đ All Aboard the Blockchain Train đ
Diving into Blockchain technology and how it can be used to increase transparency, accountability, and trust in a time when companies need to.
Welcome to BYB number 10! I took last week off from BYB as I was back in NY visiting friends on Long Island and making sure my apartment is still there (it is). I will say the overall travel experience is much nicer, with fewer people and less stressful. Wearing a mask wasnât a problem until a got to New York in the middle of a heatwave⌠temps hit 96 degrees with 100% humidity. I have to say, that wasnât fun with a cloth mask on but you arenât doing it for your own sake, youâre doing it for others. Stay masked up so we can get back to some sort of normality! Even if it is a Guy Fawkes mask (shoutout Mr.Robot/Fsociety)âŚ
Speaking of Mr. Robot, our topic this week centers around hacking â the process to exploit weaknesses in a computer system or network â but we focus this week specifically around what cannot be hacked. The blockchain. Letâs dive inâŚ
As always, I want to link to last weekâs post of BYBthat makes the case for plant-based diets đą, incentivizing companies prioritizing lower emissions, and slightly altering your diet to reduce greenhouse gases. Find all my other blog posts here for context. Once again, the goal of the blog is to better your bread and make your money materially important. Feel free to subscribe to the blog via email at the bottom of this post and as always, make sure to shoot me an email anytime with any questions at cmahoney@justcapital.com, connect with me on LinkedIn, reach out on Twitter @iCharlieMahoney, and follow me on Medium (Charlie Mahoney). Beyond happy to help.
Now, the Blockchain is incredibly confusing to many people. Usually, I will look to my brother for advice as he is in the decentralized finance world (shoutout Blockchain Brian) and runs a separate newsletter called The Balance if youâre interested in supporting him as well. But the truth is, it is only confusing because it is a new technology with limitless potential that no one has ever seen before. Imagine explaining the internet TODAY to someone back in 1990, they wouldnât even know how to process Amazon, social media, smartphones, apps, etc. Blockchain has been called Web 3.0 by many and hailed as the main framework for the new âdecentralized internetâ.
Most people think Blockchain is Bitcoin. Well â they arenât wrong. Bitcoin is a digital currency that exists on the blockchain and famously used for payment by people on sites like the Silk Road as it is untraceable, but the currency has incredible potential. Blockchain has even more.
Bitcoin is the digital asset that first utilized Blockchain technology, emerging after the financial crisis in response to distrust of the US banking system (read this NYT article on Crypto, the best explanation I have read). More recently Bitcoin is being hailed as a store of value â something akin to digital gold â and is peaking in price once again as the world falls victim to COVID-19 Crisis. Both Bitcoin and Gold are seen as alternative, decentralized, stores of value when compared to currencies. Currencies are dependent on a countryâs stability, i.e. look at the hyperinflation in Venezuela. If the US government keeps issuing money and lowering interest rates, that decreases the value of the dollar. Why wouldnât you allocate some of your money to a stable store of value that is unaffected by government corruption or political instability?
Bitcoin continues to see its value go to the moon đ and Gold is hitting all-time highs this week as well and is up over 30% in 2020 so far.
So how does Blockchain technology â the technology that powers Bitcoin â have an impact on sustainability and why should I care?
What actually is the blockchain? My favorite way to think of the blockchain is through the spreadsheet analogy. From ConsensysâŚ
âImagine a blockchain as a spreadsheet. Everyone has access to the data within each individual cell and saves a copy to their personal computer. The data within the spreadsheet is shared between multiple people. However, nobody can alter an individual cell or change the existing information. In the blockchain world, we call this âimmutableâ â the inability to change or modify something over time. Now, imagine you wanted to add a new cell to the spreadsheet. This would require approval from members who have access to the spreadsheet data. Once a majority of the spreadsheet owners approve the new cell, the data would then be added to the main spreadsheet.â
Basically, Blockchain technology offers a system of recording information in a way that makes it very hard or near-impossible to alter or hack. In a world of trust issues, concerns around data privacy, the need to increased accountability â leveraging Blockchain technology is an easy way for companies to become more transparent and focused long-term. Letâs look at how Blockchain Technology can play a role in ESG/sustainability:
Supply Chain is the most obvious initial use case. Examples includeâŚ
First, looking at Walmart, they are working closely with IBM to implement traceability mechanisms into the companyâs food supply chain. As part of Walmartâs pilot program, testing revealed that using blockchain reduced the time it took to trace a package of mangoes from the farm to the store to just two seconds from days or weeks. Think if you are at the store and can scan a QR code with your phone to see exactly what farm your fruit came from, along with that farmerâs sustainability practices, if they use GMOs, etc. That would be pretty awesome.
Second, look at The World Wildlife Foundation (WWF). The foundation is helping the Pacific Island tuna industry to implement blockchain technology to verify the sources of tuna sold to fish markets to ensure they havenât been sourced illegally. When used to track supply chains, blockchainâs visibility can help companies detect problems or risks faster and more readily trace the origin of any problems.
A streamlined supply chain, like that of Walmart above, helps companies optimize processes, come up with innovations, and increase productivity. These result in reduced operating costs and, more importantly, reductions in waste. They can also aid in the conservation of resources.
Brands say blockchain can be used to meet consumer demands for sustainability and safety. Sustainability has an important marketing side effect â through a transparent history of product transactions, companies can more effectively tell brand stories and build consumer confidence. Through a shared ledger where all transactions are visible, brands can reassure customers that products are safe and sourced legally and ethically.
Data privacy is the next best use case.
Without a single point of entry, it is more difficult for hackers to either steal the data or corrupt it for ransom purposes. Look at Equifax or Facebook with Cambridge Analytica.
Improving corporate governance by offering greater transparency and better data protection, as the lack of a centralized source of information makes blockchain harder for hackers to attack.
Lastly, making the case for Blockchain to enable decentralization and new internet. Let Richard Hendricks explainâŚ
As it goes mainstream in Shows like silicon valley, many people believe the decentralized internet based on blockchains will be the World Wide Web 3.0 and change the way the world works.
The blockchain decentralizes the single source of failure. After the financial crisis when banks like Lehman Brothers went bankrupt and others needed multibillion-dollar bailouts, we now see a movement for decentralization and the need to control your own information. Why wouldnât you want that? We go on Instagram and see creepy advertisements for things we were talking about earlier, we hop on Google and see ads for things we were shopping for on Amazon only yesterday. Our data is being mined, refined, redistributed, and sold all over the internet in a matter of seconds. Even look at cell phone companies like AT&T, Verizon, T Mobile, and Sprint that were fined 200 million dollars this year for selling your location data to third parties. I, personally, am a big advocate for decentralization as you can control the distribution of your information and data instead of putting your entire trust into companies that create 100-page long user agreements with secret language in them. For example, take a look at Facebookâs terms of agreement you accept when joining: https://www.facebook.com/terms.php. PLEASE scroll to the âpermissions you give usâ section, it will absolutely freak you out. (AKA nothing is ever truly deleted from Facebook and âYou give us permission to use your name and profile picture and information about actions you have taken on Facebook next to or in connection with ads, offers, and other sponsored content that we display across our Products, without any compensation to you.â)
The original idea of the internet was to post news articles, pictures, blogs, and games freely for anyone to access. It was the gateway to giving a voice to all people. Looking to present day, so much of our data/information is controlled by Facebook and Google. Even recently, Facebook recently introduced the Libra, its own cryptocurrency, across the three platforms it owns â Facebook, Instagram, and Whatsapp. These three platforms total to over 2.7 billion users. Now, that number is combined but given that the entire worldâs population is only 7.8 billion people, we could even say that Facebook â a website with its own digital population, communities, crime, stores, marketplaces, news, events, weather, job postings, and now even its own currency â is the biggest country in the world. The beginning of this Wired Article draws quite a few parallels between Facebook and our physical world, how we live online versus how we live in real life. It is eerily similar.
Okay⌠Iâll stop ranting (Sorry, Kay). The idea is that the Blockchain can benefit us in many ways. It can reduce costs and increase transparency in the supply chain, helping companies tell a better story and build consumer confidence. It can be used for data privacy to ensure that you own your data and it is immutable. Finally, it can allow us to own our data while re-establishing trust and accountability in the companies we interact with. The blockchain will be commonplace as we move to an increasingly digital world and will become the higher standard.
OK â letâs look at our âĄShock StocksâĄand ETFs of the week.
âĄShock StocksâĄ
đWalmart (Ticker: WMT)
Other than pioneering Blockchain integration above, Walmart has done a great job advocating for their workers, customers, and communities during the COVID crisis.
(1) They have committed almost $1 billion for special cash bonuses for U.S. hourly associates. (2) Hired 200,000 workers, more than half of whom are temporary. Some came from hard-hit industries such as restaurants and hospitality. (3) Established Covid-19 sick-leave policy with up to two weeks of pay.
đFacebook (Ticker: FB)
Ordered to pay a $5 billion dollar penalty in the US for âdeceivingâ users about their ability to keep personal information private, after a year-long investigation into the Cambridge Analytica data breach.
How to divest? The problem is that Facebook is basically in every single fund if you want to invest in the US stock market. The key here if you still want to invest in an ETF with S&P 500 Exposure is to divert your assets from investing in an S&P 500 ETF that holds a 2.12% position in Facebook but to invest in the Invesco S&P 500 Equal Weight Fund (Ticker: RSP) as it only holds a .22% weight in Facebook.
âď¸ ETF Picks âď¸
Lastly, an ETF I want to call out is the Ark Next Generation Internet ETF (Ticker: ARKW). ARKK invests in artificial intelligence, big data, cloud computing, cybersecurity, and blockchain technology. The ETF has a trailing 1-year return of 62.86% and some of the holdings include Bitcoin (via the GRAYSCALE BITCOIN TRUST) and Tesla. It is one of my favorite ETFs and Ark is a brilliant ETF provider.
There is also a purely Blockchain focused ETF is called the Reality Shares Nasdaq NexGen Economy ETF under ticker BLCN. The Index is designed to measure the returns of companies that are committing material resources to developing, researching, supporting, innovating or utilizing blockchain technology for their use or for use by others.
Thatâs it for this week, I hope you enjoyed. Have a great weekend and go buy some Bitcoin đđđ.
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Disclaimer: I aim to provide accurate information on personal finance and investing, but it may not apply directly to your individual situation. I am not a financial advisor and we recommend you consult with a financial professional before making any serious financial decisions. The content on Better Your Bread is informational and educational purposes, thank you!