate Finance. China and United States lead by deal value, and the UK is also up there with deal volume.  Read more.

Source: InnovateFinance, Pitchbook (click to enlarge)

Bitcoin & Cryptocurrency

• The Bitcoin ecosystem is abuzz with the narrow confirmation of Rick Mulvaney as the Budget Director for the Trump administration, because he is a public crypto-currency supporter. Read more.

Insurtech

• A B2C insurtech provider breaks down the phases for building a product, which mirror consumer needs: understanding insurance, managing insurance and buying insurance. Read more.
• Volkswagen partners with Mobileye, which provides crowd-sourced map technology for self-driving cars. The goal is a global map asset rivaling Google Maps. Read more.

Generational Shifts

• How should we think about failure? The analogy of bankruptcy helps -- knowing that a business can enter bankruptcy proceedings when needed has allowed firms to better allocate risk and make capital decisions. Failure is a process, not the ultimate end. In a similar manner today, people are exploring the idea of a basic income and the positive externalities it brings of motivating people to innovate and create. Read more.

Source: Evonomics

Attention Economy

So here's an idea. If the economy is now the supply and demand of human attention in the age of robots, must we somehow regulate that marketplace as we do an economy? How does free speech intersect with a marketplace of ideas? This compelling thought piece argues with are in a recession of ideas. Algorirthmic content curation, friend suggestion, attention addiction are all sources of marketplace manipulation. Read more.

Virtual and Augmented Reality

• Microsoft Hololens will be used for medical training, as shown below. Virtual objects allow for a collaborative sharing of abstract concepts, similar to what an advisor could do with a net worth statement of financial plan. Read more.

• Check out also these incredible Tiltbrush art pieces, which include a recreation of a Georges Seurat pointilist classic in virtual reality. Interacting with these simple images today teaches us how we will interact with all our products in the future, including financial services. Read more.

Internet of Things & Wearables (IoT)

• Business Insider has put up a report on the internet of things, claiming a multi-billion investment number into the ecosystem. That is consistent with our view that digital assets and designs are using scarcity-enforcing technology like blockchain to blur the line between the digital and real worlds. Read more.

Source: Business Insider 

• Flying cars? Check! Dubai showcases a drone taxi for commuters to go live this year. Read more.

Singularity

Scientists at MIT have developed a material for hosting living cells, which can then contain programmed bacteria. This in turn allows the bacteria to be used as a living sensor for a wide range of chemicals, worn by humans. What kind of chimera is this?! Read more.

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This content is not investment research, investment advice and is not intended to lead to a transaction (see disclosure).