• 01 Dec 2017

    The Internet of Things and Smart Infrastructure

    The Internet of Things enables connected objects and devices containing sensors to share data, information and insights - from industrial machines, infrastructure, buildings and vehicles, to consumer electronics and clothing. The benefits for industry, the public sector and citizens could be huge. For example: wearable monitors can improve personal health care; smart water pipes can warn of falls in pressure; street-level data can improve traffic flows and planning.

    We want the UK to remain an international leader in R&D and adoption of IoT. We are funding research and innovation through the three year, £30 million IoT UK Programme, including:

    • the large-scale Cityverve smart cities demonstrator in Manchester to show how IoT technologies and services can improve the quality and efficiency of services in transport, energy, health and culture
    • NHS test beds, using IoT and health and care innovations to help people with dementia in Surrey and people with diabetes in the West of England
    • the IoT Research Hub led by University College London and partners, to develop UK interdisciplinary research excellence, focusing on privacy, ethics, trust, reliability, acceptability and security (PETRAS)
    • help for IoT entrepreneurs and innovators from the Digital Catapult and Future Cities Catapult; and specialist accelerator schemes for IoT hardware businesses, R/GA and Startupbootcamp.

    Increasingly, new infrastructure is also smart: connected, and operated with data to achieve maximum efficiency and effectiveness. To provide leadership in the roll out of smart infrastructure, the EPSRC has announced £138 million of funding for the UK Collaboratorium for Research in Infrastructure and Cities (UKCRIC) to create a coordinated and coherent national infrastructure research community, spanning at least 14 universities. UKCRIC stated aims are to:

    • build on existing capabilities to establish a network of state-of-the-art large-scale experimental facilities supporting world-leading research in cities and infrastructure
    • establish a unique, national network of local ‘urban laboratories’ to sense, capture, monitor and evaluate new and existing infrastructure in UK towns and cities
    • establish world-leading computation and big data infrastructure for the modelling, simulation, and visualisation of cities and infrastructure
    • we have also asked the National Infrastructure Commission to undertake a new study on how emerging technologies can improve infrastructure productivity

    Sector deals offer another important channel to support specific industries. They offer an opportunity for important players to join together and address shared challenges and opportunities they face. We are therefore pleased to support reviews into the following important and rapidly growing sectors, which could inform potential sector deals.

    Professor Dame Wendy Hall, Regius Professor of Computer Science at the University of Southampton, and Jerome Pesenti, Chief Executive of BenevolentTech, will conduct a review of how industry and government can create the conditions for the artificial intelligence industry to continue to thrive and grow in the UK. The review will consider the core challenges such as skills and access to talent, access to data, and access to finance and investment. This review will build on the work on machine learning by the Royal Society, and it will complement, but remain separate from, the ongoing work by the British Academy and Royal Society on data ethics and governance, which will also cover ethical issues around AI.

    As outlined in the Industrial Strategy green paper, Sir Peter Bazalgette will conduct an independent review into how the UK’s creative industries, such as our world-leading music and video games industry, can help underpin our future prosperity by utilising and developing new technology, capitalising on intellectual property rights, and growing talent pipelines.

    In addition to these reviews, government will consider how it can further support the virtual reality (VR) and augmented reality (AR) sectors in the UK, considering how these industries could seize opportunities for growth. The UK is home to a number of innovative firms working in this sector, including Blippar, Improbable.IO, Ultrahaptics, and a host of world-leading production houses specialising in VR or AR content. As an international hub for the cultural and creative industries, and with our strengths in research and computer science, the UK is well placed to take advantage of global growth in these sectors.

    The Digital Catapult is already helping advance next generation virtual and augmented reality businesses. Earlier this month, it launched Augmentor, an equity free 10-week programme to provide technical and business mentorship to start-ups in this space. Successful applicants will have access to the Digital Catapult Centre in London as a space to work and collaborate, as well as the state-of-the-art Immersive Lab at the centre.

  • 26 Nov 2017

    The UK is the global capital for financial technology, or ‘FinTech’, which generated £6.6 billion in revenue and raised over £500 million of investment in 2015 alone. It is disrupting established processes and changing the ways that consumers interact with financial services.

    In doing so, it is radically reducing the cost of accessing financial services and broadening the range of services available. This is allowing those who may previously have struggled to access financial services to do so, and providing consumers with the tools they need to manage their finances well.

    The government and regulators are taking a significant number of actions to support the UK FinTech industry:

    • supporting the banks to deliver Open Banking through a fully open application programming interface (API), providing ongoing access to authorised third parties by Q1 2018. Third-parties will then be able to access consumers data in real-time, thereby allowing them to offer budgeting tools to support individuals in managing their finances
    • supporting industry to design and deliver a pensions dashboard by 2019 – a digital interface where an individual can view all their pensions in one place, enabling consumers to make more well-informed decisions about their pensions
    • working with Tech City UK on a FinTech delivery panel to set out a long-term strategy for UK FinTech, identify key industry initiatives to deliver this, and drive forward progress. This panel comprises key representatives from the FinTech sector, existing financial services sector, and the Financial Inclusion Commission, given the significant potential of FinTech in supporting financial inclusion
    • appointing regional FinTech envoys to ensure the continued growth of FinTech across the UK. To date, regional FinTech envoys have been appointed for the Northern Powerhouse and Scotland
    • launching a professional services information hub
    • showcasing the best of British FinTech to investors at the annual International FinTech Conference, to take place on 12 April 2017

    The Bank of England is also supporting the FinTech sector by:

    • establishing the New Bank Start-up Unit in January 2016 (in partnership with the Financial Conduct Authority). Nine new UK banks have been authorised in this parliament
    • expanding access to central bank money to non-bank payments service providers, allowing them to compete on a level playing field with banks
    • being open to providing access to central bank money for new forms of wholesale securities settlement, such as those based on Distributed Ledger Technology
    • proactively seeking contributions from a wide range of perspectives and disciplines to feed into its long-term research into the impact of a digital currency on monetary and financial stability and whether new technology has the potential to be used to provide wider access to central bank money, via a Central Bank Digital Currency
    • partnering with FinTech companies through a Bank of England FinTech Accelerator to help harness FinTech innovations for central banking

  • 23 Nov 2017

    The United Kingdom has a bright future. The fundamental strengths of the UK economy will support growth in the long term as the UK forges a new relationship with the European Union (EU). The Budget prepares for that: supporting families and business in the near term; setting a path to a prosperous, more open Britain; and building an economy that is fit for the future. It demonstrates the government’s commitment to a balanced approach to managing the public finances and supporting key public services. By investing in the future, the Budget will ensure that every generation can look forward to a better standard of living than the one before and ensures young people have the skills they need to get on in life. It backs the innovators who deliver growth, helps businesses to create better, higher paid jobs and builds the homes the country needs.

    The Budget sets out actions the government will take to:

    • support more housebuilding, raising housing supply by the end of this Parliament to its highest level since 1970, to make homes more affordable in the long term and help those who aspire to homeownership

    • prepare for exiting the EU and ensure a smooth transition by setting aside an additional £3 billion for government

    • establish the UK as a world leader in new technologies such as artificial intelligence (AI), immersive technology, driverless cars, life sciences and FinTech

    • give everyone the skills to succeed in the modern economy and get better paid jobs

    • expand the National Productivity Investment Fund (NPIF) to support innovation, upgrade the UK’s infrastructure and underpin the government’s modern Industrial Strategy

    • invest over £6.3 billion of new funding for the NHS to improve A&E services, reducing waiting times and improving performance for treatment after referral, and to transform and integrate patient care

    • provide more support in the short term for households, reducing costs of living, and boosting wages for the low paid through the National Living Wage (NLW)

      Economic context

      The UK economy has shown its resilience, with solid growth over the past year and further increases in the number of people with a job. Gross domestic product (GDP) grew 1.5% in the year to the third quarter of 2017, employment remains near the record high set earlier this year and unemployment is at its lowest rate since 1975.

      The Office for Budget Responsibility (OBR) now expects to see slower GDP growth over the forecast period, mainly reflecting a change in its forecast for productivity growth. It has revised down its forecast for GDP growth by 0.5 percentage points to 1.5% in 2017, then growth slows in 2018 and 2019, before rising to 1.6% in 2022.

      Household spending continues to grow, having slowed since 2016 due to higher inflation caused by the depreciation of sterling. Business investment has grown moderately over the past year and net trade has started to make a positive contribution to GDP growth. Surveys of export orders in 2017 have been strong, with some reaching their highest level since 2011.

    • Outlook for the public finances

    • The government has made significant progress since 2010 in restoring the public finances to health. The deficit has been reduced by three quarters from a post-war high of 9.9% of GDP in 2009-10 to 2.3% in 2016-17, its lowest level since before the financial crisis.

      The government’s fiscal rules take a balanced approach to government spending, getting debt falling but also investing in our key public services like the NHS, and keeping taxes low.

      Compared to the Spring Budget 2017 forecast, borrowing is significantly lower in the near term. However, over the medium term the impact of a weaker economic outlook and the measures taken at the Budget see borrowing higher than previously forecast. The OBR expects the government will meet its 2% structural deficit rule for 2020-21 two years before target, in 2018‑19, and with £14.8 billion of headroom in the target year. Debt is forecast to peak at 86.5% of GDP in 2017-18, and is forecast to fall in every year thereafter to 79.1% of GDP in 2022-23.

    • Building an economy fit for the future

    • The Budget sets out a long term vision for an economy that is fit for the future – one that gives the next generation more opportunities. It is an economy driven by innovation that will see the UK becoming a world leader in new and emerging technologies, creating better paid and highly skilled jobs.

      To achieve this vision, the government has already set in train a plan to boost UK productivity over the long term. A key part of this is the NPIF, launched last year to provide additional investment in housing, infrastructure, and research and development (R&D). The Budget goes further, increasing the size of the NPIF from £23 billion to £31 billion. This investment will underpin the government’s modern Industrial Strategy and help raise wages and living standards. It means public investment as a proportion of GDP will reach its highest level in 30 years by 2020-21, excluding the exceptional years following the financial crisis. Further details of the government’s plan will be set out in the Industrial Strategy.

      Government action at this Budget to boost productivity includes:

    • Transport: A £1.7 billion new transforming cities fund through the NPIF to improve connectivity and support jobs across England’s great city regions

    • Research and Development: The largest boost to R&D support for 40 years with a further £2.3 billion investment from the NPIF in 2021-22

    • Long Term Investment: Unlocking over £20 billion of patient capital, over the next 10 years so that innovative high-growth firms can achieve their full potential

    • Emerging Tech: Leading the world in developing standards and ethics for the use of data and AI, and creating the most advanced regulatory framework for driverless cars in the world

    • Skills: Creating a new partnership with industry and trade unions to deliver a National Retraining Scheme, giving people the skills they need throughout life to get a well-paid job, and equipping young people with the science, technology, engineering, and maths (STEM) skills to become innovators of the future

    • A fair and sustainable tax system

    • The government remains committed to a low tax economy, cutting taxes for both working people and businesses to help respond to short term pressures. It has secured £160 billion in additional tax revenue, and these actions have also helped the UK achieve one of the lowest tax gaps in the world at 6.0% in 2015-16. The Budget takes action so that everyone pays their fair share, including those seeking to evade or avoid tax using offshore structures. The Budget will:

    • crack down on online value-added tax (VAT) evasion by strengthening and extending existing powers that make online marketplaces responsible for the unpaid VAT of their sellers

    • provide Her Majesty’s Revenue and Customs (HMRC) with additional resources including for new technology to further tackle avoidance and evasion risks

    • As the UK economy evolves, the tax system needs to evolve with it, to ensure that vital public services can be funded sustainably. The Budget sets out the government’s approach to ensuring that digital businesses will pay tax that is fair, given the value they generate.

    • increase the time limits for HMRC assessments of offshore tax non-compliance, and support new global rules to force the disclosure of certain offshore structures to tax authorities

    Global economy

    Global growth has strengthened in the first half of 2017. The OECD estimates that GDP growth for the G20 rose to 3.6% in the year to Q2 2017, up from 3.0% in Q2 2016. Growth has also become broader-based, as activity has strengthened in the euro area and Japan, and Brazil and Russia have emerged from recession. Growth has remained strong in China and firmed in the US. Higher global growth will benefit the UK economy. The OBR forecasts that global growth will be 3.6% in 2017 and 3.7% in 2018; these forecasts are both 0.2 percentage points higher than at Spring Budget 2017.

  • 18 Nov 2017

    New Trade Bill enters Parliament, with Customs Bill to follow, to set the groundwork for the UK to become an independent global trading nation

    The government is making crucial progress on the domestic legislation needed for Brexit, taking forward the next two Brexit Bills to Parliament.

    The Trade Bill and the Customs Bill will allow the UK to set the groundwork to becoming an independent global trading nation, providing necessary certainty for businesses and international trading partners to make the most of this opportunity.

    Key measures in the Trade Bill include provisions for the UK to implement existing EU trade agreements, helping ensure that UK companies can continue to access £1.3 trillion worth of major government contracts in other countries and creating a new trade remedies body to defend UK businesses against injurious trade practices.

    Further tax-related elements of the UK’s trade policy will be legislated in the Treasury’s Customs Bill – Taxation (Cross-border Trade) Bill – as part of the creation of a new UK tariff regime. This includes the trade remedies and unilateral trade preferences which provide preferential trade access to UK markets for developing countries.

    International Trade Secretary Dr Liam Fox said:

    For the first time in over 40 years the UK will be able to shape our own trade and investment agenda – and we are determined that businesses and consumers can take advantage of this opportunity.

    We are getting on with delivering a successful Brexit, by seeking a deep and special partnership with the EU, and by boosting our existing trading relationships with old partners while opening up access to new and exciting markets across the world.

    The Bills follow engagement with stakeholders including the Scottish and Welsh Governments and Northern Ireland leaders after the Trade and Customs White Papers were published in October.

    Trade Bill

    The Trade Bill laid in Parliament today will:

    • create powers to assist in the transition of over 40 existing trade agreements between the EU and other countries
    • enable the UK to become an independent member of the Agreement on Government Procurement (GPA) ensuring UK companies have continued access to £1.3 trillion worth of government contracts and procurement opportunities in 47 countries
    • establish a new independent UK body, the Trade Remedies Authority, to defend UK businesses against unfair trade practices
    • ensure the UK Government has the legal abilities for gathering and sharing trade information

    Customs Bill

    The government also laid resolutions for the Customs Bill, which will enter Parliament shortly. The Bill will allow the government to create a standalone customs regime and amend the VAT and excise regimes. It will:

    • charge and vary customs duty on goods
    • specify which duties are payable on which goods
    • set preferential or additional duties in certain circumstances – for example, to support developing countries
    • maintain a functioning movement of goods from the day we leave the EU by continuing the VAT and excise regimes in line with the final deal reached in negotiations

  • 17 Nov 2017


    • Payments made by American Express' business customers on its FXIP platform will now be routed through Ripple's enterprise blockchain network
    • The blockchain project will initially allow customers in the U.S. to make instant, traceable cross-border payments with U.K. Santander bank accounts
    • Ripple said that its cryptocurrency, XRP, will "come into play" as a means of speeding up payments later on down the line

    American Express and Santander have partnered with financial technology firm Ripple to speed up cross-border payments between the U.S. and the U.K. by using blockchain technology.

    Payments made by American Express' business customers on its FX International Payments (FXIP) platform will now be routed through Ripple's enterprise blockchain network, RippleNet.

    Blockchain — otherwise known as distributed ledger technology — allows vast amounts of data to be stored on a dispersed network of computers around the world, rather than on one centralized server.

    It was originally used to record all bitcoin transactions but increasingly businesses are finding alternative uses for the technology, such as payments, trade finance and identity verification.

    A number of other financial institutions have been experimenting with distributed ledger projects, including JPMorganUBSCredit SuisseBarclays and HSBC.

    "This collaboration with Ripple and Santander represents the next step forward on our blockchain journey, evolving the way we move money around the world," Marc Gordon, executive vice president and chief information officer at American Express, said in a statement Thursday.

    American Express' blockchain project will initially allow customers in the U.S. to connect instant, traceable cross-border non-card payments to U.K. Santander bank accounts.

    "This blockchain solution opens up a new channel between the U.S. and the U.K. and presents significant opportunity for payments globally", Jose Luis Calderon, global head of global transaction banking at Santander, said in a statement Thursday.

    The distributed ledger platform will enable all parties involved to keep track of a transaction's status and cost.

    Ripple CEO Brad Garlinghouse said that its blockchain network would allow the business customers of financial services firms to move money in "real-time."

    "We're taking a huge step forward with American Express and Santander in solving the problems corporate customers experience with global payments. Transfers that used to take days will be completed in real-time, allowing money to move as fast as business today," Garlinghouse said in a statement Thursday.

    Both American Express and Santander suggested the blockchain project could eventually be extended worldwide.

    Cryptocurrency 'will come into play later'

    Ripple said that it is has tested a means of speeding up payments with its cryptocurrency, XRP, and that this would become a feature in its partnerships with banks and other financial companies further down the line.

    "The XRP currency will come into play later on in the evolutionary dynamics and the other players," Marcus Treacher, global head of strategic accounts at Ripple, told CNBC in an interview.

    "The technology we have developed, it separated a connection from the cryptocurrency or the token. So what that means is that a bank or non-bank like AMEX can use Ripple to connect and just exchange value from one fiat currency to another directly, without the need for any intermediate blockchain currency."

    Some banking executives have raised concern about cryptocurrencies in recent weeks.

    Last month, UBS CEO Sergio Ermotti told CNBC he was "not necessarily" a believer in cryptocurrencies but that he saw a future for blockchain. Credit Suisse CEO Tidjane Thiam went as far as to describe the world's largest cryptocurrency bitcoin as "the very definition of a bubble."

    And, most notably, JPMorgan's Jamie Dimon has been particularly critical of bitcoin, and last month said that anyone "stupid enough to buy bitcoin" would "pay the price for it one day."

  • 12 Nov 2017

    Since the Brexit vote last year, Britain’s future trade relations have dominated policy discussions across the globe as it seeks to boost trade ties.

    The United Kingdom is looking for investment and trade opportunities in Uganda to augment the already existing ties between the two countries.

    The UK Secretary of State for International Trade and UK Business Associates, Liam Fox, led a high-level delegation comprising of cabinet ministers to Uganda and held a meeting with top managers of private and public companies to discuss investment opportunities in the country. In a meeting hosted by Financial Sector Deepening Uganda (FSD-U) at Serena Hotel last Thursday, Fox said the UK has a £50b (sh210.75 trillion) fund to facilitate investments but the UK can only utilize 20% internally, thus the move to explore investment projects in African countries including Uganda to invest the excess funds.

    He said that UK is interested in exploring ways through which its financial institutions can partner with Ugandan institutions to boost capital investments, trade finance and innovations to boost financial inclusion. The FSD-U managing director, Jacqueline Musiitwa, said during the closed door meeting, the delegation expressed interest to invest in energy, agriculture and manufacturing sector. Additionally, UK Financial Technology companies (FinTechs) expressed interest in partnering with Ugandan financial service institutions to develop innovative financial products, as well as innovative ways of financing to boost financial inclusion.

    In innovative financing ways, the UK FinTechs seek to enhance agriculture insurance by enhancing local companies’ capacity in credit risk management to boost uptake. The FSD-U Board chairperson, Gertrude Wamala Karugaba, said partnerships are critical if Uganda is to boost financial inclusion and reduce poverty levels. She noted that while global absolute poverty has sharply reduced over the last 30 years from about 40% to under 20%, over 40% of people in Sub Saharan Africa still live in absolute poverty, thus the need to partner to facilitate inclusive growth. Karugaba added that there is need for more collective efforts, partnerships, innovation and close collaboration between the government and the private sector now more than ever.

    The UK’s renewed effort to seek investment opportunities in Uganda comes at a time when China is aggressively pursuing trade and investment opportunities in Africa and Uganda. China is currently funding a number of major infrastructure projects in Uganda for roads and energy projects, including the Entebbe-Kampala Expressway and the Isimba and Karuma hydropower plants.

    Statistics from Bank of Uganda indicate that Uganda imported goods worth $727.02m  (sh263.9 trillion) from China in 2016/17 financial year while exports to the Asian country were estimated at $27.97m (sh101.5b). On the other hand, Uganda’s imports from the UK were estimated at $55.32m (sh200b), while exports were valued at $16.15m (sh58.62bn). It should also be noted that since the Brexit vote last year, Britain’s future trade relations have dominated policy discussions across the globe as it seeks to boost trade ties.

  • 10 Nov 2017

    International trade has seen little innovation since the arrival of the shipping container in the 1950s. Goods are still transported over sea or land in much the same way as they were then. But one area most in need of a technological revolution is the paperwork and bureaucracy generated by cross-border trade.

    From letters of credit to product quality documentation, trade generates stacks of documents. Behind this administrative thicket is the laudable desire to eradicate ills such as human trafficking, counterfeit goods and illegal smuggling. Yet a growing number of companies believe blockchain technology could speed up trade, all the while improving, rather than compromising, security.

    “International trade demands a faster, more secure and more efficient way to handle the document approval workflows needed to move goods across international borders,” says Ramesh Gopinath, vice-president of blockchain solutions at IBM, which is working on trade-related digital ledger technologies with partners including Maersk and Walmart.

    “Traditionally, supply chains have relied on the physical movement of large volumes of paper documents, leaving the window open for fraud, human error and inadvertent delays.” He says the administrative costs of processing, moving, verifying and securing this documentation can almost double the cost of simply moving a shipment.

    Blockchain, a distributed ledger — the underlying technology for virtual currencies such as bitcoin — is a useful ‘middleware’ for slashing such bureaucracy. It records transactions in sequential blocks, creating encrypted data that can be shared between several parties through the supply chain, updating them instantly without risk of fraud.

    “With roots in financial services, digital ledger technology is making inroads into goods transport through financial instruments, such as letters of credit, and through the digitisation of traditional trade and shipping documents,” says Wolfgang Lehmacher, head of supply chain and transport industries at the World Economic Forum.

    To quantify the documentation involved in ‘business as usual’, Danish shipping giant Maersk tracked a shipment of flowers from the Kenyan port of Mombasa to Rotterdam. The process generated dozens of documents and nearly 200 communications involving farmers, freight forwarders, land-based transporters, customs brokers, governments, ports and carriers.

    Maersk’s blockchain-based approach, developed with IBM, puts all documents into a single, template-based workflow, kicked off when the farmer submits the packing list. As each step is completed, documents are captured and shared so participants can see what has been submitted, when, and by whom. “No one party can modify, delete or even append any record without the consensus from others on the network,” says Mr Gopinath. The ransomware hack that hit AP Moller-Maersk in June, sufficiently severe as to cause the company to cut its profit guidance, has no doubt increased the imperative to develop tamper-proof tools.

    Maersk and IBM are not alone in deploying blockchain to quicken trade processing times. In August 2016, a consortium of banks, with the Singaporean government, used blockchain to prototype a letter of credit, through which banks guarantee buyers’ payments.

    A month later, Barclays used blockchain to complete a trade finance deal, and in 2017 a South Korean consortium used blockchain to track reefer containers from Busan to Qingdao, monitoring everything from shipment booking to cargo delivery.

    Start-ups and small firms are also experimenting. London-based Everledger uses blockchain to ‘track and protect’ valuable assets like diamonds across the life cycle, creating a digital thumbprint used by participants along the supply chain to verify authenticity, while BlockVerify is tackling counterfeiting in industries including pharmaceuticals and electronics. While offering a rare promise — to simultaneously accelerate processing and improve security — blockchain, and digital ledger technologies, pose challenges. The technology might be tamper-proof and collaboration-friendly, but the same is not always true of its users, or of the technologies that move data from blockchain into the real world.

    “While blockchain technology itself is highly resilient, blockchain applications might be vulnerable,” explains Mr Lehmacher, referring to the hacking of multiple exchanges used for the Ethereum and bitcoin cryptocurrencies. Another challenge, he adds, is that the “technical capabilities to handle very large transaction volumes remains unproven, and the costs of maintaining the protocol are high”. Ordinary companies and individuals need to be trained to use blockchain tools correctly.

    Such ‘permissioned’ blockchain systems are heavily dependent on collaboration and work only when all the parties want to use the technology, and have the technical wherewithal to do so. It will also be difficult to take blockchain from pilot projects to widespread use, given the risks that come with overhauling decades-old financial processing infrastructures.

    But in cross-border trade, at least, participants would benefit from the simpler, automated workflows and smart contracts that blockchain can generate. The bribe-taking border officials and illicit traders would lose out. 

  • 04 Nov 2017

    This introduction explains the most important thing about crypto currencies. 

    Today crypto currencies have become a global phenomenon known to most people. While still somehow geeky and not understood by most people, banks, governments and many companies are aware of its importance.

    In 2016, you would have had a hard time finding a major bank, a big accounting firm, a prominent software company or a government that did not research crypto currencies, publish a paper about it or start a so-called blockchain-project.

    But beyond the noise and the press releases the overwhelming majority of people – even bankers, consultants, scientists, and developers – have a very limited knowledge about crypto currencies. They often fail to even understand the basic concepts.


    What is crypto currency and how crypto currencies emerged as a side product of digital cash

    Few people know, but crypto currencies emerged as a side product of another invention. Satoshi Nakamoto, the unknown inventor of Bitcoin, the first and still most important crypto currency, never intended to invent a currency.

    In his announcement of Bitcoin in late 2008, Satoshi said he developed “A Peer-to-Peer Electronic Cash System.“  

    His goal was to invent something; many people failed to create before digital cash.The single most important part of Satoshi‘s invention was that he found a way to build a decentralized digital cash system. In the nineties, there have been many attempts to create digital money, but they all failed.

    After seeing all the centralized attempts fail, Satoshi tried to build a digital cash system without a central entity. Like a Peer-to-Peer network for file sharing.

    This decision became the birth of crypto currency. They are the missing piece Satoshi found to realize digital cash. The reason why is a bit technical and complex, but if you get it, you‘ll know more about crypto currencies than most people do. So, let‘s try to make it as easy as possible:

    To realize digital cash you need a payment network with accounts, balances, and transaction. That‘s easy to understand. One major problem every payment network has to solve is to prevent the so-called double spending: to prevent that one entity spends the same amount twice. Usually, this is done by a central server who keeps record about the balances.

    In a decentralized network, you don‘t have this server. So you need every single entity of the network to do this job. Every peer in the network needs to have a list with all transactions to check if future transactions are valid or an attempt to double spend.

    But how can these entities keep a consensus about this records? 

    If the peers of the network disagree about only one single, minor balance, everything is broken. They need an absolute consensus. Usually, you take, again, a central authority to declare the correct state of balances. But how can you achieve consensus without a central authority?

    Nobody did know until Satoshi emerged out of nowhere. In fact, nobody believed it was even possible.

    Satoshi proved it was. His major innovation was to achieve consensus without a central authority. Cryptocurrencies are a part of this solution – the part that made the solution thrilling, fascinating and helped it to roll over the world.

    What are cryptocurrnecies really?

    If you take away all the noise around crypto currencies and reduce it to a simple definition, you find it to be just limited entries in a database no one can change without fulfilling specific conditions. This may seem ordinary, but, believe it or not: this is exactly how you can define a currency.

    Take the money on your bank account: What is it more than entries in a database that can only be changed under specific conditions? You can even take physical coins and notes: What are they else than limited entries in a public physical database that can only be changed if you match the condition than you physically own the coins and notes? Money is all about a verified entry in some kind of database of accounts, balances, and transactions.

    How miners create coins and confirm transactions

    Let‘s have a look at the mechanism ruling the databases of crypto currencies. A crypto currency like Bitcoin consists of a network of peers. Every peer has a record of the complete history of all transactions and thus of the balance of every account.

    A transaction is a file that says, “Bob gives X Bitcoin to Alice“ and is signed by Bob‘s private key. It‘s basic public key cryptography, nothing special at all. After signed, a transaction is broadcasted in the network, sent from one peer to every other peer. This is basic p2p-technology. Nothing special at all, again.

    The transaction is known almost immediately by the whole network. But only after a specific amount of time it gets confirmed.

    Confirmation is a critical concept in crypto currencies. You could say that crypto currencies are all about confirmation.

    As long as a transaction is unconfirmed, it is pending and can be forged. When a transaction is confirmed, it is set in stone. It is no longer forgeable, it can‘t be reversed, it is part of an immutable record of historical transactions: of the so-called blockchain.

    Only miners can confirm transactions. This is their job in a crypto currency-network. They take transactions, stamp them as legit and spread them in the network. After a transaction is confirmed by a miner, every node has to add it to its database. It has become part of the blockchain.

    For this job, the miners get rewarded with a token of the crypto currency, for example with Bitcoins. Since the miner‘s activity is the single most important part of crypto currency-system we should stay for a moment and take a deeper look on it.

    Revolutionary properties

    If you really think about it, Bitcoin, as a decentralized network of peers which keep a consensus about accounts and balances, is more a currency than the numbers you see in your bank account. What are these numbers more than entries in a database – a database which can be changed by people you don‘t see and by rules you don‘t know? 

    Basically, crypto currencies are entries about token in decentralized consensus-databases. They are called CRYPTO currencies because the consensus-keeping process is secured by strong cryptography. Cryptocurrencies are built on cryptography. They are not secured by people or by trust, but by math. It is more probable that an asteroid falls on your house than that a bitcoin address is compromised.

    Describing the properties of crypto currencies we need to separate between transactional and monetary properties. While most crypto currencies share a common set of properties, they are not carved in stone.


    Transactional properties:

    1.) Irreversible: After confirmation, a transaction can‘t be reversed. By nobody. And nobody means nobody. Not you, not your bank, not the president of the United States, not Satoshi, not your miner. Nobody. If you send money, you send it. Period. No one can help you, if you sent your funds to a scammer or if a hacker stole them from your computer. There is no safety net.

    2.) Pseudonymous: Neither transactions nor accounts are connected to real-world identities. You receive Bitcoins on so-called addresses, which are randomly seeming chains of around 30 characters. While it is usually possible to analyze the transaction flow, it is not necessarily possible to connect the real world identity of users with those addresses.

    3.) Fast and global: Transaction are propagated nearly instantly in the network and are confirmed in a couple of minutes. Since they happen in a global network of computers they are completely indifferent of your physical location. It doesn‘t matter if I send Bitcoin to my neighbour or to someone on the other side of the world.

    4.) Secure: Cryptocurrency funds are locked in a public key cryptography system. Only the owner of the private key can send crypto currency. Strong cryptography and the magic of big numbers makes it impossible to break this scheme. A Bitcoin address is more secure than Fort Knox.

    5.) Permissionless: You don‘t have to ask anybody to use crypto currency. It‘s just a software that everybody can download for free. After you installed it, you can receive and send Bitcoins or other crypto currencies. No one can prevent you. There is no gatekeeper.

  • 02 Nov 2017

    The Bank of England raised interest rates today for the first time in over a decade. The rise may be marginal, from 0.25% to 0.5%, but the move has prompted a mixed reaction from the nation's business community.

    The Federation of Small Businesses (FSB), the trade body that represents the views of more than 160,000 private firms, warned that the rise – though small – could not have come at a worse time

    'Today’s rate rise will mean yet more cost pressures for small firms as they battle spiralling prices and flagging consumer demand,' said Mike Cherry, national chairman of the organisation.


    Small firms are already failing to take advantage of external finance, which is hampering their growth potential, Mr Cherry argued.

    'We have a chronic issue with permanent non-borrowers in the small business community,' he said. 'Today’s rate increase could heighten the sense that borrowing is too expensive if you’re a small firm. 

    'That would threaten investment, growth and job creation. Just one out of 10 UK firms applies for funding at present, according to official statistics.

    The response from lobbying organisation CBI, which represents the interests of larger businesses, was more sanguine. 'While it’s the first rate rise in over a decade, it is only taking the rate back to the level seen in August 2016 and at 0.5% it remains near rock bottom,' said chief economist Rain Newton-Smith. However, she added that business leaders will be watching consumer reaction closely in case this spooks the man on the street. 

    Last month brought us a slump in consumer confidence and a dip in retail sales, and the rates rise could make consumers more reluctant to open their wallets. This would be bad news so close to Christmas, with many retailers banking on bumper festive revenues.


    Following the announcement, Sterling took a tumble, falling by more than a cent against both the euro and the dollar. (Usually, a rate rise would push sterling up as it encourages people to hold pounds in British banks, but this time it was expected and therefore already priced in.) This has the potential to hurt British exporters, who have been experiencing healthier order books as a result of the cheaper pound. 

    'The main impact of a hike is a likely reduction in confidence for consumers and firms already rattled by ongoing Brexit uncertainties and an erosion of growth that is already tepid,' commented Phil McHugh, a senior analyst at forex firm Currencies Direct. 'Some have argued the economy is still too fragile to cope with increased borrowing costs.'

    Newer start-ups are also likely to be caught on the hop by the rates rise, having never experienced one before. Graham Toy, chief executive of the National Association of Commercial Finance Brokers (NACFB), explained: 'Some of the more insightful SMEs may well have factored an interest rate hike into their financial plans but with interest rates having been so low for so long, many SMEs will have just assumed the benign cost of borrowing will continue.'

    Mortgage payments may rise for many homeowners following today’s announcement and the FSB warns that this could have a knock-on effect on Britain’s businesses too. 

    'You need to consider the fact that, for a typical micro business owner, personal and business finance are closely interlinked,' says Mr Cherry. 'If mortgage and car leasing payments start to rise that’s less money to play with when it comes to expanding the business and taking on new people.'

    The impact of this rise may be limited in the short-term. But if Mark Carney pushes through further rises over the coming months, it could be a long, gruelling winter for Britain's small firms.