The Blockchain: The Unavoidable Governance Issues

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In the Blockchain realm, it is the wild west right now. Most people mistake the Bitcoin for the Blockchain. And the public sentiment around the Blockchain seems to go up and down with the dollar value of the Bitcoin on any particular day. The Bitcoin is one application that sits on top of the Blockchain. It is the most famous cryptocurrency, but it is only one of several. And the Blockchain is not just about cryptocurrencies.

The promise is that on the Blockchain you will be able to send around money as easily as you can send text and photos over the Internet. That changes things. Ask the newspapers that were around in 1992. The financial institutions of today are like the newspapers of 1992. When the likes of Bernie Sanders rant and rave, they do so about these banks. They are said to have much power. Many people claim these banks are the tail that wags the Washington DC dog. But IBM was also powerful when Apple showed up. The Blockchain is inevitable. As inevitable as the Internet itself.

It can be argued, people will vote with their money. If they don't trust you, they will not move their money. It is in the nature of innovation that it asks for much freedom. Politicians made the wise decision of not taxing e-commerce for a really long time.

But that Internet would not have been possible if common standards had not been agreed upon. Governance issues are bound to crop up also with the Blockchain.

There are voices in DC saying if Bitcoin companies want to act like banks, they should register like banks. Fair enough. Except that the speed limits that worked for horse carriages were never going to work for motor cars.

You are not only going to move money over the Blockchain. You are also going to offer financial services. This is not just about Internet and Blockchain protocol. This is about ground rules about fundamental financial services.

Since ID is even more fundamental than finance, soon sovereignty issues will crop up. What will it mean for a company incorporated in the United States to have a large database of the identity of most citizens in a country like Rwanda or Kenya when their own governments don't have it? These questions can not be avoided.

I propose the creation of a B100, or Blockchain 100, a coming together of the top 100 Blockchain companies by market cap that meet annually along the lines of the G20, and hash out the governance issues to do with the Blockchain. These same companies will compete with each other in the marketplace. But on governance issues, they have to cooperate.

Think about it. When money can move instantly and for free from anywhere to anywhere else in the world, what does it even mean to have money? What does it mean to be a central bank? The Blockchain necessarily asks for a new governance structure for the world. This is way bigger than Bretton Woods and World War II.

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The Blockchain: The Unavoidable Governance Issues https://t.co/sPGlYgrkgw @raypaxful @paxful @skyzer4ever

— Paramendra Kumar Bhagat (@paramendra) July 18, 2019

The Underbanked, The Underserved

There is a lot of room for for profit microfinance.

Tech’s Hot New Market: The Poor

some 2.5 billion people globally lack access to basic financial services like checking accounts, debit accounts, credit, and insurance. Though not integrated into the mainstream financial system, they will still spend around $6 trillion annually

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Simple Banking

Much of banking is just moving around data. And that should be kept out of sight.

First Look: Simple Reimagines Banking

one fundamental axiom of modern life: banking sucks..... Banking sucks a lot. What’s worse, when it sucks, not only does it drive you insane, it costs you money. Lots of money. ..... they would use the large charges to make the balance fall to zero as quickly as possible, then hammer the account with the small charges to rack up overdraft fees ...... the bank’s abusive fees and seeming inability to block fraudulent charges from hitting my account — even after being notified multiple times — he was apologetic but unable to offer much help. ..... Simple, and the company’s stated goal of removing abusive fees ..... The bank’s phone support was a nightmare ..... “Simple replaces your bank, but we are not a bank.” ..... The company’s drive for simplicity permeates everything from the packaging that the card is shipped in, to the massive “Call Customer Service” button in the app, all the way to its promise to never punish its customers with hidden fees; yes, the overdraft fees that decimated my PNC account a few years back are gone. Kaput. ..... “Our stated mission is that we don’t profit from fees

There's moving around money. That's data. Then there are abusive fees. That is behavioral. And then there is customer service. Three different things, all related.

The no abusive fees part should fall in the public policy domain, one would think.

And great technology should free up resources to provide amazing customer service.

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Microfinance: No Substitute For Good Governance

Image via WikipediaDemocracy is basic. I am a firm believer in democracy. The year a country becomes a modern democracy is year one in that country's life. Lack of democracy, bad governance, massive corruption, and civil war are situations that are not within the domain of the microfinance industry. Basic good governance is critical for the microfinance industry to have a playing field where it can start performing, it can start to lift people out of poverty in large numbers.

There is plenty of diversity within the microfinance industry. There are many right ways. And microfinance is not the only tool with which to cure poverty. China has lifted more people out of poverty the past few decades than any other country, and it does not even allow MFIs to come in.

Microfinance, Not Just Microcredit

Image via WikipediaOne of the major lessons the microfinance industry has learned over the decades is that the poor need more than microcredit. They need a broad swath of financial services.

As soon as they start a business, they want to be able to open up a savings account with you. They want to be able to make easy payments. They want to be able to receive money from relatives who might have gone to some distant city or country.

And you have to offer the whole package deal. Although I do think microcredit continues to be the crown jewel of microfinance. But people don't just wear jewelry. They also like to wear clothes, also undergarments perhaps.

Microfinance: The Basics

Image via WikipediaThe basic premise behind microfinance is simple: access to credit is basic, it is a human right. You give people three tools - education, health, credit - and they fly. Traditional credit has depended on your ability to put down some collateral. And that has cut off a large swath of humanity. There are over a billion people who live on less than a dollar a day. There are over two billion people who live on less than two dollars a day.

Yunus in Bangladesh has proven the default rate among these small borrowers tends to be really, really low. 98% of those who borrow pay back. That is a much better rate than rich people and corporations in New York City. Their default rate is higher.

So what gives? Why were mad men bankers pouring trillions into real estate and shady finance tools a few years back instead of pumping that money into microfinance? Stupidity. Racism.

You can't build enough schools and colleges and print enough textbooks on time. But you can hope to take everyone online. Similarly microfinance has to be taken to all those people. Microfinance is the ultimate fishing net.

VCs Have To Raise Money Too

Intellectually they know, but at an emotional level a ton of tech entrepreneurs end up feeling VCs were just born with the cash to dispense with, if they will just open up the wallet and dole out the money, don't they realize the world needs to be changed?

Big Churns In The VC Industry

Image via Wikipedia

Paul Graham: The New Funding Landscape: After barely changing at all for decades, the startup funding business is now in what could, at least by comparison, be called turmoil..... the previously sharp line between angels and VCs has become hopelessly blurred. .... Super-angels compete with both angels and VCs. .... most of the changes will be for the better.

To those who have been regular readers of the blogs of the major venture capitalists, this churn is not news. The fact that there has been some major churn has been talked about for months. But what people make of the churn, now that's a different story. The best minds have been overall positive with the developments. Looks like entrepreneurs now get to shop around more. There is much more early money available. And that money is not blind money. Early stage investors tend to be more hands on.

Bad Time To Start A Company?

The economy is in a bad shape. Banks are not lending like they used to. Investors are cranky. Venture capitalists are nervous. The unemployment rate is high and going higher. If you have a tech startup in mind, is this a time to lay low? Or is this precisely the time to barge forth?

I am going to argue now rather than two years earlier is the right time to embark on a truly ambitious company. Microsoft got launched during the stagflation of the late 70s, as did Apple, and Oracle. Companies launched during the 30s went on to define an era. This is good time. All you need is fire in your belly. Only don't let angels and investors blackmail you.

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Google's Corporate Transparency

It's all right there, online. Too bad they don't have this one webpage that links to all the stuff. Instead there are separate starting points.



They did not have an easy start either. Earnly stage investors were not easy coming by.

Their corporate culture to me is as fascinating as their technology. The two feed on each other.

These people, they are just starting out. They are growing to grow, grow, grow. They invent challenges for themselves. They realize their competition is with themselves.

"Despite the dotcom fever of the day, they had little interest in building a company of their own around the technology they had developed."