Blockchain Industry Review, December 2021

Issue 8 Dec 2021

II N N DDUUS ST R T YR Y R ER VEI E VW I E W

BROUGHT TO YOU BY THE YOUR GATEWAY TO BLOCKCHAIN AND DIGITAL CURRENCY USE CASES AND APPLICATIONS

TABLE OF CONTENTS B L O C K C H A I N

I N D U S T R Y

R E V I E W

04 Defi 2022 Trends: Investor Protection

by Timo Lehes

Article 1

08 The benefits of Tokenisation

by Costa R, Waters T, Pezeshkpour F, Bowles S and So M.

12

Crypto Assest recovery: Strategies for Recovering Payments in Crypto to Unknown Persons

by Matthew Green and Carmel King

16

Article 4

Defi Staking Rewards Setting Up a Staking Platform

by Symmetric.finance

24

Article 3

How NFTS are Powering the Metaverse

by Matt Hawkins

20

Article 2

Article 5

Defi and Crypto 101- an Intro Guide to Bitcoin and Decentralised Finance

by Brian Sanya Mondoh

Article 6

28 Don’t Fall Into a Crypto Trap

by Peter Johnson

32

Article 7

Institutional Defi: Why Adoption is Inevitable on Wall Street

by Max Luck-Hille

Article 8

36 Innovating with Blockchain could save your business tax – R&D Tax Credits Explained

by Shaun Bartle

Article 9

Welcome to the December issue of

bring you some strategies for reco-

Blockchain Industry Review. This

vering payments in crypto in cases

issue brings a big focus on decen-

where it’s not even known who has

tralised finance, or DeFi, looking

the funds.

at the key trends we’re seeing and some predictions and why adoption of institutional DeFi is inevitable on Wall Street. We also look at the benefits and risks of offering, or receiving, staking rewards and a ge-

This issue also brings what to know on how not to fall for a crypto tax trap and how to get money back when innovating with blockchain in R&D tax credits.

neral 101 overview of what is DeFi.

We hope you enjoy this issue!

This issue also brings you features

Crypto Curry Club

on the benefits, and some practicalities of tokenisation, and how NFTs are powering the metaverse.

Crypto asset recovery is an evergrowing issue in a time of constant

Erica Stanford Founder of the Crypto Curry Club

news of increasingly sophisticated scams and hacks. The good news is, recovering stolen crypto is more possible than ever before, and we

Letf. Founder- Erica Stanford Right. Designer: Mauricio Cano

WELCOME TO BLOCKCHAIN INDUSTRY REVIEW

THE FOUNDER´S NOTE

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Blockchain Industry Review

DEFI 2022 TREND: INVESTOR PROTECTION

By Timo Lehes, co-founder of Swarm Markets and a FinTech

O

ptions, fairness, and good returns create value. This is just as true for crypto markets as it is in tra-

ditional finance and DeFi has reshaped the landscape for crypto investors by improving all three points.

Now, the industry must build a new toolkit for the financial world, leveraging the aspects of TradFi most beneficial to investor interests, in order to take DeFi to the next level. person-to-person

Compliance is another word for fairness Smart contracts alone are not a guarantee of a fair market. In fact, relying on the transparency of the blockchain alone may increase information asymmetry to the benefit of insiders and market manipulators. This is because the majority of investors cannot be expected to have the level of technical expertise required to accurately assess the risk of transact-

The core elements of DeFi, including self-custody,

pants to include institutions.

transact-

ing, 24-hour markets, and transparent operations result in the optionality and return potential that propelled DeFi into a global phenomenon. But there is still room for improvement.

ing with a particular smart contract.

Regulators with expertise in evaluating the safety of fairness of financial instruments must act as gatekeepers to ensure that the processes and rules written into smart contracts maintain the highest standards of investor protection. Furthermore, regulated

Two key areas that need to evolve are

assets are subject to disclosure require-

adding compliance and accountability

ments that level the playing field for inves-

to DeFi. By having both, they will deter

tors, ensuring that information is publicly

manipulation, bring new asset classes to

available needed to make an informed in-

DeFi, and increase the scope of partici-

vestment decision.

>>>>

by the Crypto Curry Club

In this environment investors without the technical expertise to audit smart contracts themselves, will be able to invest with confidence, knowing they won’t be taken advantage of by the smart contract authors or parties with superior technical knowledge.

Supercharging DeFi with regulated securities Stablecoins serve as an anchor point in DeFi. They are essential to DeFi because they are connected to value outside of volatile crypto markets, allowing investors to exit crypto positions while sheltering their assets and creating a stable environment for lending and borrowing.

Onboarding

asset-backed

securities

(ABSs) and commodities into DeFi will go beyond stablecoins and bolster market stability. The market cap of asset classes that could be consigned to DeFi dwarfs the size of the entire crypto market.

The industry must work with regulators to build the infrastructure between asset owners, custody providers and issuers.

This will allow regulated asset classes with intrinsic value to be digitized and enter the world of DeFi, making markets more stable.

The last step to enable DeFi to reach its full potential is to deter bad actors from hijacking the value created by honest investors.

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Blockchain Industry Review

Accountability is more than just KYC

Much more than more of the same

“I expect that projects that solve for pseudonym-

DeFi has been battle-tested from a technolog-

ity are more likely to succeed, because investors

ical standpoint. The time has come to broaden

can then be comfortable that asset prices reflect

the focus beyond just technological innovation

actual interest from real investors, not prices

in order to attract more participants and build

pumped by hidden manipulators.” – Securities

more efficient, fairer markets. Early DeFi pro-

and Exchange Commission commissioner Car-

jects succeeded in translating key functions of

oline A. Crenshaw

financial markets into code. Now the work to

Investors, the world over, have long demonstrated a willingness to share their identity with

transform regulation into code must happen, in order to protect investors.

the entity through which they trade in return for

Executing on regulatory compliance ensures

access to safe markets. Know your customer

fairness for all market participants, expanding

(KYC) and anti-money laundering (AML) checks

the set of options for investors by adding new

restrict known bad actors from onboarding, but

asset classes to DeFi and leveraging account-

accountability is more than just connecting iden-

ability that deters bad actors. An ecosystem of

tity with crypto wallets.

accountability, fairness, and efficiency enables

Detecting manipulation and having a system to enforce accountability after onboarding are inherently deterrent to bad actors looking to exploit investors. While it’s impossible to promise absolute security, markets are more likely to be free of manipulation when participants know they will be held accountable.

so many more investors the chance to access the full potential of DeFi. About Timo Lehes: is a co-founder of Swarm Markets and a FinTech and Blockchain Investor. Selected investments and exits include Pex.com, a media rights management platform, Aurigin, a

It also gives confidence to investors. Investors

Private Equity deals platform, and AdTech com-

are free to engage in peer-to-peer transactions

pany, Admeta. Lehes also has experience as a

with unknown counterparties without the risk

fund manager and led the US arm of Beringer

that they may become a party to wrongdoing

Finance as an M&A advisor under SEC license.

and face consequences, like wallet blacklisting

He holds a Masters degree in computer science

and frozen assets.

and data communication from Chalmers Univer-

Adding an identity layer to DeFi provides a substantial value to users and it appears that regulators across the globe agree.

Investors are attracted to DeFi because of the potential for profitable returns on their investment and are glad to trade a small bit of anonymity in return for protecting their investment.

sity of Technology.

by the Crypto Curry Club

Web3 is coming for financial markets.

Swarm Markets is building decentralized financial infrastructure to integrate TradFi and DeFi, where customers are put at the heart of design instead of venues.

Regulated in Germany, you can now invest in high-yield DeFi products with full control over your assets at all times without the worry of regulatory issues.

Visit swarm.markets to start trading or email partnerships@swarm.markets to collaborate with us.

>>>>

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Blockchain Industry Review

T

HE BENEFITS OF OKENISATION

By Costa R, Waters T, Pezeshkpour F, Bowles S and So M.

RON COST

co-founder of Reg A Fundin

The Realisation Group here examines the prospects for more widespread adoption of tokenisation within the Financial Markets.

There are plenty of obstacles facing tokens as we see them turn from a concept to a fi-

TARA WATERS Head of Ashurst Advance Digital

nancial offering, including security, pricing structure, to questions about regulation.

But there is also no doubt about the appetite for more institutional participation.

Below we hear from a large group of experts and tokenisation pioneers, all

FARZAD PEZESHKPOUR Director at DASL

of whom are at the forefront of efforts to bring tokenisation into the mainstream.

We speak to Ron Costa, co-founder of Reg A Funding, a crowdfunding company, Michael So, VP of Business Development at Cook Finance, Farzad Pezeshkpour, Director at DASL, Simon Bowles, Strategic Partnership Advisor at CoinPayments and Tara Waters, Head of Ashurst Advance Digital.

This wide-ranging group, representing the investing, software engineering, regulatory and vendor community, talk about what tokenisation is doing now, as well as what they expect to see from it in the future. Despite the obstacles that each of them mentions, they are unified in the view that the challenges can be overcome and that use of tokens as digital assets will only increase over time.

SIMON BOWLES Strategic Partnership Advisor at CoinPayments

MICHAEL

VP of Busine Developmen Cook Financ

by the Crypto Curry Club

>>>>

009

WHAT IS TOKENISATION?

TA

Tokenisation is the process of turning sen-

businesses holding at least some sensitive

sitive data into non-sensitive data called "to-

data within their systems, whether it be credit

kens" that can be used in a database or internal

card data, medical information, Social Secu-

system without it being ‘seen’. The purpose is

rity numbers, or anything else that requires

to swap out sensitive data—typically payment

security and protection, tokenisation is on the

card or bank account numbers—with a ran-

uptake.

domised number in the same format but with

“A good analogy is a poker chip: instead of filling a

no intrinsic value of its own. This differs from

ng

encryption, where a number is mathematically changed, but its original pattern is still stored within the new code. Tokenised data is undecipherable and irreversible, allowing it to be used to secure sensitive data. With most

table with wads of cash (which can be easily lost or stolen), players use chips as placeholders. The chips can’t be used as money so they must be exchanged for it after the game,” explains Ron Costa, co-founder of Reg A Funding, a crowdfunding company, when asked to explain what a token is.

TOKENISATION

L SO

ess nt at ce

Detokenisation is the reverse process, exchang-

“The application of tokenisation to the digi-

ing the token for the original number, which can

tal asset world is now creating new ways to

only be done by the original tokenisation system.

raise capital,” says Simon Bowles, Strategic

There is no other way to obtain the original num-

Partnership Advisor at CoinPayments, “bring-

ber from just the token.

ing liquidity to previously illiquid assets, thus

Tokens can be single-use (low-value) for opera-

opening up investment and opportunities to

tions such as one-time debit card transactions that don't need to be retained, or they can be persistent (high-value) for items such as a repeat customer's credit card number that needs to be stored in a database for recurring transactions.

The benefit of tokenisation is that if a breach of a tokenised environment occurs, the exposed data is worthless to cybercriminals, virtually eliminating the risk of data theft.

new investor bases. We are seeing a huge impact from this… typical VC holding times are 5-7 years, however the typical holding times that Blockchain VC's are getting during the private sale might only be 1 month.”

He isn’t alone in seeing how tokenisation is shaking up digital investments, Costa sees tokenisation as “basically the fractionizing of any real-world asset by creating immutable

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Blockchain Industry Review

ownership records using blockchain tech-

name a very small subset. As we know, writing

nology. The process creates ‘tokens’ which

asset contracts in these disparate networks use

theoretically can be traded on secondary

technologies that are incompatible with each

markets with the main benefit of providing

other, be they virtual machines, languages, in-

liquidity to previously illiquid investments,

terface standards etc. Up to now this has not

such as real estate and other hard-to-trade

been the greatest of concerns - poker-chips are

asset classes. And because of its global

poker-chips, however we are now seeing a rise

nature, tokenisation opens up investment

in the demand to remove the barriers between

opportunities to a much larger audience of

the networks.” This is an area that DASL are now

potential investors, making tokenisation

known for, with the capability to ‘bridge’ between

an excellent option for issuers seeking to

networks as a key feature of DASL. “By bridging

raise capital for their companies.”

I mean the ‘teleportation’ of an asset between

The advantages of tokenisation do not stop there, as Michael So, who was previously Head of Tokenisation at Atomyze LLC points out; “Blockchain tokenisation is revolutionising asset ownership through immutable and transparent blockchain records, providing opportunities to remove some of the middlemen layer and thereby reducing costs and associated counterparty risks. It also allows the in-

one network and others. DASL has a unique capability of treating all networks, be they incumbent banking and payments services, brokers, exchanges, as well as a range of public and permissioned crypto networks uniformly. Removing technical barriers allow for the flourishing of new business opportunities and this surely is in keeping with the prime directive of any technological product.”

stant settlement through atomic swap of asset

As an industry we are now moving beyond pok-

tokens”

er chips, with asset classes such as Bonds, Eq-

What can we expect for Digitisation beyond Tokens and Poker Chips?

Farzad

Pezeshkpour,

Director

at

DASL

shares what he sees for the future of tokens; “In our industry, the last decade of work has focussed on the digitisation of value. This is often referred to as “tokenisation” - the very word implying a conversion between something tangible like “cash” and a representative “poker chip”. This has been useful for several reasons - we have developed the essential foundations for cryptographic provenance of assets and transaction consensus, giving rise to a wide set of technologies and commensurate networks being born, Ethereum, Quorum, XinFin, Fabric, Corda, DAML, and Bitcoin to

uities (e.g. project equities), NFTs are growing at a significant rate. We are no longer satisfied with transferring poker chips across networks, leading to a rise in a new iteration of assets that require lifecycles whereby the issuers, owners, custodians all participate in flows intrinsic to the definition of the asset. Pezeshkpour sees this as the future of tokenisation and explains how they are building towards this at DASL; “One simple example is the payment of coupons on a bond.

If a bond is to be truly portable across networks while retaining its intrinsic coupon schedule, then we need a way of describing this lifecycle in a network-agnostic way.”

by the Crypto Curry Club

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Blockchain Industry Review

STRATEGIES FOR RECOVERING PAYMENTS IN CRYPTO TO UNKNOWN PERSONS

By Matthew Green and Carmel King

T

he approaches

Both lawyers and asset re-

in

recovering

covery practitioners are able

misappropriat-

to assist using particular strat-

ed crypto as-

egies to target the funds and

sets is determined by whether

individuals who hold them as

the wrongdoer is known, or at

they have moved along spe-

least identifiable to the victim,

cific blockchains.

or not. It is a misconception that in the latter event, funds Matthew Green, IP, tech and crypto lawyer at Brandsmiths

are irretrievable as there is no individual or body to chase, and victims are unaware of where any investigation can begin.

From payments to seemingly legitimate advisory investment platforms, ransoms paid by insurers, and even where victims hand over to fraudsters their unlocked mobile phone in a bar (it has happened), the individuals which receive the funds are not always known.

This article considers specific high level strategies used by professionals to ensure that victims of fraud are able to make enquiries and pursue their funds where no clear fraudster is identifiable.

A LAWYER’S PERSPECTIVE Once funds have been paid to an account, the victim will either know who the funds have been transferred to or not, and in many cases it is the latter even where the assets have been paid to a seemingly legitimate person.

by the Crypto Curry Club

>>>>

0013

For a lawyer the first step is to in- a victim, and to ensure they ap-

pursue the criminals by their

struct an investigator who can trace pear compliant where there is a

own means.

the funds from their original with- regulator, but do not always codrawal address, to various address- operate substantively. es across the blockchain, until they

From there, the victim can seek to negotiate with the holder of

The next step is therefore to in-

their funds, or seek to litigate,

junct the exchange, to ensure

but in either event, those funds

(i) the interim freezing of the

are frozen, and any withdrawal

From here, the victim can write to funds, known as a proprietary

from the account which hous-

the exchange via their lawyers, re- claim, (ii) a lock on the account

es those funds are frozen until

questing a freeze on the account so no funds can be withdrawn,

a resolution is obtained, or until

housing the funds, the funds them- and (iii) a disclosure order. This

the Courts order for the removal

selves and the identity of the individ- is the only legally guaranteed

of that restriction.

hit an account at a crypto service, like an exchange.

ual who is the account holder with way for these three reliefs to be that exchange. In most cases, the obtained and in many cases, exchanges will look to cooperate including where exchanges are given the reputational need to assist unhelpful, is a necessary step.

As most exchanges are now required to conduct some KYC and AML checks on their clients, the victim should then be able to obtain key information on the account holder whose account holds the misappropriated funds.

The legal tracing route as above is able to assist in idenCarmel King, Assests Recovery Manager, Grant Thornton

tifying the person who ended up with the funds when they hit the exchange. Importantly, the person who demanded the funds is, to some degree, irrelevant, as the lawyer’s job is to reobtain the funds- the police are there to locate and

In this way, victims are able to follow the money rather than the person and can reclaim their crypto assets using the above methodology.

AN ASSET RECOVERY PRACTITIONER’S PERSPECTIVE. The above methodology can be coupled with corporate intelligence solutions providing multiple lines of attack and a wider contextual background for an effective recovery process.

Importantly, whilst the identity of the fraudster may be unknown at the outset of an investigation, but the victim will have key information that can kick-start the process in identifying them.

Utilising open source intelligence, known as OSINT, can

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yield significant results in an investigation, providing a holistic picture of the fraud, like the identities the bad actors involved, those who may have dishonestly assisted them and potential assets for recovery.

Blockchain Industry Review

MOVING FORWARD Historical blockchain investigations have started without a discernible target and have ended in the recovery of crypto funds. In November 2020 the US filed a civil action to for-

The identities of the fraudsters will often be

feit cryptocurrency valued at over $1 billion in

fake, but OSINT techniques enable investi-

connection with the Silk Road investigation.

gators to trace and analyse the use of those

Eight years after the BTC was stolen, a com-

aliases, link them with other illicit activity and

bination of blockchain analysis and social

identify patterns.

media capture identified fifty four previously

Domain name investigations can also provide perspective on activities from specific IP

unidentified transactions that stemmed from unlawful activity.

addresses and websites, and provide links

It must be stressed that so long as a victim ei-

to other criminality and individuals involved.

ther has their own address from which funds

Social media capture can map out entire

were withdrawn, or the address to which the

networks of people and corporations, their

funds were deposited, legal professionals

locations and activities, as well as potential

are likely able to start the Court process to

assets.

seek to recover funds. Similarly, with some

Importantly, investigators can also identify other victims and coordinate asset recovery approaches. By layering OSINT with DNS and social media capture, practitioners can understand the broader picture which will inform the overall approach and may provide a range of recovery strategies.

Having gathered sufficient information to identify a bad actor, a corporate vehicle used or an accomplice, practitioners can then rely on insolvency and similar processes, which are powerful tools in the asset recovery process. They are ubiquitous from jurisdiction to jurisdiction, and though they can vary in nature, they offer the practitioner significant powers of investigation and recovery, like compelling disclosures and interviews with certain targets.

basic information from the victim, asset recovery practitioners can broaden the scope of an investigation, identify real world routes to recovery and work with legal professionals to achieve the best outcomes.

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click here to pre-order your copy

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Blockchain Industry Review

HOW NFTS ARE POWERING THE METAVERSE

By Matt Hawkins, Founder and CEO of Cudo Ventures

Metaverse, the next frontier in social connections, has captured the tech industry’s imagination with a promise of a futuristic vision. Ever since Facebook announced that the platform’s future would be in the metaverse, companies are clamouring to figure out how they can skew their businesses to align with this burgeoning space.

Virtual worlds have been around for a couple of years, but Facebook, Microsoft, and Nvidia joining the metaverse bandwagon injected renewed interest in this area.

Pegged as the next-generation way that people will interact online, there isn’t a single way to define the metaverse. Instead, it is an embodied internet, a hybrid between the physical and digital world. This shared 3D environment lets people join with their avatars and shapes how the virtual “reality” looks.

Transferability and centralisation issues While many virtual worlds exist online, users currently cannot travel between them. However, the future metaverse could solve this problem, letting users navigate a single, seamless entity. In that sense, the true metaverse is a long way from actualising, but these platforms could allow users to transfer the NFTs they buy or own between platforms.

So isn’t that how actual ownership should work in the metaverse? Ultimately, the future metaverse will allow unparalleled interoperability of digital assets and data across different virtual worlds.

Additionally, the metaverse expands the Web 3.0 concept, the antithesis of the current state of the Internet, crippled by centralisation and data ownership issues. Companies like Facebook, Google, Amazon own the information users share on their centralized networks, leaving the everyday user with no absolute

by the Crypto Curry Club

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ownership or control of their accounts. However, at its core, the metaverse will challenge that by establishing decentralisation and giving users true sovereignty over their privacy and data.

Riding the NFT wave NFTs will play a crucial role in driving purpose, commercial activity, and delivering utility in the evolving metaverse. In addition, NFT ownership could serve as a gateway to onboard millions of users into the metaverse. For instance, Dapper Lab’s NFT token marketplace, a leader in digital sports collectables, witnessed $500m in sales in April and around 150,000 to 250,000 daily logins in May. Simply put, adding the NFT component to the metaverse allows individuals to participate and define the experiences in these virtual spaces.

Seeing this potential, many have rushed to capitalise on the intersection between the metaverse and NFTs. For example, Dolce & Gabbana rolled out a collection of virtual clothing for digital avatars in the metaverse. Elsewhere, NFTs have had many use cases like utility tokens for exclusive concerts, display at virtual galleries, real estate investments, virtual sporting competition, among others.

Morgan Stanley forecasts that the digital demand for fashion and luxury brands, fuelled by NFTs and social gaming in the metaverse, is expected to reach $50 billion by 2030. Little wonder then that we will witness huge conglomerates shape the metaverse in innovative ways by crafting worlds involving gaming, fashion, entertainment, and social experiences in the coming days. But is this the direction we want to take?

A better way forward It is difficult to imagine the metaverse without cryptocurrency and its underlying blockchain technology. Concepts such as transparent and traceable transactions, an open, interoperable network to ex-

Blockchain Industry Review

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by the Crypto Curry Club

0019

change virtual assets, and storing virtual assets via a permissionless, trustless, verifiable ledger are all fundamental.

However, interoperability could emerge as a challenge even as NFTs create the foundations for the emerging metaverse. As tech companies build the infrastructure, solutions should keep the affordability of minting and transfer of NFTs in mind, making it accessible for the artist community. Further, it must facilitate frictionless integration with marketplaces and other custom smart contracts, allowing easy transfer of assets. Lastly, it’s crucial to embrace an environmentally sustainable way to ensure a positive lasting impact of NFTs in the metaverse.

While,

undoubtedly,

blockchain

provides

much promise to the metaverse, some limitations remain. For instance, scalability and our ever-increasing need for computing which, although available, is wastefully underutilised.

There are two unresolved problems, however. First, some layer one and two technologies are working to alleviate slow, expensive transactions to solve scalability but are far from perfect. Second, centralised offerings can fuel the computing demand but are structurally vulnerable to mass outages and ideologically conflicted with Web 3.0.

Decentralised computing could be a sustainable solution to harness the underutilised capacity of inactive business and personal devices globally. The future is an open-source, permissionless blockchain ecosystem that allows developers to build and deploy smart contracts and DApps, relying on decentralised computing to scale.

As the influential corporations control the centralised real world, it will be refreshing to be part of a virtual universe with no central authority, no surveillance, no data theft, but community-driven governance. Imagine a parallel world where NFTs will be used to authenticate ownership over digital assets with an opportunity to monetise virtual creations in the metaverse. From not owning anything, individuals could become stakeholders in the NFT-powered metaverse of the future.

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Blockchain Industry Review

DEFI STAKING REWARDS SETTING UP A STAKING PLATFORM

Symmetric BTC

By Symmetric.finance

S

taking has become known as a method of earning relatively high yield payouts in exchange for locking up ones crypto tokens. Staking is often

confused with yield farming- another DeFi mechanism whereby users earn rewards in exchange for locking up their crypto. With yield farming, the sole purpose of sending ones crypto to a contract is for the potential profits.

With staking, the primary purpose for the platforms offering staking, is to secure their blockchain network. For users,

Core

APR

-x + =

Earn

key issues and updates affecting the network, as well as the rewards earned. Staking, in this sense, is a more environmentally friendly- as well as economically viable and lower risk method of securing a blockchain network as an alternative to mining.

Staking can benefit both the user- through earning rewards – as well as the platform – by offering an additional way of securing a blockchain network without using any of its own resources.

Blockchain Platforms that support decentralised finance – DeFi- are growing fast. Many have raised large amounts of money, either several years ago, through an Initial Coin Offering (ICO) or more recently. Many of these, thanks to

88.9 %

Symmetric

Deposite Fee Harvest Delay LP Type

0% 336 hours Cake LP v2

Symmetric EARNED

~100.10 USD

SYMETRIC-USDC LP STAKED

0.011

staking offers the chance to be part of the governance of a given platform and provides the chance to thus vote on

3X

Details

Harvest Stake LP

>>>>

by the Crypto Curry Club

0021

shrewd investments of that raise, now

crypto users who are just starting to look

have far more resources than they initial-

at defi.

ly raised. This could be either from having successfully held onto the money they raised in crypto, or from having invested it into other cryptocurrencies and watched the value rise through the last market cycles. For several others, their native token, through a combination of having a good product, skilled marketing, good timing and luck, has shot up exponentially, leaving some of these platforms with billions of dollars and demand to grow their platform security and userbase.

Such DeFi platforms wishing to grow their ecosystems now have the money to invest in DeFi projects willing to build on their platforms, to grow their userbase, as well as giving grants and funds to these projects to offer as staking rewards to bring more users – and network securityto their platforms.

Staking doesn’t require any additional or complex equipment, and is arguably a way to bring crypto – and DeFi – increasingly to the mainstream. Not everyone wants to deal with the risk- and stressof volatile crypto markets, and those who see DeFi as a long term game might be happier trusting their crypto to a platform and earning regular interest payouts than watch the markets or worry about the volatility.

For those who want to hold onto a given cryptocurrency anyhow, HODL, in crypto terms, staking offers a good alternative to just holding that cryptocurrency in a wallet or on an exchange and hoping for a price increase which may or may not come. With staking, at least the holder gets regular rewards at an annual interest rate until they can withdraw the coins in

Staking offers DeFi projects a way to

full, depending on the length of the lockup

win over new potential users. Platforms

period. On the downside, if that crypto-

such as wallets and exchanges might use

currency drops in value, it’s locked up, so

staking rewards to grow their user bases

users can’t just cash out and sell. That

and attract new customers- as well as to

risk shouldn’t be understated. The vola-

bring in loyal users who will stay with the

tility of the crypto markets is such that a

platform out of loyalty for the long term,

token might well crash whilst it’s locked

either from their competitors or from the

up, and token holders then can’t just sell

vast majority of crypto and even non

if they see or expect this to happen.

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Blockchain Industry Review

For stakers, there is always a risk that the net-

adding security and validation to their platform

work deems your transaction to be illegal or

at no environmental or economic cost to the

invalid, and then you might lose all or a big

platform. Stakers use their computing power to

chunk of your stake, like a deposit. This could

validate transactions, which can be set by pre-

be due to not having kept up to date with the

determined rules governed by smart contracts.

latest terms or developments, for example. If

Stakers agree to validate only valid, legal trans-

a network does deem your transaction to be

actions, for which they earn rewards. If stakers

valid, there’s not really generally much you can

were to validate illegal transactions, they may

do. Some DeFi platforms go

lose their entire stake, so largely will be tempt-

out of their way to work with

ed to adhere to rules of the platform. Staking

their users and play nicely, but

arguably also adds to a project’s community

not all do.

and gives a project many loyal followers.

For stakers, whilst yes there

Staking is more environmentally friendly than

is the benefit of high potential

other methods such as proof of work and is fast

yield rewards, the risks are

getting more uptake within the community, es-

worth spelling out. There is

pecially as the safety and user experience of

the practicality that their cryp-

platforms improves.

FARMS HOME TRADE V1 TRADE V2 FARM POOLS

to assets will then be locked up for longer, making them illiquid, which isn’t risk free in

a space that a) is known for bad actors however good the intentions (and skill) of the good projects and b) is evolving so constantly and so rapidly that users might feel their resources are better allocated elsewhere. There is also the risk of losing their entire stake for perhaps allowing an illegal transaction to be validated.

For many, the high potential passive rewards outweigh the risks.

Platforms, by offering staking, get a way to attract and reward loyal users who will tend to stay on the platform perhaps longer than they otherwise might. Staking will attract those who not only are motivated by the rewards but also who are willing to lock up their assets for a longer time on a platform they support. Most importantly for the platform, staking users also benefit the platform in other ways, such as

Investors don’t need to stake alone. DeFi platforms will now offer staking pools. These allow investors to pool together their crypto which collectively used to increase chance of getting rewards. This can also be an easier, more passive way to get started and can allow for smaller values needed to get started.

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Article 6

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<<<<

Blockchain Industry Review

101 DEFI AND CRYPTO

AN INTRO GUIDE TO BITCOIN AND DECENTRALISED FINANCE

By Brian Sanya Mondoh, Esq.

Decentralised finance (‘DeFi’) is a broad term for financial services that build on top of the decentralised foundations of blockchain technology. DeFi is a global, open alternative to every financial service used today; i.e. from savings, loans, trading, insurance and more. DeFi protocols use a non-custodial design, meaning assets issued or managed on DeFi platforms theoretically cannot be moved or expropriated unilaterally by parties other than the account owners. With legacy banking, all financial services are controlled by a central party who acts as a middleman between the sender and the receiver of funds.

>>>>

by the Crypto Curry Club

0025

Bitcoin Origins Bitcoin in many ways can be seen as the first DeFi application; it enabled digital cash payments without needing to rely on costly third parties and prevented the double spending

er which could then be used to manipulate transactions.

problem. Bitcoin arose due to severe econom-

Smart Contracts

ic pressures and a desire to regain control and

In DeFi, a smart contract re-

ownership at the onset of the global financial crisis in 2008.

Bitcoin is based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for an intermediary. Bitcoin’s protocol encompasses a distributed timestamp server to generate computational proof of the chronological order of transactions. This way, the protocol remains secure as long as honest nodes collectively control more CPU power than any cooperating group of attacker nodes.

The accumulated “Proof-of-Work” of the whole network acts as a signal that the miners, who are highly invested parties, have come to agreement as a means to determine the validity of any given block or transaction.

The steady addition of a constant amount of new coins is analogous to gold miners expending resources to add gold to circulation. In Bitcoin’s case, it is CPU time and electricity that is expended. Bitcoin is an open source protocol, its design is public and no one has the authority to change its rules of governance except through a vote or a fork.

There is a theoretical risk in the Bitcoin protocol of a so-called ‘51% attack’, meaning that a single miner–or a group of collaborating miners–might capture an absolute majority of the network’s computing pow-

places the financial institution in the transaction. Smart contracts are self-executing pieces of code on a blockchain that execute business logic when predetermined conditions are met.

Smart contracts work by following simple “if/when…then…” statements that are written into code on a blockchain. A smart contract cannot be altered once it is deployed – it will always run as programmed, however, in practice developers often do maintain the protocols with upgrades or bug fixes.

In 2015, Ethereum debuted as the first smart contract-enabled blockchain. Today, Ethereum dominates as the protocol of choice for providing decentralised

finance

applications

(DApps). Ethereum leverages the same principles of 'digital trust' and governance as Bitcoin and applies them to smart contracts.

Article 6

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Blockchain Industry Review

Although Bitcoin has always possessed smart con-

protection rights including; a right to rectification, a

tract capability, it has never been utilized to its full

right to erasure (“right to be forgotten”) and a right

potential due to the problems associated with the

to object to the processing of personal data etc. The

scaling of transactions. With Bitcoin’s November

issue with blockchain is the absence of a central da-

2021 Taproot update, smart contracts will become

tabase. Consequently, decentralised nodes cannot

more efficient on the Bitcoin blockchain and this will

respond to tasks the GDPR requires of centralised

definitely take a huge chunk out of Ethereum’s mar-

agents in their capacity as data controllers.

ket share.

In legacy banking a level of privacy is maintained

Ethereum’s native currency ETH commands the

by limiting access to information to the parties in-

most funds in terms of Total value Locked (TVL) for

volved and the trusted third party. Banks have an

different blockchain protocols in DeFi with $175.12

obligation to ensure that information relating to pro-

billion i.e. 65.87% of the entire DeFi. (At the time of

cessing of personal data and the storage period are

writing - 29 November 2021)

communicated to the data subjects (clients) prior to

Transparency -vs- Privacy The three main properties of blockchains and other Distributed Ledger Technologies (DLTs) are trans-

the start of processing, in fulfilment of information obligations.

Circumventing the Privacy hurdle in Bitcoin

parency, immutability and decentralisation. Block-

transactions

chain makes data open/transparent in a way that

With Bitcoin, a network participant can ensure per-

has not existed in financial systems, which is why

sonal data privacy by;

many argue that blockchain could be used as the new standard for transparency.

With the Bitcoin protocol, all transactions are public, traceable and permanently stored in the network, which means anyone can see the balance and transactions of any Bitcoin address despite keeping public keys anonymous.

Bitcoin’s pseudonymous nature therefore provides the ultimate paper trail for law enforcement agencies, tax authorities and compliance professionals.

This plainly suggests that Bitcoin is a terrible means to conduct illegal activity because the blockchain evidence trail is permanent. However, there is a whole set of cryptocurrency blockchains focusing on being

I. using a new Bitcoin address each time they receive a new payment II. Iusing clustered or multiple wallets for different purposes III. not publishing a Bitcoin address and any transaction information on websites or social media networks IV. hiding one’s computer's Internet Protocol (IP) address using VPNs or anonymizers such as The Onion Router (Tor), the Invisible Internet Project (I2P) and other anonymizing software or anonymity enhancements

anonymous like Monero and Zcash amongst others.

Mixers’ or ‘tumblers’, could also be used to break

Although blockchain promises increased transpar-

up the paper trail by exchanging one set of bitcoins

ency and trust amongst parties, it may be incompatible with national data protection and privacy rules.

The GDPR for instance enshrines various data

for another with different addresses and transaction histories. Although mixers/tumblers can break traceability for small amounts, it becomes increas-

>>>>

by the Crypto Curry Club

0027

ingly difficult to do the same for larger transactions.

Mixers/Tumblers also require you to trust the individuals running them not to lose or steal your funds and not to keep a log of your requests.

Enhanced Privacy - Taproot 2021 Bitcoin’s Taproot upgrade aims to improve the privacy and efficiency of its network. Taproot only exposes the details of the executed transaction while also obscuring some private transaction information.

Those auditing the Bitcoin chain would be unable to

Author: Brian Sanya Mondoh, Esq Barrister, England and Wales (NP) and Attorney at Law, Trinidad and Tobago

view unexecuted transaction conditions or outcomes,

Titan Chambers, 19 Dundonald Street, Port of

which may have contained sensitive private informa-

Spain

tion such as what type of wallet was used. Committing less data also creates space in each block for more transactions, which should reduce fees and increase transaction throughput.

Privacy -vs- Anti-Money Laundering (AML)/Terror Financing (TF) Regulation Financial Action Task Force (FATF) guidelines indicate that a lack of customer and counterparty identification is especially concerning in the context of cross-border Virtual Asset (VA) transactions. Although DeFi transactions are generally transparent and traceable, new privacy-enhancing protocols and/ or tools such as mixers/tumblers (discussed above) and Anonymity-Enhanced Cryptocurrencies (AEC) may create additional regulatory challenges.

The potential for increased anonymity or obfuscation undermines a Virtual Asset Service Provider’s (VASP) ability to know its customers and implement effective Customer Due Diligence (CDD) and other AML/FT measures. Jurisdictions under FATFs purview should be aware of the intersection and potential impact AML/FT requirements have on other regulatory requirements and policy areas, such as data protection and privacy, financial inclusion, derisking, consumer and investor protection and financial innovation.

Co-Founder: BLOCK6TY and NXTDIMEN$ION - ‘Empowering Women and Children in Tech’

Disclaimer: The information provided on this opinion does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this opinion are for general informational purposes only.

Information on this opinion may not constitute the most up-to-date legal or other information.

Readers of this opinion should contact their Barrister/Attorney to obtain advice with respect to any particular legal matter.

0028

<<<<

Blockchain Industry Review

DONT

Article 7

By Peter Johnson

It’s easy to get excited by crypto, with many following the latest crypto crazes, moving from one cryptocurrency to the next, trying to jump on the next new hot coin, never thinking of what the tax implications might be of what they are doing until it is too late and the taxman comes calling.

This can be particularly dangerous in a bull market – as we find ourselves in today. Many crypto traders and investors don’t realize that when they move from one cryptocurrency to the next, they are creating taxable transactions – they have sold one cryptocurrency to buy another. It

FALL FALL FALL FALL

INTO A CRYPTO TRAP vestor paid for that asset when they bought it. In a bull market, the chances are that the trader or investor paid a lot less for the coin or token then they sold it for – which means they made money. The taxman wants his share – and sometimes that’s a large share. The user may have actually just created a tax liability without realizing it, and more importantly, without having allocated any fiat currency (BP) to pay for that tax liability. And don’t forget – you can’t pay taxes with crypto yet. The new crypto that was bought – because it is a bull market – has been purchased at a relatively high price – perhaps the all time high. All this is fine and good as long the market stays high.

The problem is when we move into the next tax year. There might now be a significant tax liability in the previous year from selling our first coin – but taxes aren’t due to be filed and paid until 9 months later. The tax year ends on April 6, but we have up to January 31st of the following year to file and pay our taxes. A lot can happen in 9 months, and if it’s crypto, with massive bull runs, there can also be huge

is that sell transaction that the tax

corrections – just look at a chart for BTC.

authorities are interested in.

By the time that tax bill comes due – the market might have

The tax authorities view the sale

dropped and the new crypto we are holding, perhaps what

of the first cryptocurrency as a taxable event and they want to know how much the trader or in-

we thought we would use to pay our crypto taxes (if we thought about taxes at all) may now be worth only a fraction of what it was worth when we bought it. We can still

>>>>

by the Crypto Curry Club

sell it – but perhaps it’s at a new recent low

parer, if we can even find or afford one, will

and the worst time to sell – and it may not

have difficulty helping us with.

even be close to enough to pay our tax bill.

Even though we have losses in the current year – we can’t use those losses to offset our taxable gains for the previous year. We

TAX

can end up paying far more in taxes than we earned in Crypto. There are countless night-

TA

X

mare stories of traders suffering real financial hardships from failing to understand that basic truth about crypto trading - that taxes

TAX

TAX

0029

are due whether we have the funds or not.

Never paying attention to the tax implications of moving from coin to coin can put us in a crypto tax trap.

Before we execute any trade, we also should know the answers to each of these questions. Will the trade cause a tax liability? In a worst-case scenario, will we have the funds to pay those taxes? If not, where will we get those funds when taxes are due? When will the taxes be due? Will the trade create a loss that we can offset against other gains?

Should we set aside some fiat currency to pay for the taxes before the market has a chance to move against us? Can we delay our trade to a new tax year – so that we can use any losses occurring in that tax year to

But what can we do about this – other than

offset our gains? Should we trade a differ-

just stop trading crypto – or not moving our

ent coin with a better tax outcome? Should

holdings from one coin to another?

we donate certain coins to a worthy cause

Not

everyone might want to do that!

So then what?

The first thing we should

instead if selling them? What is our tax strategy anyway and how will we implement it?

do is be aware of the tax consequences of

This is where strict monitoring of positions

every trade we undertake before we make

and trades is critical. A portfolio manage-

the trade. This can sound difficult and in-

ment system that tracks the gains and losses

timidating – but there are portfolio tracking

of each coin is needed – regardless of where

tools available with tax optimization features

we transfer it to, in which wallet it is held, or

that tell us where all of our coins are located,

on which exchange it is traded. This kind

what was paid for them, and how much profit

of information can help users develop a tax

or loss is imbedded in each coin no matter

trading strategy that can prevent headaches,

how many times we have moved it or in what

lower stress, and save money.

wallet it is held. These tools can help say what the tax implications are of any trade we make before a trade is made. These are tasks that even a professional crypto tax pre-

About the author.

Peter Johnson is Head of Business Development at Accointing. Peter has years of experience working in Fintech, professional trading, business consulting, technology, business development, accounting and taxes.

AVAILABLE

LERS L E S K O O B D O O G L L A FROM AND ON AMAZON

click here to pre-order your copy

What is DeFi?

Article 8

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<<<<

Blockchain Industry Review

The buzzword on Wall Street, Decen-

ized financial ecosystem over the past

tralized Finance, or ‘DeFi’, refers to the

few years (see Electric Capital’s non-ex-

new financial structured products built for

haustive list) with new protocols launch-

blockchain-based digital assets. Anyone

ing and raising funds on a weekly basis.

with assets such as Ether (native to the

There is currently over $100bn of digital

Ethereum blockchain; market capitali-

asset value locked in DeFi today and ac-

zation ~$520bn) can unlock a range of

cording to Pitchbook, over $17bn of VC

platforms to trade and earn high yields on

funds have been invested in crypto solu-

their holdings. From decentralized bor-

tions this year alone. Understandably, the

rowing and lending protocols to automat-

ecosystem growth and yields have turned

ed market makers and numerous staking

a lot of heads. So how can newcomers

opportunities, the DeFi ecosystem is un-

participate?

furling exponentially. Over nine hundred

Institut

Why ad

inevita

Wall St

projects have emerged in the decentral-

By Max Luck-Hille, A

WALL St

How can digital asset adoption lead to DeFi? The first step to accessing smart contract-based

so high America’s oldest bank, BNY Mellon, formed

DeFi protocols is holding the associated native un-

a Digital Asset unit to issue and handle crypto. So

derlying blockchain tokens, such as $ETH, $SOL

what finally prompted institutional investment after

or $AVAX. Until recently, retail customers were the

years of dismissing digital assets and why are the

main protagonists driving digital asset adoption and

structured products of decentralized finance trending

buying tokens. However, the market reached a new

now? Exorbitant alpha, not only from the underlying

level of maturity when the “institutional investors ar-

blockchain digital assets but also from the emerging

rived in 2020”, contributing to a total market capital-

DeFi protocols is a big response to the ‘why now?’.

ization of around $2 trillion. MicroStrategy

With macro tailwinds against a daunting economic

and Tesla were amongst the first

backdrop, the emerging digital asset ecosystem is

corporations to allocate treas-

compelling. However, the bigger picture comes into

ury balances to digital assets

focus when considering the characteristics of the

with Blackrock and hedge

current established financial system, its operational

funds such as Paul Tudor

inefficiencies and why this natively digital asset class

Jones joining the fray.

running on digital rails is fast emerging as the capital

Customer demand was

markets disruptor.

>>>>

by the Crypto Curry Club

0033

Addressing the shortcomings of legacy financial infrastructure

tional DeFi:

doption is

able on

treet

Alkemi Network

At the centre of the economic world, to-

the name of ‘protecting consumers’ yet

day is a financial system that enables

when users deposit funds into a tradi-

the movement of global currencies in

tional financial bank account, they have

exchange for goods and services. The

no idea to whom their funds are being

current legacy paradigm (‘TradFi’ or

lent. One of the conclusions of the 2008

‘CeFi’) revolves around centralized da-

market crash was that record-keeping

tabases and slow, siloed banking infra-

is imperative in a world of tranched fi-

structure (resulting in a lack of transpar-

nancial structured products. On top of

ency); incompatible software, countless

this, the centralized financial system

middlemen and external checklists, and

is composed of central banks that can

other friction-causing services. Financial

choose to print money when they see

markets take days to settle, SWIFT pay-

fit. The key takeaway here: centralized

ments are slow and costly and can take

financial infrastructure is antiquated,

up to a week to arrive. What’s more,

opaque, and difficult to update without

31% of the global population are ‘un-

a complete overhaul. Crucially, central-

banked’ [1.7 billion people in 2017, ac-

ized financial institutions are aware that

cording to the 2018 World Bank Report]

the outdated systems are under threat

as they don’t meet the qualifying criteria

and overdue a shakeup.

to set up a bank account. This is all in

Why Decentralized Finance offers a paradigm shift In stark contrast, blockchain-based financial tech-

na and Polkadot are also contributing to the new era

nology known as Decentralized Finance, or ‘DeFi’

of autonomous operation, supporting self-executing

for short, is expanding at an exponential rate. Since

smart contracts deployed to enable the frictionless,

the ‘Money-Over-IP’ seed was first planted by Sa-

almost instant, transparent, efficient and coopera-

toshi Nakamoto in the 2008 Bitcoin white paper,

tive flow of digital assets. However, with Ethereum

numerous blockchain technologies have emerged.

still offering the largest market capitalization (more

The principles and underlying tech continue to be

resilient to hacks whilst supporting institution-grade

refined at each iteration, with Vitalik Buterin adapt-

transaction sizes) and the longest track record of

ing the Bitcoin code to incorporate programmability

stability (secure) it is understandable why Raoul Pal

and utility via a ‘virtual computer’ in 2015. Whilst

(founder of GMI) and much of ‘The Street’ now see

Ethereum was the first notable mover in terms of a

Ethereum as the inevitable institution-grade clear-

Turing-complete solution, other chains with compet-

ing and settlement layer for decentralized finance.

itive scaling attributes and cross-chain interoperability are now vying for the limelight. Avalanche, Sola-

0034

If the potential for DeFi is so vast, why aren’t more institutions participating?

Article 8

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Blockchain Industry Review

There are three key friction points that have prevented corporations from allocating their digital assets to decentralized finance. Compliant participation has been the primary concern, with KYC/AML verification practices at odds with the trustless, open nature of DeFi. The connectivity issues have also hindered access, with Web3 infrastructure and wallets creating connectivity issues for traditional financial institutions. Finally, the levels of liquidity in the space haven’t met institutional requirements until very recently. Some of the DeFi incumbents within the Web3 stack have adapted their offerings to include

institution-grade

solutions,

with Aave’s ‘Arc’ and Compound’s ‘Treasury’ recently coming to market.

Alkemi Network, a launching challenger project, was purpose-built by the team for Institutional DeFi. Alkemi Earn, their professional DeFi borrowing and lending protocol, was tailored specifically to the requirements of financial institutions, from the ground up. By using Alkemi Network, institu-

tions can solve the key friction points and participate in decentralized finance, beginning their migration from legacy financial systems to the new, natively-digital infrastructure. With recent moves by the SEC, the demand for KYC/AML layers is growing.

Market commentators perceive the next phase of decentralized financial growth to be led by centralized institutions integrating an ‘under-thehood’ compliant DeFi infrastructure, such as Alkemi Network.

Whether reading through Federal Reserve reports or tuning-in to the conversations on mainstream financial media outlets, the general conclusion is that DeFi is just getting started and is anticipated to grow and evolve rapidly. Centralized institutions will be obliged to update their fundamental processes or risk being superseded by challenger banks integrating DeFi protocol utility. “We are so early” is one of the most common phrases heard at crypto conferences. As long as the innovation can continue, as long as digital asset protocols are permitted to continue to forge an educative and cooperative path for institutions and the lawmakers of tomorrow, the future of digital finance will continue to be an exciting prospect.

>>>>

by the Crypto Curry Club

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0035

Article 9

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<<<<

Blockchain Industry Review

Innovating with Blockchain could save your business tax – R&D Tax Credits Explained

By Shaun Bartle, Associate Director Finch & Associates

T

he last few years has seen The scheme is a Government inhuge adoption of Block- centive that rewards UK compachain

being

integrated nies for pushing the boundaries of

across almost every industry, from innovation and help to fuel growth real estate to finance to logistics in the UK, making a claim can po-

>>>> Photo: Shaun Bartle

to retail. There has also been an tentially provide a valuable cash increase in companies creating injection into the business and retheir own native cryptocurrency to duce your corporation tax bill. enhance their business, such as a token that is tracked to the supply chain of jewellery, allowing the end user to know exactly where the material has been sourced from.

To qualify, a business must be seeking an advance in science or technology, and when trying to achieve this, encounters scientific or technological un-

So, what does this have to do with certainties that are not readily saving your business on tax? The deducible by an expert in that UK Governments Research & De- given field. velopment Tax Credit Scheme!

This generous tax -saving scheme allows companies who are innovating to reduce their corporation tax burden and potentially receive a game-changing cash injection to the business.

A loss-making company which qualifies for the SME scheme can potentially recoup up to 33p in every £1 spent on qualifying R&D activity (more on this later), whilst a profit-making company profit-making compa-

The scheme does, on the face of ny can potentially reclaim up to it, sound too good to be true, but I 26p in every £1 spent. can assure you that is not the case.

>>>>

by the Crypto Curry Club

0037

How does this relate to Blockchain?

The core value that underpins Blockchain is that it acts as a consensus mechanism that enables a database to be directly shared without a central administrator, essentially cutting out the middle man. Not only this, Blockchain offers businesses advantages such as trust, transparency, efficiency, reduced transaction costs but with faster transaction settlements, and with the pace of technology moving faster than ever before, it was inevitable that technology such as Blockchain would begin to become “the next big thing”, no doubt being helped by the crypto-craze we’ve been encountering with its various highs since 2017.

The number of companies exploring the use of Blockchain and actually integrating it into their day-to-day operations has significantly increased.

This has led to higher volumes of R&D

Potential Benefits As an example, let’s assume a profit-making company qualifies for t he SME scheme and their Tax Advisor has identified £100,000 of qualifying R&D expenditure for the period.

The potential benefit could be a tax refund or reduced tax liability of £24,700, broken down as follows: £100,000 x 130% (enhancement rate) = £130,000 (known as your enhancement) £130,000 x 19% (current Corporation Tax rate) = £24,700 Now let’s see what the potential benefit could be if that same company were a loss-maker instead: £100,000 x 130% (enhancement rate) = £130,000

claims being made where companies are

We then add this to the original expenditure:

innovating with Blockchain.

£100,000 + £130,000 = £230,000 (known

So what is the benefit of doing an R&D claim?

Credit where it’s due!

SME’s can claim an additional 130% deduction of the qualifying expense incurred Whether you are profit or loss making, you may still be eligible for the relief, with up to 33p in every £1 spent on qualifying R&D activity potentially being recovered.

A Tax Credit is an immediatsource of cash which you can reinvest in your R&D and continue to lead innovation.

as your enhanced expenditure) £230,000 x 14.5% = £33,350 The 14.5% is the known as the “surrender rate”, as the business is essentially giving up their loss for an immediate cash injection instead.

The average claim made by an SME company in the 2016/17 tax year was £53,876.

With benefits like this it’s easy to see why claiming R&D tax credits could help transform a business around!

Article 9

0038

<<<<

Blockchain Industry Review

What Costs Qualify as R&D? The cost of staff directly involved in the R&D work.

Some Software & Consumable items.

65% of the cost of third parties who worked

So what next?

on the R&D projects.

If you are adopting Blockchain within your

Grants – You can still claim R&D tax relief

business and integrating it with your ex-

if you have received a grant.

Blockchain Case Study

isting systems, or innovating via another method, you should contact your Accountant or Tax Advisor as soon as possible to discuss whether or not you qualify.

Real Estate

It’s important that you act sooner rather

The increasing use of Distributed Ledger

than later, as claims can only be made

Technologies (‘DLT’) such as Blockchain

within the 24 months after your year-end.

to record real estate transactions has led

Remember, this could help transform your

to an increase in R&D claims for Property Investment companies.

The R&D is usually integrating an existing

business around, freeing up cash quickly to enable you to continue to innovate and further growth.

CRM system with the DLT. As the Intellectual Property vests with the business and is usually kept as a trade secret, the knowledge that is available in the public domain is scarcely limited.

This results in specialists creating and advancing a new integrated platform that is more efficient for the business.

To emphasise the impact that Blockchain is having in Real Estate, HM Land Registry themselves are currently exploring how Blockchain technology could be used to provide quicker and simpler services at Government level.

Contact Details: e-Mail: shaun.bartle@finchassociates.co.uk Telephone: 07494 170 202 Website: www.finchassociates.co.uk

>>>>

0039

BLOCKHAIN

by the Crypto Curry Club

INDUSTRY

REVIEW

BLOCK CHAIN INDUSTRY REVIEW MAGAZINE

Issue 8- Dec 2021

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