by Samuel Mbaki | Jul 26, 2023 | Banking
Key Points
- PacWest Bancorp shares have recovered after Bank of California struck a rescue merger deal.
- The bank’s shares had crashed 27% in hours, slumping from $10.33 to $7.50 on July 25
PacWest Bancorp has been saved from becoming the latest bank to crash in a banking system meltdown witnessed in March 2023. On July 25, its shares had fallen by as much as 25% but have now recovered to almost the initial figures at the start of the flash crash
PacWest Bancorp merges with Banc of California
PacWest Bancorp and the Banc of California have had a stock merger backed by two private-equity firms, Warburg Pincus and Centerbridge. The all-stock merger has come with the provision of $400 million in equity from the firms, which gives them a 19% stake in the combined business.
As a result, the combined PacWest Bancorp shares have returned to ‘normal’ levels. The combined bank’s business is expected to have around $36 billion in assets and over $25 billion in liabilities/ loans. As a result of the merger, PacWest shareholders will get 0.66 of a share of the Banc of California common stock.
The combined bank business will repay around $13 billion in wholesale borrowings to be funded by the sale of its assets. PacWest’s shares had also dipped by over 60% in May, which made it seem like the next bank to fail in the US after Silicon Valley Bank, Signature, and First Republic Bank.
However, the Federal Reserve saved it after giving a Bank Term Funding Program in June. While it was expected only to be utilized at 250 million, the demand for the funds grew to 120+ billion, cushioning banks in the country from further fails until PacWest got a flash crash on Tuesday.
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by Samuel Mbaki | Jul 26, 2023 | Banking
Key Points
- Britains richest man Gopichand Hinduja has come out to accept that Brexit was a disastrous decision for the U.K. and has driven the economy down.
- The Indian-born investor believes that PM Rishi Sunak can resuscitate the economy and lift pain from the markets.
Britains richest man Gopichand Hinduja believes it was a bad idea for Britain to go on with Brexit, which could be attributed to the current economic slowdown. However, he is convinced the current regime could pull the country out of its economic shackles.
Brexit was not good for the U.K.: Britains richest man Gopichand Hinduja.
Billionaire Gopichand Hinduja condemned the departure of the U.K. from the European Union, saying, “The step taken of Brexit was not good for the U.K.,”
He spoke to CNBC’s Tanvir Gill on Monday, reflecting on the decision for the U.K. to leave the European Union in 2016, seen through in Jan 2020. He says the current regime has everything it takes to turn the economy around.
At the time, India and the U.K. had bilateral trade talks to increase their partnerships. The Indian-born billionaire is the chairman of the Indian conglomerate Hinduja Group. He believes that increased cooperation between the two countries will provide a much-needed boost to their economies.
India has been projected to become an overwhelmingly big economy in the coming years, which makes it wise to invest in them. In a recent report by the UN, India is set to overtake the U.S. to become the second-largest global economy by 2080.
In the talks with the CNBC reporter, Hinduja said:
“The biggest help the U.K. can get is from India, because India’s economy, by 2027, will be the third largest in the world.”
He also added that the U.K. still needs to be better off, but bureaucracy could hinder its growth. He terms it as the “biggest problem,” but added that the continued cooperation between the two countries will open more opportunities for them and their citizens.
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by Samuel Mbaki | Jul 24, 2023 | Blockchain
Key Points
- Vitalik Buterin has released a blog note on what he thinks about biometric Proof of Personhood as cases of identity theft rage.
- He applauds the Worldcoin team for their efforts in linking up to discuss the matter.
Vitalik says that Proof of Personhood has been a key point in the Ethereum community as they try to build an undisputable real-world identity that asserts a person’s registry on a blockchain. In the blog, he explains that there have been multiple attempts to tackle this issue, with Proof of Humanity, BrightID, Idena, and Circles coming on top.
Why Proof of Personhood matters
Worldcoin, a crypto project built by Sam Altman, the CEO behind the world-moving GPT chatbot, has been in the limelight after showcasing the lengths AI can go to replace human prints on the internet. As a result, they have devised an idea to plug the hole by making it possible to tell who is a human and who is a bot.
The philosophy behind these plans will follow the following deliberations
(i) creating a really good proof-of-personhood system so that humans can prove that they are humans
(ii) giving everyone a UBI.
Worldcoin will achieve this by scanning the user’s iris with an orb. However, it has not gone without a backlash that the security concerns around it could compromise users. According to Vitalik, Proof of Personhood, all in all, is valuable because “ it solves a lot of anti-spam and anti-concentration-of-power problems” in a way that reduces their solves a lot of anti-spam and anti-concentration-of-power problems.”
In the article, Vitalik says that if Proof of Personhood is not developed, decentralized governance could become much easier to capture by wealthy actors, including hostile governments. He adds that most of the available services would only be able to provide denial-of-service attacks by setting an access price which ensures that bots won’t be used owing to high cumulative costs.
However, he pointed out that the current usage of government-backed identity systems like passports may be ineffective in the long term as it brings forth unacceptable sacrifices on privacy, which is open to attacks.
“Today, Many major applications deal with this issue using government-backed identity systems such as credit cards and passports. This solves the problem, but it makes large and perhaps unacceptable sacrifices on privacy and can be trivially attacked by governments.”
Vitalik further pointed out the already existing use cases of Proof of Personhood.
He explained that the major underlying problem with Proof of Personhood projects is the leakage of personal data, where he suggested using zero Knwoneledge proof technology.
“Instead of directly making a signature with a private key whose corresponding public key is in the database, a user could make a ZK-SNARK proving that they own the private key whose corresponding public key is somewhere in the database, without revealing which specific key they have” he suggested.
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by Samuel Mbaki | Jul 24, 2023 | Learn
Introduction
Proof of Stake (PoS) is a consensus mechanism used in blockchain networks to validate and secure transactions. Unlike Proof of Work (PoW), which relies on computational power, PoS leverages the concept of staking, where validators are chosen to create new blocks and validate transactions based on the number of tokens they hold and “stake” as collateral. In this guide, we will delve into the inner workings of PoS, its benefits, challenges, and its role in the evolution of blockchain technology.
Understanding Proof of Stake (PoS)
PoS is a consensus algorithm that selects validators to create and validate new blocks based on the number of cryptocurrency tokens they “stake” or hold in the network. The higher the amount of tokens staked, the higher the chances of being chosen as a validator. This process aims to ensure that validators have a vested interest in maintaining the network’s security and integrity since they would lose their staked tokens in case of malicious behavior.
How PoS Works
a. Validator Selection: In a PoS blockchain, validators are selected in a deterministic manner based on factors such as the number of tokens staked, the age of the staked tokens (coin age), and sometimes through a randomization process. Validators are responsible for creating and validating new blocks.
b. Block Creation: Validators take turns creating new blocks, and the chance of being chosen is proportional to the number of tokens they have staked. When chosen, the validator adds a new block to the blockchain, containing a batch of transactions.
c. Transaction Validation: Validators also validate transactions by checking if they adhere to the network’s rules and have sufficient funds to proceed. This process ensures that only valid transactions are added to the blockchain.
d. Block Finality: In PoS, finality is achieved more quickly compared to PoW, as there is no need to wait for multiple confirmations. Once a block is added to the blockchain, it is considered final, and the included transactions are confirmed.
Benefits of PoS
a. Energy Efficiency: PoS is significantly more energy-efficient than PoW, as it does not require the immense computational power necessary for solving complex mathematical puzzles.
b. Security: PoS incentivizes validators to act honestly, as they have a financial stake in the network. The risk of losing staked tokens encourages good behavior and network participation.
c. Decentralization: PoS promotes decentralization by allowing anyone with tokens to participate in the validation process, rather than relying on expensive mining equipment.
d. Scalability: PoS facilitates higher transaction throughput and faster block confirmation times, making it more scalable for large networks.
e. Lower Barrier to Entry: PoS reduces the barrier to entry for participation, as validators do not need to invest in expensive mining hardware.
Challenges and Considerations
a. Rich Get Richer: Critics argue that PoS might lead to centralization, as wealthier participants have a greater chance of being selected as validators, potentially concentrating power in the hands of a few.
b. Nothing at Stake: The “nothing at stake” problem refers to the theoretical possibility that validators could attempt to create multiple competing blockchain histories, leading to potential double-spending. However, most PoS protocols have mechanisms in place to prevent this.
c. Long-range Attacks: PoS is susceptible to long-range attacks, where an attacker could accumulate a significant number of tokens over time and then attempt to create an alternative blockchain history. Several PoS implementations have methods to mitigate this risk.
Examples of PoS Blockchains
a. Ethereum 2.0: Ethereum, the second-largest blockchain by market capitalization, is transitioning from PoW to PoS with the Ethereum 2.0 upgrade, aiming to improve scalability and energy efficiency.
b. Cardano: Cardano is a blockchain platform that uses the Ouroboros PoS protocol, known for its emphasis on peer-reviewed academic research and scalability.
c. Tezos: Tezos is a self-amending blockchain that relies on PoS to achieve consensus, enabling network participants to vote on proposed protocol upgrades.
d. Cosmos: Cosmos is an ecosystem of interconnected blockchains that uses PoS to secure its network and facilitate cross-chain communication.
Conclusion
Proof of Stake (PoS) is a consensus mechanism that has gained significant traction in the blockchain space due to its energy efficiency, scalability, and decentralization features. PoS-based blockchains are driving the evolution of blockchain technology, providing a viable alternative to traditional Proof of Work systems.
As blockchain networks continue to mature, PoS is likely to play a crucial role in shaping the future of secure, efficient, and sustainable decentralized systems. However, like any consensus mechanism, PoS is not without challenges, and its successful implementation requires careful design and constant vigilance to maintain network integrity and security.
by Samuel Mbaki | Jul 22, 2023 | Regulation
Key Points
- US SEC has expressed discomfort with the recent XRP rule, saying that the Judge behind it was incorrect.
- The landmarking ruling stirred the crypto market as analysts and investors called for counter lawsuits against SEC’s crypto onslaught and hinted at primary markets being termed non-securities-proven markets.
Per a recent statement, the US SEC has hinted that it is considering various avenues for the decision made in a Ripple case ruling that claims the native coin, XRP, is not a security.
The Judge behind the Ripple XRP ruling wasn’t correct- US SEC
In a statement regarding Ripple’s partial win in a case against the US SEC, the US SEC said it is “considering the various available avenues for further review.” It has suggested that it is exploring options to appeal the ruling that claims the sale of XRP to retail traders is not a security.
The regulator claimed that the ruling goes against the Howey Test, the fundamental set of rules determining if an asset falls under the category of securities. Notably, the US SEC had commended the Judge for acknowledging Howey Test and ruling that the sale of US SEC to secondary markets was classified as a security.
At the time, the US SEC claimed that the Judge was fair to rule out Ripple’s makeshift tests to determine whether an asset was a security and stood by the existing tests. The US SEC made these comments in a lawsuit against Terraform Labs, expressing many issues with the Court’s decision in the Ripple XRP case.
“Contrary to Defendants’ assertions, much of the Ripple ruling supports the SEC’s claims in this case and rejects arguments Defendants have raised here. However, with respect to the Programmatic and other sales, the SEC respectfully avers that Ripple conflicts with and adds baseless requirements to Howey and its progeny,” the SEC stated
The regulator added,
“Respectfully, those portions of Ripple were wrongly decided, and this Court should not follow them. SEC staff is considering the various available avenues for further review and intends to recommend that the SEC seek such review.”
These comments come days after the SEC chair Garyy Gensler expressed dissatisfaction with the ruling. In an interview with Yahoo Finance on July 17, he expressed that the regulator was pleased with the partial win that secondary markets encompass securities offering but greatly disappointed with a ruling that Primary markets are excluded.
He expressed that they are looking into that and will take further steps if necessary. Keep watching Fintech Express for updates on regulation and other fintech-related developments.
