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Decentralised finance – what the future looks like

What is the scope for DeFi in 2021?

In Panacea Advisor’s last in a series of cryptocurrency masterclasses, “Decentralised finance – what the future looks like”, we looked at decentralised finance and what this whole area looks like for institutions and touching on high net worth clients.

We had guest speaker Dr Amber Ghaddar.

Amber is one of the founders of AllianceBlock, the blockchain startup building a framework for the world’s first globally compliant capital market by bridging centralised finance and decentralised finance.

Amber started her career in Global Investment Research at Goldman Sachs London, and moved from there to the cross asset solution team at JP Morgan, where she built the JP Morgan UK multi asset franchise.

Later she spearheaded the microsystems training strategies team at JP Morgan London.

What is DeFi, and how can people access it?

DeFi is an umbrella term that is used to describe various financial products that are built on blockchain technology.

The most famous one that’s a poster child of DeFi is Bitcoin. We’ve seen quite a big drive from institutional investors into Bitcoin this year and there’s been many reasons some people tell you why Bitcoin is a very interesting alternative asset class that adds diversification within a portfolio.

That Bitcoin is a non normally distributed asset with a very high positive kurtosis, meaning that the probability of extreme move on the upside or on the downside is much higher than let’s say the equity market.

Some people will tell you it’s because of liquidity, that finally there’s enough depth for institutions to come in.

Regulations VS Infrastructure

But the truth is Bitcoin became an alternative asset class and we’ve seen a lot of institutions coming into Bitcoin because of two reasons. One is regulations, and the second one is infrastructure.

In terms of infrastructure we’ve had leaps forward in the past two years and a half now; in terms of custody, and in terms of operational processes.

Today we have an infrastructure that smells, that tastes and that looks the same as you have in traditional finance. In terms of custody, today you can invest in Bitcoin by taking custody yourself, i.e. by opening an account at a custodian, companies like Fidelity or Copper and then having to set up the system within your infrastructure. Or you can invest in Bitcoin without having to take custody through funds and derivatives.

We see that most of the investment that is made at the private wealth level, and in the family office level is through derivatives, rather than through spots, and this is mainly for, let’s say momentum based strategies and short term strategies, where you’re just investing in the derivative entering and exiting positions on short term, medium term basis.

Bitcoin is digital gold?

Then you also have those that have Bitcoin in their portfolio under a label of digital gold and for those usually they would invest in Bitcoin and spot Bitcoin by taking custody themselves. Within DeFi, as I said Bitcoin is the poster child. But then in the past two years we’ve seen a plethora of new products coming onto the market, and these products are foremost derived from what we have in traditional finance. Products that are based on lending and borrowing, products that are based on insurance, products that are based on exchanges. But we have also seen the development of products that didn’t exist before.

Becoming a market maker

One of the most famous one is liquidity pools within decentralised exchanges.

Just to give you a little bit of background on what a decentralised exchange is. It’s matching book orders, you have buys, you have sells and you match them to find the price.

What you have in decentralised exchanges is the opportunity to say, I am holding assets or I’m holding tokens of whatever protocol, and I’m really not doing anything with them. I’m going to provide liquidity and providing liquidity entitles me to put these tokens, these assets into what we call a liquidity pool, and, in some way, I become a market maker.

In this liquidity pool you would have a lot of players, each putting their assets in there, and then you will have what we call an automatic market maker that will decide on what the price is. Of course this automatic market maker has Oracle’s in place, and is able to match or look at the various prices across the other various exchanges to determine what the correct price is.

Now the beauty of this is that you’re rewarded a fee.

It depends on the exchanges, but roughly 30 basis points every time there’s a trade that is done. Imagine that there’s five people in the pool, you have 1/5 of the pool so you will take 1/5 of 30 basis points at each when each trade occurs. This has allowed the boom of decentralised finance protocol because suddenly you did not need an exchange to be able to list your coins and you did not need all that you have in the background in terms of operation, in terms of legal, in terms of regulation to be able to create a to create a new product.

Tokens = Securities

In the end, there is one thing that regulators are absolutely correct in is that a lot of these tokens are initially securities. Most of these tokens are issued as a way to raise funds to the future protocol. The protocol doesn’t exist, you issue tokens and you raise the funds to be able to build this protocol.

What we have seen in the field is that people now, instead of doing what we call “initial exchange offering” IEO instead of ICO because if you do an IEO and you’re in the US you really fall under the SEC rules and you are a security. What people now do is they create initial fundraise from crypto VCs, from a crypto high net worth individuals in what they they call seed rounds at private sales, which allow them to develop a minimum viable product, an MVP.

Once this minimum viable product is on the market, they go and ask some legal opinions on which country they’re based that say, “oh you know what, the token that I’m issuing is a utility token” and that allows them to go onto a decentralised exchange and publicly issue their tokens.

Becoming a central bank

One of the interesting things that I find in there is that each protocol becomes its own central bank. You can imagine that each protocol is a country and the riskier the country is, normally the higher the credit spread on this country is.

When you’re a very young protocol, you will need to pay people to basically buy your coins and put them in this liquidity pool. How do you pay them? By offering them a yield.

Let’s say I’m a new protocol, and I want to build a lending and borrowing protocol. I issue my coins and then I open a liquidity pool on a decentralised exchange. Because I’m very new, what I would say is I am very high risk. Because I’m very high risk, I’m going to pay you 50% per annum for you to buy my tokens, put them in the liquidity pool and provide liquidity. If you want to compare it to what we have in credit market, it is not very contrarian to what we have in credit market. It’s a very emerging country risk.

In emerging countries you have risk.

You have political risk, you have economical risk you have tonnes of risk in there but you never get a 50% spread.  In the end it offers you very high return products with, I would say also high risk. This is why it is interesting to have a small allocation to these type of products.

How can you invest in DeFi?

How can you invest in these products because everything that I described now sits in the decentralised space.

If you’re a crypto investor, it’s very easy for you to do that. You just go and try to find the pools that are the highest yielding pool, then you do some due diligence to understand if it’s a real pool or it’s a fake pool and if there’s a real product behind it and if there is not a real product behind it. Then you go and you invest. On some of the pools that I invested, we were making 300% per annum.

What is the risk?

The risk is that what if the protocol would fail?

The second risk is what we call impermanent loss and impermanent loss is a very idiosyncratic feature of liquidity pools. What it says is, when you enter into liquidity pool, you need to put in a pair. Imagine you have USD EUR, you need to put USD and EUR in the pool, you cannot put just one leg.

What does that mean?

It means that if you have one asset in the pair that is much more volatile than the other asset, you will end up with more of the “more’ volatile assets and less of the “less” volatile assets. Let’s say you have a BTC so Bitcoin and let’s take my coin AllianceBlock coin. You have a Bitcoin/AllianceBlock pool, you put in Bitcoin and you put in Alliance Block. Let’s say Alliance Block rallies 50%.

What happened? The pool will need to rebalance because technically the amount that you have put in is equivalent in dollars term. Well, usually the pool thinks in ETH term, but let’s simplify things in dollar terms. Let’s say you only put $10,000, you put $5,000 equivalent of Alliance Block at $5,000 equivalent of Bitcoin. Alliance block rallies 50% what would happen? Suddenly you have, $12,500, but this amount needs to be rebalanced.

Now imagine in a very volatile market which is the case of most of these protocols, you will suffer from what is called impermanent loss.

This impermanent loss is a type of market of your assets within the pool. One way to bypass that for protocols for young protocols is to offer very high yields in order to cover you in case markets become very volatile. I would say it is quite beneficiary. Let’s say you have pools that are yielding 200% 300% per annum, even if you lose 100% you’re still making more than 100% per annum and doubling the amount that you initially put in.

How can you access this if you are an institutional investor?

Rules and regulations

First issue is compliance and regulations of course.

You don’t know who are the people that are in this pool. From a KYC AML perspective, it is very hard to justify an investment there because you’re putting your money in a black hole. You don’t know if there’s terrorism money, you don’t know if there’s money laundering money that is in this pool.

One of the solutions that we are working on at AllianceBlock is what we call a “trustless KYC AML” that will KYC AML everyone in the pool and people that don’t want to be KYC AML, then they don’t need to be in in this pool. You can already imagine that the fact that you have put in a KYC AML system would already bring the yields down because you have less risk. But it will still be very sustainable yields compared to what we have in markets today. I’m still happy to make 50% per annum in a KYC AML greenlit pools. As I said first is the compliance and regulations point of view, i.e. you need to KYC AML everyone within the pool, that is doable.

How do you access this?

Do you really need to go on an exchange and take custody and have a wallet and buy this product on the left and this product on the right? As you can already see it’s quite complicated.

What you have is opportunities to have these products wrapped into certificates. Instead of doing all of the work yourself in terms of choosing the protocol. All you do is have a sort of actively managed certificate, and you will have a list of these protocols, and you can pick and choose what are the protocols that you want to invest in. Our view is that there’s a huge opportunity in USD stable coin pools. I mean what are fed rates now, 5 basis points? What are deposit rates now, 60 basis points per annum in USD?

Imagine that I am giving you a USD product that is paying you more than a high yield bond, much more than junk bond. Junk bonds are, I would say around 500 basis points spread. That’s like 5% and I’m giving you a product that is paying you between 12% and 16%. That is regulatory compliant. All you need to do is buy this certificate, and then allocate. This is where we see the real opportunity. Not on the more I would say exotic product, at the 200% 300% level, but more on these USD stable coin products that are paying you much more than junk bonds without the risk.

I mean there’s always risk and the risks are a little bit different but compared to the risk that you have in junk bonds. I would say the reward that you get is very enticing.

What happens in terms of due diligence that’s done for the protocols and what are the risks that you need to be looking out for?

If you go through the certificate route, you still have a security risk.

Remember all of these protocols are open source and one of the issues that I’ve noticed in the field is that a lot of people are very quick to go to market. Which in a way is good because it is an open source product and it is supposed to be improved continuously. But what happens is there is no real failsafe in these protocols and you see a lot of these protocols getting hacked. In my opinion, too much for me sometimes to be comfortable.

This is why it is important to in a way to wait until the protocol matures enough because everyone tries to attack. If you’re a hacker, you’re going to try to find whatever opening there is and if there is an opening, you’re going to attack. The good thing about hacking is that, once it’s hacked once it’s not going to get hacked twice because the community is going to come and strengthen the system. But it is a real risk.

Cyber security is a real risk.

A way to hedge this risk is to have what we call insurance on these protocols. Of course, it’s going to decrease the yield, but it still remains a high yield compared to what you have in traditional markets. That is to be honest the real risk. Of course there’s the regulation compliance risk, especially in terms of AML, KYC AML. But as I said, this is something that also can be solved by creating pools that are KYC AML compliance, and where all the participating actors have been checked the previous way.

What sort of products might they be coming across that it would be good for the advisor to be aware?

Right now, even JP Morgan is not offering Bitcoin, per say i.e. taking custody of Bitcoin. As I said, from an operational perspective and an infrastructure perspective it requires you to onboard a new custodian, a digital custodian, there there’s a lot of work in the background.

What JP Morgan and other banks are doing is giving access through funds.

You have the GBTC form, that’s the grayscale fund. You have a few funds and few in Europe Exchange Traded products that gives you access indirectly without you having to take custody to Bitcoins. I would say, some banks are already offering derivatives. There are two derivative markets. You have the CME derivatives, trading futures on the CME and the CME has its own rules and sometimes you will see that the CME derivative varies from the decentralised finance derivatives in terms of pricing and you always have arbitrage opportunity there. Most of the derivative markets, most of the future markets sits on exchanges such as STX and Binance and some others.

These I would say are a little bit more maybe uncomfortable to access because you still need to have wallets. You don’t want to leave all of your funds sitting on the exchange because the insurance process that you have there is not as stringent as in regulated markets. Usually most people, or most asset managers, most private wealth managers would invest in CME futures.

If I’m correct, Goldman has opened a crypto trading desk and I am sure that they are offering futures like one delta one certificates on BTC. That’s very simple. With Goldman is like long the futures and just selling you wrapping it into a certificate and you can offer this to your clients with no issues.

But one point to highlight correctly, I think in the UK you really need to be a sophisticated client to access these products. I believe the FCA came in and said, no derivatives and no ETPs and no ETNs and the rest for for retail customers. But again, I would say the less complicated and the cleanest way is to access funds that already hold Bitcoins.

What I would ask the people on the call is to be careful in what is this fund investing in. Is the fund holding Bitcoin? Do they have custody of Bitcoin? Or are they invested in futures?

If they are invested in futures, are they invested in CME futures, or are they invested in non CME futures? Keeping in mind that you do have a big risk on the non CME futures in terms of operation because you never know when these exchanges are going to be shut off. You heard what happened to Binance recently. There’s some operational risks that they need to consider when they’re invested in funds, investing in futures that are not CME futures.

The future of DeFi

The revolution we’re going through in the investment space is very similar to what we’ve seen, I would say maybe 10 years 5,6 7 years ago in retail banking.

When we started having FinTech coming and disrupt retail banking, creating new payment system, creating even digital banks, and this has forced incumbents players to actually start modernising their infrastructure as well.

I remember when I came to England, which was 10 years ago. I’m a customer of Barclays, I didn’t really have a really good Barclays app. My Barclays app could do nothing at all. And now today because Barclays has been buying the technology of fintechs, developing fintechs in house, they have an app that is, I would say quite valid and quite good. I’m not promoting Barclays by the way. I mean quite good when you compare it to Revolut. This has pushed banks to disrupt themselves, because we know big incumbents, making IT changes in bank is never the priority, the priority is making money. Being front office and making money through clients or through  investments.

Now what DeFi is doing in my view is similar to what fintechs have done to retail bank and DeFi is going to do it to the investment banks and the asset management space. I would say, because it’s an industry that is in its infancy. There is a lot of trial and error going on. I think it’s healthy. Things are still are still evolving. But I do think in the future and we’re already seeing it in banks like  every bank has a blockchain team. Every bank.

Actually a lot of banks are working on improving their infrastructure and making their infrastructure much more flexible and adaptable and less costly. What people don’t realise is that infrastructure in investment bank is, I mean the legacy systems that you have in there are oh my god disgusting.

I was at a bank that has bought a lot of banks. You end up with legacy systems sitting one on top of the other. If you’re a developer, it’s just gross. But the issue is banks have never put in money in IT. They’ve never felt the need to put money into IT. But now when they see these asset managers coming out, very flexible asset managers and very achieved asset managers. For them, they need to start thinking and start investing in their own infrastructure. And a good example is the ETF revolution in some way. Beta funds, everyone talked about active management and suddenly we have exchange traded funds that just track the S&P, and suddenly, all of the banks have a suite of products that track, Smart beta or whatever it is.

You can see that the banks are getting there. If the banks are getting there, it means things are changing and things will keep moving forward. I would say that right now, you will see banks adopting some parts of DeFi and DeFi adopting some parts of what we have in traditional finance. And I would hope that I would say in 20 years time, even less I would say 15 years time, we would move away from the intermediation framework that we have in investment because not just blockchain, but AI as well.

How AllianceBlock is helping to shape the future

We are building a bridge between decentralised finance and traditional finance and we offer various product for asset managers, private wealth managers, family offices that give them access to decentralise finance. Similar to what I was talking about, a product that are wrapped in certificate, yield products that are wrapped in certificates and very systematic strategies as well in the crypto space.

Here is the full recording: https://www.brighttalk.com/webcast/8117/495360?utm_campaign=viewing-history&utm_source=brighttalk-portal&utm_medium=web

 

CBDCs and Britcoin – what does a digital central bank currency mean for us?

We’ve all heard the hype about ‘Britcoin’, but what is CBDC really all about?

Are governments seriously considering introducing their own cryptocurrencies? (spoiler alert – No). In this session, we’ll take a look at central bank digital currencies – what are they, what are their benefits, and what does adoption of a CBDC mean for a country, its economy, financial institutions, businesses and citizens?

We’ll look at how different design considerations give rise to different CBDC features, and also discuss some of the CBDC projects in flight around the world.

What does digital central bank currency mean for us?

With us today we have expert Jannah Patchay.

Jannah is the founder of Markets Evolution, a consultancy specialising financial market simulation and helping financial institutions and fintechs to define, develop and execute their commercial strategies to highly regulated environments.

She is a leader in CBDCs, central bank digital currencies.

CBDC, what is a central bank digital coin?

Central bank digital currencies sometimes mean slightly different things to different people.

Fundamentally, the easiest way to tell you what a central bank digital currency is to explain what it’s not.

Central bank digital currency is as the name implies, a digital native form of central bank issued, otherwise known as fiat, currency.

And people often ask “well what do you mean by digital native?” because if we look at the money we use today when it’s not cash and increasingly it’s not cash these days, we’re transferring money to each other’s accounts through our online banking and we’re paying by card.

At the end of the day, there’s no expectation that wheelbarrows full of cash are going to be exchanged between financial institutions any longer. Arguably we already have digital forms of money.

Fiat VS Central Bank Digital Currency

What’s the difference between that and a central bank digital currency?

The digital money that we have today, if we look at commercial bank money, the money that we typically transact with digitally. These evolved over decades, verging on centuries and the systems that they’ve evolved on are based on some underlying assumptions.

One of which is that there are actually wheelbarrows full of money being exchanged at the end of the day.

And because this design has happened organically, these forms of digital money have evolved organically over the years. They also face the same constraints as money did decades ago when wheelbarrows of cash had to be exchanged in order to settle between banks. For example, when we look at a lot of the constraints on legacy payments infrastructure, things like multi day settlement. If you transferred money from your bank account to someone else’s, it would take three days to reach there and it wasn’t just floating in the ether for three days.

Those latencies existed in systems because of the expectation of physical settlement in the first instance. With the advent of faster payments, payment systems have been upgraded to deal with more instantaneous settlement. But to a large extent there are a number of inbuilt inefficiencies, based on historical and outdated assumptions that are built into the money that we have now.

Central Bank digital currency is a digital native form of money. It’s what would happen if we set up the user requirements for money today. We design the solution to address those using the technology that we have today.

What is the type of money, central bank issued money that we could design if we didn’t have the technology constraints of the past hanging over us?

What sort of changes can CBDCs do over the money that we currently have?

When I talk about the benefits of CBDC, it’s important to distinguish between two types of use cases: wholesale and retail.

Those reflect the payments infrastructure that we have today. We have wholesale use cases which are financial institutions that need to settle between each other, either for delivery versus payment. That settlement of securities transactions or payments versus payments which is settlement of transactions or payments between each other.

And then there’s the retail side, which is everything else so business to business, consumer to consumer, transactions between businesses and consumers, payments to HMRC from your business or from yourself. Anything else is in the retail bucket.

Wholesale VS Retail

On the wholesale side, there are some very clear benefits to introducing CBDC. There’s a potential for more efficient cross border payments for example. If you think about the inefficiencies in the payment system of one jurisdiction and then extrapolate that to making cross border payments and going through two sets of inefficient infrastructure plus all the requirements for intermediaries and things like that correspondent banking. Many stablecoin issuers have already started using stablecoins as a means to make payments faster. CBDCs take that to the next logical step.

For CBDCs to power the evolution of digital asset markets and by digital assets I don’t just mean cryptocurrencies I mean security tokens, any type of digital native assets that can be itself settled instantaneously but need something for payments leg. CBDC can fill that gap.

On the retail side, there are huge benefits to designing the type of money that’s actually fit for the needs of society with the economy today. There’s the potential for having greater financial inclusion which is often cited for so many kinds of mobile native or digital native apps and solutions can be designed around the transmission of money using CBDC.

As we’ve seen in many developing countries it’s those digital native solutions that have often enabled much greater inclusivity.

There’s also potential to change the way that we transact with each other and with governments. For governments it can be an important mechanism for policy delivery. There’s also the ability to support innovation in payments.

We might want to use payments in different ways, we’re increasingly seeing the rise of embedded payments and transactions and CBDCs allow for more frictionless payments to be made in those frontier technology type solutions and apps using central bank issued digital currency instead of for example privately issued stablecoins.

How do stablecoins differ from Bitcoin, and how CBDCs again differ from those two?

There’s a spectrum of digital money and cryptocurrencies would like to be on that spectrum but at the moment, most of them aren’t there. They’re on a separate spectrum.

If for example you have cryptocurrencies like Bitcoin that were truly used as a means of payments then perhaps they could sit on the digital currency spectrum. But at the moment, I think generally they fall into something else because their typical uses right now are not really as a means of payment.

Cryptocurrencies tend to be, and this is more of a tend to be rather than an always the case, tied to a blockchain and instrumental to the functioning and operation of  that blockchain. They’re native to certain blockchains and the idea is that they should be usable as a means of payment, but due to the volatility or the issues around tax which I think you have covered in various sessions, they aren’t often used for that intended purpose. They’re typically more of a store of value at the moment and that could change in future and there will be a lot of benefits if it did.

Moving on to the spectrum and rich forms of where fiat money sit. Stablecoins are at one end, and it’s a public private spectrum.

Stablecoins: Private VS Public

On the private end are private issues of stablecoins.  Stablecoins are tokens that are linked to the underlying currency, and examples will be tether, the USDC, the most famous of them all which is Facebook’s Diem, formerly known as Libra.

These stablecoins are in a way, already proving the use cases for CBDCs because their very existence, the fact that they’re being used as a means of payments and digital settlement proves the case that there is a need for digital native forms of money.

The problem with privately issued stablecoins is that they expose the user to counterparty risk. If Facebook, or the Diem association is issuing you with Diem coins, and you’re using those payments, and then for some reason the issuer goes down, it ceases operating, for example. What are you left with? Can you still do anything with those?

That’s the counterparty risk that you face being exposed to the issuer of a privately issued stablecoin. From a regulatory perspective, the potential for systemic importance of stablecoins is increasingly on regulators agenda. In the UK for example, the Treasury has recently concluded an open consultation on regulating stablecoins and crypto assets. It looks as though the UK, like many other jurisdictions is going to move towards implementing prudential regulations for issuers for stable coin. That will mean that for example, private issuers of stable coin will need to fully back them with the underlying currency and they will need to hold that in reserve accounts so that there’s some security there.

Moving along that spectrum, at the other end there are public forms of digital currency. That’s your central bank digital currencies.

Central bank digital currencies are issued by a central bank itself

Purists will say yes you still have counterparty risk there to the central bank and that’s true all the money you hold today anyway. Depending on which jurisdiction you’re in that degree of risk will be higher.

But in most G20 countries it’s pretty much zero risk effectively. By virtue of being issued by the central bank are a form of public money. They’re not commercial bank money. They’re not issued by private stablecoin issuers and therefore central banks can also use them as a means of affecting public monetary and public policy as well.

How do you build a CBDC? Does it have to be on a blockchain?

No is the short answer. You don’t have to build a blockchain.

There are some implementations at the moment. Some central banks are exploring options that are not built on blockchain, or on any form of DLT. And you don’t have to.

There are some potential technical benefits to doing so, there are also some benefits in terms of perception of public trust. It’s by no means a pre requisite that it’d be built on blockchain technology.

What are the sort of site design considerations that countries are looking at and what do you think people should be considering?

That’s a pretty huge question. From a design perspective, there are a few key decisions every jurisdiction has to go through when it’s assessing the type of CBDC that it would like to implement.

The first is, whether it’s going to be direct CBDC or an indirect model. In the direct model the central bank issues the CBDC and everyone who uses that CBDC basically accesses directly with the central bank. In effect, the central bank then has to operate a whole account infrastructure. Everyone has their holdings directly with the central bank itself on that infrastructure.

Now no one in the world is actually considering that model, which is interesting because typically when you mention CBDC to a member of the public or many economic correspondents for newspapers and other publications. The first thing they’ll tell you is about all the disadvantages of having a CBDC associated with everyone having to have accounts directly with a central bank.

Again, no one is actually exploring that model. Many of those arguments are moot.

The model that’s typically looked at or various variations on it is an indirect model whereby, much like in our current payments infrastructure today, you have a set of intermediaries who basically have accounts directly with the central bank, and they access the CBDC, and then they act as intermediaries of CBDC services to their customers who are the end users, businesses and consumers.

An example of an intermediary would be a bank or any other regulated financial institution like payment service provider, or e-money institution. They could all hold accounts directly with the central bank, they could all access CBDC and they could then provide CBDC accounts and services to their end users. And it’s variations on that that most jurisdictions are looking at at the moment.

Other design considerations, whether you’re going for an account based or token based model is quite important as well. These terms mean different things to different people. They’re not necessarily mutually exclusive either. With an account based model for example, movement of the CBDC are represented by debits and credits on ledger or accounts.

You’ve got to have an account in order to transact to the CBDC in the first instance. In a token based model on the other hand, the CBDC is issued in the form of tokens, and you could hold the token in an account and you could hold the token in a wallet on your device and there’s a potential for greater flexibility there.

But there’s also potential to combine those approaches as well.

To look at models in which smaller transactions could be transacted on more anonymous basis between individually held wallets and devices, and large transactions would need to go through accounts.

Privacy considerations

That leads us on to privacy considerations, because privacy is a huge area of concern around CBDC. Obviously from governments of all political stripes, there is a massive appeal in the idea of having full visibility over all of your citizens and businesses transactions and CBDC holdings, but from the individuals perspective that’s not always desirable.

Again, many privacy advocates make out though it’s one or the other. It’s either completely anonymous or completely visible with no privacy. That’s not necessarily the case.

Sweden and its Riksbank are exploring that model of smaller transactions being able to be conducted on an anonymous basis where as large transactions have to go through accounts and have the necessary reporting built in.

Invasion of Privacy?

Looking at what’s available from open banking – you’ve probably used open banking or given permission to apps to access information about your bank accounts by open banking. There’s a huge amount of detailed transactional data available there as well.

The key is really building in safeguards so that people can be assured that they have some control over their data and how their data is going to be used and where it’s going to be used.

One of the features of CBDC is the potential for having programmable money.

CBDC is not just money that can be used for payments, it’s money that can have functionality programmed into it. For example, it can have smart contracts governing its usage. Some of those smart contracts can be reporting to HMRC on transactions, some of them could be setting up automated payments or enabling helicopter money payments to be made by government that could even potentially evaporate if money isn’t used within a certain time period.

It could be used for lots of use cases but some people might think are fairly intrusive.

CBDCs for the people!

For example, benefits money could be ring fenced for certain usages, money that’s paid out for childcare to parents, or money that’s paid out for housing could be ring fenced for that usage and actually strictly controlled. Some might say, that’s a huge potential privacy impact and is incredibly invasive.

The flip side of that is actually at the moment, most governments have no idea really how ‘benefits money’ is being used. Childcare credits for example, are they actually always be used for child care, or is housing, always used specifically for housing? Is it in fact being used to subsidise something else.

If you know how the money is being spent, then you can also see where your policies are failing, where you need to actually be topping up a certain type of benefit or increasing it because people are meeting the shortfalls they experience, and the inadequacy of that benefit as it currently is, by using other benefits to top it up instead.

I think implementing these in making it appealing to users and encouraging take-up, it’s really important to build in sufficient privacy control so that people want to use it and feel safe using it. It can’t really get traction or adoption if people believe that they’re giving too much away and can stick with other forms of money instead.

What does the adoption of CBDC mean for a country?

Most citizens don’t really understand or care about money that they’re transferring between their bank account and someone else’s or using to make payments and CBDC should be seamless in that respect as well. It’s arguable that people should care more and they should know more as well but ultimately, it should be a pretty seamless experience for individuals.

For most businesses, the introduction of CBDC may be able to create more innovative business models so some of them may use CBDCs as fundamental to their business to their new business model.

Others may find that they can just offer slightly different services more easily using a CBDC than they can at the moment so anything that involves any innovation and payments. The ability to have internet of things type sensors around your house that detect something’s running low and automatically ordering it from Amazon, as an example.

Having payment made automatically through the device, actually, the device being programmed to know what its kind of tolerances are. Those are the innovations that businesses can do that are not directly related to CBDC but they’re enabled by CBDC.

There are probably millions of things that we can’t foresee at the moment.

For financial institutions, it enables them to take that next leap forward into the digital economy and digital financial markets and to really move away from the legacy constraints and infrastructure that they have now as well.

For a country. It gets a little bit more philosophical. I touched on the private money versus public money spectrum. And the niche filled by stable coin issuers at the moment,

People should care a lot more about what money they’re using when they’re accessing their bank accounts for making payments. I think everyone realises there’s been a major decline in the use of cash over the last 10 years. That decline has been accelerated by the rise of mobile devices, and the increasing use of mobile payments. The decreasing use of cash has been a trend for a couple of decades but it’s really gone down exponentially over the last decade.

Cash is public money. Cash is central bank issued money and it’s bearers instruments as well so you know you’ve exchanged that and the cash belongs to you because it’s sitting in your hand. The money that’s in your bank account on the other hand is not public money, it’s actually a form of private money itself. It’s commercial bank money, it’s created by commercial banks.

You’re entirely reliant on the commercial bank which holds it and the standing of that commercial bank in the long run when it comes to your deposits being safe. Not quite entirely so in the UK for example, we’ve got the Financial Services compensation scheme which basically underwrites banks and protects your deposits up to about £85k per accounts that you have.

But from a monetary policy perspective, if you’re a government and you’re seeing this rapid shift from public money to private money, then it could have repercussions for you in terms of your ability to control monetary policy. Especially if this is going to move to global issues of systemically important stable coins, whose activities you can’t always control.

You’re giving up a degree of monetary sovereignty, a control over what you can do with public money at your disposal and how you implement your monetary policy.

There’s those very important philosophical considerations there for some countries around the type of money that they want to have in circulation and the degree to which should be public versus private.

CBDC projects in place around the world

There’s a variety of CBDC projects that are in flight around the world and almost every major jurisdiction is doing something at the moment and many minor jurisdictions as well. There’s a variety of different projects on at the moment.

Bahamas went live with this Sand Dollar project which is the world’s press CBDC, and that was earlier this year.

Cambodia also went live with it’s Bakong project. Some would call it to CBDC, I would call it a to synthetic CBDC.

This is more of a design consideration, but if you’re implementing a CBDC there are different ways to do it completely digitally native, or you could basically build your own stable coin that represents underlying central bank money that tells existing central bank systems.

And that’s known as a synthetic CBDC that Cambodia’s implemented. Their aim with that was to promote financial inclusion and facilitate greater use of mobile devices for payments. To that extent it’s really effective, and it’s probably a good model for developing countries or for those who don’t necessarily want to be the initial leaders in the space, to get in on because it gives you the benefits, but in a way where you can still observe what the rest of the world is doing, and transition potentially to a digital native CBDC at some point in the future.

On the wholesale side, there’s quite a lot going on as well. There have been a number of cross border experiments between different central banks. So, project Jasper was Singapore, and Canada. I think project Uben as well which is Singapore, and some other Asian countries.

They’ve all been looking at the use of wholesale use cases and applications of CBDCs particularly affecting passport payments and settlements. Numerous countries have declared an interest and are starting to build out Proof of Concept.

Sweden‘s Riksbank has done quite a lot in this space, it’s also looking at how it can balance out privacy considerations.

China is a really  notable one. China has actually got its CBDC, well it’s digital currency electronic payment system in advanced pilots actually being used for payments but with some businesses at the moment. China also has, shall we say, an ability to coercively control the rollout of it and adoption of instant currency, which gives it an advantage in terms that it doesn’t need to wait for a popular buy in, it can push ahead.

Although I don’t think anyone is strongly against using it, given the potential benefits. But this also puts China in an interesting position when it comes to some of its global initiatives. If you look at its Belt and Road initiative for example, if China was to start asking for all payments to and from companies that are involved in that Belt and Road initiative to be made in its digital currency, then that could actually have the potential to challenge the reserve status of the US dollar. Now that’s again, quite speculative although it’s been put forward by many commentators.

In reality, it’s not clear that China would want its currency to become the world’s reserve currency. But it just gives you an example of the potential for impacting global geopolitics CBDC can have its, it’s not just about the country’s internal use, it’s also about how it expresses itself on the world stage as well.

Interoperability Challenges

Amongst all of this interoperability is a major challenge and if we don’t have some degree of interoperability between different CBDC systems then this seriously constrains the benefits that can be realised from CBDC when it comes to cross border payments. The BIS, Bank for International Settlements recently published a really interesting paper on interoperability, where they described different levels of interoperability.

At one level, you can have all CBDCs essentially having direct interoperability with each other. This would be quite challenging to implement because you’d have to get some kind of global consensus. Other levels of interoperability that they looked at or other solutions to the problem of interoperability included things like having consistent interfaces that each CBDC would implement or having an underlying payment rail that each CBDC could plug into that connected them all together, and all of those solutions have their own challenges as well.

Here is the recording:

 

ConsenSys Academy Blockchain Developer Program 2021 Cohort

Registration for this years ConsenSys Academy Blockchain Developer Program has kicked off .

With thanks to Genevieve Leveille, CEO Agriledger and advisor to The Bigger Pie, we will be able to offer scholarships places to the bootcamp.

ConsenSys’ flagship technical Blockchain Developer Online Bootcamp brings the best of the best together in an industry-standard, instructor-led, community-driven online certification program, getting you programming in Ethereum at a professional level in just 11 weeks.

Program information:

The program begins 1st September 2021 and is an 11-week course running until 3rd December. There will be an additional 3 week period after the completion of the course work to finish a final project. There will also be a graduation ceremony in December with the opportunity for students to present their final projects to peers and members of the ConsenSys community.

The course features multi-modal content (videos, interactive exercises, assignments, and hands on projects), mentors, community based peer support, and networking opportunities. It requires about 10-15 hours per week, and is administered in English.

There will be a number of scholarship places with ConsenSys Academy available and along with Genevieve Leveille, The Bigger Pie will be facilitating a number of people going through the programme.

By coming through the The Bigger Pie, you will have access to mentorship and community support in order to successfully complete the programme.

Key information:

  • There will be 2 AMA sessions where there will an opportunity to ask any questions that you may have about the program and course details. The first session will be held on the 4th August 2021 at 10am – 11am BST and the second session at 6pm – 7pm BST. You can choose which session to attend that suits you best.
  • In order to receive the scholarship,  you will need to register your interest and also complete mandatory Basic Training. This is a pre-course to help better prepare you with the knowledge you need to be successful on day 1 of this course. If unable to complete in time for the 2021 cohort, you will be eligible for the 2022 Cohort!
  • You will also need to submit an application form through the Google Form provided and answer all application questions.
  • Access to the course material is from one year from the start of the course (31st August 2022)
  • Those who successfully complete the course receive a certificate and become a part of the alumni community!

Important Links:

AMA Recordings

1st AMA session:

For an introduction into branches watch this video:

https://www.loom.com/share/665aaef969814b7e885c5a7da5bd13e9?sharedAppSource=personal_library

The video about merges you can find here:

https://www.loom.com/share/fd87fd9aeed44990a0ead5da53064540?sharedAppSource=personal_library

The link to the video about Pull Request i this one:

https://www.loom.com/share/09ccdb52b51341b7905d58157903294d?sharedAppSource=personal_library

And a special one that you should only watch at the end is this:

https://www.loom.com/share/86fc6ba03cbe4775ba0e317a87e00a0f?sharedAppSource=personal_library

Why we need everyone at the design, development and deployment table

United We Stand!

The Bigger Pie is an organisation founded to support gender equity in the blockchain/Crypto/DLT/De-Fi space.

Half of the global population is female, and we come in all sorts of shapes, sizes, creeds, backgrounds, cultures, experiences, and capabilities.

By focusing on diversity and inclusion in one metric (gender, including gender minorities) we hope to foster diversity and inclusiveness across all measures.

Blockchain technology allows us to reshape how we do business, interact, recognise value and fundamentally shift our thinking and behaviours. It’s creating another massive transference of wealth because of it, and it is vital half of the population don’t miss out on this just because of their gender.

We need everyone at the design, development and deployment table.

Research shows that businesses which embrace diversity and inclusion in gender, ethnicity and culture are profitable and successful.

It shouldn’t be a difficult problem to solve, however inherent systems and biases means the reality is not so straight forward. We can’t do this alone, and The Bigger Pie partners with others who believe the same.

Our purpose is to focus on actions that will help make a difference. This includes visibility for the women in the space, shared learning and opportunities, helping companies find the female talent they’re looking for, investing in female led start-ups and much more. As we’re often asked by men, ‘what can we do?’ I’ll focus on some simple actions anyone can take.

We aim to get to the stage where never again do you hear ‘we can’t find the women’.

You can’t be what you can’t see. The power of role models.

History shows that we have a habit of erasing the names and work of women, people of colour and LGBQT pioneers leaving a dearth of role models. We should never under estimate the power of a role model.

Cynthia Dwork was instrumental in Proof of Work, Elizebeth Smith Friedman, Agnes Meyer Driscoll and Grace Murray Hopper are examples of women who pioneered in cryptography and we should be as familiar with their names as we are the men often cited.

This erasing of names is literally happening today, just look at what’s happening with Joy Buolamwini’s work tackling biases in AI.

Seeing someone that looks like you, that represents you, excelling in their field, making a difference is everything.

If you’ve always seen people like you in leadership roles, then it’s impossible to understand what it’s like to not have that. If you’re fortunate enough to look at every field of business and government and see role models that look like you in senior positions, then hear us when we say, let’s stop removing that for others.

It’s vital we give the incredible women in this sector visibility. There are a number of ways to do this. We have a #SmashingIt campaign that allows women in the sector to share their background, how they got into the sector and advice for others looking to enter it.  Nominate the amazing women you know to submit their videos, if you are that amazing woman, submit your video so we can share your story.

We work with event organisers to help them access female expertise. I’m in awe of the vision, purpose and expertise the women in this space hold, and we need to hear their voices next to the incredible men in the space. If you’re an event organiser, make sure you don’t fall foul of the Bingo excuses for not having proper representation at your events.

Image credit: Jezebel’s Female Conference Speaker Bingo

And if you don’t have the women in your network yet, reach out to organisations like The Bigger Pie, Women in Blockchain, Crypto Chicks, SHE256, Women in Blockchain Talks etc. You’ll be blown away by the global expertise in their networks.

For the men who ask, ‘What can we do?’

Only agree to talk on panels with diversity.

Make sure your sponsorship money matches organisations that share your values about diversity and inclusion and have gender parity with their speakers and panelists. Check to see if women in your organisation are being passed over for the opportunity to share their voice and expertise, and if they are, do something about it. If you’re looking to hire more expertise, remember that it’s not a case of fixing the women.

There’s the often quoted “a woman won’t apply for a job unless she ticks all of the required skills and experience (or at least 80% of them) and that a man will apply if they have just 20%”, or in another way, a man will apply for a role 2 years before they’re ready for it and a woman 2 years after they’re ready. Imagine 4 years in emerging tech and what gets built in that time.

Nobody benefits from that disparity.

Use language that is inviting and inclusive, there are tools to help with this, it will foster more applications from more diverse candidates.

As Keir Finlow-Bates said, if you have a cv that’s exactly the same, but one is from a man and the other a woman. It’s most likely the man has fallen into his career choice and path, but a woman has actively chosen hers and has overcome challenges the man didn’t have to.

Based on that assumption, who would you prefer to hire?

If the boy’s network is still the best way to hear about roles, and get your foot in the door, then actively work to create inclusive networks.

Actively go out to the networks where female talent are comfortable and hang out and become allies (see interest communities mentioned above). Mentor women. Advocate for women. Recommend women. Create opportunities for women to connect with peers at the work place.

If you don’t have women, or only one or two women in your firm, reach out to other companies and communities for these women to have a number of ways to feel supported and part of a more gender balanced ecosystem, at least until such time as your company has that internally.

There is a shortfall of people with the necessary skills to fulfil the growing demand across all disciplines in the blockchain sector.

We’re seeing more women who are well educated, successful, driven individuals enter the space, they are learning and discovering about the industry through their own research and learnings. Why not open up your doors to let these women have some experiential learning, to see behind the curtain of what it looks like to work in one of these companies, in your company?

Gintare Geleziunaite is one example of someone looking at entering this sector.

An accredited and experienced project, programme and change management practitioner (mostly in the public sector). Delivered numerous transformation, business and culture change initiatives. Keen to find opportunities to ‘peak behind the curtain’ in order to understand; how solutions are being applied in real life, how projects are initiated, how stakeholders are brought together and what cultural impact these projects could have on people and organisations.In return, she’s happy to contribute her P3M and change management knowledge and skills wherever they may be of use.

If you’d like to learn more about the various ways you can support the initiatives of The Bigger Pie then we’d love to hear from you bridget@thebiggerpie.io

 

How to get a Board/Advisory Position within the blockchain/Crypto space: Board Advisory Playbook – Part 1

Ever wondered how to get that board position, or wanted to be an advisor for the burgeoning start up scene in the blockchain and DeFi space?

In this talk we learn from the experts who work in the sector as advisors and who help women to get on boards across all industries.

Blockchain Companies are becoming more mainstream. The new form of capital raising requires those organisation must assure that they have proper governance.

This is achieved through the creation of boards that are both part of the funding firm and independent members that can support the organisation in its growth. The demands will be for individuals with not only a good understanding of the Blockchain and Crypto space, but having a solid back ground in other parts of business.

Women on Boards have launched a new report which reveals the hidden truth about diversity and inclusion across the whole FTSE All-Share. It shows a stark ‘diversity divide’ between those firms who are making progress – and those who are not.

All this proves why it is now more important than ever to maintain the scrutiny of board diversity and expand it to cover all forms of diversity across the entire FTSE All-Share. It shows why female and other under-represented candidates are still sorely needed to step forwards and develop as board members.

Read the full report here: https://www.womenonboards.net/en-gb/reference-items/resource-centre-articles/the-hidden-truth-june21

It’s vital that we see more women in the space and in senior positions in the blockchain and crypto space.

This event is designed to help you understand what you can do to get on that board, become the advisor to that company.

This is part 1 where our panel introduces themselves and shares a little bit about their background and how they got into the blockchain space. Amber also shares some wisdom on getting into those more senior roles and advice on hiring for board positions. Rachel shares her tips and tricks to getting that board role and how to create the perfect CV that will help you get there. We also hear from Toby of the work he is doing at Novum Insights and how he is going from advisory to board.

How do we invite women to get into board roles, senior positions, get into advisory roles in this new sector?

Clearly it’s not from having years of experience in the sector because the sector is not that old, it’s only very nascent.

Amber Ghaddar: I’m Amber Ghaddar.

I’m one of the founders of Alliance Block. At Alliance Block, we’re building the world’s first globally compliant capital market.

The idea is to build a new type of investment bank that comes in blocks. As you could guess, I’ve spent my career in investment banking.

It was a logical move for me, especially when I saw the potential that blockchain and AI can bring to the very centralised  financial industry.

Rachel Tranter: Hi everyone. Thanks so much Bridget for inviting me to join you today. I have to say that your blockchain, I had to do a little bit of research and it’s a fascinating exciting world that you all live in.

What world do I live in? What’s my background.

I am one of the founders of Women on Boards here in the UK. We set up nine years ago at the time that Lord Davis and the UK government said we need to do something about diversity, gender diversity in the boardroom.

And the focus really at that point was purely on FTSE100 and we came along and said, “Brilliant, we really want to support what you’re doing, but what about all the other companies? What about the smaller companies? What about the public sector? What about sports boards? Housing associations? Charities?”

We set up to help. I like to think of it as supply and demand. We are there to help those companies on the demand side.

We’re there to say you need support to find the talent. On the supply side, no great surprise there is a fabulous talent pool out there of women, of all shapes and sizes, whatever sector, wherever they’re beginning in their career. We want to help effectively match that talent with the opportunities.

In the middle of all that supply and demand, is a lot of support from us, whether it’s training, workshops, events, whatever it might be, we are there to help. We started off very much bravely on the gender piece. I think if I think about what we do now, we’re much more on that broader diversity piece, all about supporting people to get those board roles and also supporting people in their own careers in terms of getting through, I guess the journey up to the more senior positions in your own company.

What do I do within that? That’s broadly what Women on Boards is all about. Within Women on Boards I do two primary functions.

I work with the organisation, looking to recruit who are looking for non-execs, only non-execs. I help them with their search effectively. Then on the member side, I’m very much on the member engagement side in that I help those members who are going for interviews.

I provide an awful lot of interview support away from Women on Boards.

I also sit on a sports board. I’m the board of the amateur FA. If any of you wants to know anything about the sports world, then please contact me. I can give you warts and all. I’m also an independent panel member for the Ministry of Justice.

That is me. What I’d like hopefully to talk to you about in a little while is some useful tips on how to get on your own journey.

Toby Lewis: I set up Novum Insights, we’re a research business, a blockchain and DeFi.

Building a SAS product, tracking signals and outliers in the blockchain and DeFi space. I guess because of that position of analysts and data scientists looking at the industry, we’ve always had a continuous stream of clients looking for consultancy and advisory work that can vary from the smallest startup with two founders and a backpack and a laptop, or two laptops to sort of large multinationals like Hitachi and Barclays and whatever.

We’re going to dive in a discussion to that advisory board playbook that’s the topic today and I find it really interesting.

It’s very much how I first got exposed to the decentralised finance space was a project in early 2019, mid 2019, asked me to come on board as an advisor. I’ve known the founder for a year or so, they were pretty interesting. They had a very informed young programmer involved.

Then found it really, really interesting and then ended up driving Nova much deeper into doing DeFi analytics and data having done that. I think it opens a lot of doors, just looking into different products.

Amber Ghaddar:

I think maybe first we need to start with differentiating the different boards if you want, that you need in the different stage of your company.

When you are quite an early stage startup, i.e you still have not raised your series A you. The board members are usually the directors of the company, and usually they are the founders of the companies. Then you see some startups adding to what we call the advisory board and that part is sometimes a little bit confusing but it could be interesting.

An advisory board is that they are advisors.

One thing to keep in mind if you’re a startup is that they have absolutely no value for VC. Usually you could have a really good advisor that had 10 to 20 years experience in a certain field. And you would think that putting them on your pitch deck will gain you some points, but most VCs don’t actually look at that.

The way you build your advisory board is something you need to be a little bit careful about in terms of what it is exactly that this advisor is going to be bringing to your company, keeping in mind that the advisor will be paid either in cash, either in a mix of cash and equity and either in the decentralised space in tokens.

I’m more than happy to talk about tarriffs if someone has questions about this. But as founders, I would highly advise you to make it very clear what are the points that you require this adviser to achieve for him to get his salary. Because I’ve seen a few advisory contracts that were unfortunately not in the benefit of the startup.

Then of course, once you start growing and you’re at your series A and you start having VCs involved, your boards of director will basically change and will include the VCs. The way the VCs do that is usually they would want at least a 50/50 control of the company, even if they have like 20% of the equity. You would need to take out some directorship from some of the founders and then add in the VCs.

I’ve seen this happen quite frequently in the UK.

As you keep growing, you would need a chairman. Whether it is a non-executive chairman or an executive chairman, but it’s something that we don’t have at the moment to be fully transparent.

But it’s a role that is very important in terms that, he would need to be someone that is quite recognised in his field as someone who has quite a lot of experience and usually can really back up the CEO, especially when you’re starting to scale up and scale up your business. His role will be somewhere between an advisor, a mentor, and a senior manager, especially if he is an executive chairman rather than a non-executive chairman.

In terms of adding people to your boards of director, that’s also something that is, well I mean in startups will mainly be driven by VCs, but you can take the step and start looking for directors that will compliment your business, in our business in the blockchain crypto DeFi business.

One advice I would give is either have someone that is very senior in finance or someone that is very senior in legal or someone that is very senior in regulations because all of this is one of the pain points that we have in the industry and could give validation in some way, or at least comfort from your future investors.

Keep in mind, these boards of directors are here to make sure that shareholders value is protected and shareholders value is created.

One of the CCs that you have someone, that was head of legal at UBS and you’re in the DeFi space and he sits as a director on your board. That would give them a little bit more confidence in terms of how you’re positioning yourself from a legal and regulatory perspective and whether you have strong compliancy and strong regulation framework in place.

I’m sure all of you are in the crypto space and you saw what happened to Binance. Last weekend, few days ago where basically the FCA announced that they cannot operate in the UK anymore.

In terms of non-executive directors, these are also interesting roles in terms of, for me, they’re more of a consultancy role. Even in bigger companies, they are more of a connected and correlated opinion and outside opinion on the management team and on the long-term strategy of the firm. In our space, especially when you are at the series A maybe series B level, they come in more as consultants for the firm.

At least this is where I see their values.

You would pick a non-executive director on a very particular subject.

You would tell him to work with you on this very  particular subject. In terms of applying for non-executive director roles, I think Rachel will be able to speak about this better than me.

But I must say that before launching the company, I was quite interested in applying for these roles and I actually found it very difficult.

Rachel can definitely tell us what it is that we did wrong.

Genevieve Leveille: For me, what I’m finding is and maybe Rachel can tell us more about what has transcribed this in the last few months. Because I am getting at least one or two a day coming into me and saying:

“Have I got a job for you?”

Obviously as a CEO of a company, I have to make sure that I’m not putting too much of my time against something which I won’t be able to do or something which is not of interest.

Genevieve Leveille:

Rachel, could you tell us about the new changes going from 30, 33 to 50 and how we can actually also shape our resumes.

Rachel Tranter: I’m not sure I can necessarily tell you where you’ve gone wrong but I can give you some broad suggestions, which is what I wanted to do.

Just to clarify some of the headline numbers, the hidden truths.

I don’t know how many of you have read the report that we published very recently. But I think there’s a general perception, that we’re doing quite well with our stats now in the UK and that we’re meeting the targets.

To a certain extent, in the FTSE in the larger companies, we’re not doing too badly are we. We’re creeping, we’re meeting those targets, but are we?

Are we at risk of moving towards that ‘fishing in the same pond’. Which is probably what you’re sensing. What are the hidden truths, which is what we felt we wanted to dig into.

There is a sense that people are starting to feel, “yeah job done”. But the job is never really done when you’ve only just met the target, which some of us still think is quite a low target.

40:40:20

At Women on Boards, we think that really, it should be 40:40:20 and 20 being obviously what is naturally what any individual board should be getting to.

We actually are much more aggressive with our aspirations. When you start digging into the stats, what we’ve found recently and let me just pull out some of our headlines in fact, if I can find a report.

At the moment, in the large listed companies, you could say job done we’re at 34%, but that’s 34% now.

What are we doing to continue bringing the new talent through?

I think we would say that maybe we’re not doing enough there and companies need to work harder.

If we look at the stats outside the three fifty it’s not looking as good. Less than half of those companies outside the larger three fifty have actually met that 33% target. The warning bells are ringing there. Again, focusing upon those X three fifties we call them, only 16% of chairs are women, 3% are directors of color. There is a gulf. There are 48 companies in the research that we did that have 50% or more women on their boards. Great. But there are 98 who have one or no women.

From our point of view, there’s still quite a lot of work to be done.

I’d quite like to give you some sort of general tips on how to go and what I currently think the challenges are.

One of the challenges being, how do you actually articulate your value?

Because I think one of the key challenges that you possibly have in your sector is being able to articulate what you will bring to the boardroom and that golden board CV versus your exec exact CV.

One thing that I want you all to remember is that you’re all unique.

There is no set journey when it comes to where you are now to get into the board room, we’re all different and we should celebrate the fact that we’re different. Some of us are young and ambitious. Some of us are maybe more mature and have been in the business for longer.

There are board roles for everybody.

If you are starting off in your career, you may now be saying, well actually I would like to add value to a board and maybe you should be looking away from your sector and looking at not-for-profits. Looking at sports boards, looking at housing associations, whatever it might be. All the way through to, should you be looking at the listed roles?

Should you be looking in your sector? Should you be looking outside of your sector?

At the moment, I’m posing you more questions and answers but that’s because it’s a really exciting world and there are lots and lots of opportunities for you to be looking at.

We’re all different and where on earth, therefore, do we begin?

Remember that you’re in control. You don’t need to do this, you doing this because you’ve decided you want to, you’re ambitious and you’re thinking actually, taking a non-exec position at the end of the day is good for you. It’s aligned to your values, or it may be that it’s simply good for your career.

I guess I would throw in another question out there and say:

Why do you want to join a board in the first place?

There are many reasons why going to the board is good for you. It may be that it’s time to give something back. You feel very passionate about something and you know that you’ve got skills that you have developed along your executive career so far and it is time for you to give it back to possibly your community. Other reasons for joining a board there’s no doubt about it, it does build career resilience. Going on a board in a different sector, meeting people that you’ve never worked with before does absolutely build your market and your broad industry knowledge.

They’re very good career based reasons why you would do it as well. It may be that it opens up other opportunities for you. It opens up other opportunities in your, call it your ‘post executive career’. Many reasons why you could be thinking about this and many different stages of your career that you could be thinking.

What value do you add?

As much as I am putting out all the positives of the moment and saying, there’s absolutely a role for everybody, what are the challenges? Why are we all not sitting comfortably on boards? There are many challenges. I view them and I’ve tried to put it point of view to talk to you about today I would say the number one thing is, like I mentioned at the beginning, what is my value add? What do I give? Where are the roles that I should be applying for? Challenge number two, challenge number three. How on earth do I succeed? And challenge them.

For actually, which we do all have to be aware of. How do I then manage that juggling? How do I juggle that portfolio of positions? I’m only used to having one job, now suddenly telling me I’ve got to have two or three.

Let’s just touch on those challenges.

The Secret Recipe

Value add. We’ve all got probably spectacular executive CVS. Great.

What I want you to do mentally is rip that up and want you to start thinking about building a board CV. A board CV is quite a bit different to an exact CV.

Think of the board CV as almost turning your exact CV round. Because what you need at the top of a board CV is your value add. What do I bring?

And the best example I always think is a lawyer. I don’t know whether we’ve got any lawyers here, but you could be a fabulous lawyer. You’re continuing to have a fantastic career as a Linklaters partner or MD, whatever they may be. And then somebody says to you, “oh what’s your value add?” If you haven’t put any thought into it, you may struggle because you’d say I’m marvelous. I’ve done all these wonderful things and you will be marvelous, but what’s behind being a lawyer? Because although every board wants the lawyer, they want to know what you’re good at.

What’s in that NED toolkit.

The whole point of having a board CV is being able to articulate the fact that you’re strategic, your risk, your regulation, your people, whatever it might be. Number one is being able to identify that value and the way you do it is by creating the board CV. I can almost promise although it’s difficult to write one, once you’ve got one you’ll feel so much more confident about going for these roles, whether they’re not-for-profit, whether they’re listed, whether they’re in your sector or outside of your sector. Do think about that value add piece.

The second point, the second challenge I mentioned where are the roles?

Again, I can’t say, you guys are the experts in terms of your sector. But broadly speaking, I would say where do you find the roles?

You use your networks. Networks are so important.

Still the vast majority of board roles, non-exec roles come to you through your network and we celebrate that. That’s absolutely fine. But what we say to you is therefore understand your networks. We have our personal networks, we have our networks within the organisation that we work in, and we also have our  broader network in terms of people that we know outside.

And that’s where professional networks, not just us obviously, but I’m going to recommend that you become part of our network if you’re focusing upon your NED career, but there are lots of networks out there. Please do use these networks and it is your director connections at the end of the day, that are really going to help tell people that you’re looking for a board role.

Don’t be afraid of bringing it up in conversation.

Use LinkedIn. LinkedIn, I think over the last year has really become a place where companies go directly searching for people. Do as well as producing a fairly fabulous board CV, get your LinkedIn profile to marry. It’s a useful blend of the board and the exact piece.

And if you’re bold enough to put on that LinkedIn, ‘currently looking for opportunities’ do it. Increasingly I see people do that.

Your networks are important.

Head hunters. Head hunters play a vital piece in the non-exec world.

They are very difficult to tap into, but once you find the right ones, once you found the niche head hunter who is going to work for you and listen to you, keep hold of that contact.

Invest the time in finding who those headhunters are. I think if you can tell your employer, tell your employer. Be bold. I don’t see any problems with that.

The third challenge, I may be a bit out of order here, but:

How do I succeed? How do I do it?

I’ve got my board CV. I’m starting to open up my mind to my networks. What are the opportunities?

I don’t think we do a very good job of investing in ourselves and I don’t mean money. I mean investing time in ourselves.

Step back, think what do I want from my career? Am I strategic? Am I somebody who should look forward to where I’m going to be in two years time?

If actually I think I’m somebody who wants to keep my really busy exec life going, but actually I could see myself in a couple of boards. Great. Well, how are you going to get there?

If that’s where you see yourself in two years time, you have to start that planning now. Not in two years time, you may be lucky. But the chances are, you need to do that now.

Invest time in yourself.

If you do that and if you start that almost branding yourself, then I suspect your confidence levels and your direction will come as you go along.

Find your level. Anyone in this room today can go on the board, but what board? Find your skills and find the board and find the opportunity and be bold and go for it, view it.

There was some research a few years ago now on FTSE100 NEDs and the vast. The vast majority of those really senior mega successful NEDs all when they were interviewed, they all started in the not-for-profit sector.

Now I’m sure they didn’t do it as a fabulously strategic journey, but it just so happens that they found that passion at a much earlier age in their career or earlier stage in their career, rather.

Don’t think that somebody who’s on the FTSE board suddenly just lept onto that FTSE board. They went on a journey and they look back and yes, they’ve got fabulous CVS, but they had to start somewhere. Do view it as a stepping stone, as a journey if you wish to do it in that way.

I think I’ve said this. Understand the landscape. There are opportunities everywhere for you to look up, look within your own company. Lots of our members when they put that board CV together, they said they haven’t been on a board. But when we dig in a little bit closer they say, well I have been on a committee. At Morgan Stanley or JP Morgan. Fabulous. Write it down. That’s board experience. I’ve been an advisor, write it down. I’ve been on my own internal pension fund. Write it down.

Start to understand you and understand the landscape, invest in yourself, invest in understanding what directors do. What are the fidiciuary duties of a non-exec? Do we really know? Spend a bit of time looking at that and understand what boards do. I don’t want to go on and on about this, but as you can probably guess I could do.

But what are boards looking for?

They’re looking for your sector knowledge, potentially aren’t they. If you’re looking at a role within your sector, I’m sure they’re interested in your sector knowledge. Are they looking for your professional skills and your experience? Have you got skills that you could package up and take into another sector?Yeah, I’m sure you have.

It’s just taking that time to do it. They probably want your strategic networks. They may want you for fundraising connections. That’s reality. They may want you for your community reputation. There are many, many reasons that many things that boards are looking for. Don’t think that there’d be maybe as narrow as you think they potentially are.

The final thing I mentioned, managing the portfolio. I think the last year and a half has taught all of us. How important peer to peer support is. I would say one of the key things you can do when you’re starting to juggle more than one role is keep your network very close to you. Use your peers, engage, be strategic.

Constantly look ahead. Think about your next move.

If you’re on a board, fine. What’s your next board?

Start to think about it halfway through the term that you’re on and stay informed. There’s so much out there that board members need to know about, whether it’s AI, whether it’s ESG, all these things, all these terms that we need to remember.

Stay informed.

They’re just some of the highlights that I would offer you. Any questions later

Genevieve Leveille: I think it’s a great segway into Toby talking to us about the work that he’s being doing at Novum, how he is moving from the advisory to where now he is going on board.

I would love for you to sort of cover that also is legitimisation of the blockchain space. When you see a company like Coinbase, getting such a great welcome into the stock market and how well they have done. I expect that we’re going to see more of those happening and part of the requirement for them aside from things like the FTSE is really what their board needs are going to be major because of regulatory.

Toby Lewis: 

I was lucky enough to be on the advisory board of a company that’s going on to the public markets.

I went onto the public markets, which was a mining business and there was quite an interesting journey. There’s a whole sort of legitimisation of crypto going on as more of crypto and blockchain as more and more of the bigger and smaller names in the space go on to either main markets like Coinbase did or some of the junior markets like AIM.

There’s a growing group of these kind of things. I guess I’ve always been interested in early stage founders and that kind of journey just because I emphasise I’d founded two businesses. Both of which were effectively bootstrapped to significant revenue and investment.

Always empathised with a founder was a good idea and a power point and the passion. So found that could add quite a lot of value. I guess where we’ve gone with that is we can do some of the advisory needed for any type of business touching the crypto and blockchain space.

We set up a small family office that does some venture capital deals as well. What I like about the advisory stuff is essentially you get to know founders and projects quite early on and can advise them on strategy, move through where they should take the business.

You can choose to invest or not, depending on what makes sense. The sort of investments we’re doing, it’s still relatively early stage. Generally, when you’re connected and the crypto blockchain space, you typically get to know a lot of the major investment firms in the space.

I think the key element I’d say of an advisor and I guess the best advisory role I’ve had was, was when one of my projects was doing a token offering and they’d actually raised a significant amount of capital but ran into some technical issues due to the raise. There were a lot of people who’d invested in the project that were going, “we should replace the founder” and whatever.

I was on the phone to him going, “look it’s all going to be okay. You just go forward and whatever happens, it should be fine.”  There’s no need to resign a month, a week before you’re meant to be listing. Instead, just push forward. I guess if you could be just a calm voice of reason, that’s very valuable to people.

Genevieve Leveille: Thank you so much Toby.

Here is part 1 of the recording:

 

Do’s and Don’ts. How to get a Board/Advisory Position within the blockchain/Crypto space – Part 2

Skillset? Experience? or Expertise?

Following on from Part 1 in this series, our panel opens up the floor for questions.

Some topics that come up include CV do’s and don’ts and the range for salaries and how to negotiate!

 

 

Bridget Greenwood: You spoke about tailoring your CV for the board position and what a value add that you bring.

When you are looking at the boards, would it therefore make sense to see the skillset of the board that you’ve got, a board that you might be applying for and where they’re missing your expertise?

Rachel Tranter: Oh, absolutely. One of the key pieces of advice that I give to people actually when they’re applying, but possibly more so when they’re going through the interview is find your seat at the table.

If we just step back a minute, you produce your board CV and that’s your generic CV, but then obviously as you applied for a particular role, you will tweak it depending upon that specific role.

One CV won’t fit every role. But I would definitely, part of the process is get to understand, go into everybody that’s on the board, understand their skills and find your seat at the table.

There will not be a “you” at the table.

There won’t be. I can guarantee there will not be. And your first challenge is to say, well, why isn’t there a me at the table? What do I mean by that? And that’s going to be you helping to actually build up what your profile is. It tends to happen more and actually by the time you’ve come to the interview and I’ll always say to somebody, “have you looked at the board? Have you figured out why you’ve got the interview?”

Well, because they clearly don’t have a you because of your skills. It’s a really important thing to do definitely.

Bridget Greenwood: As you were talking, does anyone remember the book?

“What color is your parachute?”

I read it back in my twenties when I was looking at my career and it basically says, write down everything that’s great about you and then go and find that role.

It seems to be very much the same thing in the boardroom.

The other question that I had,

“what are the salary ranges apart from zero to and how do you figure out what does that negotiation look like?

Do you come asking for something? Do they offer something? What does that look like?”

Rachel Tranter: Again, forgive me. I don’t know about the more specialist areas that you’re in, but more broadly up until you get to the private sector, it’s almost zero pay. Charities, for example, cannot pay. Sports bodies cannot pay. Housing associations pay you a bit, but not a lot. You’d be delighted if they offered you 12 grand a year to sit on a housing association board.

That’s reality.

Public sector boards do pay. Pretty much all public bodies pay, but it tends to be a per day rate. Does it do much more than cover your expenses? Not really.

Once you get into the listed roles, I can tell you I’m helping two companies at the moment.

They’re FTSE, they are paying between 50 and 70,000 for the position.

One for example is saying 50,000 and offically seven meetings a year but expect to commitment, therefore 24 days annual. Now fifties low, fifties low. But this is a recently listed growing ambitious company.

You’d expect 70 I would say as a typical listed company board.

Toby Lewis: And Bridget, I’d sort of chip in a bit on I guess the crypto blockchain tech space.

Largely the first area where you’re negotiating for is either equity or tokens.

You’re looking for a percentage of the upside and obviously depending on how advanced the space is, that kind of table stakes. Then the reality is your time is very valuable, right? You probably want some form of paid retainer. That can be anywhere from a thousand pounds to 50,000, but obviously like 50,000, would you be bringing a whole army of people, right? That’s more a consultancy engagement.

What I would recommend to people looking at doing advisory work and in the crypto and blockchain space is take a project that you find really, really interesting and inspiring take some of their tokens and take some of their equity.

See if you can negotiate a fee, that’s often dependent on how much money that project has at that time, or sometimes a success fee on capital raised. Depending what your skill set is like, I think you’ll find certain people; marketing people, corporate finance people, lawyers, those kind of people have the skill sets that startups will want to pay for all programmers right or whatever.

A lot of other people, it will be a bit more,

“Why are you you at the table? Why are they wanting to pay for you?”

But I think my view is in the tech startup space. You shouldn’t be pressurising a founder to compensate you because I think that can be distasteful and I think quite experienced executives can sometimes lead to the wrong dynamic with founders just because they might not actually be experienced at scaling a startup scaling a crypto business.

I think it’s just a very fluid negotiation, but I think the best thing was a lot of these roles to dive in and see what happens.

Genevieve Leveille: Thanks Toby. We have a couple of questions.

She’s asking,

“What kind of board roles or sectors are available for senior HR professional?”

In my viewpoint, I would think that if you’re going to be working with startups, they are starving for your support because they’re basically scaling up, being able to understand what are the issues around that is key. And I would also even suggest that in some of the large banks, they are looking at re-skilling and having somebody who’s outspoken be able to provide them with feedback. It’s something that would be really greatly appreciated.

Amber Ghaddar: I would say with regards to HR role, I think they’re quite relevant  in banks that’s for sure, because we have a retention problem and we have a diversity problem and we have a pay gap problem. Having senior HR professionals on board of banks is something that I would strongly support.

Similarly, I would say for sort of larger corporation in the startup space from my experience, I don’t think there’s a real need because the VCs that come on board usually have the skillset to with regards to anything that is related to HR, anything that is relating to hiring talent, retention, et cetera. Especially when you are at this very, very fast growth space.

But I think if you check with scale-ups. I think maybe that could be something that is interesting to them. Especially scale-ups. I don’t know what sector you specialise in but I would say anything that is a very highly technical and rare i.e. C plus plus coders that are not very easy to find.

If you have like strong experience in this or that was the Saturday you were working in. Definitely speaking with scale-ups in the deep tech space would be something interesting.

Rachel Tranter: I can obviously add from outside into the other sectors that there’s an absolute need for HR, but it’s D&I, it’s people, it’s talent.

They’re the type of things that I see in the criteria of roles.

Has there ever been a better time to be looking for to join a remuneration committee?

There are plenty of opportunities to go run comms I can assure you. So, yes. I would say.

Companies haven’t always had HR directors on their boards, so they’re missing that, that is a seat at the table as we were talking about earlier. Absolutely yeah, lots of demand.

Genevieve Leveille: The next question came from Jannah and I think part of it might’ve been answered, which was the salary range is from zero to 50.

And what do they look like for advisory board? And what is a typical time commitment in terms of appointment? How many hours per week should be needed for a consultancy role?

Toby Lewis: Yeah. I mean, I guess it’s kind of how long is a piece of string really.

I think you can really formerly timebox a lot of these things, I’ve never been particularly good at this. I’ve hired a project manager who was running trip to Deutsche bank so she’s now extremely good at that. Everything is costed. Everything is mapped out. Normally in an earlier stage business, there’s a bit more of a sort of informal negotiation and tease. And then as you formalise it, you, you can have an hourly rate and the structure  and just how that engagement operates.

I think it all depends on the entrepreneurs and the people  knowing the advisors and vice versa and getting something that is a non frustrating relationship right. I think in the startup space especially, there’s a bit of a cat and mouse between advisors who are pseudo investors often and the founders.

There’s a lot of nuancing and the relationship of how those things get built up. And sometimes someone who you think might be your advisor ends up being the lead venture capitalist in your race or whatever it is. It’s a complex field.

Amber Ghaddar: If I may add something here, I think a good way to go about it is, it’s easier for you to just ask them, “okay, what is the budget that you have for this consultancy role or for this advisory role?”

And then you get back to them telling them. For this salary, this is how much I can offer. This is how many hours I can offer. And within these hour I will be able to do XYZ. For example, not the rest and you can start the negotiation from this point in time.

Genevieve Leveille: I’d like to add a little bit to this because I’ve had some of the experience being asked. I’ve looked at about three roles recently.

Usually in terms of time commitment, they will tell you anywhere between one to two days a month, and that doesn’t always include your meeting. That also includes things like reviewing papers, providing advice on the board meetings and depending on the maturity of the board, you could have very formalised meetings whereby it’s a three hour meeting. May need to be face to face and everything such as finance and also strategy is being brought to your attention.

But those you will have had gotten the papers ahead of time to do a review. You can figure about to six hours to get yourself around that, which then comes in to that 8 to 14 hour a month timing.

I’ve had certain people tell me that you will need to be flying overnight for dinner prior to the board meeting. Which means you’re then looking at about two or three days in that timing when the board meetings are happening and usually they will tell you formally when those days will be on calendar, plus you will have informal ones.

Depending on the size of the company, you may also be asked to be participating in committees. Those can be the renumeration committee, the technology committee and diverse things. For those for the larger company, they will be a top up, which is put on top. Most of those large boards will ask you to actually be part of one. Um, there is actually only three minutes left.

I’d like to give a big thank you to everybody for your time. And I would like to give starting with Toby our esteemed guest the opportunity to have one last minute and quickly tell us how you would go about it.

Toby Lewis: I think on the point and valuing your time, the way I tend to look at those is try and have a portfolio of retainers.

I think it’s a good way of just ensuring that you’re always getting a good income from that kind of activity. I think if you’re of a certain mindset, advisory board and board roles are very interesting. If you’re a typically inquisitive thinker, someone who’s quite out of the box, it can be really, really valuable and you can get this area of very trusted relationships with interesting CEOs and, and people around the world.  I’ve also seen both the advisor board role go wrong both from the entrepreneur’s perspective. I’ve had to fire a chairman before and run into areas where the client doesn’t listen to your advice. But anyway, lots to discuss.

Genevieve Leveille: I’d like to hear one quick from Amber and Rachel and of course our hit esteemed hostess Bridget.

Rachel, would you like to please give your last parting

Rachel Tranter: My call to arms statement.

I think that there is never a better time to start looking at board opportunities  than today.

This time last year boards were starting to resurface from a few months of stepping back and really wondering what on earth do we need now? There’s never been a better time. Boards need talent, they need diversity. And please don’t think for one minute that we are at a tipping point in terms of meeting those targets.

We’ve met the targets, marvelous. But there’s so much work to be done and it is talent like you that needs to get on those boards and make the difference.

Amber Ghaddar: If you’re running a business and you want to build your board don’t be ashamed or scared of trying to hit high, especially within your network.

The ex CEOs of the companies you were working in, don’t be afraid to go and ask them and tell them, “I’m building this business, we have X revenues we’re growing at X. And we think that you could be a real addition to a real addition to our boards in terms of X, Y, Z.”

Again, you’d be surprised a lot of people are looking for these types of roles, don’t know where to find them and are always willing to be part of a potential success story.  That would be my last one.

Bridget Greenwood: A huge thank you to everyone Genevieve, Amber, Toby and Rachel everyone showing up, especially asking your questions.

I know a couple of you have joined us in The Bigger Pie so welcome. When it comes to things like negotiation of salaries, people will ask in the group and I’ll pull together a select people who can give you their experience for the different types of roles that you’re going into as particularly in the crypto sector where,

I can’t say money anymore I have to say Fiat to have to define it. But it’s not just sort of what salary expectations that might be an equity, but we also have the tokenisation as well.

Thank you very much everyone, we are more than happy to continue these types of discussions in our community.

Genevieve Leveille: Thank you very much everybody and looking forward to seeing you guys online on The Bigger Pie channel.

Here is both parts of the recording for the second segment: