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Publications

 

Get Smart About Scandals: Past Lessons For Future Finance

By Professor Tim Connell and Bob McDowall

Sponsored by Cardano Foundation

Long Finance (March 2018), 102 pages.

 

Long Finance's Distributed Futures research programme is pleased to announce the launch the report “Get Smart About Scandals: Past Lessons For Future Finance”, another in a series of exciting projects in the programme. 

The report informs you of the basic tricks that fraudsters, conmen, and the incompetent have used, over many centuries and explores:

  • Scandals: How To Identify Them – And How To Stop Them
  • Vehicles For Fraudulent Behaviour
  • Corrupt Practices And Procedures
  • Bubble, Booms And Busts
  • The Good Guys: Scandals And How To Avoid Them
  • The Future Direction And Dynamics Of Financial Scandals

The report also offers recommendations based on policy, procedures, structures, and training, that are linked to the Lord Mayor’s “Business Of Trust” initiative, which resulted in the mnemonic ‘CIVIC’

  • Competence and skills – doing what you do well;
  • Integrity – being honest, straightforward and reliable;
  • Value to society – recognising and meeting wider societal needs;
  • Interests of others – respecting the interests of customers, employees and investors;
  • Clear communication – being transparent, responsive and accountable.

 

Related Links

"The Business Of Trust - Better Business Trusted By Society", City of London Corporation, 2018.
The City of London Corporation’s initiative "The Business Of Trust seeks to improve the trustworthiness of the UK financial and professional services sector to create a lasting legacy of better business trusted by society.

To complete the "Business of Trust" Survey, please click here.

 

 

                        

 

 

The Quantum Countdown: Quantum Computing And The Future Of Smart Ledger Encryption

By Maury Shenk

Sponsored by Cardano Foundation

Long Finance (February 2018), 59 pages.

 

Long Finance's Distributed Futures research programme is pleased to announce the launch the report “The Quantum Countdown: Quantum Computing And The Future Of Distributed Ledger Encryption”, another in a series of exciting projects in the programme. 

Smart Ledgers are based on a combination of mutual distributed ledgers (aka blockchain: multi-organisational databases with a super audit trail) with embedded programming and sensing, thus permitting semi-intelligent, autonomous transactions. Smart Ledgers are touted as a technology for fair play in a globalised world. There are numerous projects building trade systems using this technology with announcements from governments, shipping firms, large IT firms, and the like. The research is intended to inform policy makers and business people making decisions about moving towards these systems.

This report is about a major threat to the security of Smart Ledgers and other systems from quantum computing. If and when large-scale quantum computers become available, there is a concern that such computers would be able to break the security of widely-used public key cryptography, which allows remote parties to communicate securely and authenticate transactions and data without sharing a secret key in advance. Fortunately, there are good solutions to this problem, and better ones are emerging. The hard questions for individual computer system operators involve when and how to address the problem, given its uncertain timing and the evolving solutions. The report seeks to explain the problem in detail for both non-technical and technical readers, starting with the essentials of cryptography, quantum computing, and how quantum computing threatens public key cryptography. It then considers the available solutions to the problem, and provides frameworks for deciding when and how to respond to it.

Related Publications

"The Future: From Plastics To Quantum Computing", Strategy, January 1999.

"The Potential Impact Of Quantum Computing", Croner Business Networks Briefing, November 1998.

 

                        

 

 

Liquidity Or Leakage - Plumbing Problems With Cryptocurrencies

By Rodney Greene and Bob McDowall

Sponsored by Cardano Foundation

Long Finance (March 2018), 61 pages.

 

Long Finance's Distributed Futures research programme is pleased to announce the publication of the report, “Liquidity Or Leakage - Plumbing Problems With Cryptocurrencies”, the latest in a series of exciting projects in the programme. The report, sponsored by the Cardano Foundation, was written by Rodney Greene, Quantitative Risk Professional, and Bob McDowall, Advisor to the Cardano Foundation, and includes a Foreword from Professor Michael Mainelli, Executive Chairman, Z/Yen Group.

Cryptocurrencies are another application of Smart Ledgers. Smart Ledgers are based on a combination of mutual distributed ledgers (aka blockchains) with embedded programming and sensing, thus permitting semi-intelligent, autonomous transactions. Smart Ledgers are touted as a technology for fair play in a globalised world. There are numerous projects building trade systems using this technology with announcements from governments, shipping firms, large IT firms, and the like. Cryptocurrencies often exhibit high price volatility and wide spreads between their buy and sell prices into fiat currencies. In other markets, such high volatility and wide spreads might indicate low liquidity, i.e. it is difficult to turn an asset into cash. Normal price falls do not increase the number of sellers, but should increase the number of buyers. A liquidity hole is where price falls do not bring out buyers, but rather generate even more sellers.

If cryptocurrencies fail to provide easy liquidity, then they fail as mediums of exchange, one of the principal roles of money. However, there are a number of ways to assemble a cryptocurrency, as well as a number of parameters, such as the timing of trades, the money supply algorithm, and the assembling of blocks, which might be done in better ways to improve liquidity.

The “Liquidity Or Leakage - Plumbing Problems With Cryptocurrencies” report is trying to help the governance of cryptocurrencies, by more clearly tying their novel money supply algorithms to traditional economic and financial analysis. The report includes:

  • Cryptocurrency Mutual Distributed Ledgers – Introduction And Security Risks
  • Cryptocurrency Liquidity And Market Risk Factors
    • The Crypto-Market’s Liquidity Risk
    • So What’s Creating Crypto-Illiquidity?
    • Crypto-Market Risk Factors
  • Smart Contracts – The Legal Risk
  • Conclusions

The report concludes that there is little correlation between cryptocurrency liquidity and other asset classes’ liquidity, so far. Cryptocurrency liquidity is low, extremely low, due to a number of factors including high failure rates among crypto-exchanges, taxation on conversion from crypto to fiat, and speculation due to high price volatility. Digital fiat currency may have a bright future, while cryptocurrency liquidity will only improve with better ‘backing’ by physical assets or a move to much higher real-economy transactions.

Professor Mainelli concludes the Preface with “My sincere hope is that much of the analysis in this report helps improve the governance and regulation of cryptocurrencies by showing that traditional problems have not changed their spots that much in the wonderful new world of Smart Ledgers.”

 

The Economic Impact Of Smart Ledgers On World Trade

By Douglas McWilliams, Cristian Niculescu-Marcu, and Beatriz Cruz

Sponsored by Cardano Foundation

Long Finance (April 2018), 77 pages.

Project Infographic

 

Long Finance's Distributed Futures research programme is pleased to announce the publication of the report, “The Economic Impact Of Smart Ledgers On World Trade”, the latest in a series of exciting projects in the programme. The report, sponsored by the Cardano Foundation, came as a result of the the Worshipful Company of World Traders and the Distributed Futures' interest in quantifying the potential impact of Smart Ledger technology on international trade.  Written by Douglas McWilliams, Cristian Niculescu-Marcu, and Beatriz Cruz from the Centre for Economics and Business Research (Cebr), it includes a Foreword by Michael Parsons FCA, Chairman of Cardano Foundation, and a Preface by Professor Michael Mainelli, Executive Chairman of Z/Yen Group.

The report features a description of the econometric approach that maps trade frictions that Smart Ledger technology might be able to offset, especially in the realm of non-tariff and bureaucratic barriers to trade.  The authors draw the following conclusions: 

  • Smart Ledger technology could boost world trade in goods by at least $35 billion dollars per annum.
  • The cost of importing a single container could, therefore, be reduced by around $46, by simplifying procedures.
  • These potential benefits are driven by a 2.5% cost clawback assumption, supported by case studies on previous technological advancements in trade. One such case study is containerisation, where the cost savings have been calculated to be in the range of 20%.
  • If reduced uncertainty is, also, taken into account, using option pricing theory, the potential gains become even larger, with a potential monthly net cost saving of $172 million (or, approximately, $2 billion per annum).
  • This would boost world GDP by $10 to $20 billion and could, potentially, add between 450,000 and 900,000 to the worldwide demand for labour, boosting wages and living standards worldwide. The World Bank estimates that 10.7% of the world’s population still lives in extreme poverty, with an income below $1.90 a day (2011 prices).

The report also includes the results of a global survey of 247 contract and commercial managers, focusing on the respondents' awareness and use of Smart Ledgers, the importance they attach to various aspects, and the areas of ‘pain’  that could be relieved by the adoption of Smart Ledger technology. There are some truly insightful results.

Smart Ledgers are based on a combination of mutual distributed ledgers (multi-organisational databases with a super audit trail) with embedded programming and sensing, thus permitting semi-intelligent, autonomous transactions. Smart Ledgers are touted as a technology for fair play in a globalised world. There are numerous projects building trade systems using this technology with announcements from governments, shipping firms, large IT firms, and the like.

As Michael Mainelli wrote in his Preface to the report: "Trade reaps economic benefits from specialisation and comparative advantage, creates prosperity, distributes success and wealth, and collectively enriches all of our societies and communities.  Hopefully, knowing the scale of relative benefits can help speed adoption of some boring technology – ‘multi-organisational databases with a super audit trail’ - for the benefit of all of us".

Z/Yen and Long Finance would like to acknowledge the significant contribution of the Worshipful Company of World Traders, Cardano Foundation, IACCM, the City of London Corporation, and the Centre for Economics and Business Research.

 

 

Auditing Mutual Distributed Ledgers (aka Blockchains): A Foray Into Distributed Governance & Forensics

By  Michael Mainelli and Matthew Leitch

Sponsored by DasCoin

Long Finance (November 2017), 37 pages.

 

This project was commissioned by DasCoin in the summer of 2017. Z/Yen’s Long Finance project team reviewed the limited literature on the topic to produce four discussion papers that described the issues and explored some potential ways of addressing them.

On 4 October 2017, Long Finance held a symposium to explore the discussion papers in the ornate Main Reception Room at Chartered Accountants’ Hall in London. The 28 participants had wide ranging backgrounds and interests. They included representatives from regulators, professional associations, external audit firms, technology companies, and academia.

This report includes the background information chapters on Auditing Distributed Ledgers, Auditing Distributed Data, Auditing Distributed 'Smarts', and Auditing Consortium Blockchain Systems, along with a brief summary of the symposium discussions. The final chapter makes suggestions for the audit profession to address.

 

Related Publications

 

 

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