Month: September 2021

Evolution of DeFi

Shabbir Chunawalla

Decentralised finance has been keeping pace with the changing technology. In a matter of years, things have changed significantly. To begin with, it was a mere exchange of cryptocurrencies. It has evolved now into a full-fledged eco-system.

The key enabler is the Bitcoin. Its scope, however, was limited but led to the creation of Ethereum, which turned out to be the default blockchain for most of DeFi platforms. Bitcoin used Script as the programming language. It was not suitable for advanced apps. Ethereum launched in 2015 went beyond the limitations of Script. Its programming language is Solidity. It follows ERC20 standard for new token creation. It become popular smart contract platform.

These developments led to a protocol resulting into the creation of Stablecoins. Stablecoin, as cryptocurrency, provides value stability and is pegged to the reserve assets held by central banks. In addition, it offers privacy, safety and quickness of transactions offered by cryptos. Most of all, it is stable just like the fiat currencies.

Ethereum expanded on account of Initial Coin Offerings (ICOs) between 2017 and 2018. It involved the sale of tokens to raise funds for the development and launch of decentralised applications.

Initially, except exchanges where cryptos were traded, there was no other infrastructure. After the smart contracts were incorporated to initiate the first stages of DeFi (2017-18), a lot of infrastructure was built. In 2020, DeFi took off. As the market opportunities come on the scene, there will be more infrastructure.

It is expected that in future there will be regulation to facilitate crypto fund management. There are experiments of creating decentralised funds.

Crypto Lessons from El Salvador

Shabbir Chunawalla

As we know, cryptocurrency Bitcoin has been made legal tender by El Salvador, a central American country. It is populated by 6.5 million people. Its GDP stands at $27 billion. It has already accepted dollar as the official currency in 2001 to counter inflation. Thus it has two official currencies –Bitcoin and USD.

Its Bitcoin wallet is called Chivo. Every citizen has been allotted $30 worth of Bitcoin. These could be downloaded from Chivo to citizens’ wallets. It will facilitate adoption.

ATMs are enabled to convert dollars into Bitcoin.

There is resistance to this move in EL Salvador. Citizens are worried about the high volatility of cryptos.

Bitcoin will facilitate cross-border remittances, which are 20 per cent of El Salvador’s GDP. It will save the transaction costs.

Bitcoins are mined by solving complex math puzzles, and by verifying transactions on the blockchain. It requires great computing power and large amount of electricity to run these computers.

Every Bitcoin is unique. It becomes difficult to lend. It requires conversion to traditional currency, and converting back while serving the loan. There are massive risks of exchange rate.

It will be interesting to learn how cryptos work in day-to-day life. There are already 10 per cent of daily transactions in Bitcoin.

Each Bitcoin can be split up into fractions of one hundred million, each one being called a Satoshi. Each has a unique code.

It takes a long time to register and verify every transaction on the blockchain. It requires validation by multiple blockchain-watchers.

Both lack of understanding and lack of technology act as barriers to early adoption. Very few understand the working of Bitcoin. Many are against the adoption. Transactions happen only when there are smartphones. The penetration of smartphones must increase.

It is interesting to track the progress of adopting the Bitcoin.

Confidential Computing

Shabbir Chunawalla

When crucial data is moved to public cloud, confidential computing is used. It is a response to security and privacy concerns in the cloud. We know inside the hotel rooms, we get a safe with a separate key to keep our valuables. Hotel staff cannot access these valuables.

Confidential computing is akin to providing such safes or enclaves where users have complete control over their data.

This environment is hardware-based. It is called Trusted Execution Environment (TEE). It protects data both at rest and in transit. It also protects data in processing. Encryption protects data at rest and in transit. Confidential computing protects even data at the processing stage.

The data being processed can be accessed only by an authorised programming code. It is not visible to others, including the cloud provider.

This technology is nascent and is breakthrough technology. It is crucial for health and financial services. Industry 4.0 will benefit from it too.

IBM provides this technology. Open standards are being developed for confidential computing. This technology will also facilitate early adoption of cloud computing.

China Makes Cryptos Illegal

Shabbir Chunawalla

China’s regulators has put a blanket ban on all cryptocurrencies and crypto transactions in September 2021. Many agencies have joined forces to give effect to this ban. The comprehensive ban aims at suffocating the crypto market.

The move is among the global crackdown on cryptos by the governments as these volatile cryptos undermine the financial and monetary system. Even mining of cryptos is an energy-intensive process which undermines the environmental goals.

Private cryptos pose a threat to China’s own digital-yuan which is at an advanced design stage.

YouTube : Focus on Shorts

Shabbir Chunawalla

It is estimated that monthly active users of short-form video content will be 650 million by 2025, holding the second spot after TV. (Redseer). TikTok was responsible for the rise in popularity of the shorts. YouTube lagged behind others in entering this space. However, it is receiving encouraging response.

YouTube has acquired simsim, a social commerce startup. simsim facilitates the transition of small business to e-commerce using the power video and creators. Thus YouTube focuses on its short video offering called YouTube Shorts and would like to make a revenue stream from social commerce.

The company has created YouTube Shorts Fund to pay the creators. Thus the payment method will be different from the usual through ads or memberships.

Shorts have democratised the ability to create content on YouTube. The videos for shorts can be created easily by opening the app on the phone, switching on the camera and adding some music. It is possible to add from sound of all the videos that are on the YouTube. You can create amazing mashups.

Shorts were launched first in India in 2020, and have since expanded to over 100 countries. The shorts receive 15 billion views daily. They see above average views from India.

Ordinarily, YouTube shares ad revenues with creators if people watch the ads before video. Premium members do not see the ads, and so a part of their monthly fees is shared with creators.

simsim will bring together small businesses, retailers and consumers. The central position will be occupied by the creator. It will generate another revenue stream.

Power-hungry Bitcoin Mining

Shabbir Chunawalla

The process of creating Bitcoin consumes around 96 terawatt-hours of electricity every year. It is more electricity than what a small country will consume in a year. The electricity consumption goes up several times in the last five years.

The reason for such heavy consumption is the computing power it requires.

Imagine a bitcoin transaction. An exchange is approached to purchase bitcoin with fiat currency. The transaction must be first validated by the Bitcoin network to receive the authentic bitcoin. It goes to the very heart of Bitcoin book-keeping system — the decentralised blockchain ledger. The system is maintained by using large amount of electric power.

Companies and miners (individuals) validate transactions and enter them in public ledger (which keeps account of all bitcoin transactions). There is guesswork here, and there is competition amongst them. If they succeed, they are rewarded with a freshly minded Bitcoin. Mining is thus a competition for newly created Bitcoin. There is no advanced math or computation involved. You have to be the first miner to come up with a 64-digit hexadecimal number called a hash that is less than or equal to the target hash. Thus essentially it is guesswork. The more is your computing power, the more guesses you make rapidly.

Bitcoin miners therefore run warehouses equipped with powerful computers running at great speed to guess big numbers. Thus they use great amount of electricity. The one who comes at the top of the guessing game validates a standard block of 6.25 newly minted Bitcoins.

Initially, just one computer at home was enough for mining. Currently, you require a sophisticated set-up of powerful computers housed in big space, and powered by endless stream of electric power. There is cooling system to take care of the overheated hardware system. Mining is done by huge data centres. There are hardly half a dozen such centres now who do most of the mining.

Though mining is spread across the world, majority of it happened in China, say 75 per cent, which after recent crackdown has reduced to 46 per cent. Consequently, mining in the US has gone up from 4 per cent to 16 per cent.

As environmental criticism mounts, Bitcoin miners look at nuclear power for clean energy generation. Though this possibility could be years away, it could be a way out in future. Crypto miners use vast amount of computing power and energy to verify transactions on the blockchain (decentralised ledger) that underpins the digital token. Reactors are small and generate a lot of power without harmful emissions.

Digital Streaming

Shabbir Chunawalla

Digital streaming was not considered a primary platform for advertising. TV screen was the primary platform. Still, of late, digital streaming has emerged as the primary platform for many advertisers. It has no longer remained supplementary to TV. In IPL too, brands choose digital-only partnerships. Digital is being used for brand building. In sports events, it has been used for fan engagement. Moment marketing too gets a boost.

As data prices fell in India after 2016, streaming video usage picked up. This industry sourced its content from broadcast and film industry. On OTT, storytellers have freedom, and Indian originals are now appreciated.

Measuring Video Streaming Quality

Shabbir Chunawalla

As we know, the short video form of content has become very popular. There are two kinds of streaming — broadcast streaming on TV and video streaming on Internet. Video streaming has in fact overtaken broadcast streaming. The quality of video streaming is critical. Even if there is slight delay in the start of the video or slight buffering, the users will move away. This is called a drop off.

Edutech companies offering video lessons cannot afford to compromise on quality. It is necessary to measure the quality of the streams continuously. It should be quickly known if there is any deterioration in the stream.This is central to streaming companies.

Videos were measured previously by beacons, pixels and ACR or automatic content recognition. These criteria measure video at particular points. However, continuous monitoring of video stream is necessary.

Video streaming is made on a number of devices. There are many video formats and advertising formats. An Android device and an iPhone provide different information. Such diversity must be managed while measuring so that results are comparable to initiate action.

There should be continuity and normalisation in measurement. Conviva uses software, embedded in the streaming application.

There could be video start problems in certain geographies. There could be problems with the ISPs. There should be dialogue with the CDN or content delivery provider to fix the issue.

In many markets, large format, big screen consumption is being overtaken by streaming.

YouTube

Shabbir Chunawalla

OTT players such as Netflix, Amazon Prime, Disney+Hotstar are aggressively pushing for more subscription revenues in India. Subscription revenues are going to rise much faster than advertising revenues. OTT players on an average earn 36 per cent revenues from subscriptions, and the rest comes from advertising.

Google’s YouTube is a major video-on-demand or OTT player. It takes another view. It has a market share of 43 per cent. It has 325 million unique viewers above 18. It does not invest upfront in content. Unlike its competitors, Google’s YouTube is focusing on advertising rather than subscriptions. It has a lucrative advertising model. It has been a TV for teenagers and upcountry audiences. In online ad revenue, YouTube has a 67 per cent share, but it is likely to come down to 55 per cent by 2025.

YouTube premium charges a monthly subscription free of Rs.99 to make the content ad free. YouTube music channel has a monthly subscription of Rs.129 without ads.

YouTube can offer creators of content a subscription model to be managed by YouTube on a revenue-sharing basis. YouTube has many creators in gaming, learning, news and finance. They offer subscription-like feature on their channel.

YouTube is exploring other areas such as e-commerce and targeting of small business.

Google can get into buying content, especially in sports. YouTube may exercise this option even for short videos.

Google would not like to lose its leadership in this space.

Short Videos

Shabbir Chunawalla

TikTok of Bytedance was the lord of short videos. In India, it was banned along with 58-plus other Chinese origin apps in June 2020 at the height of India-China border tension. India was probably its biggest market. According to some reports, TikTok is trying to re-enter India under a new name — TickTok. It has filed for trademark for the new name.

In the US, TikTok was being forced to break up and there were bidders such as Microsoft and Oracle competing to acquire it.

ByteDance was not a pioneer in short videos. Douyin was launched as a clone of Musical.ly. Douyin is TikTok in China. ByteDance managed to buy Musical.ly and Twitter shut down Vine. Even Instagram’s short videos predated TikTok but never achieved the popularty of TikTok. There are TikTok clones such as Facebook’s Reels, InMobi’s Glance, Josh, Mx Taka Tak which are growing in popularity and subscribers. Before its closure. TikTok had a subscriber base of over 600 million downloads.