Paul Levy, University of Brighton

The Bank of England believes that cryptocurrencies like Bitcoin could be big news and even UK chancellor George Osborne is tweeting about it. But it is important to note the detail in the central bank’s comments. It is talking about forming its own digital currencies in a trend which could yet see Bitcoin take a back seat in the future it helped to create.

At a recent meeting of the Social Media Leadership Forum in London on the theme of Bitcoin and cryptocurrencies, we watched a short film that portrays Bitcoin as a kind of moral alternative to traditional banks. Not only is Bitcoin the new, cool choice of Generation Z, but it is also a way to render third party profiteering from financial transactions irrelevant. Bitcoin is the answer! Bitcoin is the future. Bitcoin is the best way of transferring value digitally without a third party. No pal needed to pay …

There was a straw poll in the audience. Who, of these leaders of (mostly) large corporations in the UK, had any direct experience of Bitcoin? Three hands went up – and they belonged to three young terrier-like Bitcoin entrepreneurs who chatted freely and articulately about their wares and painted the Bitcoin story as a huge, unstoppable business opportunity.

Two contrasting views emerged at that meeting. One is of Bitcoin as a kind of moral revolution, setting us free from corporate greed, interference and snooping. The other is a more prosaic view, of Bitcoin as a new means of making money in a leaner and smarter way. (There is also a subsidiary view of course: of a below-the-radar gambling den, a shadow money-changing table for the Dark Web)

Morality play

The unscientific poll in that meeting room would appear to support findings elsewhere. One online survey found that only 8% of US retailers were planning to accept Bitcoin within the next 12 months. None was currently accepting Bitcoin. Another survey found 65% of people polled were not at all familiar with Bitcoin. Of those that were even slightly familiar, 80% had never used it before.

There has been a significant decline in the value of bitcoins, and questions have been raised about whether 2015 is Bitcoin’s make or break year. Whatever the prophets of doom say, there remain bullish young entrepreneurs, buoyed by the recent announcement that Dell will be the first major retailer to accept Bitcoin, as well as a survey that suggests lower income populations may well embrace it.

First draft of something greater?

The Bank of England is understandably circumspect about the feasibility and advantages of creating its own digital currency, but the simple fact of the discussion adds to the feeling that Bitcoin may be the “first draft” of something with broader application. Digital value doesn’t only have to mean money and the popular view of Bitcoin might just emphasise the “coin” a little too much.

At the meeting in London much discussion centred around the “blockchain”. This public ledger of all Bitcoin transactions effectively creates continuity for Bitcoin users, a context in which the currency can exist.

According to technology writer Nozomi Hayase:

When I say Bitcoin, I am talking about the underlying technology of the blockchain (which is much more than currency), along with its decentralized network, and also blockchain-based cryptocurrencies in general. Bitcoin might not be the final currency that ends up bringing us into a decentralized future, but it has opened the door.

Beyond Bitcoin

So, let’s say that Bitcoin is a good example of decentralisation and people power, but it is only a first example, and we will move on to using and innovating the underlying technology. It is no longer about cryptocurrencies really but about the potential of third party-free transfer. That can involve entirely different cultural interactions than just seeing value as meaning money. For example, we could see voting and collective decison-making without the use of third-party control. The future can involve all kinds of creative exchange between human (and even digital) beings that are direct, private when wanted, and totally in the hands of sender and receiver.

[youtube https://www.youtube.com/watch?v=KPx5icIAklQ?wmode=transparent&start=0]

You might enact your will without lawyers. You might even ensure your driverless car isn’t mediated by Google but is just a direct relationship between you and the vehicle’s operating system. We will transfer all kinds of digital value and assets without third party control. Our artistic creations: our music, our digital art. With the advent of drones, even physical things.

One of the issues that Bitcoin has is its split personality. It is touted as a place of personal empowerment and direct, honest transacting that is private and yet also potentially seedy and criminal. It is billed as a moral reaction to greedy banks that, at the same time, offers ways to gamble in a money market not dissimilar in terms of underpinning ethics. It suggests freedom from governance even as that very lack of governance may throw up all kinds of social problems.

That puts our choice of future at a crossroads. For, even as we cut a direct channel from sender to receiver, between sharers of different kinds of meaning and value, we also potentially cut out the moral force that third parties have usefully played. Most users of Bitcoin are shocked to discover that if they are scammed into sending Bitcoins to a fake web site, their money is gone for good, with no way of getting it back.

Currently, there’s redress in the realm of conventional banking. If insurers spring up in the Bitcoin arena with hundred dollar excesses, aren’t we heading back into the realm of third party involvement again anyway? And if central banks start issuing their own digital currencies?

Bitcoin in 2020

Yet the opportunity is there to take Bitcoin away from a collusion of mediocrity around money metaphors and evolve into genuinely new and exciting ways to allow the sharing of value in ways that empower individuals, regardless of income. As Hayase, also points out: “Bitcoin makes possible open source governance. The power to decide the course of one’s own destiny is now in the hands of ordinary people.”

That huge claim implies the way crypto-value exchange is viewed and deployed is going to change significantly. Without third party governance, we will have to build ethical awareness and behaviour into new versions of the platform, and also research and educate ourselves in the new moral challenges and risks associated with it.

The technology promises much, but the whole thing may end up parked in wiring cash and simply buying and selling more stuff online. Yet it could be so much more. Blockchain technology could underpin the internet of things, safeguarding our privacy, reducing cost, and ensuring the next wave of change in the digital realm puts real control in the hands of people, not corporations. Whether it does will depend not on enthusiastic Bitcoin entrepreneurs, or opportunistic corporations like Dell, but on the users. You and me. And maybe the odd central bank.

Paul Levy, Senior Researcher in Innovation Management, University of Brighton

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Jeremy Eng-Tuck Cheah, Nottingham Trent University

One area in cryptocurrencies attracting huge attention is DeFi or decentralised finance. This refers to financial services using smart contracts, which are automated enforceable agreements that don’t need intermediaries like a bank or lawyer and use online blockchain technology instead.

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Between September 2017 and the time of writing, the total value locked up in DeFi contracts has exploded from US$2.1 million to US$6.9 billion (£1.6 million to £5.3 billion). Since the beginning of August alone it has risen by US$2.9 billion.

This has driven a massive rise in the value (market capitalisation) of all the tradeable tokens that are used for DeFi smart contracts. It is now around US$15 billion, almost double the beginning of the month. Numerous tokens have risen in value by three or four times in a year – and some considerably more. For example, Synthetix Network Token has increased more than 20-fold, and Aave almost 200-fold. So if you had bought £1,000 of Aave tokens in August 2019, they would now be worth nearly £200,000.

Maximum disruption

DeFi, most of it built on the ethereum blockchain network, is the next step in the revolution in disruptive financial technology that began 11 years ago with bitcoin. One area in which in which these decentralised applications (dApps) have taken off is cryptocurrency trading on decentralised exchanges (dexs) such as Uniswap. These are entirely peer-to-peer, without any company or other institution providing the platform.

Other DeFi services now in use allow you to:

• Borrow and lend cryptocurrencies to earn interest using platforms such as Compound or Aave.
• Bet on the outcome of events using Augur.
• Create and exchange derivatives of real-world assets such as currencies or precious metals on Synthetix.
• Take part in a no-loss lottery on PoolTogether, where everyone gets their money back and one lucky participant wins all the interest that has accrued in a shared pot.
• Buy cryptocurrencies known as stablecoins, which are pegged to the value of a particularly currency or commodity. For example, DAI and USDC are both pegged to the US dollar.

DeFi is sometimes known as “Lego money” because you can stack dApps together to maximise your returns. For example, you could buy a stablecoin such as DAI and then lend it on Compound to earn interest, all using your smartphone.

Though many of today’s dApps are niche, future applications could have a big impact on day-to-day life. For example, you will probably be able to purchase a piece of land or house on a DeFi platform under a mortgage agreement whereby you repay the price over a period of years.

The deeds would be put up in tokenised form on a blockchain ledger as collateral and, in the event that you defaulted on your repayments, the deeds would automatically shift to the lender. Because no lawyers or banks would be required, it could make the whole process of buying and selling houses cheaper.

Why the craze?

First, regulators have been behind the curve, and DeFi has been able to flourish in this vacuum. For instance, in traditional unsecured lending, there is a legal requirement that lenders and borrowers know one another’s identities and that the lender assesses the borrower’s ability to repay the debt. In DeFi, there are no such requirements. Instead, everything is about mutual trust and preserving privacy.

Regulators are having to weigh the delicate balance between stifling innovation and failing to protect society from such risks as individuals putting their money into an unregulated space, or banks and other financial institutions potentially being unable to make a living as intermediaries. But it seems more sensible to embrace change – and that seems to be happening. In July, the US Securities and Exchange Commission (SEC) made a major shift towards embracing DeFi by approving an ethereum-based fund, Arca, for the first time.

This is welcome and important, since one of the major challenges towards financial innovation is the hostile environment created by archaic regulations written for a bygone era. This has caused some DeFi projects to fail – including major ones such as New-Jersey-based Basis, which returned US$133 million to investors in 2018 when it concluded it couldn’t work within the SEC rules.

A second reason for the DeFi surge is that mainstream players are getting involved. Many high-street financial institutions are beginning to accept DeFi, and seeking ways to participate. For example, 75 of the world’s biggest banks are trialling blockchain technology to speed up payments as part of the Interbank Information Network, spearheaded by JP Morgan, ANZ and Royal Bank of Canada.

Major asset management funds are starting to take DeFi seriously as well. Most prominent is Grayscale, the world’s largest crypto investment fund. In the first half of 2020, it was managing over US$5.2 billion of crypto assets, including US$4.4 billion of bitcoin.

Third is the effect of COVID-19. The pandemic has driven global interest rates even lower. Some jurisdictions, such as the eurozone, are now in negative territory and others such as the US and UK could potentially follow.

In this climate, DeFi potentially offers much higher returns to savers than high-street institutions: Compound, for example, has been offering an annualised interest rate of 6.75% for those who save with stablecoin Tether. Not only do you get interest, you also receive Comp tokens, which is an added attraction. With two-thirds of people without bank accounts in possession of a smartphone, DeFi also has the potential to open up finance to them.

One final important reason for the surge in people putting money into DeFi tokens is to avoid being left out of their explosive growth. Many tokens are worth nothing or close to nothing in practical terms, so we are seeing a lot of irrational exuberance.

But like it or not, we are heading towards a new financial system that is more liberalised and decentralised than before. The central question is how best to guide its development with checks and balances that minimise the risks and spread the potential benefits as widely as possible. That is the challenge for the next few years.

Jeremy Eng-Tuck Cheah, Associate Professor of Cryptofinance and Digital Investment, Nottingham Trent University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

We’ve Never Seen Anything Like This Before! Pandora’s Box and the Next Monetary System by David Quintieri Inflation is everywhere today! Real estate continues to increase in price right now as we see low interest rates keep this going. There is upward pressure on markets right now globally because of the inflation of the money […]

We’ve Never Seen Anything Like This Before! Pandora’s Box and the Next Monetary System

Posted August 3, 2021 by Nick Maggiulli

Recently a friend asked me:

What keeps you up at night financially? What is your version of an investing nightmare?

Fortunately, I don’t have anything that keeps me up at night (I tend to be an optimist), but if I had to describe my investing nightmare, it wouldn’t be something we haven’t seen in recent decades. In fact, I’d argue we haven’t seen it within the last 100 years of U.S. market history.

Yes, the Great Depression is about as bad as it gets, but even that would have been over in the span of three years. A hellish three years for sure, but three years can go by quicker than you think.

My investment nightmare doesn’t involve a 50% decline or a lost decade like the one we had in the U.S. from 2000-2009 either. It’s far worse than that. Because even the Lost Decade for U.S. stocks wasn’t that bad when you consider the path markets took over that time period. Let’s review.

Some Bad Decades

The chart below shows the change in U.S. stock prices over the decade from March 1999 to February 2009 (aka The Lost Decade):

Yes, prices declined by nearly 50% from 2000-2003, but that was after one of the biggest price runs in U.S. market history (the DotCom bubble). So was anyone actually shocked when this happened? I would hope not, because it was obvious that a bubble had emerged, but no one knew when it would pop.

Some would say that the same thing is happening today. And they may be right. So if we experience a 30-40% decline in the next few years, will I be shocked? Of course not. Similarly, if the market ripped upward for the next few years would I be shocked? Not at all. This is the nature of markets.

Anyways, back to the chart. After the decline into 2003, what happened next? A massive rally that sent prices above their 1999 highs. So yes, the 50% decline from the bubble sucked, but then you got a rally that got you back to new all time highs within a few years. Think about the level of hope and optimism that this inspired among U.S. investors.

Following that optimism came the Great Financial Crisis and another 50% crash. This wasn’t easy to experience under any circumstance, but considering the rally before, the cumulative pain for investors during this decade was limited to 4 of the 10 years. That’s bad, but I’ve seen worse.

Compare this to the Italian stock market after the Great Financial Crisis. If you look at what happened there, you will see a big decline over a year then basically flat (just oscillations) for the next seven years:

I would argue that an investor would feel objectively worse investing through this decade than through the Lost Decade in the U.S. Having seven years of a flat market would start to weigh on you by the end.

Don’t get me wrong though, being an investor in either of these markets would have been a struggle, but my investment nightmare is a bit worse than both of these.

Going Up the Downstair (My Investing Nightmare)

If I had to pick a market to represent my investment nightmare, I would pick Spain from 1973-1983. For the uninitiated, from the mid 1970s to early 1980s Spain experienced high inflation, high unemployment, and sluggish growth that destroyed their capital markets over the course of a decade. And, as the chart below shows, it was a slow ride down for those 10 years:

In my opinion, this is worse than anything that U.S. investors have ever experienced. While the Great Depression was objectively more damaging to capital markets, it happened over a much shorter time period. I cannot imagine seeing stocks decline consistently for four years only to be followed by a weak four year rally, then two more years of declines.

The cumulative pain experienced by investors in this market is unheard of in U.S. market history. This is why it’s my investing nightmare. The slow grind downward. The loss of hope. The questioning of my profession. I can’t even imagine it.

But as bad as that is, there is one market that is much, much worse. It’s so bad that I can’t even consider it as an actual possibility for the future of U.S. or global equities. I’m talking about Greek stocks after 2008, which saw a decline greater than 95% in less than a decade. This chart should be titled “Abandon all hope ye who enter here”:

After seeing this, Spain from 1973-1983 seems like a cakewalk. This is why I can’t even consider this a real possibility for U.S. (or global) markets. Why? Because a 97% decline in U.S. (or global) stocks would imply some sort of end of civilization like event.

If we end up in such a scenario, the only investments that you will actually need are guns and canned goods. As grim as this sounds, fortunately, there are ways to avoid even the worst investment nightmares.

How to Avoid an Investing Nightmare

Though bad markets (and bad decades) will always be out of your control, the one way you can counteract these investing nightmares is to limit your exposure to each of these markets. As bad as Spain was in 1973-1983 or Greece was from 2008-2018, any rational investor should have been diversified across multiple equity markets.

More importantly, they should have been diversified beyond equities as well. The only way to avoid an investing nightmare is to prevent yourself from falling into one in the first place. Limit your exposure to individual markets just like you would limit your exposure to individual stocks. Of course, when markets crash they tend to crash together, but worldwide crashes in equities are exceedingly rare.

Yes, these events will occur now and again (and they will suck when they do). However, you can prepare for these eventual crises by owning income-producing assets that are less correlated with traditional financial markets along with some non-income producing assets as well.

This is how I sleep at night despite the investing horrors that the future surely holds.

Until then…thank you for reading!

Source: https://ofdollarsanddata.com/my-investing-nightmare loaded 06.08.2021

David Glance, The University of Western Australia

Bitcoin was dubbed the worst investment of 2014. As predicted however, 2015 has seen the continued fall in value of the currency that was supposed to fuel the digital age. In the last 10 days alone, it has lost 26% in value.

If 2014 was a bad year for the digital currency, 2015 looks like it will be even worse. Barely days into the year, UK-based Bitcoin exchange Bitstamp was “hacked” and 19,000 Bitcoin stolen. At the time, this loss was valued at US $5 million. Bitstamp has since come back online, with revamped security from BitGo. It may however, all be a bit too late.

Hacks of Bitcoin exchanges have come to characterise the Bitcoin world. It isn’t something that is necessarily inherent in Bitcoin itself, but more of a feature of the types of companies that have sprung up around the troubled technology. At best, the hack of one-time leading Bitcoin exchange Mt Gox, was a result of sloppy coding and business practices. At worst, it was an inside job, defrauding its customers of $487 million.

A more ominous problem has cast its shadow on the future of Bitcoin. Bitcoin relies on people to engage in “mining” to validate every exchange of the virtual currency. Miners, do some agreed calculations, and if they are fast, or lucky, enough, will succeed in winning some newly produced Bitcoin in exchange for adding the transaction onto the Bitcoin ledger called the Blockchain.

The strategy of mining has become Bitcoin’s achilles’ heel. The design of Bitcoin dictates that the difficulty of mining will increase as more Bitcoins are produced and more miners get involved. This has led to mining being dominated by companies that can scale to the point where they can guarantee to earn a certain percentage of Bitcoins created each day. As Bitcoin’s value has dropped, the economics of the mining operation have changed, to the point that mining ceases to be economically viable.

Cloud mining company CEX.io suspended their mining operations this week, declaring that it needed the price of Bitcoin to be at least $320 before it would be able to resume its operations. Unfortunately for them, the price has dropped even further since and the likelihood of it climbing back to $320 seems slim.

Another mining company, CoinTerra, is being sued by a data centre provider for $5.4 million for unpaid fees. The cost of power alone to run CoinTerra’s services was $12,000 a day.

The underlying protocol of Bitcoin does allow for the relative difficulty of mining to be eased if it becomes to hard for miners to stay in operation. In fact, this happened last month for the first time since 2012. It could theoretically continue to become easier as the Bitcoin price drops. The issue is however, that this wasn’t supposed to happen. Bitcoin’s price was supposed to keep increasing as more Bitcoins came onto the market.

Bitcoins value relies purely on the belief of the people who buy and sell it. There is no central bank or government around to support it in the case of its value crashing to zero. Once that belief is questioned, Bitcoin becomes unsustainable. Even if the price of Bitcoin doesn’t go to zero, the chances the Bitcoin community convincing the wider public, governments, and industry that Bitcoin really represents the future of the world’s digital economy will become extremely unlikely.

For the time being, Bitcoin still has enough devotees who believe that the currency will eventually recover and still claim the crown as the future enabler of all digital commerce. However, even they are having their doubts that this grand technological experiment may have run its course.

David Glance, Director of UWA Centre for Software Practice, The University of Western Australia

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Kevin Werbach, University of Pennsylvania

Fervent proponents of cryptocurrencies and the blockchains they run on have promised a lot.

To them, these technologies represent salvation from corporate power over the internet, government intrusions on liberty, poverty and virtually everything else that ails society.

But so far, the reality has mostly involved financial speculation with popular cryptocurrencies like bitcoin and dogecoin, which soar and plunge with alarming regularity.

So what are cryptocurrencies and blockchain good for?

As an expert on emerging technologies, I believe that decentralized finance, known as DeFi, is the first solid answer to that question. DeFi refers to financial services that operate entirely on blockchain networks, rather than through intermediaries like banks.

But DeFi comes with a host of risks as well that developers and regulators will need to address before it can go mainstream.

What is DeFi?

Traditionally, if you want to borrow US$10,000, you first need some assets or money already in the bank as collateral.

A bank employee reviews your finances, and the lender sets an interest rate for the repayment of your loan. The bank gives you the money out of its pool of deposits, collects your interest payments and can seize your collateral if you fail to repay.

Everything depends on the bank: It sits in the middle of the process and controls your money.

The same is true of stock trading, asset management, insurance and basically every form of financial services today. Even when a financial technology app such as Chime, Affirm or Robinhood automates the process, banks still occupy the same intermediary role. That raises the cost of credit and limits borrower flexibility.

DeFi turns this arrangement on its head by re-conceiving of financial services as decentralized software applications that operate without ever taking custody of user funds.

Want a loan? You can get one instantly by simply putting cryptocurrency up as collateral. This creates a “smart contract” that finds your money from other people who made a pool of funds available on the blockchain. No bank loan officer necessary.

Everything runs on so-called stablecoins, which are currencylike tokens typically pegged to the U.S. dollar to avoid the volatility of bitcoin and other cryptocurrencies. And transactions settle automatically on a blockchain – essentially a digital ledger of transactions that is distributed across a network of computers – rather than through a bank or other middleman taking a cut.

The rewards

Transactions made this way can be more efficient, flexible, secure and automated than in traditional finance.

Moreover, DeFi eliminates the distinction between ordinary customers and wealthy individuals or institutions, who have access to many more financial products. Anyone can join a DeFi loan pool and lend money to others. The risk is greater than with a bond fund or certificate of deposit, but so are the potential returns.

And that’s just the beginning. Because DeFi services run on open-source software code, they can be combined and modified in almost endless ways. For example, they can automatically switch your funds among different collateral pools based on which currently offers the best returns for your investment profile. As a result, the rapid innovation seen in e-commerce and social media could become the norm in traditionally staid financial services.

These benefits help explain why DeFi growth has been meteoric. At the recent market peak in May 2021, over $80 billion worth of cryptocurrencies were locked in DeFi contracts, up from less than $1 billion a year earlier. The total value of the market was $69 billion as of Aug. 3, 2021.

That’s just a drop in the bucket of the $20 trillion global financial sector, which suggests there is plenty of room for more growth.

At the moment, users are mostly experienced cryptocurrency traders, not yet the novice investors who have flocked to platforms like Robinhood. Even among cryptocurrency holders, just 1% have tried DeFi.

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The risks

While I believe the potential of DeFi is exciting, there are also serious causes for concern.

Blockchains can’t eliminate the risks inherent in investing, which are the necessary corollary of the potential for returns. In this case, DeFi can magnify the already high volatility of cryptocurrencies. Many DeFi services facilitate leverage, in which investors essentially borrow money to magnify their gains but face greater risk of losses.

Moreover, there isn’t any banker or regulator who can send back funds transferred in error. Nor is there necessarily someone to repay investors when hackers find a vulnerability in the smart contracts or other aspects of a DeFi service. Almost $300 million has been stolen in the past two years. The primary protection against unexpected losses is the warning “investor beware,” which has never proved sufficient in finance.

Some DeFi services appear to violate regulatory obligations in the United States and other jurisdictions, such as not barring transactions by terrorists, or allowing any member of the general public to invest in restricted assets like derivatives. It’s not even clear how some of those requirements even could be enforced in DeFi without traditional intermediaries.

Even highly mature, highly regulated traditional financial markets experience shocks and crashes because of hidden risks, as the world saw in 2008 when the global economy nearly melted down because of one obscure corner of Wall Street. DeFi makes it easier than ever to create hidden interconnections that have the potential to blow up spectacularly.

Regulators in the U.S. and elsewhere are increasingly talking about ways to rein in these risks. For example, they are starting to push DeFi services to comply with anti-money laundering requirements and considering regulations governing stablecoins.

But so far they have only begun to scratch the surface of what may be required.

From travel agents to car salespeople, the internet has repeatedly undermined the bottleneck power of intermediaries. DeFi is another example of how software based on open standards can potentially change the game in a dramatic way. However, developers and regulators will both need to up their own performance to realize the potential of this new financial ecosystem.

Kevin Werbach, Professor of Legal Studies and Business Ethics, University of Pennsylvania

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Paul Levy, University of Brighton

Most people who have heard the term think that the “blockchain” is only something to do with cryptocurrencies such as bitcoin, litecoin, doguecoin and others. It’s the technology that underpins digital currencies and ensures that all transactions are properly conducted and recorded. But what is stored on the blockchain need not be just a currency unit – it can be put to all manner of other interesting uses.

The blockchain is defined as “a system that’s secure without a higher authority, distributed across many strangers’ computers, yet tamper-proof, and promises a mechanism for trust mediated directly between individuals”. Essentially, by providing a distributed means to guarantee and verify transactions, the blockchain offers the ultimate opportunity to cut out the middleman.

A key aspect is the programmable smart contract: code stored on the blockchain that automatically executes when certain conditions have been met. In uses that involve a financial transaction, it makes sense to use bitcoin or some other digital currency for the same reason – by doing so, transactions can be automated and guaranteed without recourse to third parties, such as a bank.

Not all uses involve payments. For example, Kim Jackson and Zach LeBeau were married on the blockchain in November. Is a blockchain marriage legally binding? Well, some parts of it would fall within contract law, but it’s a first symbolic step.

Many major companies are looking to the blockchain as a way to simplify and strengthen supply chains, where the blockchain could record each step a product has taken. For example, it could be used to guarantee the origin of foods.

In other cases, the blockchain can be used for peer-to-peer exchange or sale. Imagine you have an electric car. When your charger is unused, you can rent it out to other car owners, paid in bitcoins via a blockchain smart contract.

Another use is automated security, using code embedded on the blockchain to trigger granting or denying access depending on the requester. This way security is assured, as no third parties are involve and no one holds the “keys”: the lock has become one with the key, and assurance lies in the distributed trust of a shared, anonymous network.

One firm supplying this is Slock. The owner can set a deposit amount and a price for renting a property, which the user pays through a blockchain transaction (not even Slock is a middleman), which permits the user to open and close the smart lock through their smartphone. It’s a lock activated by money, without any need for third-party authority. And it’s not just start-ups such as Slock that are taking notice – bigger players, including IBM, are onto it too.

Decentralising everything

A radically different application comes from Bitnation, a project aimed at using blockchain to decentralise governance. Bitnation is offering victims of the refugee crisis an emergency digital ID and bitcoin-based credit card which can be used to receive funds from family members or friends without bank accounts.

With this it is possible for an individual to prove their existence and identity through family relations cryptographically, recorded on the blockchain like a distributed public ledger. This acts as a sort of international notary public. Bitnation works by generating a QR code – a barcode – which can be used with a cellphone to apply for a bitcoin credit card which can be used throughout Europe and the UK without a bank account.

Blockchain automation

Australian software firm Edgelogic offers a glimpse of how blockchain technology could be used at home, a bridge between digital payments and the Internet of Things. For example, a sensor could report to the blockchain when it detects damp, an alert which triggers a set of instructions that transfers cash for repairs from an insurer to a claimant’s account, even before the person knows anything is wrong.

A digital crypto-currency has just launched that is generated by human movement. Bitwalking dollars can be earned simply by walking, unlike other digital currencies such as bitcoins that require “mining” though using computers to solve cryptographic problems. With Bitwalking, a phone app counts and verifies users’ steps and walkers earning approximately BW$1 for every 10,000 steps (about five miles). These can be spent in an online store, or traded for cash.

While some ideas may seem like solutions looking for a problem, others are more closely tied to real needs. They redefine what use the blockchain could be put to – eliminating the need for banks, or even for aspects of government. It’s clear that the blockchain has expanded beyond bitcoin and cryptocurrencies – but as with all disruptive technologies, in which direction it will be taken remains to be seen.

Paul Levy, Senior Researcher in Innovation Management, University of Brighton

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Mark Klempner, University of Massachusetts Medical School

Lyme disease has become an insidious epidemic in the United States. Caused by bacteria transmitted through the bite of an infected tick, it can lead to heart problems, meningitis or arthritis if left untreated. It is the most common tick-borne illness in the United States, and the Centers for Disease Control and Prevention estimates that around 475,000 people likely contract the disease each year.

Scientists, doctors and ecologists have worked for decades to slow the spread of Lyme and the blacklegged, or deer, ticks that carry the disease-causing bacteria. However, the ticks’ range continues to expand. Today, over 50% of the American population lives in an area where these ticks are found.

The U.S. Food and Drug Administration approved a vaccine against Lyme in 1998, but it was met by controversy and was pulled from the market three years later. Efforts continue today to create a human vaccine as well as to stop the spread of Lyme by other means, including using gene editing to immunize mice that can transmit the bacteria to ticks, killing deer and using pesticides to control ticks.

My colleagues and I have been working on a different kind of prevention: a yearly injection. I am an infectious diseases physician-scientist and have been studying and working toward preventing Lyme disease for much of my career. Our recent work on preventing Lyme disease has been conducted at University of Massachusetts Medical School’s MassBiologics, the only nonprofit, FDA-licensed manufacturer of vaccines and biologics in the United States.

Our method, known as Lyme PrEP, delivers a single anti-Lyme antibody directly to a person rather than triggering the patient’s own immune system to make many antibodies, as vaccines do. It is designed to be a seasonal shot that people can get once a year before tick season begins in April. We have published several peer-reviewed articles on this method, including on its success in mice and nonhuman primates.

In February 2021, we received approval from the FDA to proceed with the first human clinical trial of Lyme PrEP, and all of the volunteers in this trial have been enrolled and received the shot. Our goal for this study, also known as the phase 1 clinical trial, is to test the safety of the new medicine and determine how long it might stay in the bloodstream and prevent Lyme disease.

The preliminary results from the trial are very encouraging: They show that Lyme PrEP is safe and should be effective during the entire nine-month season when most people acquire Lyme disease.

A vaccine’s cautionary tale

In 1998, the FDA approved a Lyme vaccine composed of protein antigens from the surface of the Lyme bacteria, Borrelia burgdorferi.

A vaccine works by introducing proteins from the disease-causing agent into the body to trigger the body’s immune response, which includes making antibodies against bacterial proteins. Antibodies have been used to prevent and treat infectious diseases for over a century. In the case of the Lyme vaccine, it can take many months for the body to build up the necessary level of immunity to prevent infection. It also means that some of the antibodies induced by the vaccine can have “off-target” effects, or side effects.

The Lyme vaccine, known as LYMErix, largely reduced infections but was withdrawn from the market after three years because of limitations and controversy.

LYMErix needed to be administered by multiple injections over a year before immunity developed. Uncertainty about the length of immunity from the vaccine also raised questions of whether a booster shot would be regularly needed. Further, publicity about side effects such as arthritis, reported by some who had been vaccinated, contributed to its decline in popularity.

Today, a French biotech company, in collaboration with Pfizer, is attempting to develop a Lyme vaccine; it is currently in clinical trials.

A different approach

Unlike a vaccine, Lyme PrEP uses a single human antibody, or blood protein, to kill the bacteria in the tick’s gut while the tick drinks its victim’s blood, before the bacteria can get into the human host.

Through our research, we realized that just one of the antibodies that the human body developed after multiple injections of the LYMErix vaccine was sufficient to prevent infection. So we identified which antibody led to immunity and tested it in animals, where it proved 100% effective.

These animal studies show Lyme PrEP gives protection immediately upon injection as it circulates through the blood. Unlike a vaccine, which induces many antibodies that may not contribute to protection but can cause side effects, this approach uses a single, defined antibody, thus reducing the risk of side effects.

Initial tests of a single injection of Lyme PrEP protected mice for several weeks.

Humans, however, need to be protected longer, likely for the approximately nine-month season when over 90% of cases occur. So far our phase 1 trial indicates that the shot will give protection for the necessary amount of time, but we will have to confirm that during the later phases of the clinical trials.

For the phase 1 trial we wanted to avoid testing the Lyme PrEP antibody on volunteers who may have already been exposed to the Lyme bacteria and have developed responses that could confuse the results. For that reason, initial testing took place in Nebraska in volunteers who have not been exposed to Lyme disease.

The next two phases of the clinical trial will test for safety and efficacy. We hope to complete these larger studies in late 2022. If all goes well, Lyme PrEP could become available to the public in 2023 or 2024.

This is an updated version of an article originally published on June 4, 2020.

Mark Klempner, Professor of Medicine and Executive Vice Chancellor for MassBiologics, University of Massachusetts Medical School

This article is republished from The Conversation under a Creative Commons license. Read the original article.