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Technology Stocks
An SI Board Since December 2014
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Emcee:  Glenn Petersen Type:  Moderated
Fintech is new and innovative financial technology applications that are competing with traditional methods and incumbent institutions for the delivery of financial services. Financial services has long been seen as one of the business sectors most vulnerable to disruption by software because, like publishing, financial services are made up of information rather than concrete goods. In particular, mobile services and blockchains have the potential to significantly disrupt the incumbents and reduce costs for consumers. While financial institutions have historically been shielded by a wall of regulation, and managed to weather the dot-com boom without major upheaval, a new wave of startups are actively “disaggregating” global banks.

Fintech eliminates middlemen. Financial products and services that have historically been the realm of entrenched legacy institutions are migrating to mobile devices and software platforms, which allow customers to execute transactions effortlessly and on a peer-to-peer basis. Fintech startups raised $17.4 billion in funding in 2016 and are on track to exceed that amount in 2016.

The most dramatic developments in this space have been the introduction of cryptocurrencies and initial coin offerings (ICOs). The first cryptocurrency, Bitcoin, was conceptualized in 2008 by an anonymous person or group known as Satoshi Nakamota and implemented in 2009. In his white paper on Bitcoin, Mr. Nakatoma also conceptualized blockchain, which serves as the core component for the technology underlying most cryptocurrency transactions.

Since its introduction, Bitcoin has increased in value from less than a penny to a recent high of over $20,000, spawning the introduction of hundreds of other cryptocurrencies.

Arguably, the cryptocurrency market, and Bitcoin specifically, has evolved in a direction that runs counter to Mr. Nakatoma’s original intent. Mr. Nakatoma’s paper, spawned by the economic crisis of 2008 stated that, “I’ve been working on a new electronic cash system that’s fully peer-to-peer with no trusted third party.” In other words, Bitcoin was supposed to be a way for individuals to pay for products and services while circumventing the existing financial establishment and middlemen. Unfortunately, that vision never materialized in any significant way and the currency has become a speculative commodity that has attracted the inevitable middlemen (Coinbase etc.).

When the current fervor corrects, and it will, many, if not most, of the current cryptocurrencies will be washed away. Hopefully, some will survive and thrive, as did many of the Internet companies after the burst of the Bubble. I am a firm believer in the value of cryptocurrencies, free of governmental and institutional control, as a medium of exchange. It will be interesting to see if our governmental authorities allow this to happen on a long-term basis. Personally, I am pessimistic.

The initial coin offerings (ICOs) are very interesting. They are essentially a crowdfunding mechanism for startups and other businesses to raise funds without giving up an ownership interest. The “coins,” which are more accurately referred to as “tokens,” generally give their owners the right to future services and products. As with the cryptocurrencies, there is an aftermarket that trades the tokens. Quality-wise, the tokens are a mixed bag. Some are funding legitimate projects; some will crash and burn; and others are outright scams.

The fact that the ICOs are not offering ownership stakes is important. According to the SEC, if the companies selling tokens offered ownership stakes they would have to comply with securities laws. There have been hundreds of ICOs this year, which have raised over $4 billion.

Initial coin offerings are crowdfunding campaigns on steroids.
My quote. Feel free to use it, with attribution, of course.

SI already has a board that does a good job discussing cryptocurrency trading on a daily basis. I envision using this board to discuss cryptocurrency issues in a more general fashion and to drill down on specific investment opportunities in the fintech and ICO arenas.

This board was originally created to discuss LendingClub Corp., the first peer-to-peer lender to complete an initial public offering.

External resources

Cryptocurrency market caps:

Initial coin offerings (ICOs) market caps:

Satoshi Nakamoto whitepaper (Bitcoin: A Peer-to-Peer Electronic Cash System):

Related SI boards

Bitcoin: Subject 59173

GBTC: Bitcoin Investment Trust (not an ETF): Subject 59732

IOTA (which does not use a traditional blockchain technology): Subject 59917

Blockchain: Subject 59919

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153A major fintech IPO: Max Levchin’s Affirm pops nearly 100% after market debut Glenn Petersen-last Wednesday
152Walmart launches fintech startup to build digital financial products for customeGlenn Petersen-January 11
151Affirm Holdings Affirm Holdings Inc. is postponing its initial public offering,Sr K112/12/2020
150Lagarde Says Her ‘Hunch’ Is That ECB Will Adopt Digital Currency Alexander WebeGlenn Petersen-11/21/2020
149Chinese fintech giant Lufax plans international push as $2.36 billion U.S. IPO gGlenn Petersen-11/2/2020
148Lufax Proposes Terms For $2.2 Billion U.S. IPO Summary * Lufax has filed to rJulius Wong-11/2/2020
147Helps that they're like a closed ecosystem... it's like we're handicFollowing-Mr.Pink-10/27/2020
146Yes digital currencies are inevitable and China certainly has a good head start Glenn Petersen-10/25/2020
145state-backed digital currencies just seems like such a natural event. but I'Following-Mr.Pink-10/24/2020
144Central Bank of Bahamas Launches Landmark ‘Sand Dollar’ Digital Currency CoinDeGlenn Petersen-10/22/2020
143Bitcoin continues surge as PayPal launches crypto service in run at Square InJulius Wong210/21/2020
142A 32-Year-Old Trader Is Driving 21,000 Amateur Stock Investors EToro has gainedGlenn Petersen-10/18/2020
141China hands out $1.5 million of its digital currency in one of the country’s bigGlenn Petersen-10/12/2020
140Seven central banks and BIS publish report on digital currency, detailing how itGlenn Petersen-10/11/2020
139h/t Julius Wong The Pandemic Plutocrats: How Covid Is Creating New Fintech BillGlenn Petersen19/27/2020
138Chime is now worth $14.5 billion, surging past Robinhood as the most valuable U.Glenn Petersen-9/18/2020
137Disruptors PayPal and Square surpass Wall Street giants including Goldman Sachs Glenn Petersen-9/4/2020
136Start-up co-founded by ex-Goldman trader is first fintech to complete takeover oGlenn Petersen-9/3/2020
135Robinhood snags third mega-investment of the year, boosting valuation to $11.2 bGlenn Petersen-8/17/2020
134Square surges after reporting 64% jump in revenue, more customers using Cash AppGlenn Petersen28/5/2020
133WSJ 10:44 AM Jack Ma’s Ant Group Plans Dual IPOs in Shanghai, Hong Kong, BypasSr K-7/20/2020
132Fintech disruptor SoFi wants to become a national bank — again Published Thu, JGlenn Petersen17/9/2020
131From WSJ WDI -71% 6/25 1:11 PM <b>Wirecard Files for Insolvency After RSr K-6/25/2020
1306/18/2020 8:01 AM Ant Financial Services Group’s flagship money-markeSr K-6/18/2020
129How Kabbage saved its small business lending operation in the middle of the pandGlenn Petersen-6/17/2020
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