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Interview with Tom Higgins: The Cryptocurrency Debate
How is Crypto shaping the Fintech world of today and the future? In this episode of Off The Record, Andrew Saks speaks to CEO Tom Higgins, addressing the importance of Cryptocurrency and the technology that surrounds it in today's modern financial markets structure.
Is Institutional investment growing?
Tom: "Four years ago, there were no institutions involved in Crypto at all. Businesses said they didn't want to be involved, but a lot were actually looking at it. I know this because we talked to them, and they asked us for advice on what they should be doing in this space. Since the big crash in 2017 - where Bitcoin dropped from $20,000 to $2,000 - institutions have been building up their technology, portfolio and clients who want to trade Cryptos. Businesses now find that their clients - the funds - have clients who want to have digital assets in their portfolios.
With this change in institutional demand, I feel Crypto has got a more resilient and robust nature that it hasn't had before."
Proof of Work (PoW) vs Proof of Stake (PoS)
"Bitcoin uses a calculation method called 'Proof of Work (PoW)', which is now known to cause significant environmental issues. With PoW, you need bigger and bigger mining computers to generate the Cryptography, but this uses enormous amounts of electricity that produces vast amounts of heat. Most Cryptos currently use PoW because it was how Bitcoins came about, and therefore others followed.
Ethereum, on the other hand, is an exciting coin as it's moving away from 'Proof of Work (PoW)' to 'Proof of Stake (PoS)', which works differently and doesn't use the same calculation method, which means there is less of an environmental impact.
Therefore, it's very likely you will start seeing Ether start overtaking in a few years."
Advancements in Crypto Liquidity
"If you looked back to before 2017, if a retail broker wanted to offer Crypto assets, it was challenging to find a Liquidity Provider to cover the risk. You couldn't really do it. There were very immature exchanges designed for retail, not institutional B2B type coverage, but that's changed a lot now.
We forefronted innovation in this space, creating a product called Crypto Switch™. The technology stack currently offers access to twelve Market Makers who make prices in physical cash/coins, giving access to deep liquidity. What this means is that brokers can now have somewhere that they can offset their risk to, hold a pure A-Book model, which is exciting as it wasn't possible to do before."
The Evolvement of Blockchain
"The process of digital assets is clever; the way you can trade a product, clear or settle it using Blockchain is efficient. The advancements will come with Blockchain (2.0 & 3.0), which uses the DeFi model with a distributed application (DApss). DApss uses Blockchain to distribute the whole application around an entire network - a trustless network in a trusted way. It's very clever.
Unless Bitcoin gets investment or some of the Ethereum ideas go into it, it can't make use of these Blockchain advancements because it simply doesn't have the capability. However, Bitcoin currently has all the liquidity, and that's why it is where all the trading is."
Benefits of Crypto Education
"I've always thought that the key to a successful brokerage is education. Having a churn business where your clients disappear and lose money quickly - similarly to the binary options market - is just wrong. In contrast, an education model can allow everybody to win; the brokerage, regulators and clients - because they'll know what they're doing.
Andrew: That's exactly right. If we want to be leaders in this industry, we have to develop products, software and training for this audience. There is also enough information on the internet to that effect now to steer people in the right direction.
Gold-i is a proud member of CryptoUK - the UK’s self-regulatory trade association representing the crypto-asset sector.
Find out more about Gold-i's Crypto Switch™ - the advanced aggregation, liquidity management and distribution platform.
If you want the proven digital asset institutional solution for consuming and distributing Crypto liquidity, get in touch with us today.