LONDON, UK — Attendees at the second Crypto, Fintech & Banking meetup at LIBF last week were keen to learn more about the limitations of bitcoin, tokenization, and what tax looks like on the blockchain.
Together with the London Institute of Banking & Finance (LIBF) and LendIt Fintech, Web3 newcomers and experts gathered to share knowledge.
Bo Brustkern, CEO at LendIt Fintech, started the session off. He discussed plans for LendIt Fintech, including the flagship event Merge on Oct. 17-18, 2022, the first conference and expo dedicated to the impact of Web3 on financial institutions and how to harness this shift to gain a competitive advantage.
He introduced guest speaker Conor Svensson, founder and CEO of a blockchain technology company Web3 Labs, and host of the Blockchain Innovators podcast. Svensson is also the author of The Blockchain Innovator’s Handbook.
Brustkern was eager to create an environment that took a pragmatic view of web3, fostered education, and positioned the discussion to be more of a “conversation than a lecture.”
Svensson explained that ethereum emerged because of the limitations of bitcoin. Ethereum, like bitcoin, is built on blockchain technology — essentially a distributed computer network that records all cryptocurrency transactions. But unlike bitcoin, people can make applications on top of ethereum, such as tokens, and smart contracts applications like DeFi and NFTs, so it works better for a computational environment.
So when bitcoin was created, there was not much competition, whereas now the environment is more competitive.
Even for web3 experts like Svensson, it can be hard to keep up, though he does point out that ethereum still has a “first movers advantage,” and other currencies have yet to do enough to shift people’s interest.
Brustkern added a definition of what layer one and layer two stand for since understanding ethereum would not be complete without this understanding. He also clarified that “Layer 0 is us — the humans who build L1 and L2.”
He told the audience to think of blockchain-like public ledgers collecting information in data. Humans are layer zero; blockchain’s central architecture is called layer one. Layer two networks can be considered overlaying networks. A layer two protocol (e,g., Polygon) enhances the base layer of the blockchain (e.g., ethereum). The ultimate goal is to make the user’s experience seamless, so they won’t even think about these layers in the background.
Tokenization (emerging markets)
When discussing tokenization, Svensson recalls a tweet he once read: “Tokens are for Web3 what the websites were for Web1.”
Although there is much speculation, the point of a token is often to represent something such as membership, ownership of assets like digital artworks, or could, in the future, represent the deed to a property.
When thinking about emerging markets such as LatAm or war-torn areas like Ukraine, you can see the innovation happening in how tokens can democratize finance to those populations. For instance, Svensson said that one of his employees who fled Ukraine does not have a bank account in his settled country but is paid through his Binance wallet.
Brustkern added that Columbia’s economic situation is another example. Allowing people worldwide to have flexibility in storing their money could reduce corruption and protect them from inflation.
Brustkern also said this tokenization could be “a renaissance” for the music industry, allowing artists to have more power and benefit from their production.
Both Brustkern and Svensson highlighted taking out the middle man is one of the key benefits and opportunities for creators. Additionally, there was some explanation of custody and non-custody wallets.
Tax and regulation
Brustkern said, “taxation on the blockchain is easy” as there are many applications that allow users to calculate their crypto tax, which makes the job of HMRC or the IRS easier because everything is recorded on the blockchain.
Countries have different approaches to welcoming fintech. The UK appears to be more welcoming with the introduction of the Kalifa Review, the launch of government-backed NFTs (Royal Mint), and a pragmatic approach from the FCA. In contrast, the U.S. is more cautious, possibly giving the UK a temporary competitive advantage.