Blockchain-Based Lending Could Mean Trouble for Big Banks 0 2054

If there’s one industry that could use a good dose of disruption, it’s global finance. The established lending systems and their calcified pantheon of banking institutions are practically begging to be undermined with fresh, humanitarian technology.

To date, the banks have been iffy on acknowledging the legitimacy of the blockchain, trying to capitalize on it here, then publicly denouncing it as a fad there. Shortly after Goldman Sachs CEO Lloyd Blankfein called Bitcoin “a vehicle to perpetrate fraud,” Sachs hired a crypto trader as head of its digital assets.

Their waffling apprehension is no shocker. Blockchain is designed to cut out the middlemen in any given transaction. In the world of lending, that middleman is the bank. Seemingly all it would take is the public embrace of a blockchain-based lending system to set the classical era overlords quaking in their ivory towers. The public, meanwhile, stands to gain.

The Problem With Banks

It’s no news that the banking world is fraught with heinous ethical transgressions. When you bank with major institutions, you have no control over where your money goes. The bank lends it to whomever they choose. Wells Fargo, Citibank and Chase, to name only a few, contribute money to illegal and hazardous oil pipeline construction on First Nations’ sovereign land. Examples of problematic profiteering like this are plentiful.

And if it were up to the banks, you would never know. Because big banks are so entrenched in the global flow of money, exploited resources, and, consequently, political power, transparency is not an option. When it comes to giving and receiving loans, we need an alternative.

Blockchain Empowers Responsible Lending

Decentralized lending would theoretically solve these problems. You would lend your money directly, instead of giving it to a bank to lend out. You select ventures based on your own criteria, which are reflected in the smart contracts that govern the transaction. The whole process would be transparent and automated. At the end of a successful transaction, you reap the rewards directly in interest.

Conversely, borrowing would be available to everyone. And unlike banks, blockchain lending platforms could reward borrowers for completing successful loan payments as well. That’s what’s proposed by platforms like ELIX. They’re building a token-backed credit system to incentivize successful loan completion for both lenders and borrowers.

Trustworthy borrowers would gain tokens for timely payments and establish a credit reputation, readable in the ledger, to make themselves more attractive to future lenders. Lenders, in addition to seeing a return on their investment, would gain tokens as well. In classic blockchain form, everybody benefits.

Borderless Lending Would Promote Global Economic Equality

On a global scale, which ELIX is aiming for as a long term growth strategy, funds would be available to anyone, irrespective of their location or access to things like venture capital or amenable banking rates. This would promote equality of opportunity between the citizens of developing nations, and subjects of first world powers. Anyone looking to build a house or launch a startup, for example, could connect with financial backers directly. Backers would set their terms in smart contracts, and the whole process would be automated and tracked in the ledger. A rice farmer in Southeast Asia could get funding from a private citizen in Munich, a family member in California, and an investment firm in Sydney.

If this sounds like crowdfunding on a bigger scale, that’s no accident. In fact, ELIX includes a crowdfunding platform, as well. It improves on traditional crowdfunding platforms like Kickstarter and Indiegogo because it doesn’t need any kind of escrow or third party mediator to complete transactions.

Blockchain crowdfunding is one of those match-made-in-heaven ideas that has us all facepalming for not thinking of it first. But like most things blockchain, it’s still too new to see if it flies. Borderless crowdfunding and lending could revolutionize the way we finance, and everyone who’s not a bank stands to gain from it. But we have to try it first, and it has to strike a chord. Then there are the banks’ responses to consider.

It’s Not All Doom and Gloom for the Banks Who Will Play Ball

Adopting blockchain technology instead of competing with it could be the future of banking. Some banks, such as Spain’s Santander Group, are exploring the possibilities of using blockchain technology themselves. Santander recently introduced a blockchain-based service to facilitate money transfers across international European borders, for example.

According to the Financial Times, who interviewed a handful of bankers, consultants and analysts, the banking world has “a serious chance of being transformed by blockchain” in the following areas: clearings and settlements; payments; trade finance; identity; and syndicated loans. This assumes a bank’s willingness to adopt blockchain technology. It may be their only option for survival in the long run.

Whether blockchain lending topples the big banks or merely tills the soil of the financial world, the possibilities for the public make it hard to ignore. With its endemic transparency, automation and decentralization, blockchain looks like the ideal platform to support real world people looking to finance their dreams.

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A tribal member of the Choctaw Nation, Brian grew up in the Silicon valley under the technological mentorship of Steve Wozniak. He's lived, worked and traveled all over the world, and now writes from the Pacific Northwest.

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The Block Talk Awards 0 104

The first inaugural Block Talk Award nominations are open now. The 2018 Awards will recognize the influencers that are pushing the industry forward through innovation and analysis. Nominations will be accepted from August 13, 2018 to September 1, 2018 at 10pm PT. To qualify, influencers should have at least a cumulative following of 10,000 across social media platforms, or similar readership across relevant blogs and web properties.

Winners in each category will receive a $1500 media credit on The Block Talk, access to a network of TBT Award honorees, and VIP access to TBT events in 2019.

Nominate yourself or your favorite influencers in the following categories:

  • Best ICO Analysis & Commentary
  • Most Engaged Community
  • Favorite Blockchain Blogger
  • Best Crypto Journalist
  • Innovative Female Founder
  • Best Podcast Host(s)
  • Favorite Blockchain Event Host
  • Top Crypto Speaker
  • Most Innovative Blockchain CEO
  • Top Social Entrepreneur

Submit Your Nomination

VEZT Wants You to be Able to Own Shares of Your Favorite Songs 0 66

Mr. Cheeks has been producing music since the early 90s, under the mentorship of his late uncle, the legendary Gil Scott-Heron. He started with the Lost Boyz, won a Grammy for his work with Stephen Marley, and has released a handful of solo albums since.

Now, royalties for his singles will be available to his fans, thanks to the blockchain. Mr. Cheeks’ songs will be available on a platform that allows fans and investors to claim a slice of the rights to pop music they believe in. When the song is licensed for use, in advertising or film for example, you, the investor, get a cut.

It’s made possible through an app called VEZT, which is positioning itself to revolutionize the way music relates to money as the world’s “first music rights marketplace.” VEZT partnered with a long time Mr. Cheeks producer, Bink, to offer shares of the song “Lights, Camera, Action” which is currently available on the company’s website.

The Problem of Selling Music

Mixing music and markets is an old problem. How should musicians get paid? Who pays them? What about their support teams? How do we keep track of the flow of money and make sure everyone’s fairly compensated? Among the music world’s financial obstacles, one of the biggest issues is navigating licensing and royalties.

In Austin, for example, one of America’s most proficient music hubs, almost a third of musicians make less than minimum wage, and 70 percent are earning less than $10k per year on their work. That’s below the poverty line even for a household of one. It’s been like pulling teeth trying to get royalties from companies like Spotify, who generate income off their songs. Meanwhile even more expensive lawsuits pile up, or go completely unpursued from lack of funds, as marketers continue to ape good music with copyright infringing fakes. It’s a constant headache for musicians, producers and labels, and it makes it prohibitive to eke out a living in the music world.

Under VEZT’s model, royalties are simple. Music is intellectual property owned by the artist. The artist can sell a portion of those rights to fans, who become investors when they purchase a percentage of shares. Fans and musicians make an agreement to co-own the songs they both care so much about. If you love a song and want to see it do well, you invest. If it does well, you have a share in the artist’s success. Royalties are split based on percentage of ownership.

The concept comes from cofounders Robert Menendez, a former Wall St. financial trader/analyst, and Steve Stewart, an industry regular with entrepreneurial tendencies, whose accomplishments include ushering Stone Temple Pilots to fame in the early ‘90s and managing the band for a decade. They say they founded VEZT as part of a vision to “detangle a lot of the financial problems in the music industry, and connect fans more directly with the music they love.”

And now, they’ve expanded across the Pacific from VEZT’s headquarters in Los Angeles, and opened an office in South Korea.

‘The Perfect Environment’

“The fans of music in Korea are quite possibly the most enthusiastic and active fans on the planet,” says Stewart. “Combine this with a robust tech community and a government leading the way in adopting blockchain technologies and you have a perfect environment for VEZT.”

The ROK’s new legislation legitimizing crypto exchange, Dapps, and blockchain systems will take the peninsula farther into a brave new technological world, where many others have so far feared to tread. Combined with their now-world-famous maximalist pop industry, and it’s not hard to see why VEZT moved in.

Construction recently finished on their new 2500 square foot office in the Gangnam district of Seoul. VEZT has enlisted a host of professionals to their C-Suite, including veterans of major Korean record labels, Kpop producers, marketing and PR executives and, of course, tech experts.

Fixing Music With Blockchain

If their model works in Seoul and LA, VEZT could bring a more harmonious rhythm to an industry still trying to find its groove in the digital age. The world needs music, and musicians need to get paid. As with anything blockchain, cutting out some of the middlemen could be the Occam’s razor with the solution. When fans are directly invested in their music, everyone will want to see it succeed.

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