terests in the property.

LOTTERY.COM - $UNCONFIRMEDThe online digital gambling platform,was the first to create a digital revenue-share instrument based on blockchain.

MARKET OUTLOOKAlthough Blockchain is at the forefrontof many discussions today, it is importantto note that in five to ten years,blockchain will likely be a standard andboring method of wiring our financialmarkets and seldom discussed. Similar tohow all modern businesses need to havea website, any business that engages inthe transfer and storage of data, particu-larly if that data reflects ownership, will

likely utilize blockchain with various de-grees of centralization. Today, issuers are mostly ignoring this

fact, assuming that by placing their secu-rities on a blockchain, their deal instantlybecomes more ‘fundable’. Although thetechnology does provide some obviousbenefits of efficiency, transparency andliquidity, it does not increase the inherentquality of the deal. Thus, these issuances,are still dependent on traditional sourcesof capital such as family offices and assetmanagers. Issuers continue to brace theuphill battle of educating investors on po-tential benefits of programmable securi-ties in addition to selling their deal. Slowbut steady, security tokens will continueto gain prominence, with the goal of sim-ply becoming the new ‘normal.

Tatiana Koffman is a frequent contributor,speaker and advisor in the digital securitiesspace, focusing on impact and consumertechnologies.

You won’t have any problem findingvisionaries and ideas in theblockchain and crypto worlds, but

viable real world examples of thesetechnologies in action and servinguseful purposes are relatively rare.There’s a hive of energy and

momentum behind German KraftBeer’s (GKB) efforts to help launch the‘Craft Beer Coin’ alongside a rapidlyburgeoning blockchain event culturethat congregates around their Elephant& Castle Mercato Metropolitano freshlocal beer tanks and bars. GKB is a unique story in itself. Brewing

fresh beers onsite while simultaneouslycapturing energy to distill water tobrew with and create ‘Acquiva’ bottledwater, their authentic quality Germanbeers were hugely popular at the recentHyde Park ‘Winter Wonderland’Christmas event. By using the sameingredients as local German beer brews

plus their distilled water, GKB is able toserve pints in London you couldpreviously only find if you went to alocal bar in Bavaria.Since the invention of beer around

25,000 years ago societal perceptionsof the consistent value of a pint ofbeer over time are well understoodeverywhere.In mankind’s history beer is arguably

the commodity with the most stablevalue - much more stable than gold,oil or all the paper currencies that

opportunities is great for beerdrinkers, with plans rapidly beingaccomplished to create a digitalcommunity around fresh local beers.The realities of actually doing this andnot just talking about it has attracted avibrant community of like-mindeddigital entrepreneurs to MercatoMetropolitano in S1. GKB has becomea hub for crypto and blockchainaficionados helping to test the GKBsmartphone app, buy beers at the bar,interact around presentations,network with peers and discuss theirprojects over pints and food. The nextbig, public event, will be theBeer&Blockchain Club on the 27th ofthis month. Interesting speakers willmake themselves available for a chatover a beer. ‘Craft Beer Coin’ will hit beta testing

later this month and launch to thepublic as soon as the real world legaland regulatory details are completed.‘Asset backed’ tokens are arguably thefuture in a world that has until nowbeen dominated by speculation on‘store of value’ crypto tokens such asBitcoin, and the community aroundthis launch is also well worth watchingand attending if you can get there.

For more information visithttps://craftbeercoin.info

20 TUESDAY 12 FEBRUARY 2019FEATURE CITYAM.COM 21TUESDAY 12 FEBRUARY 2019 FEATURECITYAM.COM

TOKEN DEALS SO FARThere are over 150 Security Token is-suances on the market. Below are someof the more interesting ones that havetouched mainstream investors.

BLOCKCHAIN CAPITAL - $10MBlockchain Capital was the first to intro-duce an STO into the market. The offer-ing created a blueprint for futuretokenized securities, in particular tok-enized fund structures which are tradi-tional illiquid vehicles.

ASPEN DIGITAL - ST. REGIS - $18MThe Aspen Hotel deal is notable for beingthe first major commercial real estatetransaction facilitated by blockchain. Thedigital security provided holders with eq-

An otherwise stable market erupted lastFriday, 8th February with a substantialgreen candle day. Notably there was

massive 32% uplift in the price of Litecoin(LTC) trading at $44.35 and taking it to 4thposition on the Market Cap list. Last weekalso saw Binance Coin (BNB) enter the topten Market Cap list - US$1.32bn - in tenthposition trading at US$9.64. Bitcoin (BTC) surgedabove the US$3,700 level but came off a bit and, at the time ofwriting, BTC is trading at US$3,624.62. Ethereum (ETH) regainedits number two slot at US$121.14 with now third position Ripple(XRP) at US$0.3028 and overall Market Cap up 6.8% since thelast Crypto AM at US$121.4bn.(data source:www.CryptoCompare.com)

So with London Blockchain Week now in full swing, theBinance juggernaut sent its Binance Labs division to host a veryinteresting last minute meet-up panel event to King's CollegeLondon’s Strand Campus at Bush House. The panel discussionfocussed on ‘Growing the Blockchain Ecosystem’ andmoderated by Teck Chia (Partner at Binance Labs) the panel wasmade up of academics, investors and innovators in the space.The general feeling was that despite the noise surrounding the‘Crypto Winter’ that the stronger well managed projects werethriving with less distraction to focus on building out theirprojects. Transaction speeds, privacy and finality were high onthe agenda too. Finality, as described by Josef Hazi, Co-Founderof Zeroline Capital, is the point at which a transaction can nolonger be reversed which clearly is vital with settlements onexchanges.

Following in the footsteps of Malta and Bermuda, Mauritiushas joined the list of island states organising their legislativeframeworks. The Financial Services Commission of Mauritiushas announced that it will start issuing Custodian Services forDigital Assets licences from 1st March 2019 which will be a boonfor the evergrowing Loretta Joseph, who made me aware ofthis, is the Blockchain advisor to the OECD in Paris and hasplayed a key role advising both Bermuda and Mauritius. She hasvery kindly agreed to write a Guest Main Feature in the comingweeks to shed light on this fast paced.

Archax, the forthcoming institutional-grade, digital securitiesexchange based in London, yesterday announced seedinvestment from SPiCE VC, the world’s first fully tokenisedventure capital fund. Speaking to Archax CMO Simon Barnbyearlier, he commented: “There is huge momentum buildingaround the tokenisation of assets and security tokens inparticular. We aim to be at the very centre of this emergingecosystem and this partnership with SPiCE show’s their belief inour strategy, and will help us deliver it.”

uity shares in a portion of the 180-roomAspen St. Regis resort, world renownedfor its skiing in the Rocky Mountains.

MAECENAS - ANDY WARHOL - $1.7MMaecenas, a fine arts tokenization plat-form, pushes the blockchain industry for-ward with the successful execution of thefirst fractional ownership for fine art, withAndy’s 14 Small Electric Chairs (14SEC).

436 & 442 EAST 14TH ST, MANHATTAN - $30MThis luxury Manhattan condo was thefirst to be tokenized on the Ethereumblockchain, in partnership with Fluidityand Propellr, using AirSwap tokenizationtechnology. Investors were given the op-tion to receive either analog or digital in-

An area of crypto and blockchainthat appeared to be niche only 9months ago, is overtaking themainstream. It seems that everycrypto event worldwide has a se-

curity token or asset tokenization panel,as well as a prominent focus on regula-tion. These offerings have gained themost prominence in the U.S. and Switzer-land, with Asian markets slowly catchingup.

SO, WHAT IS A SECURITY TOKEN?A Security Token Offering (STO) may referto the issuance of:£ Smart, Digital or Programmable Se-curities — traditional securities, such as eq-uity, debt, revenue share, convertiblenote, or bond, that rely on distributedledger technology to establish theirterms, features and transferability. Someissuers have renamed this as a Digital Se-curity Offering or ‘DSO’. £Compliant Network Tokens— a utilitytoken or right to receive a utility token foruse in a distributed network in the futurethat constitutes an investment contractunder securities laws at the time of is-suance. These were formerly known asICO’s and are functionally similar, butcomply the securities regulation wherethey are sold. The first type, the focus of this article,

represents programmable ownership oftangible items in the real world, such asreal estate, art or cashflow, is becomingparticularly popular amongst more tra-ditional issuers and investors, allured bythe benefits of blockchain technology.This new innovation on digital assets canprovide an array of financial rights to aninvestor such as equity ownership, divi-dend payouts, profit share rights, votingrights, buy-back rights, or a type of frac-tional ownership.

WHY TOKENIZE?The are several advantages of tokeniza-tion, while the most frequently cited in-clude fractionalization of traditionallyilliquid assets, increased or advanced liq-uidity, decreased issuance fees, greatertransparency and pricing efficiency. Thegreatest allure to issuers, however, is theability to access a global pool of capital,thus making the fundraising process

more efficient. The majority of Security Token deal

flow is taking place across Real Estate, Fi-nance, Consumer Technology and Energysectors.

WHAT YOU NEED TO ISSUE A SECURITY TOKEN IN 2019£A fast and secure protocol: This is thetechnical layer into which your instru-ment is programmed. Some current fi-nance-compatible choices include: Stellar,Cardano, Hashgraph, Tezos and Dusk. £A robust issuance platform: This is theregulatory layer that sits on top of the pro-tocol to insure compliance with local se-curities laws. These platforms are alsoresponsible for checking investor accred-itation, where applicable. Current playersinclude: Securtize, Securrency, TokenSoft,

Sharespost and Polymath. £A seasoned broker-dealer to help youfundraise! Some issuance platforms canalso act as broker dealers. Typically theseare boutique investment banks focusingon digital securities. The choice of firm ishighly dependent on geography.£ A popular fundraising portal: Thesewebsites tend to have a built-in audienceand network of investors. Some popularchoices include CoinList, StartEngine andIndiegogo. £ Find an exchange to trade your secu-rity: Liquidity is one of the paramountvalue propositions of digitizing your of-fering. Secondary platform options arelimited and currently include TZero, Tem-plum and OpenFinance Network.

MOST INTERESTING SECURITY

Designed by Phill Snelling,Bowater Media

In association with

CITY A.M.’SCRYPTO INSIDER

Crypto A.M. shines itsSpotlight on The ‘CraftBeer Coin’ backed bythe price of a pint

@CityAm_CryptoE:CryptoInsider@cityam.com

JAMES BOWATER

PARTNER CONTENT

Our series on AI, Blockchain, Cryptoassets and Tokenisation

‘Asset backed’ tokens are arguably

the future

Having lived through the internetboom and bust - the Dot-Com era - it'snow obvious, to even the meanest in-

telligence, that jobs are now at risk in theCity.It is far clearer now then at the same

point in that revolution that what we arefacing is exactly that: In the rearview mir-ror of history we’ll look back on a revolu-tion more disruptive than anything we'veseen before.Tens of thousands of jobs, more likely

millions, wiped away - many of them inthe City. Some of them replaced. If we be-lieve some pundits then nearly. Others areless sanguine - not without good reason.Pretty much everyone has now heard of

DLT and/or Blockchain Technology. Thefact that far fewer people understand thisand most can’t imagine how it will changethe way the City works is irrelevant to thefact that it will. Likewise Frontier Technologies includ-

ing DLT, AI, Augmented Reality and IoT:Only really used today by specialists andexperts. This will soon change. So will yourcareer, and the opportunities open to youin the future.Despite all the false rhetoric not just

banks but treasuries and finance ministersaround the world are already on this jour-ney. It's simply a matter of time beforemost currencies have, or are, cryptocur-rencies.Fintech has established a foothold - but

that’s all. Fired up with Frontier Technolo-gies footholds are becoming base-campsfrom which to scale the giddy heights. Willthis transform the behemoths for whichmost City workers toil today as Fintechnewcomers are snapped up? Or will theygrow large, disrupt and displace them?Probably a mixture - but it really doesn't

matter! The landscape will change - andnone more than the City skills and em-ployment landscape. A near future very

different not just from the past but fromtoday. New and existing employers de-manding new skills and scarce experience.Along with the challenges this will pro-

vide a raft of new opportunities - for thosewho have made it their business to under-stand the capabilities of these technolo-gies.It will be those who start this journey

early who benefit. Whether they start assceptic or convert. The path trodden byWalmart's vice president of food safety,Frank Yiannas, for example. Initially asceptic after studying it Walmart are nowrolling out blockchain technology totackle problems that have become increas-ingly intractable with scale - together withnine other food retailer giants includingNestle and Unilever, who’ve teamed upwith IBM . How long before IBM hyperledger tech-

nology, or a rival, begins to bring FrontierTechnologies to bear on your organisa-tion? Will you be at the forefront helpinginform the organisation, lead the changeand shape the future? Or will you be look-ing for a glimmer of light?This week at London Blockchain Week

we turn-on a new network, open to theworld, that will help shed a new light. This,together with the new model associationwhich is bbfta.org, will provide clear pathsfor executives and others to get a better un-derstanding of the implications of these‘Frontier Technologies’ which are alreadybeginning to transform the workplace.This is not just for geeks. It's also for those

who need to know because they want tobe the ones helping inform their organi-sations - and shaping the future. Includingand especially their own.

Let us help ensure you have the skills andinsights needed to prosper in this new era.join us at... bbfta.org, or hear more atICOrad.io

Slow but steady,security tokens will

continue to gainprominence

With the recent news thatGerald Cotton of QuadrigaCX,the Canadian crypto

exchange, passed away at the age of30 being the only person there whoknew the private keys to the coldstorage wallet for the exchange, itbrings up some challengingquestions. Starting with: How couldthis happen?

When you consider thatapproximately 250 million Canadiandollars’ worth of crypto, belongingto over 115,000 customers, may nowbe locked in the network andinaccessible forever. (Crypto doesn’tever go away - it is simplyinaccessible without the private key).Why would QuadrigaCX have a

business where there existed a singlepoint of failure? It’s one thing for anexchange to be centralised, andwholly another for a single individualto be the sole person who has fullcontrol over all customer funds. Thisappears to be very poor treasuryplanning and disaster managementon behalf of the exchange. I amuncomfortable giving a dead guy ahard time, it does still leavequestions for the business.

Custody in crypto is a huge issuethat has not been solved as yet.

So what good custody solutionsare available for wallets andexchanges?

There are multi-signature walletsolutions, where a combination of

private keys - such as any 3 of 5 keys- are necessary to access the funds.This is not unlike a multi-signaturebank account. There are other someproviders who provide custodianservices to hold keys securely in amanner that is disaster proof andsecure. And there are solutionsinvolving smart contracts where notonly private keys are required, butcertain real-world situations cantrigger access or deny access tofunds.

The industry has a challenge on it’shands, and there can be nomainstream adoption for cryptountil we get better at handlingcrypto access and custody of privatekeys.

Jon Walsh, Associate Partner at Blockchain Rookies.

DEATH IN CRYPTO

Last Friday Bitcoin woke up the bearsand posted its highest daily positiveperformance (+7.85%) this year.

Friday also saw the highest bitcoinvolume traded on exchanges sinceJanuary 10. Bitcoin is up 6.9% this week,outperforming Ripple (+2.94%), butlagging behind Ethereum (up 17.02%this week +14.41% on Friday). Litecoinstole the show however postingimpressive gains of 40.47% (+30.6% onFriday).

The driver behind the rally appears tohave been the new three-month highreached by the Bitcoin hash rate. Lastweek we explained the significance ofthe hash rate as a measure for thevolume of bitcoin transactions. The ratemeasure for Thursday exceeded 50 THper second, achieving levels that werelast seen in early November 2018,confirming the rate’s recent positivetrend. Could this rate signal the end ofthe bear’s grip on the markets?

The hash rate’s evolution is at least oneless concern for the health of bitcoin, andmore specifically for the integrity of theblockchain. However, if we re looking forpositive signs of bitcoin adoption in theeconomy, payments per transaction andpayments per day are two additionalindicators that are essential.

The number of Bitcoin payments perday has been increasing at a steady pacesince mid-2018 (from 360k to 476k perday +32%), but at a much slower pacethan the number of transactions per day(from 200k to 330k per day +65%). Apartfrom the November drop, there has beenno clear short or medium-term positivecorrelation between the Bitcoinpayments per day and the bitcoin price.

The most likely reason for the pricejump is the low market liquidity. As aconsequence, even the most mundaneevent relayed by the press acts as astrong positive catalyst. Litecoin’s stellarperformance was due to a blog post byBeam on Thursday, revealing discussionswith Litecoin for the implementation ofthe Mimblewimble protocol fortransactional confidentiality. One couldassume that regulators would not beenthused about this new protocol,however according to MimbleWimble,while transactions have stronganonymity guarantees, it maintains theproperties required for a valid blockchain- the transaction does not create money,and proof of ownership is establishedthrough private keys.

It would seem that buyers are now onhigh alert, and ready to challenge thebears.

THE WIREX WEEKLYMARKET VIEW

Frontier Tech Remaking City Jobs

have come and gone.Now, after a lot of hard work, GKB

and DLT.Partners are at the late alphastage of testing a transactional ‘CraftBeer Coin’ that enables fresh localbeer purchase via the coin holders’smart phone, creating a ‘coin’ always

underwritten by at least one fresh pintof craft beer. Everyone understandsthe value and therefore the price of apint, and the craft beer coin currencyis pegged to that psychological reality.This real world, practical application

that leverages modern cryptocurrency

2019:THE YEAR OFTHE SECURITY

TOKEN