Interest high in bitcoin limitations, taxation talk among LIBF meetup attendees

LONDON, UK — Attendees at the second Crypto, Fintech & Banking meetup at LIBF  last week were keen to learn more about the limitations of bitcoin, tokenization, and what tax looks like on the blockchain.

Together with the London Institute of Banking & Finance (LIBF) and LendIt Fintech, a group of Web3 newcomers and experts gathered to share knowledge.

Bo Brustkern, CEO at LendIt Fintech, started the session off. He discussed plans for LendIt Fintech, including the flagship event  Merge on Oct. 17-18, 2022, the first conference and expo dedicated to the impact of Web3 on financial institutions and how to harness this shift to gain a competitive advantage.

He introduced guest speaker Connor Svensson, founder and CEO of a blockchain technology company Web3 Labs, and host of the Blockchain Innovators podcast. Svensson is also the author of The Blockchain Innovator’s Handbook: A leader’s guide to understanding, adopting, and succeeding with this disruptive technology.

Brustkern was eager to create an environment that took a pragmatic view of web3, fostered education, and positioned the discussion to be more of a “conversation than a lecture.”

Why Ethereum?

Svensson explained that ethereum emerged because of the limitations of bitcoin. Ethereum, like bitcoin, is built on blockchain technology — essentially a distributed computer network that records all cryptocurrency transactions. But unlike bitcoin, people can make applications on top of ethereum, such as tokens, and smart contracts applications like DeFi and NFTs, so it works better for a computational environment.

So when bitcoin was created, there was not much competition, whereas now the environment is more competitive.

Even for web3 experts like Svensson, it can be hard to keep up, though he does point out that ethereum still has a “first movers advantage,” and other currencies have yet to do enough to shift people’s interest.

Brustkern added a definition of layers since understanding ethereum would not be complete without it.

He told the audience to think of blockchain like public ledgers collecting information in the form of data. Humans are layer zero; blockchain’s central architecture is called layer one. Layer two networks can be considered overlaying networks. A layer two solution (ethereum) integrates a third-party programming language into the leading network of the blockchain.

The layer one solution (bitcoin) modifies the base protocol, while layer two supports the base protocol with off-chain solutions or protocols. The ultimate goal is to make the user’s experience seamless, so they won’t even think about these layers in the background. 


Tokenization (emerging markets)

When discussing tokenization, Svensson recalls a tweet he once read: “Tokens’ are for Web3 what the internet was for web one.”

He said the purpose of utility tokens is to appreciate. This value is created by utility, objectives, and underlying cashflows. 

The ultimate objective of a utility token goes beyond the individual to further the achievement of external good, bringing benefit to many people, he said. And although there is much speculation, the point of a token is to represent something such as membership, ownership of artworks, or could in the future represent the deed to the property, etc. 

When thinking about emerging markets such as LatAm or war-torn areas like Ukraine, you can see the innovation happening in how tokens can democratize finance to those populations. For instance, Svensson said that one of his employees who fled Ukraine does not have a bank account in his settled country but is paid by Binance.

Brustkern added that Columbia’s economic situation is another example. Allowing people worldwide to have flexibility in where they store their money could reduce corruption and protect them from inflation. 

Brustkern also said this tokenization could be “a renaissance” for the music industry, allowing artists to have more power and benefit from their production.

Both Brustkern and Svensson highlighted taking out the middle man is the key benefit and the main opportunity for creators. Additionally, there was some explanation of custody and non-custody wallets. 


Tax and regulation 

Brustkern said, “taxing blockchain is super easy” as there are many applications that allow users to calculate their crypto tax, which makes the job of HMRC or the IRS easier because everything is recorded on the blockchain.

Countries have different approaches to welcoming fintech. The UK appears to be more welcoming with the introduction of the Kalifa Review, the launch of a government back NFTs (Royal Mint), and a pragmatic approach from the FCA. In contrast, the U.S. is more cautious, giving the UK a temporary competitive advantage. 


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