METAVERSE. Hype or Disruptive Technology?

It is my great pleasure to join some of Europe’s leading B2B marketing and e-commerce experts at this year’s PROJECT NETWORKS STRATEGY SUMMIT to discuss the potential that arises from technological advances and initiatives such as the Metaverse. In the introductory keynote on the topic, I will explore the following topics in more depth:

Keynote: METAVERSE. Hype or all-changing?

The History of the Metaverse: From Snow Crash to Google Maps and Mark Zuckerberg’s $10 billion visions of a digital world.
Is the Metaverse becoming a reality?
Data: Be prepared – The Metaverse will increase the demand for for data engineers and AI developers
Marketing in the Metaverse

For everyone who‘s already interested to prepare for the disussion, a quick introduction by OpenAI‘s ChatGPT to the topic: METAVERSE. Hype or Disruptive Technology

The metaverse is a term that has gained popularity in recent years. It refers to a virtual world where people can interact with each other through avatars and digital goods. Some consider the metaverse to be hype, others see it as a breakthrough technology that will change various aspects of our lives. This paper will explore the concept of the metaverse and evaluate whether it is hype or a disruptive technology.

First of all, it is important to understand what the metaverse is and how it works. The metaverse is a collective, virtual, shared space created through the convergence of various technologies, including augmented reality (AR), virtual reality (VR), blockchain and the Internet of Things (IoT).^1 The metaverse provides a multidimensional experience that allows users to interact in real time with each other, digital assets and real objects. The idea of the metaverse is not new and has already been taken up in various media such as films, video games and books. However, recent technological advances have made it possible to create a metaverse that is closer to reality.

One of the main arguments for the metaverse being hype is that it is still at an early stage of development and there is much speculation about its possible uses. Currently, the best-known example of the metaverse is the popular online game Second Life, which was launched in 2003.^2 Second Life has successfully created a virtual world in which users can interact with each other, but it has not had a significant impact on the real world. Moreover, current applications of the metaverse are limited to games, social networking and digital art. This has led some to believe that the metaverse is hype and will not have a significant impact on society.

On the other hand, the metaverse has the potential to be a disruptive technology that will change various aspects of our lives. One of the most important areas where the metaverse could have an impact is the economy. The metaverse enables the creation and exchange of digital goods that can have real value. This has led to the emergence of non-fungible tokens (NFTs), which are unique digital assets that can be bought and sold on the blockchain. By 2021, the market for NFTs reached $2.5 billion, and is expected to continue growing in the coming years.^3 The metaverse has also opened up new opportunities for businesses, including virtual real estate, advertising and e-commerce.

Another area where the metaverse could have an impact is education. The metaverse offers a new way of learning that is immersive and interactive. For example, students could use the metaverse to research historical events, visit different countries or even explore space. This would allow for a more engaging and memorable learning experience that could lead to better academic outcomes.

In conclusion, although considered hype by some, the metaverse has the potential to be a disruptive technology that will change various aspects of our lives. The metaverse offers a new way of interacting with each other, with digital goods and with the real world. It has the potential to revolutionise business, education and other areas of our lives. Although the metaverse is still at an early stage of development, it is clear that it will continue to be of interest to researchers, entrepreneurs and investors in the years to come.

Sources:

Al-Rikabi, A. (2020). Metaverse: A virtual shared space. Advanced Science News, 7(9), 1903421.
Wagner, J. (2021). The story of the metaverse. VentureBeat.
Statista. (2021). Market capitalisation of non-fungible tokens

Hot off the press: What makes a stablecoin

Author: Angelika Breinich-Schilly

Published on 11 January 2023 at Springer Professional – Follow this LINK to original text in German. Translation created with deepL.com

Experts quoted in the article: Stefan Behringer, Leef H. Dierks, Florian Follert, Jochen Werne, Dr. Johannes Winter, Joachim Wurmeling

What distinguishes so-called stablecoins from cryptocurrencies like Bitcoin, Ether & Co? By linking to one or more currencies, this form of digital money forms a bridge to classic FIAT currencies. How this works and where problems lurk is shown in our “Compact explained”.

Stablecoins are digital tokens, assets of private issuers that can also take on money functions. According to Leef H. Dierks, they usually replicate the value of a reserve currency, such as the US dollar, or even a whole bundle of official currencies.

Thus, they do not have to represent a claim on the issuer (the reserve currency) itself, but can also be backed by demand deposits of various currencies, securities or other assets. This so-called peg reduces the volatility of stablecoins compared to classic virtual currencies, such as Bitcoin,” writes the Springer author in the book chapter “Virtual Currencies and Monetary Policy” on page 234.

According to Dierks, stablecoins take on a bridging function to fiat currencies, “especially since, as long as they are backed by legal tender, they do not challenge the currency monopoly of central banks (analogous to bank deposits) at any time”.

Stablecoins make new business models possible

According to a thesis paper by the Landesbank Baden-Württemberg (LBBW) from mid-December 2022, stablecoins do open up new business models. At the same time, however, they are “anything but stable, but are subject to the risk of the holders fleeing from them if there are doubts about their collateralisation”. Digital money may have a negative impact on macroeconomic lending and reduce the influence of central banks on the aggregate money supply. One way to regulate it is to require issuers to hold central bank reserves.

The best-known stablecoin project is Tether, which is pegged one-to-one to the US dollar. “There has been repeated criticism of Tether, so that the company behind the issue has since admitted to using not only currency holdings in US dollars to collateralise the issued units of cryptocurrencies, but also other assets (for example, commercial papers of companies),” Stefan Behringer and Florian Follert describe the background in the book chapter “Controlling of cryptocurrencies” (page 187). This also explains why this stablecoin does not correlate exactly with the performance of the US dollar.

Risks of stablecoins

Jochen Werne and Johannes Winter explain in the book chapter “Cash, book money, cryptocurrencies and the digital euro” on page 84 that there are risks for the financial sector if stablecoins become widespread. They could undermine the banks’ deposit business and their business models. The Springer authors see in the central bank cash-backed stablecoins a possibility of a trustworthy transitional solution in hybrid form. This is a stablecoin that demonstrably holds any digital twin in the form of central bank money.

“Due to the tradability of the tokens, the flexibility of book money is paired with the guarantee of physical central bank money. Even the expected damage from a successful attack on the underlying blockchain could thus be minimised, since an unlawful acquisition of power of disposal over assets is quickly restricted in its usability. A regulated expert function guarantees that only central bank money or a digital twin is traded and thus the central supervisory function always lies with the central bank,” say Werne and Winter.

MiCA forms future legal framework

With the Markets in Crypto Assets (MiCA) regulation, the European Union has sewn a legal garment for the crypto industry in the 26 EU states. The new EU regulation is to enter into force by the beginning of 2023 and become effective 18 months later vis-à-vis all market participants.

“MiCA responds to the growth of the cryptoasset ecosystem and integrates a large number of new players into the European supervisory space,” explains Joachim Wurmeling, member of the Executive Board of the Deutsche Bundesbank, in a guest article on the occasion of the Bundesbank Symposium in November 2022. “In future, crypto service providers and issuers of crypto assets will not only have to ensure that the risks arising from the cryptoasset business are adequately managed; they will also have to apply for authorisation to issue crypto assets or to provide crypto services and be subject to ongoing supervision.”

In addition, he said, the regulation also applies to traditional financial institutions that provide services around cryptoassets. The regulatory approach for MiCA is new and is emerging alongside the traditional structure.

Money in the digital age

Hot off the press: Money in the digital age – a Springer Gabler book contribution

It was a pleasure contributing in co-authorship with the AI-expert and friend Dr. Johannes Winter / Jochen Werne to this new Springer Gabler publication ”Praxisbeispiele der Digitalisierung” (Best Practice of Digitilisation) which is available now as e-book and paperback at https://link.springer.com/book/10.1007/978-3-658-37903-2

Cash, Book Money, Crypto Currencies and the Digital Euro

The aim of the chapter in the book is a contribution to the debate of money in the digital age. It combines historical insights into the meaning of money with the latest technological developments, to compare visions of the financial industry with realities and to develop options for action to shape the digital transformation of money.

Abstract: In a world where tech companies are leading campaigns to create a new cryptocurrency and bitcoin is surpassing the US$50,000 mark because a visionary electric car maker wants to recognise the cryptocurrency as a means of payment, some fundamental questions arise: how must money be defined in a digital world to reliably fulfil the characteristics of a universally recognised store of value and medium of exchange? And what changes are in store for the financial industry when so-called stablecoins proliferate and challenge the banks’ classic deposit business and their outdated business models? The aim of this contribution to the debate is to combine historical insights into the meaning of money with the latest technological developments in the digital age, to compare visions of the financial industry with realities and to develop options for action for shaping the digital transformation of money.

All contributions to the book

  1. Management
    1. Front MatterPages 1-1
    2. Chancen und Risiken der digitalen Transformation
      • Mark Harwardt, Andre M. SchmuttePages 3-29
    3. Der Enterprise Transformation Cycle
      • Peter F. -J. SteinhoffPages 31-45
    4. Künstliche Intelligenz für die Geschäftsmodellinnovation
      • Johannes WinterPages 47-64
    5. Künstliche Intelligenz im Management
      • Jeanette Kalimeris, Sabrina Renz, Sebastian Hofreiter, Matthias SpörrlePages 65-82
    6. Bargeld, Buchgeld, Kryptowährungen und digitaler Euro
      • Jochen Werne, Johannes WinterPages 83-99
  2. Marketing
    1. Front MatterPages 101-101
    2. Elektronische Marktplätze – Potenziale, Vor- und Nachteile der Online-Intermediäre
      • Mark Harwardt, Vanessa Julia HaselhoffPages 103-135
    3. Digitale Plattformen – Grundlagen, Herausforderungen und Lösungsansätze
      • Vanessa Julia Haselhoff, Mark HarwardtPages 137-158
    4. Digital Transformation of the Commercial Functions of B2B Companies
      • Axel SteuernagelPages 159-195
    5. Digitale Customer Journey
      • Benjamin BirzerPages 197-210
    6. Service Design in einer digitalisierten Omnikanalwelt: von Kundenreisen und der Möglichkeit zu scheitern
      • Andreas SchölerPages 211-233
  3. Organisation
    1. Front MatterPages 235-235
    2. Herleitung eines möglichen Qualitätssicherungskonzepts für digitale M-Health-Angebote in der Prävention und Gesundheitsförderung
      • Mathias Bellinghausen, Luisa Maria Waerdt, Heiko BaumeisterPages 237-269
    3. Fragilität, Resilienz, Antifragilität von Organisationen: Implikation für digitale Strukturen
      • Thomas Heinrich Steiner, Christian Hager, Matthias SpörrlePages 271-289
    4. Consulting 4.0
      • Jessica NagelPages 291-297
  4. Sport- und Eventmanagement
    1. Front MatterPages 299-299
    2. Eventisierung und Digitalisierung von Sportevents – ein Ausblick auf die Sportveranstaltungen der Zukunft
      • Thomas Apitzsch, Katharina Schöttl, Florian Kainz, Oliver AngermüllerPages 301-308
    3. Eventmanagement 2.0 – Veranstaltungsplanung und -umsetzung im Zeichen der Digitalisierung
      • Thomas Apitzsch, Michael Pfleger, Frederike HaberlandPages 309-325

About Springer Gabler

Springer Gabler Verlag is the leading specialist publisher for the business sector. Its classic and digital teaching materials and specialist media address current business questions and provide reliable, practical solutions.

TIME of MISTRUST

A plea for trust in a time of mistrust. Trust is the foundation on which monetary systems are built. Trust forms the basis of international diplomatic relations and is the foundation for all progress.

But what happens once trust is shaken?

The diplomatic dispute over a multibillion-dollar submarine treaty – which took place three months before the Russian – Ukrainian war, concerns about a new cold war, and the collapse of the Bretton Woods system exactly 50 years ago are the manuscript for this maritime-themed French-American story about money and trust. It is an object lesson for our times, where we are witnessing the emergence of crypto-financial markets and thus stand on the threshold of a new form of money.

TIME OF MISTRUST

by Jochen Werne

After the traditional long summer vacation, France awakens in September from its brief self-created slumber, as it does every year. Life begins to take its usual course, even if some are still reminiscing, perhaps enjoying the first harbingers of post-Covid worry-free life. Not so Philippe Étienne. For him, on the other side of the Atlantic, in Washington, which is actually picturesque at this time of year, autumn begins with a diplomatic thunderstorm. A storm that must have been new even for the 65-year-old gray-haired eloquent ambassador of France. 6160 kilometers away, at the Élysée Palace, Président de la République Emmanuel Macron decides to call his top diplomat in the United States, along with his Australian counterpart Jean-Pierre Thebault, to Paris for consultations. The unprecedented act in Franco-American history is justified by Foreign Minister Jean-Yves Le Drian with the “exceptional gravity” of an Australian-British-American announcement, and impressively underlined with the words “lie,” “duplicity,” “disrespect” and “serious crisis.”

At the heart of this crisis is the surprise announcement by the aforementioned countries to enter into a strategic trilateral security alliance (AUKUS) with immediate effect. An alliance that also provides for the procurement of nuclear-powered submarines for Australia, effectively putting to rest a 56-billion-euro French-Australian submarine order already initiated in 2016. The conclusion of the agreement comes at a time when U.S. President Joe Biden has asserted to the UN General Assembly, “We do not seek – I repeat, we do not seek – a new cold war or a world divided into rigid blocs.” However, experts, such as renowned historian Niall Ferguson, have been talking about this so-called “new cold war” between the U.S. and China since 2019, and it is not about nuclear arms races, but rather about technology supremacy in cyber security, artificial intelligence and quantum computing. Even though nuclear-powered submarines are at the center of the diplomatic dispute, one is quick to note in the AUKUS agreement that cooperation in the aforementioned fields is one of the most important components of the treaty. An objective that is perhaps also congruent with French interests. But the dispute between the old friends is less about the “what” than about the diplomatic “how” – that is, about the breach of trust that is triggered when close allies are simply presented with a fait accompli. Facts that also affect them financially and personally.

Because money and trust are closely interwoven. The trust of a bank that the creditor will repay its debts. A citizen’s trust that the currency in which he or she is paid their salaries is stable. A state’s trust in a currency system that the agreements made there will be honored by all. Georg Simmel, in his “Philosophy of Money,” sums it up this way: “Money is perhaps the most concentrated and pointed form and expression of trust in the social-state order.”

Last year marked the 50th anniversary of another French-American trust-busting melodrama with a maritime backdrop. Benn Steil, senior fellow at the Council on Foreign Relations, describes the moving events of August 6, 1971, in his book, The Battle of Bretton Woods, as follows: “…a congressional subcommittee issued a report entitled ‘Action Now to Strengthen the U.S. Dollar` that concluded, paradoxically, that the dollar needed to be weakened. Dollar dumping accelerated and France sent a warship to pick up French gold from the vaults of the New York Fed.”

At first glance, this dramatic gesture by then French President Georges Pompidou in the final act of the collapse of the Bretton Woods system seems as strange as the withdrawal of ambassadors today. The basis, however, is similar and lay then as now in an equally shaken trust between the great nations that were nevertheless so closely intertwined. Without going deeper into the new monetary order created after World War II, with the U.S. dollar as the anchor currency, it is important to understand the reason for the French revolt evident in the “White Plan.” The plan provided that the U.S. guaranteed the Bretton Woods participating countries the right to buy and sell gold indefinitely at the fixed rate of $35 per ounce. The dilemma of this arrangement became apparent early on. For by the end of the 1950s, dollar holdings at foreign central banks already exceeded U.S. gold reserves. When French President Charles de Gaulle asked the U.S. to exchange French dollar reserves for gold in 1966, the FED’s gold reserves were only enough for about half that amount. The ever more deeply anchored loss of confidence forced the American president Richard Nixon on August 15, 1971 to cancel the nominal gold peg and the so-called “Nixon shock” ended the system as it was.

And where something ends something new can or will inevitably begin.

Today we live in a world where the stability of our currency is based on our confidence in government fiscal policy, the economic strength of our country, and the good work of an independent central bank. However, we also live in a time when new currency systems are already looming on the dense horizon. The basis for this was laid in 2008, not surprisingly, by one of the most serious crises of confidence in the international banking system that modern times have seen. And the new systems are being implemented with the help of cutting-edge distributed ledger blockchain technology. The new, with its decentralized nature, is challenging the old. While many of the new currencies in the crypto world, such as bitcoin, are subject to large fluctuations, stablecoins promise a link and fixed exchangeability to an existing value, such as the US dollar or even gold. However, the old Bretton Woods challenge of being able to keep this promise at all times remains in the new world. Millions of dollars in penalties imposed by the New York Attorney General’s Office on the largest U.S. dollar stablecoin, Tether, for not being fully verifiable do little to help trust, especially when less than 3 percent of the market capitalization is actually deposited in U.S. dollar cash. As always with new ones, trust has to be built up. This can be done privately, perhaps with a stablecoin backed 100% by central bank money, or by the state, with well thought-out central bank digital currencies, such as the digital euro planned by the European Central Bank.

We live in a world of perpetual rapid change and trust is, as Osterloh describes it, “the will to be vulnerable.” Without trust, there are no alliances, no togetherness, no progress.

Philippe Étienne was back in autumnal Washington after just a few days and has since been working again on what diplomats are best trained for – building trust.

Sources

Billon-Gallan, A., Kundnani, H. (2021): The UK must cooperate with France in the Indo-Pacific. A Chatham House expert comment. https://www.chathamhouse.org/2021/09/uk-must-cooperate-france-indo-pacific (Retrieved 24.9.2021)

Brien, J. (2021): “Stablecoin without stability”: Tether and Bitfinex pay $18.5 million fine. URL: https://t3n.de/news/stablecoin-tether-bitfinex-strafe-1358197/?utm_source=rss&utm_medium=feed&utm_campaign=news (Retrieved: 9/30/2021).

Corbet, S. (2021): France recalls ambassadors to U.S., Australia over submarine deal. URL: https://www.pressherald.com/2021/09/17/france-recalls-ambassadors-to-u-s-australia-over-submarine-deal/ (Retrieved 9/25/2021).

Ferguson N. (2019): The New Cold War? It’s With China. And It Has Already Begun. URL: https://www.nytimes.com/2019/12/02/opinion/china-cold-war.html (Retrieved: 9/30/2021).

Graetz, M., Briffault, O. (2016): A “Barbarous Relic”: The French, Gold , and the Demise of Bretton Woods. URL: https://scholarship.law.columbia.edu/cgi/viewcontent.cgi?article=3545&context=faculty_scholarship p. 17 (Retrieved 9/25/2021).

Osterloh, M., Weibel, A. (2006): Investing trust. Processes of trust development in organizations, Gabler: Wiesbaden.

Steil, B. (2020): The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the new world, p. 377.

Stolze, D. (1966): Does de Gaulle defeat the dollar? In ZEIT No. 36/1966. URL: (https://www.zeit.de/1966/36/besiegt-de-gaulle-den-dollar/komplettansicht (Retrieved: 9/26/2021)

The Guardian Editorial (2021): The Guardian view on Biden’s UN speech: cooperation not competition URL: https://www.theguardian.com/commentisfree/2021/sep/22/the-guardian-view-on-bidens-un-speech-cooperation-not-competition(Retrieved: 9/29/2021)

Unal, B., Brown, K., Lewis, P., Jie, Y. (2021): Is the AUKUS alliance meaningful or merely a provocation – A Chatham House expert comment. URL: https://www.chathamhouse.org/2021/09/aukus-alliance-meaningful-or-merely-provocation (Retrieved: 9/24/2021).

Time Online (2021): France sees relationship in NATO strained. URL: https://www.zeit.de/politik/ausland/2021-09/u-boot-deal-frankreich-australien-usa-streit-nato-jean-yves-le-drian?utm_referrer=https%3A%2F%2Fmeine.zeit.de%2F (Retrieved: 9/25/2021)

Bank Blog Crypto

Bank Blog Publication: WHERE BITCOINS MEET HIGH SECURITY FACILITIES

State-of-the-art crypto custody

by JOCHEN WERNE

Original published in German at DER-BANK-BLOG. Please click HERE Translation created with DeepL.com

14 February 2022

Digital assets are as safe as their encryption? Unfortunately not. After all, the dangers do not only come from hackers. Security must be thought of more broadly, as examples of state-of-the-art crypto custody solutions show.

The protection of crypto assets can only be guaranteed if there is a clear awareness of the dangers. Attacks on digital assets such as cryptocurrencies or asstes no longer end with the numerous attack vectors of cyberattacks, but unfortunately already extend to the use of physical force against their owners. It is therefore important to raise awareness of possible dangers, as shown by examples of the state of today’s state-of-the-art crypto custody solutions.

According to Investing.com, the total number of cryptocurrencies as of 12 December 2021 is 9,004 with a total market capitalisation of US$2.24 trillion. After Bitcoin, Ether, XRP, Litecoin and co, the Libra Coin initiated by Facebook received unprecedented media attention, triggered by the announcement of the project alone. And the emotionality and sharpness with which the discussion was conducted shows how seriously the topic is taken internationally at the state level. It is about reputation, influence, control, responsibility and only in the last instance about technology. And for every investor, it is first and foremost about protecting his assets.

The right sense of danger

In the future, protecting our assets will not just mean keeping our wallet in the deepest pocket of our jacket or handbag or turning the key to our flat twice in the lock. In the future, we will have invested part of the fruits of our labour, our fortunes, in crypto investments and cryptocurrencies. This part of our wealth needs to be kept safe, and we need to understand exactly where and how. This requires that we understand the risks. The sense of danger must therefore adapt, as must the lure of the new opportunities. For this, it is of utmost importance to understand the real dangers and to take appropriate protective measures.

As yet, however, this sense does not seem to be all that pronounced. According to Slowmist Hacked , which specialises in aggregating information on detected attacks on blockchain projects, apps and tokens, the total amount of crypto assets stolen in 122 different attacks in 2020 is $3.78 billion. Even though the evaluation is based on the Bitcoin peaks of January 2021, it clearly shows the importance of greater efficiency in security.

In comparison, only 1.63 billion US dollars were captured in the ten largest bank robberies of all time. Considering that the largest robbery took place when dictator Saddam Hussein ordered his son Qusay to withdraw nearly US$1 billion from Iraq’s central bank with a handwritten note, and the tenth largest robbery netted the perpetrators just US$18.9 million, crypto-cybercrime has become an extremely lucrative business.

Crypto custody: Do hot and cold wallets offer sufficient security?

The famous military scientist Carl von Clausewitz argued in the early 19th century: “An army on the defensive, without fortifications, has a hundred vulnerable points; it is a body without armour”. “We must always retain sufficient forces beyond the garrisons to be a match for the enemy in the open field, unless we can rely on the arrival of an ally to relieve our fortresses and free our army.” In cryptocurrencies, the wallet is the fortress and the blockchain – the distributed ledger – is the army in the open field. It is the job of modern crypto custodians – as guardians of their clients’ assets – to ask themselves daily what additional measures can be taken to best protect cryptocurrencies and crypto assets.

Crypto custody solutions typically involve a combination of hot storage or crypto custody that is connected to the internet and cold storage or crypto custody that is not. Rakesh Sharma comments on Investopia, “Both types of storage have advantages and disadvantages. For example, hot storage is connected to the internet and therefore offers better liquidity. But hot storage options can be vulnerable to hacks due to online presence. Cold storage solutions offer more security. However, it can be difficult to generate liquidity from crypto holdings in the short term because they are offline. Vaulting is a combination of both types of cryptocurrency custody solutions, where the majority of funds are stored offline and can only be accessed with a private key.”

The risk of becoming a victim of physical violence in private crypto custody

The risk of theft of crypto assets is no longer solely about digital robbery in cyberattacks and hacks. Physical violence against the owner of crypto assets or threats to family members is already sadly present. In November 2021, for example, the American co-founder of Tuenti, once billed as the Spanish Facebook, Zaryn Dentzel, was the victim of such an attack in his private Madrid flat.

Dentzel stated on record that the gangsters beat him and stabbed him in the chest with a knife while shooting him several times with a Taser.

Thus it becomes clear that the protection of crypto-assets must also go hand in hand with the fact that a perpetrator who is prepared to use physical force understands in advance that his alleged victim does not readily have power of disposal over his total crypto-assets. Cold storage not at home, but in a cold space, for example a high-security facility, can provide the necessary protection.

State of the art crypto storage meets high security facilities

In July 2021, Prosegur Crypto – the crypto custody subsidiary of Prosegur, one of the largest security companies in the world – announced the creation of the world’s first “digital asset custody bunker”. The consistent combination of a physically and digitally inaccessible environment here is unique to date.

In collaboration with cybersecurity company GK8, Prosegur Crypto brings together all the infrastructure, facilities, technologies and security protocols required to minimise all risk areas identified in the digital asset custody chain.

The solution consists of state-of-the-art cyber security systems provided by GK8’s patented technology and the highest level of a military-grade secured protection environment. It is based on a “360° inaccessibility” approach, mapping over 100 protection measures into 6 integrated layers of security. This ensures the highest possible protection against physical and cyber attacks.

The HSM (hardware security module, a device that generates, stores and protects cryptographic keys) is housed in a military grade briefcase within the high security vault. This vault is only accessible to a limited number of people who manage the data manually and offline. Staff have restricted access to the information they handle to avoid any risk of internal theft and work from a secure facility where there is no risk of physical attack, copying or theft of systems or passwords. In the event of an unauthorised attempt to access the HSM, its contents are permanently deleted. Immediately, a recovery plan is activated, including a protocol for recovering private keys using seeds located in various other vaults.

The module is connected to an MPC (Multi-party Computation) system, which provides a fast signature process on a state-of-the-art computer network and generates transactions on the blockchain without a direct internet connection. This minimises the possibility of fraudulent access and eliminates any potential vector for cyber attacks. These system features are patented and represent a highly differentiated offering in the market.

Plea for openness: danger recognised – danger averted

The analysis shows that from Clausewitz to the latest developments in cyber security and crypto-custody, the security perspective has hardly changed. The more you rely on a single system or fortress, the more vulnerable you are. It’s all about layered security, which makes it time-consuming and very costly for attackers to get what they desperately want.

We are still only at the beginning of a new era for our monetary systems. An era driven by technology in which it is increasingly important for every actor to develop a good understanding of it in order to build sustainable ones. Technology has never been right or wrong, only the way we humans use it can make it so.

New technologies offer the opportunity to make our world more prosperous for all – let’s use it!

ZEIT DES MISSTRAUENS

TEASER

Ein Plädoyer für Vertrauen in einer Zeit des Misstrauens. Vertrauen ist die Grundlage, auf der Währungssysteme aufgebaut sind. Vertrauen bildet  die Basis internationaler diplomatischer Beziehungen und ist die Grundlage für jeden Fortschritt. 

Doch was passiert, wenn das Vertrauen einmal erschüttert ist? 

Der aktuelle diplomatische Streit um einen milliardenschweren U-Boot-Vertrag, die Sorge um einen neuen kalten Krieg und der Zusammenbruch des Bretton-Woods-Systems vor genau 50 Jahren sind das Manuskript für diese maritim angehauchte französisch-amerikanische Geschichte über Geld und Vertrauen. Sie ist ein Lehrstück für unsere heutige Zeit, wo wir das Entstehen von Kryptofinanzmärkten miterleben und somit an der Schwelle zu einer neuen Form des Geldes stehen.

ZEIT DES MISSTRAUENS

von Jochen Werne

Nach dem traditionellen langen Sommerurlaub, erwacht Frankreich im September wie jedes Jahr aus dem kurzen selbst kreierten Dornröschenschlaf.  Das Leben beginnt seinen gewohnten Gang zu nehmen, auch wenn manch einer noch in Erinnerungen schwelgt und dabei vielleicht die ersten Vorboten post-Covid-sorgenfreien Lebens genießt.  Nicht so Philippe Étienne. Für ihn beginnt auf der anderen Seite des Atlantik, im für diese Zeit eigentlich malerischen Washington, der Herbst mit einem diplomatischen Gewittersturm. Ein Unwetter, das selbst für den 65-jährigen grau-melierten eloquenten Botschafter Frankreichs neu gewesen sein dürfte. 6 160 Kilometer entfernt beschließt im Élysée-Palast Président de la République Emmanuel Macron seinen Spitzendiplomaten in den USA, samt seines australischen Amtskollegen Jean-Pierre Thebault, zu Konsultationen nach Paris abzuberufen.  Der in der französisch-amerikanischen Geschichte einmalige Akt wird von Außenminister Jean-Yves Le Drian mit der „außergewöhnlichen Schwere“ einer australisch-britisch-amerikanischen Ankündigung gerechtfertigt und mit den Worten „Lüge“, „Doppelzüngigkeit“, „Missachtung“ und „ernste Krise“ eindrucksvoll unterstrichen. 

Im Mittelpunkt dieser Krise steht die überraschende Ankündigung der genannten Länder ab sofort ein strategisches trilaterales Sicherheitsbündnis (AUKUS) einzugehen. Ein Bündnis, welches auch die Beschaffung atomgetriebener U-Boote für Australien vorsieht und somit einen bereits 2016 initiierten 56 Milliarden Euro schweren französisch-australischen U-Boot- Auftrag quasi ad acta legt. Der Abschluss des Abkommens fällt in einen Zeitraum in welchem US-Präsident Joe Biden vor der UN-Generalversammlung beteuert: „Wir streben nicht – ich wiederhole: wir streben nicht – einen neuen kalten Krieg oder eine in starre Blöcke geteilte Welt an“. Über diesen sogenannten „neuen kalten Krieg“ zwischen den USA und China sprechen Experten, wie der bekannte Historiker Niall Ferguson jedoch bereits seit 2019. Es geht hierbei nicht um atomares Wettrüsten, sondern vielmehr um die Technologievorherrschaft in Cyber Security, Künstlicher Intelligenz und Quantum Computing. Auch wenn nukleargetriebene U-Boote im Zentrum des diplomatischen Disputs stehen, so stellt man im AUKUS-Abkommen doch schnell fest, dass die Zusammenarbeit in den oben genannten Feldern einer der wichtigsten Bestandteile des Vertrags ist.  Ein Ziel, welches vielleicht auch mit französischen Interessen kongruent ist. Doch geht es im Streit zwischen den alten Freunden im ersten Moment weniger um das „Was“, sondern viel mehr um das diplomatische „Wie“ – das heißt, um den Vertrauensbruch, der ausgelöst wird, wenn man enge Bündnispartner einfach vor vollendete Tatsachen stellt. Tatsachen, die sie auch finanziell und persönlich betreffen. 

Denn Geld und Vertrauen sind eng verwoben. Das Vertrauen einer Bank, dass der Gläubiger seine Schulden zurückbezahlt. Das Vertrauen eines Bürgers, dass die Währung, in der er oder sie ihre Gehälter ausbezahlt bekommt, stabil ist. Das Vertrauen eines Staates in ein Währungssystem, dass die dort getroffenen Vereinbarungen von allen eingehalten werden.  Georg Simmel bringt es in seiner „Philosophie des Geldes” so auf den Punkt: „Geld ist die vielleicht konzentrierteste und zugespitzteste Form und Äußerung des Vertrauens in die gesellschaftlich-staatliche Ordnung.“ 

Eine weiteres französisch-amerikanisches Vertrauensbruchsmelodrama mit maritimer Untermalung jährt sich in diesem Jahr zum 50. Mal. Die bewegenden Ereignisse des 6. August 1971 beschreibt Benn Steil, Senior Fellow des Council on Foreign Relations, in seinem Buch „The Battle of Bretton Woods wie folgt: „…ein Unterausschuss des Kongresses gab einen Bericht mit dem Titel  ´Action Now to Strengthen the US-Dollar` heraus, der paradoxerweise zu dem Schluss kam, dass der Dollar geschwächt werden müsse. Das Dollar-Dumping beschleunigte sich und Frankreich schickte ein Kriegsschiff, um französisches Gold aus den Tresoren der New Yorker Fed abzuholen.“ 

Diese dramatisch anmutende Geste des damaligen französischen Präsidenten Georges Pompidou im finalen Akt des Zusammenbruchs des Bretton-Woods Systems wirkt auf den ersten Blick genauso befremdlich wie der Abzug der Botschafter heute.  Die Basis jedoch ähnelt sich und lag damals wie heute in einem ebenfalls erschütterten  Vertrauen zwischen den doch so eng verwobenen großen Nationen. Ohne tiefer auf die nach dem Zweiten Weltkrieg geschaffene neue Währungsordnung mit dem US-Dollar als Ankerwährung eingehen zu wollen, ist es wichtig den im „White Plan“ offensichtlichen Grund des französischen Aufbegehrens zu verstehen. Der Plan sah vor, dass die USA den Bretton-Woods-Teilnehmerstaaten garantierten, Gold auf unbestimmte Zeit zum festen Kurs von 35 US-Dollar pro Unze kaufen und verkaufen zu dürfen. Das Dilemma dieser Regelung wurde früh sichtbar. Denn bereits Ende der 1950er Jahren überstiegen die bei ausländischen Zentralbanken befindlichen Dollarbestände die Goldreserven der USA. Als der französische Präsident Charles de Gaulle 1966 die USA aufforderte die französischen Dollarreserven gegen Gold zu tauschen, reichten die Goldvorräte der FED, nur für etwa die Hälfte. Der immer tiefer sich verankernde Vertrauensverlust zwang den amerikanische Präsidenten Richard Nixon am 15. August 1971 die nominale Goldbindung aufzukündigen und der sogenannte „Nixon-Schock“ beendete das System wie es war.

Und dort wo etwas endet kann oder wird zwangsläufig etwas Neues beginnen.

Heute leben wir in einer Welt, in der die Stabilität unserer Währung auf unserem Vertrauen in die staatliche Finanzpolitik, der Wirtschaftskraft unseres Landes und auf der guten Arbeit einer unabhängigen Zentralbank beruht. Wir leben jedoch auch in einer Zeit in der sich am dichten Horizont bereits neue Währungssysteme abzeichnen. Die Basis dafür legte 2008 nicht überraschend eine der schwersten Vertrauenskrisen in das internationale Bankensystem, die die Neuzeit erlebete. Und umgesetzt werden die neuen Systeme mit Hilfe modernster Distributed-Ledger Blockchain Technologie. Das Neue mit seinem dezentralen Charakter fordert das Alte heraus. Während viele der neuen Währungen in der Kryptowelt, wie etwa der Bitcoin, großen Schwankungen unterworfen sind, versprechen Stablecoins eine Bindung und fixe Umtauschbarkeit an einen vorhandenen Wert, wie beispielsweise den US-Dollar oder auch Gold. Die alte Bretton-Woods-Herausforderung, dieses Versprechen auch jederzeit einhalten zu können, bleibt jedoch auch in der neuen Welt bestehen. Von der New Yorker Generalstaatsanwaltschaft verhängte Strafen in Millionenhöhe gegen den größten US-Dollar Stablecoin Tether wegen nicht lückenloser Nachweisbarkeit helfen dem Vertrauen wenig, besonders wenn weniger als 3 Prozent der Marktkapitalisierung auch wirklich in US-Dollar Cash hinterlegt ist. Es gilt wie immer bei neuem, Vertrauen aufzubauen. Sei es privatwirtschaftlich durch eventuell einen zu 100% mit Zentralbankgeld hinterlegten Stablecoin oder staatlich, mit durchdachten Central Bank Digital Currencies, wie dem von der Europäischen Zentralbank geplanten digitalen Euro.

Wir leben in einer Welt immer währenden schnellen Wandels und Vertrauen ist, wie Osterloh es beschreibt, „der Wille sich verletzlich zu zeigen“. Ohne Vertrauen gibt es keine Bündnisse, kein Miteinander, keinen Fortschritt. 

Philippe Étienne war bereits nach ein paar Tagen zurück im herbstlichen Washington und arbeitet seither wieder daran wofür Diplomaten bestens ausgebildet sind – Vertrauen zu schaffen.

Quellen

Billon-Gallan, A., Kundnani, H. (2021): The UK must cooperate with France in the Indo-Pacific. A Chatham House expert comment. https://www.chathamhouse.org/2021/09/uk-must-cooperate-france-indo-pacific (Abgerufen 24.9.2021)

Brien, J. (2021): „Stablecoin ohne Stabilität“: Tether und Bitfinex zahlen 18,5 Millionen Dollar Strafe. URL: https://t3n.de/news/stablecoin-tether-bitfinex-strafe-1358197/?utm_source=rss&utm_medium=feed&utm_campaign=news (Abgerufen: 30.9.2021)

Corbet, S. (2021): France recalls ambassadors to U.S., Australia over submarine deal. URL: https://www.pressherald.com/2021/09/17/france-recalls-ambassadors-to-u-s-australia-over-submarine-deal/  (Abgerufen am 25.9.2021)

Ferguson N. (2019): The New Cold War? It’s With China. And It Has Already Begun. URL: https://www.nytimes.com/2019/12/02/opinion/china-cold-war.html (Abgerufen: 30.9.2021)

Graetz, M., Briffault, O. (2016): A “Barbarous Relic“: The French, Gold , and the Demise of Bretton Woods. URL: https://scholarship.law.columbia.edu/cgi/viewcontent.cgi?article=3545&context=faculty_scholarship S. 17 (Abgerufen 25.9.2021)

Osterloh, M., Weibel, A. (2006): Investition Vertrauen. Prozesse der Vertrauensentwicklung in Organisationen, Gabler: Wiesbaden.

Steil, B.  (2020): The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the new world, S. 377 

Stolze, D. (1966): Besiegt de Gaulle den Dollar? In der ZEIT Nr. 36/1966. URL: (https://www.zeit.de/1966/36/besiegt-de-gaulle-den-dollar/komplettansicht (Abgerufen: 26.9.2021)

The Guardian Editorial (2021): The Guardian view on Biden’s UN speech: cooperation not competition URL: https://www.theguardian.com/commentisfree/2021/sep/22/the-guardian-view-on-bidens-un-speech-cooperation-not-competition(Abgerufen: 29.9.2021)

Unal, B., Brown, K., Lewis, P., Jie, Y. (2021): Is the AUKUS alliance meaningful or merely a provocation – A Chatham House expert comment. URL: https://www.chathamhouse.org/2021/09/aukus-alliance-meaningful-or-merely-provocation (Abgerufen: 24.9.2021) 

Zeit-Online (2021): Frankreich sieht Verhältnis in der Nato belastet. URL: https://www.zeit.de/politik/ausland/2021-09/u-boot-deal-frankreich-australien-usa-streit-nato-jean-yves-le-drian?utm_referrer=https%3A%2F%2Fmeine.zeit.de%2F (Abgerufen: 25.9.2021)

Preview: COLD HISTORY. HOT REALITY.

SECURITY BRIEFING. The battlefields of the past as a lesson for the protection of crypto assets today.

COLD HISTORY. HOT REALITY is a contribution to The Yearbook 2022 “Treasury and Private Banking”, edited by Roland Eller. The book is a well-known platform for building the bridge from the traditional to the new decentralised financial world.

COLD HISTORY. HOT REALITY by Jochen Werne is a plea for openness to new technologies, embedded in a historical-social security briefing on money, power and the indispensable need to protect assets. The battlefields of the past provide the framework for lessons on protecting crypto assets in our technology-dominated world and help us gain a basic understanding of the opportunities and threats in our new cyber reality.

COLD HISTORY – HOT REALITY was particularly inspired by conversations and articles from the following thought leaders, to whom I am deeply indebted.

Raimundo Castilla – CEO Prosegur Custodia Digitales, Ghislain D’Hoop – Ambassador of Belgium to Austria, Slovakia, Slovenia and Bosnia and Herzegovina, Permanent Representative to the United Nations, Roland Eller – Founder and CEO of Roland Eller Consulting, Niall Ferguson – Milbank Family Senior Fellow at the Hoover Institution at Stanford University, Christoph Impekoven – Co-Founder micobo GmbH, Benon Janos – CFO flatexDEGIRO Bank AG, Lior Lamesh – Founder & CEO of GK8, Bernd Lehmann – Historian, Commander of the German Navy (ret.), Rakesh Sharma – Author, Thomas Vartanian – Author and Counselor, Heath White – CEO Prosegur Germany, Johannes Winter – Managing Director of the Platform „Learning Systems“ – Germany‘s AI-platform

Preview and excerpt from Chapter I of “COLD HISTORY – HOT REALITY”

WHAT IS PAST IS PROLOGUE

Impressive and powerful, the words “What is past is prologue” are chiselled in white marble at the foot of the statue in front of the National Archives in Washington D.C.. The famous quote from William Shakespeare’s “The Tempest” is a haunting reminder to everyone that history provides the context for the present.

We live in a present that is changing at breathtaking speed. This fact concerns us daily, but if we do not take the time for a little history lesson, we are doomed to painfully repeat the mistakes of the past. More than aware of this realisation is the former CEO of tech giant Alphabet, Google’s parent company. He dedicated the following note to the New York Times bestseller, “The Square and the Tower: Networks and Power, from the Freemasons to Facebook”: “Niall Ferguson … brilliantly illuminates the great power struggle between networks and hierarchies that rages around the world today. As a software engineer familiar with the theory and practice of networks, I was deeply impressed by the insights of this book. Silicon Valley needed a history lesson and Ferguson delivered.” Not only is Eric Schmidt impressed, but many of the thoughts in this article are inspired by Niall Ferguson’s illuminating papers and lectures.

The beauty of the past is that everything that has already happened, successes and failures, can always be explained in detail and serve as lessons for future challenges. Successful leaders use this knowledge to develop solutions to the problems of the future and to develop communication strategies to make their visions understood by others.

This article was written at a time when humanity is in the final stages of a global pandemic that is saddling countries with an unprecedented debt burden. At the same time, a “New Cold War” is emerging and an arms race for technological supremacy has begun. With new possibilities, the old equilibrium is shaken and a new, albeit familiar, competition for power and money begins. All this at a time when crypto-blockchain-based monetary systems are rapidly becoming a new reality.

The article, with its historical analogies, aims to give the reader a better understanding of how money, power and security are closely intertwined. This helps to put quite complex issues into perspective and gives a clear view of the dangers and opportunities of our changing reality.

The world and change are not to be feared, but understood.

Jochen Werne

The new YEARBOOK will be available in Spring 2022. Find out more HERE

Comment: Crypto regulation

The crypto market has become and will remain an undeniable part of our financial system and Germany has become the frontrunner in regulating the market

Jochen Werne

The German Act Implementing the Amending Directive on the Fourth EU Anti-Money Laundering Directive (Federal Law Gazette I of 19 December 2019, p. 2602 (Gesetz zur Umsetzung der Änderungsrichtlinie zur Vierten EU-Geldwäscherichtlinie) has included crypto custody business in the German Banking Act (Kreditwesengesetz – KWG) as a new financial service. Since the Act came into force on 1 January 2020, undertakings wishing to provide this service are required to apply for an authorisation from BaFin.

One of the prerequisites receiving the authorisation is the proof the the managing directors of an institution must be qualified and reliable and devote sufficient time to the performance of their duties (section 25c (1) of the KWG). This also applies for the conduct of crypto custody business within the meaning of section 1 (1a) sentence 2 no. 6 of the KWG. A managing director’s lack of qualifications will constitute a ground for denial of authorisation (section 33 (1) no. 4 of the KWG).

Aside from the fact that lifelong learning is a MUST for leaders in our rapidly changing technology-driven environment, the crypto regulation Germany has opted for underscores an important point: “The crypto market has become and will remain an undeniable part of our financial system.”

It was a pleasure participating with other executives of innovation driving companies and banks at the 1st Crypto Custody Certificate Course offered by WM Seminare.

The well balanced equilibrium between theory and practise makes the course valuable. Especially the expert speakers as Dr. Carola Rathke ( Eversheds Sutherland ), Veronika (Vicky) Ferstl (TEN31 Bank AG ), Dr. Sven Hildebrandt ( DLC Distributed Ledger Consulting GmbH ), Martin Kreitmair ( Tangany GmbH ), Dr. Tim A. Kreutzmann, LL.M. (SUN) ( BVI Bundesverband Investment und Asset Management e.V. , Jacek Trzmiel ( Coinfirm ) & Christopher Zapf ( Tangany GmbH )

https://www.bafin.de/EN/Aufsicht/BankenFinanzdienstleister/Markteintritt/Kryptoverwahrgeschaeft/kryptoverwahrgeschaeft_node_en.html

THE NEW REALITY OF MONEY

A historical-social innovation briefing for a world where military high-security standards meet digital crypto-assets

by Jochen Werne

Chief Development & Chief Visionary Officer PROSEGUR Germany

SAVE THE DATE

Strategy Summit B2B Sales & Key Account Management
5. – 6. October 2021

The aim of this contribution to the debate is to combine historical insights into the meaning of money with the latest technological developments in the digital age, to compare visions with realities and to develop options for action for shaping the digital transformation of money.

The 10 most successful bank robberies in human history, in which the equivalent of US$1.62 billion was taken at sometimes massive expense, seem like the work of amateurs compared to the US$3.78 billion taken by cybercriminals in 2020 alone. In a world where tech companies are spearheading campaigns to create a new cryptocurrency and bitcoin is surpassing the US$50,000 mark because a visionary electric car maker wants to recognise the cryptocurrency as a means of payment, some fundamental questions arise: How must money be defined in a digital world to reliably fulfil the characteristics of a universally recognised store of value and medium of exchange? And what changes will result if so-called stablecoins challenge the banks’ classic deposit business and their traditional business models?

MONEY IN THE DIGITAL AGE

Reflections by Jochen Werne, Chief Development & Chief Visionary Officer Prosegur Germany (published in Prosegur Express 02/2021)

In all debates on analogue and digital means of payment, “trust” is always at the centre of the discussion: trust in the state-social order, which stands as a guarantor for stability and security of the fiat money issued. In this respect, some would almost like to marvel at how Bitcoin & Co. have managed to gain such trust in such a short time that a market capitalisation in the billions has been achieved. One of the points is certainly the technological confidence in the non-manipulability of the blockchain.
But is the blockchain really not manipulable, or is it rather a question of time before an attack will succeed? And what conclusions are central banks around the world drawing from this as they look at creating central bank digital currencies? Currencies designed to bridge the gap between the stability of analogue central bank money and the demands of our digital age.

Perhaps the solution for a trustworthy and generally accepted today and now lies in a hybrid model: in a cryptocurrency, in form of a stablecoin, that is 100 per cent backed by physical central bank money. This means that every digital token has a unique physical counterpart (euro). Due to the tradability of the tokens, the flexibility of book money is paired with the guarantee of physical central bank money. Last but not least, a regulated trustee function guarantees that the existing and securely stored central bank money is always paired with its digital twin. Thus. the best of both worlds is firmly united.