Money Metaverse Book PDF

Money Metaverse:
How Crypto Is Reinventing

Finance and Unlocking Value
via Tokenization
Paul Schulte
William Dogger
Foreword by David Lee, Ph.D.
Copyright © 2021 Paul Schulte, William Dogger
All rights reserved.
ISBN:
DEDICATION
To the world-class investors who have been with me right from the beginning
of my 11 years of independent research: Eric Bushell, Adam Levinson, Amit Rajpal,
David Courtney, Rob Citrone, Tomonori Tani, Todd Tibbetts, Scott Sleyster, and
Gary Ang. Thank you for letting me stand on your tall shoulders.
Paul Schulte
To my father.
William Dogger
CONTENTS
ACKNOWLEDGMENTS�� v
Foreword�� vi
Introduction�� xi
Chapter 1: NFTs and crypto�� 1
Chapter 2: Fintech and Blockchain�� 43
Chapter 3: Insurtech and blockchain�� 95
Chapter 4: Proptech and Blockchain�� 131
Chapter 5: Case study – The fight for Southeast Asia: Sea, Grab, and Payoneer�� 152
Index of companies�� 158
ABOUT THE AUTHORS�� 160
iv
ACKNOWLEDGMENTS
Many people helped me to drag this book over the finish line. One person
helped me with profound insights on a higher plane, and that is David Lee. Another
is Taiyang Zhang, a unique world-class thinker on crypto issues and the evolving
world of digitization. Adam Levinson is another superb thinker on these issues who
always sees around the corners. Those who offered support, friendship, and sanity
checks along the way were John Fowler, Brian Ganson, JY Phuang, Roman She-
makov, Gary Ang, Dillon Hunter, Jim Stent, Matt Zayco, David Sheldon, David
Halperin, Peter Early, Rob Jesudason, and Austin Groves. Also, great thanks to my
co-author William Dogger, one of the best hires I have made in 10 years! Special
thanks to Marcus Frontera for his great work.
Paul Schulte
For the continuous support by my family in France, Norway, and Iran. For the
friends I have made along the way in Nice, Paris, Milan, London, and Toronto:
Angie, Clément, Jonathan, Benjamin, Vincent, Loubna, Mona, Matthias I., Marcus,
Stefanos, Matthias H., Manó, Giorgos, Isis, Clémence, Rayan, and many others. For
my colleagues JY, Tom, and Dean. Paul, for the trust you placed in me.
Thank you.
William Dogger
v
FOREWORD
When Amazon bought Whole Foods in 2017, many were scratching their heads. Why
would an offline entity buy a physical property? As it turns out, this was ingenious as
this revolutionized the O2O business model that is ubiquitous. In this same way, the
digital world steeped in crypto and gaming has moved into the physical market of cur-
rency, art, wine, entertainment, and even securities to create a new “offline to online”
market leveraging blockchain — let us call it O2B or offline to tokenized blockchain.
The nexus of this is the non-fungible token, or NFT. This is simply a unit of data of a
unique digital object stored on a digital ledger or blockchain, which can then be saved
or traded. In this way, it stands as a unit of exchange and as a store of value.
An example of this is Axie Infinity, developed by Sky Mavis and uses Ethereum. Its
NFT collection is valued at $42 mn. Another example of this is Sygnum, which boasts
NFTs ranging from wine to Picasso’s. The digital world is increasingly bringing the
physical world into its universe via blockchain, and this extends to cards, collectibles,
art, gaming, currency, content, and carbon credits, among many others. As more and
more younger people live in this digitized world for almost all their needs (and with
increasing wealth!), these millennials are creating a metaverse of blockchain-based to-
kens, which are likely to explode in value. This world promises to be a more inclusive,
more innovative, and more creative than a physical world from which many of these
younger people feel they have been excluded.
This metaverse is parallel to the physical world — a world of avatars, virtual sub-
stitutes, and XR designed to interact in what we will call an ABCD fashion. This
form of artificial intelligence (let us call it A), when joined to the blockchain (let us
call this B), could add around 16% to global output, or about $13 trillion. Indeed,
it is clear that both AI and blockchain are immature technologies and are subject to
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Paul Schulte
glitches. Nevertheless, this is true of all technologies. AI can overcome many types of
human biases that bring about bad outcomes. Blockchain offers a way to create trust
through an immutable transaction with no need for an intermediary that takes a big
cut, often initiates new inefficiencies, and usually involves cartelized franchises. The
governance function of the blockchain I describe is a self-sustaining mechanism to al-
low for maximum improvement and inclusion for all participants. By buying an NFT
on a blockchain, you own an immutable digital space in the binary trustless virtual
world sustained and protected by the consensus of the decentralized nodes. One of
the most important aspects of a blockchain-based metaverse instead of a centralized
cloud-based network is that ownership on a cloud can disappear with it or be changed
by the centralized authority.
This leads us to the C of ABCD: cryptocurrencies. In the metaverse, crypto is the

foundation of “DeFi”, the D of ABCD. This new form of blockchain-based finance
has evolved for many reasons: impatience with unfair structures, profit-seeking en-
trenched oligopolies, irresponsible monetary policy, among others.
Crypto is the currency of choice to interact within the metaverse. It relies on

smart contracts, mainly through Ethereum. It bypasses the traditional structure of the
use of paper currency as issued by central banks. (Please refer to my recent book Fi-
nancial Management in the Digital Economy for more details). This world of crypto
is how almost all non-fungible tokens are traded. The value of these NFTs surged to a
new high of $2.5 bn in the first half of 2021. Christie’s has sold $70 mn of NFT art.
Sotheby’s has also entered the fray. Even Visa has entered the scene, buying a “Cryp-
topunk” avatar for $150,000.
The D of ABCD is where Paul Schulte’s book, which you are about to explore,
becomes essential. DeFi is seen as integrating AI, blockchain, and crypto with a
digitized metaverse to save, trade, transact, and manage wealth. It does not rely on
centralized financial institutions such as commercial banks, clearing banks, or cen-
tral banks. It does not rely on traditional securities exchanges or other entities ——
like SWIFT for banks or DTCC for brokers. China has taken a decisive lead here,
with other countries such as Singapore, Thailand, HK, and the UAE in advanced
stages of rollout.
vii
M O N E Y M E TAV E R S E
Here is the rub. This is clearly a threat to most traditional commercial and in-
vestment banking structures, although Goldman Sachs and JP Morgan have done
remarkable work in advancing their blockchain systems. However, is it a threat to the
fintech firms that have only recently created a new generation of financial services
which are purely digital but lack blockchain applications? This book explores who in
the fintech space is capable of and ready for more change and upgrades in their rela-
tively new systems.
Among those companies that have a real chance to (yet again) leapfrog into the
world of DeFi, we put our money on Visa and Master Card. Square and PayPal are
also doing quite advanced work in this area. The book nicely covers this. Facebook,
Google, and Apple are threatening to move into this area aggressively, but they are
very low-key in articulating their strategies. The book also covers Coinbase and what
they are up to. The book also addresses some of the more helpful valuation parameters
that can value these companies. On the unlisted side, companies like Circle are in the
middle of the traffic and are essential to understand.
The other part of this book analyses whether the new crop of insurtech will be
capable of making the leap to the blockchain metaverse. So far, Schulte’s conclusions
are somewhat dire. Few if any of them have mastered a purely digital model that of-
fers even a hope of profitability. As they bleed losses trying to master a strictly digital
approach to insurance, can they also pour money into complex new metaverse DeFi
functionalities that require complex blockchain systems? He is skeptical. This is prob-
ably because insurtech got off the ground in 2017-18, much later than fintech, in
2013-2014. If the evolution of fintech is anything to go by, insurtech will likely begin
to move into the metaverse in 2022-2023. However, the speed of the pure metaverse
companies like Coinbase, Envelop, Sygnum, or Silvergate could leapfrog them and
move into the insurance space. The blockchain-based world of insurance is open field
running, and there are virtually no players. Surely, this is a place to dig.
Lastly, the book explores two other vital areas. One is the world of proptech.
Schulte and his team have picked Linklogis in China and Bukalapak in Indonesia
as two companies redefining logistics. Linklogis has done more than any other com-
pany globally to link blockchain into working capital for small and medium-sized
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Paul Schulte
enterprises. Their business model is fascinating and represents the best of DeFi — cre-
ating a working capital metaverse for entire systems. Bukalapak is looking for a new
way to fund small shops across Indonesia’s archipelago. The best of all worlds would
be Bukalapak’s “distribution and logistics” system and Linklogis blockchain “working
capital and logistics: system.
The last part of the book is essential from the viewpoint of Singapore. SE Asia is a
global hotspot for new finance applications to hundreds of millions of unbanked and
generally unresponsive banks. Grab, Payoneer and SEA are the major players here. As
these morph into digitized payments platforms and then stretch into the metaverse,
his money is on SEA. After all, the world of gaming is the best teacher for the DeFi
metaverse. Grab’s losses grow by the year, and Payoneer operates in dozens of regulat-
ed jurisdictions. This will be a battle royale to watch.
Lastly, there is extensive coverage on Chinese Big Tech companies. They are con-
tinuously improving AI, data, machine learning capabilities and rolling out block-
chain-based services to stay on top of the market, improve margins, and ultimately
reach an interoperable infrastructure. This is fundamental to communicate and share
data on a new set of digital rails: seamless, immutable, secure, and scalable. The “lais-
sez-faire” attitude in the last 20 years in China led to the rise of massive conglomerates
with valuable proprietary databases and the emergence of systemic risk from a narrow
pool of companies.
Recently, these companies confronted political risk underpinning the Chinese

government crackdown. Alibaba, Tencent, and Ping An are technologically and op-
erationally way ahead. However, they are fighting fierce headwinds from aggressive
regulators. The latter are bent on curbing China’s Big Tech and redefining the Chinese
regulatory landscape: greater state control on data, monopolistic activity, payment
channels, and consumer lending habits.
I strongly encourage readers to look into this book. Paul Schulte and his colleague
William Dogger dissect each company in fine detail and then circle back, offering a
strategic view of where things are going sector by sector. Finally, they package every-
thing up in the front of the book with important themes for professors, investors,
ix
olicymakers, and central bankers to gauge success or failure on a corporate or na-

p
tional level. It has extensive text at the beginning of each section to offer insight and
context but is also well articulated in PowerPoint for too many of us lost in the Twit-
terverse. All in all, it is the right book at the right time and in a cutting-edge area of
finance. The metaverse will only grow. There is no way regulators can put this genie
back in the bottle. They must evolve with it and, at best, tame it. Trying to get rid of
it will only broaden it.
David Lee, Ph.D.
x
INTRODUCTION
This book is a kind of illustrated look at the evolution of finance and insurance -
as well as property - from the now musty world of digital apps to a very recent shift
into blockchain-based functions. The latter can shape both the quantity and the qual-
ity of digital information of people, places, things, and ideas. It is happening at great
speed, as all new technologies can and must. It is happening to several different,
although related, industries simultaneously but in slightly different ways. This book
is very detailed and case-specific about exactly how these changes are happening and
how they will affect the lives of consumers, bankers, investors, and regulators.
The picture below lays out the theme of this book. Fintech, proptech, and insurtech
are now in an intermediate stage of development. They have done what they can for
customer acquisition, AI, edge computing, elaborate credit scoring, telematics, IoT,
cloud, and display. New digital sub-sectors have been created in payments, eCommerce,
wealth management, lending, buyer/seller platforms, smart homes, cities, and end-to-
end all-digital insurance products. Much of this has been done autonomously from
traditional platforms. In this way, a new industry born twelve years ago, starting with
pioneers such as Alibaba, PayPal, and Square, has now reached a stage of maturity.
Figure 1
xi
In 2020 and 2021, we have seen this technology move to a whole new level with
the acceptance and integration of blockchain technologies. They are causing a pro-
found fracture in traditional financial services because they can create open- and
closed-chains for all kinds of services as noted above — property, finance, insurance,
broker/dealer activity. At best, all of this can be done without the traditional systems
for banking such as SWIFT, DTCC for securities, or expensive mortgage brokers
for property. At worst, they can exist alongside and offer a fringe group of “financial
anarchists” an opportunity to operate outside a system they have grown to distrust.
We submit that the acceptance and integration of blockchain technologies in finance,

insurance, and property would not have been workable without the increasing accep-
tance of cryptocurrencies. In many ways, the themes we lay out in this book clarify that
the growing popularity of crypto and the ever-increasing use cases of blockchain are a
“hand in glove” affair. They go together. The chart below shows a new set of tools that
have grown out of blockchain and crypto activity. These include financial services, health-
care, clinical trials for drugs, government and civic action, transportation, and insurance.
We think that the greatest need for blockchain applications lies in insurance. The
spate of newly listed insurtech companies have impressive technologies, but they have
no blockchain applications almost to a man. This is remarkable since insurtech evolved
long after fintech, a recent phenomenon dating back to 2017. There is a gaping hole
in the insurtech landscape for blockchain/crypto projects. Blockchain applications in
property are only now bearing fruit in 2021.
So, the companies we highlight have little blockchain technology but are candi-
dates for “bolt-on” crypto activity.
Centralized blockchain infrastructure

Focus on Government services, Healthcare, and Transport
Banking and Financial

Faster and more secure payments, settlements, and clearance
services
Healthcare Securely share data across Healthcare institutions
Research & Clinical

Reconcile disparate data
trials
Government & public Increase efficiency, minimize fraud, and increase accountability
records Casting, tracking, and counting votes
Public transportation Commuting and transit data to improve transportation systems

Schulte Research
Claims management Improve back-end healthcare and insurance infrastructures
Sources: Schulte Research
Figure 2
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Paul Schulte
As 2021 draws to a close, we think a new phenomenon will become standard

over the next two to three years: NFTs — non-fungible tokens. The manifesta-
tions of NFTs we see today are talked about as hype, glamorous, over the top,
activity for those with cash to burn. We think this is a mistake to believe that
this is a flash in the pan. We will show in this book the natural use of blockchain
to extend the maturity and uses of digital fintech products. In the same way, we
believe the use of NFTs is a natural extension of blockchain and crypto. Indeed,
a strong case can be made that NFTs can only arise out of a world encased inside
blockchain and crypto.
The page below shows how NFTs can extend the uses of blockchain and create yet
again a new set of industries that we have never seen. Blockchain’s indelible creation of
universally recognized ownership and identity — as well as fungible smart contracts —
solves many problems of ownership and financial rights for amateur digital art, film
characters, unique avatars, and talented gamers. It solves many issues of minimal roy-
alties for products bought by millions of people. It can play a role in public and civic
activity. It creates whole new digital worlds in gaming and education. And it creates a
store of value that can be in the gate of hundreds of billions.
Initial applications of NFTs

Applications of NFTs are broad and growing
Entertainment Own sporting moments, film characters, or amateur memes
Store assets safely, relying on underlying wallet

Collecting
Unique ownership of an item, with continual proof of authenticity
Anyone can share their talent publicly and own it indefinitely

Creation
Claim royalties on future sales, guaranteed by smart contracts
Voting functions (i.e., choosing next signing for sport team)

Governance
Could develop to decentralization of political and corporate decisions
Offers a new item to wager the digital file itself

Gambling
Zed Run has sold tens of thousands of virtual horses that can be bred and raced for money up to US$65 k
Investing Uniqueness of assets leads to appreciation in price as popularity grows

Schulte Research
Both in gambling format and with a more recreational focus

Gaming
In-game items are tokenised, to be exchanged outside of the game
26
Figure 3
We will also unabashedly explore the political ramifications of this massive shift
in technology. Control of cities along the Silk Road is an essential part of this. We
must examine the US-China conflict to see who will control the new digital railroad
systems these blockchain products will travel. The regulatory issues are paramount
since regulators have sovereign financial autonomy problems to consider. They need
xiii
to raise debt shortly and use old copper-based systems to pump out this debt to old
buyers. New technologies could very well compromise this ability. Exchanges are pri-
marily a private sector affair and are naturally jealous of new entrants that can disrupt
profitable businesses.
Furthermore, when it comes to insurtech and the oncoming freight train of block-
chain technology and tokenization, these fairly new creatures with novel solutions
to insurance will need yet another investment cycle reasonably soon. It is not good
enough to say that the technology is three years old, so it is sufficient. Technology is
changing rapidly. Fintech companies like Visa and PayPal have invested in crypto and
blockchain since four or five years ago, so they are ahead.
Insurtech will need costly programs to create newer technological solutions for
2022 dilemmas. This will involve investing in parallel blockchain solutions, which
are expensive. Bolting on blockchain solutions to existing “older” technology is not a
sufficient solution. This will be expensive. And it will require new forms of interoper-
ability. For us, it makes sense to think of insurance products as a universal insurance
offering. The new blockchain technologies speak to a unified platform that can be
spun off later after interoperability is established.
Lastly, we add an insurtech case study that shows the kind of insurance super
app we would want if we had a magic wand. It envisions an easy-to-use interface
that is interoperable and universal in its offerings of insurance products. Specialized
insurance runs against the grain of the ubiquity that is offered by multiple layers of
data. This app lays out the app features which combine the best of health tech and
insurtech with blockchain in the background. Again, these new technologies beg the
use of universal ubiquity and not niche specialization. Platform ubiquity will lead to
specialization. Gathering specialist niche platforms in the hopes of creating one inte-
grated system may be a fool’s errand with blockchain.
The movement from fintech and insurtech based on AI and IoT to block-
chain-based NFTs is to us as natural as the move from whale oil to electricity. It is as
easy to grasp as the move from the horse to the car. It is as simple to comprehend as
the move from the telegraph to the telephone. It is unstoppable. It will be accepted
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Paul Schulte
and regulated. It will provide vital solutions to governments. It will bury those who
refuse to adopt it.
Enjoy this book. We are exploring new trends as they develop – technical, polit-
ical, geographical, and civilizational. With tokenization achieved through cryptocur-
rencies, the move from physical to pure digital on all fronts will have massive implica-
tions for existing financial, political, and economic infrastructure. Figure 4 to Figure
8 below explain what drives home the front. The economic and financial essence of
tokenization cannot be understood without connecting them to the political and dip-
lomatic shifts appearing before our eyes. May the best man win!
Welcome to the money metaverse.
Key issues in Blockchain infrastructure:

How the public-private intersection will work
Monopoly, data privacy, regulations, systemic risk, proprietary/public infrastructure?
Will the development of Blockchain-based infrastructure be led by privately-owned entities,

governments, or collaboratively?
VS.?
With?
Schulte Research
Figure 4

Private infrastructure Public infrastructure
Threat of monopoly behavior can lead to antitrust

Government controls data
investigations, hindering advancements
Fragmented market leads to inefficiencies in the

treatment and usage of Big Data due to unconsolidated
and absence of trust in the government
data
Lack of incentives in developing proprietary technology Fragmented government entities in the US slowing down
due to systemic risk posed by data monopoly
Schulte Research
Centralized control in China lead to faster advancements

Trust and accountability of private companies
harmonization of internal and external data
Sources: Schult
Schulte Research
Figure 5
xv

Our take
Data in the US does not have consolidated

control. Fragmented data in FB, APPL, AMZN,
Data in China will be owned by the PBOC?
GOOG plus investments by government in
privately-owned companies
Blockchain in the US now heavily funded by the

Blockchain and DC/EP powered by the BSN?
Department of Defense
Schulte Research
Data are the cars on the railroads, Blockchain is the railroad

Railroad monopoly controls how much it charges, when, how, who, and at what frequency its usage
10
Figure 6
Global Summary:
Deviation between sectors
Deviation between sectors on valuation & operating metrics, but all adopting similar business models
Fintech and Crypto companies trading at far higher multiples relative to Proptech and Insurtech
Valuation Early listings resulting from a plentiful supply of capital that is spurring record valuations and company growth
Fintech giant Visa spearheads trading multiple rankings
Fintech companies are seeking a path to profitability;
They need headway to reach scale and market;
Operating metrics Fintech is an industry characterised by high technological barriers;
Meanwhile, Insurtech is struggling to reach profitability;
Select Insurtech companies are still achieving loss ratios comparable to traditional insurers due to poor proprietary technology
Fintech, Insurtech, Crypto, and Proptech

Schulte Research
A one-stop-shop super app seems to be the weapon of choice to achieve CEN, supporting cross-selling/up-selling benefits. This remains elusive
Business Models
Ping An has achieved this by leveraging an O2O strategy to offer a variety of services in a single app
PayPal is on this bandwagon by recently announcing the creation of its own one-stop super app
11
Figure 7
Global Summary:
Similarities between US & China
US & China both focused on antitrust & data, whilst shared goals between sectors are driving trend commonalities
Key goals focused on solving pain points at both ends of the value chain
Goals and Limitations Ultimately look to achieve harmonised decentralized platforms, remove intermediaries and improve efficiency
Limitations are related to poor transparency, uncertain regulatory landscape, fraud, fragmented markets, etc.
Blockchain a key railroad for all sectors it is a transportation system for all data
Record funding Q1 and Q2 2021 have seen a flurry of capital fuelling growth
Trends IoT, Big Data, AI and analytics becoming a mainstream technology for all sectors across all aspects of their business model fraud,
operations and customer experience
Decentralisation and data as a store of value are hot emerging topics
US and China at cross roads on regulation

Schulte Research
Regulations Both are focused on addressing issues related to antitrust, data privacy and data monopoly
Chinese IPOs in the US to redirect to Hong Kong in response to cybersecurity reviews requirements before listing overseas
12
Figure 8
xvi
Chapter 1:
NFTs and crypto
Section 1: The world of finance, insurance, property, and health is rapidly morph-
ing into a crypto-led digital metaverse where all physical movement (people, places,
things, and ideas) is being tokenized, valued, and traded. Increasingly, all of this
must be seen as a whole, and financial institutions which fail to see this will be out
of business.
Global Summary:
Blockchain as the railroad, Big Data as the cars
Fixing transparency, traceability, AML, KYC for future advancements in data analytics (e.g., edge/quantum computing)
US key players NFT

Intellectual property
Property
Crypto Fintech Money
Insurance
Art/Wine/Sports
NFTs Gaming
Rewards and incentives
China key players Insurtech Proptech Risks

Monopoly behavior
Antitrust hindering
development
Schulte Research
Incentives to develop
Railroads Required proprietary technology
Blockchain (e.g., BSN) Fragmented data

Central Bank Digital Currency
Public trust
14
Figure 9
There is a new railroad being laid; only it is digital. This railroad is blockchain.
China has the lead so far, but the western alliance is rapidly catching up. Central
bank digital currency will be the main railroad, though it is unsure who will own
it. More importantly, who will operate the railroad station franchises. In China, it
is Alibaba and Tencent now securely under the thumb of the PBOC and the State
Council. In the West, it is still hard to say, but Visa has done a phenomenal job
1
of commandeering much of the activity of railroad stations. PayPal is catching up

quickly. JPM and Square are also powerhouses. Coinbase is a significant player but
just cannot get any love from investors.
Digital currency: institutional investors

CBDCs as the first step to democratization of digital currencies
Remarks Primary role for a crypto in a portfolio or treasury account
Issuance of CBDCs necessary to establish functioning market for new The Economist survey of 200 institutional investor and corporate treasury management
financial instruments
Capital appreciation, 33%
will increase demand for other forms of
digital currencies
Alternative asset diversification, 31%
Institutions sees a demand for international institutional-only currency
exchange platform Monetary transfers for large settlements, 29%
Increased regulatory clarity needed F/X or currency exchange, 28%
Preference for transactional use in the future, but currently used as a store of
Hedge against inflation, 28%
value
Governments and regulatory entities: Hedge against low interest rates, 27%
1. must work together to bring clarity and investor protection when
investing in crypto-assets; and Protection against geopolitical uncertainty, 25%
2. must educate and provide guarantees for both investment in
crypto-assets as a store of value and as a medium of exchange
Simplified digital settlement/transaction only, 24%
Speculation, 21%
Schulte Research
Deflation protection, 16%
They should have no role, 1%
Sources: The Economist Intelligence Unit: Digimentality 2021: Digital currency from fear to inflection
20
Figure 10
Figure 10 shows just how rapidly cryptocurrencies have become an integral part
of investing. According to the EIU, only 1% of participants in its survey said crypto
does not belong in a portfolio. The suggested uses include capital appreciation, diver-
sification, transfers, inflation hedge, and a political risk hedge.

Catalysts and obstacles to acceptance of digital currencies
Primary triggers to enhanced activity in digital currencies Primary obstacles to institutional investor of digital currencies
The Economist survey of 200 institutional investor and corporate treasury management The Economist survey of 200 institutional investor and corporate treasury management
Wider adoption of CDBCs, 31%

Market trust or understanding of digital currencies/assets, 47%
Availability institutional-only digital currency exchange, 29%

Financial market structures, 43%
More robust AML controls, 25%
Increased economic instability, 25% Asset volatility, 36%
Sharp rise in other asset prices, 23%
Provide regulatory Internal technological challenges, 32%

Support digital currencies by leading corporations, 23%
framework and
Reduction purchasing power, 21% institutional investor Regulations, 32%
protection
Sharp fall in other asset prices, 21%
Lack of related digital financial services, 27%
New regulatory framework, 21%
Rising interest rates, 19% Lack of corporate support, 24%

Schulte Research
Continued low negative interest rates, 18%

Insufficient interoperability, 19%
Significant social unrest, 13%
21
Figure 11
Figure 11 shows the obstacles to greater use. Frankly, we boil it down to two:
absence of insurance and regulatory approval as a tradable commodity asset class on
the CBOE.
2
Paul Schulte
Stablecoin categories
Growing base of stablecoins displaying a movement beyond traditional crypto use cases
Fiat-backed Coins backed by a corresponding US$ in a treasury
Crypto collateralized Stablecoin collateralized by other digital assets (e.g., ETH, BAT, USDC)
Interest-bearing Token created to represent stablecoin deposit earning interest
Backed by SNX holders who are rewarded for providing collateral and stability
Synthetic with fees generated by Synth transactions
Schulte Research
Algorithmic Coin programmed to optimize search of highest yield opportunities
16
Figure 12
Crypto lending
Crypto lending booming a trend picked up by blockchain projects
Deposits crypto assets as collateral Deposits fiat currency

Borrower
Lender
DeFi Lending
Obtains crypto loans
Platform
Repays the loans with interest

Schulte Research
Receives collateral back after Receives funds back with interest

repayment (passive income)
Sources: Medium.com
18
Figure 13
NFTs: Crypto Art Boom

NFTs have grown to account for c.10% global art market sales where Millennials account for 71%+ resell art
NFT sales by category NFTs quarterly sales1
Data in US$ m
Collectibles Sports Games Art Utility Me taverses
$2,929.2
5% 3%
11%
40%
10%
31%
$503.9
$424.0
Schulte Research
$9.2 $7.7 $18.4 $31.6
Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021
Sources: Consensys, NonFungible

(1) Q3 2021 until 15-Sep-2021 included
19
Figure 14
3
Then, we get to the evolution of non-fungible tokens. The first element of this
is the inclusion of DeFi to trade, collateralize, securitize, and perform government
functions (Figure 12, Figure 13, and Figure 14).
The second is to guarantee an immutable, connected, and transparent establish-

ment and public recognition of this thing or this person. Solana is seen as a strong
candidate for this space.
The third element of this is the theme of this report — the metaverse. This in-
cludes the public valuing of assets outside of any intermediary. This includes artistic
expressions which live only in the digital domain.
Summary
Special benefits, opportunities, and use-cases
Enable price-fixing, royalties, loyalty

Validity, uniqueness, and properties
Authenticity are immortal and decentralized Smart contracts rewards, and infinitely many other
functions
Immediate access to creators, Incentivise fans and encourage

Connectivity buyers, and sellers globally Fresh engagement repeat-purchase of other products
Assets owned on public keys, visible

Transparency, yet and tracked, without direct
Decentralized Provide voting rights, with all of the
anonymity identification governance above benefits
A key step towards a digital,

tokenised world. More
Immutability Once minted, an NFT is immutable Metaverse immersion interoperability and sectors must
follow
Schulte Research
Ownership is validated by the Involvement of the general public

Security underlying blockchain Inclusion into any space
24
Figure 15
NFTs unique representation of a digital file

Exist on the blockchain: capable of exchange and ownership, with the benefits of immutability, traceability, and security
Anyone can purchase (or even create) an NFT

Accessibility
Most popular public marketplaces: OpenSea and Rarible
Unique: can not be interchanged with another

Uniqueness NFT
Underlying digital file allocated to single owner on the blockchain
Controlled by private Similar to cryptocurrencies

cryptographic key Most users connect to a wallet (i.e., Coinbase) to the marketplace, allowing non-custodial storage
Laws and regulations The nascency of NFTs limits the associated laws and regulation currently
Minting Process of converting a file to an NFT

Schulte Research
Smart contract Usage and ownership of an NFT igoverned by smart contracts
25
Figure 16
4
Paul Schulte


Collecting

Creation

Governance

Gambling

Schulte Research

Gaming
26
Figure 17
NFTs trends: integrate financial frameworks

Integration into DeFi and Portfolio management
Virtual objects type of cultural capital

Traditional and emerging art expected to be integrated into emerging financial frameworks
DeFi Portfolio management

Schulte Research
Collateral for borrowing or Attached to fixed income

fractionalized Government participation tokens
instruments
Sources: Blockchain Council
27
Figure 18
NFTs trends: metaverse, DAOs, digital museums

Difficult to implement in the fiat universe
Decentralized autonomous
Ethereum Applications
organizations
Software-defined investment
Schulte Research
to send and lock NFTs to individual collectives that bid on the acquisition
addresses of artistic expressions
28
Figure 19
5
NFTs trends to watch: multichain and institutional

protocols & networks
IPFS and multi-chain support to avoid losses of digital assets in case of blockchain discontinuity
IPFS and multi-chain support Enterprise IP networks and emerging media
Token market collapse in 2018 caused majority of crypto community

NFTs allow ownership of a reference to a file stored on IPFS to shift focus to institutional enablement models
Led to proprietary protocols and networks

Problem: if business ceases to exist, unclear what happens
to your digital asset
Resulted in digital asset and consultancy programs aimed

at developing blockchain controlled operations
Schulte Research
Expect similar chain of events in traditional media: film, music, and

Possible solution: IPFS secures NFTs in the multichain world
art
29
Figure 20
NFTs provide new opportunities within

entertainment
Secure and reliable revenue stream, providing traceability, engagement, and governance
Fans are willing to pay to for inclusion and interaction

New revenue stream
Offerings and transactions can continue outside of the sporting-season
Security and traceability of all tickets

Ticketing
Tickets with fixed price on the blockchain, preventing scalping and touting
Fan engagement Exclusive offers and loyalty rewards tracked and distributed via ownership of NFTs
Data value at the core

Customer relationship
management Ownership segmentation, quantity, and composition within a wallet offer insights to the customer base. Leveraged for
tracking improvement, advertising, and collaborations
Advertisement High-profile NFTs draw attention to the underlying entertainment (e.g., NBA Top Shop for the NBA)
Schulte Research
Governance Fans can contribute to decisions: revenue generation and benefit from wisdom of the crowd
30
Figure 21
Crypto is the cashflow, NFTs are the assets

Nascent market expanding at a rate that can not be ignored
Transaction volume c.US$2.5 bn of sales in H1 2021
CryptoPunks have had more than US$1 bn in volume

Famous NFTs
Beeple Everydays the most expensive NFT ever sold for US$69 m
How can it be pictured in this PowerPoint, yet sold for US$69 m?

Ownership of a file?
Comparable to photographing or copying the Mona Lisa: the value is in unique ownership
Schulte Research
The pause in entertainment and sport required a new way to engage and monetise fans worldwide
Pandemic as a catalyst
Aligning with the surge in blockchain-based products
31
Figure 22
6
Paul Schulte
The fourth element of this is the enterprise or institutional, which are a betrayal
to the purists in that they are proprietary. This includes central bank coins and aspects
of traditional media like music and film. Figure 15 to Figure 22 are clear pictures
showing the trends in NFTs.
The bottom line for us is that crypto is the cash flow and NFTs are the assets. This
will flow into art and wine but also tickets, fan engagement, advertising, governance,
and member wallets. This market is $2.5 bn and rising sharply by the month.

Data in US$ m
Collectibles Sports Games Art Utility Me taverses
$2,929.2
5% 3%
11%
40%
10%
31%
$503.9
$424.0
Schulte Research
$9.2 $7.7 $18.4 $31.6
Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021

19
Figure 23
Key risks associated with NFTs rollout
NFTs are difficult/impossible to value, due to their unique nature. Combined with rapid and global exchange; prices
Volatility change quickly
Ethereum, currently the leading blockchain for NFTs, demands vast amounts of energy for its Proof-of-Work structure
Environmental
Ethereum switching to Proof-of-Stake consensus mechanism
Owners-rights are dependent on the marketplace and NFT, these should be reviewed prior to purchase
Licensing
Newer projects are offering more commercial rights
Novelty, uniqueness, and complexity combine to uncertainty of future regulation and laws for NFTs
Regulatory
Global reach and semi-anonymity further disrupts regulation
Criminal activity
Schulte Research
Blockchain transactions fees, marketplace fees, and infrastructure costs cause expenditure upon purchasing an NFT
High fees (typically between 1-10% of the price)
36
Figure 24
Figure 23 shows the art market activity. Ethereum and Flow are likely winners in
this area. Figure 24 shows all the risks, and there are many.
7
Section 2: The integration of crypto into the new blockchain rails created a digital
data transportation system that confers ownership. This is the metaverse. A perfect
“tangible” example of this metaverse is Somnium. Somnium is a self-contained VR
reality customizable and ‘lovable’ because it has AI capabilities that bring avatars to
life. It is a “persistent” social VR world. You can live in this world and buy, sell, trans-
act, learn, shop, and travel. (Somnium means “dream” in Latin. Kepler wrote a book
called Somnium and anticipated space travel — in 1608).
Partners of Somnium
Pimax -level specifications
Somnium has partnered with Pimax -based domain
Somnium has partnered with Sony via their state-of-the-art 3D model creation technology
In addition, Sony houses a VR-based store within the Somnium universe that is one of the first in the world
Somnium is a part of the specialized Microsoft for Startups program.
Bring advertising revenue for users on the platform

Schulte Research
-two solution offers speed and near-zero transaction costs for Somnium users with respect to on-
platform transactions.
Sources: Metaverse series Part II
42
Figure 25
Partners of Somnium
OpenSea provides an accessibility, highly-liquid marketplace to empower these new economies, and offers tools that
permit developers to build such marketplaces for their digital assets
VR Education uses the Somnium space VR platform to enhance experiences and drive more education with respect to VR
adoption
Collaborative efforts towards constructing a truly decentralized and immersive metaverse
Enabling teleportation between VR worlds

Schulte Research
One of the most trusted and secure digital currency exchanges/custodians globally enabling customers to transact and
store digital assets
43
Figure 26
8
Paul Schulte
People who never had a computer in their home wondered why you needed a
computer – until you got one. People who never had smartphones wondered why
you needed them — until you got one. The same will be true, in our opinion, for
new equipment which offers us a self-contained world of AI-driven entertainment,
learning, and commerce. This is the gamification of finance and investment. To
this end, Somnium has partnered with Sony, Microsoft, and Polygon, among many
others – Figure 25 and Figure 26.
Economy in Somnium
Product/service offerings that allow platform users to generate revenue
Characteristics Economic activities
VR-based economies are unfettered by restrictions such as physics Tokenizing and selling their productions directly via open
and geography marketplaces
Owning and monetizing broader digital assets within the Somnium

Applications involving blockchain and digital asset
Economy
Safety, privacy, encryption, traceability, and verifiability of ownership

VR world navigable by thousands of users simultaneously
of digital items/asset transacted on platform via the network.
Schulte Research
Users to maintain full ownership over their digital assets/possessions in

Creation, building, and monetization of land
the form of NFTs.
44
Figure 27
Figure 27 is a taste of what is to come in the metaverse — everything can be to-

kenized in Somnium. Players have a digital wallet, NFTs, marketplaces, art, learning,
events, thousands of interactive friends, and even land.
Somnium Space monetization and business

models
Developers Developers selling tokenized digital assets and avatars

Cornerstone principles
Tokenization of virtual land

Sominium Economy
NFT collectors exhibiting their collections on their land as Tokenization of digital

Collectors well trading amongst each other assets/experiences
Decentralized marketplaces
Entrepreneurs Entrepreneurs can build and sell digital/tangible goods
Traditional companies Traditional companies and businesses creating a store presence within the Somnium Space
Schulte Research
Game developers Game developers inserting short/large demos or gaming experiences into the Somnium Space
45
Figure 28
9

models
Content creators can showcase a variety of virtual Native token of Somnium: Somnium CUBEs
Content creators experiences (e.g., vlogs, commentary, etc.) and monetize
them within the Somnium Space/platform
CUBEs can be used for a broad array of product/service
offerings including:
Universities and other higher-learning institutions building interacting in entertainment (e.g., race cars)
Universities courses and experiences such as an immersive
planetarium
land purchases or renting
digital asset/item sales in the marketplace

Artists can showcase a variety of creations such as 2D/3D
Artists paintings and sculptures
eCommerce
Streamers Streamers (e.g., Twitch, etc.) having their own virtual studio from which they can record within the Somnium Space
Schulte Research
Developers can build anything - for fees or otherwise - and upload it via the Somnium Unity SDK for other users to engage,
Unity SDK interact, and transact with
46
Figure 29
Investing, Buying & Renting Land

Brand new area of virtual real estate
Overview Value of parcels
Each land parcel is unique, unreplicable, non-forgeable, and has verifiable The value of various parcels within the Somnium Space varies as a function
ownership. of factors: popularity of areas, the view of different areas, size, etc.
Owners of these NFT-based land parcels have direct autonomy over The average land parcel in the Somnium Space across the different size
contents that are built on top of their land parcels ranges sold for roughly 6.57 ETH, or equivalently US$14,560
Throughout the COVID-19 pandemic, as more users enter the Somnium
scarce digital real estate within the Somnium Space will continue to
increase in value.
Metaverse Property: the first VR-based real estate company in the entire industry
Property Management
Property Development
Renting property to clients, maintenance of
Architecting, designing, and developing the build, as well
technical and visual aesthetic, collecting rents from
as establishing on-map development
clients
Consulting Marketing
Schulte Research
Helping property owners/renters make important Metaverse Property has strong access to the burgeoning
decisions in VR-based real estate using their advertising network that exists across the various
knowledge of virtual land across metaverses metaverses
47
Figure 30
The world of “Ready Player One” is here – Figure 28, Figure 29, and Figure 30.
The future of conferences is here. Think of a world where every elementary or high
school has a chance to become an avatar for their students. It is scary, but that is where
this is going.
PayPal is one of the major companies which is young enough to be hungry and
not yet old enough to rest on its laurels. It is aggressively moving forward with a
broader product range and expanding geographically. Square is also doing terrific
things in this area, but we prefer PayPal on valuation grounds.
10
Paul Schulte
Visa vs. Mastercard vs. PayPal vs. Square

Content/Section Title
Through partnerships and collaboration

Through partnerships and collaboration Cryptocurrency trading and as a funding Cryptocurrency trading and as a funding
Issuance of Mastercard credit cards with
Issuance of Visa credit cards with crypto- source source
Crypto approach related rewards
crypto-related rewards
Adds a lower cost of funding for PayPal Buys and sell crypto directly from its
Plans on rolling out stablecoins settlement
Involvement in stablecoins Supportive of users & engagement customers
in 2021
1. Buy, hold, sell using Visa credentials 1. Buy, hold, sell using Mastercard
1. Crypto Checkout: settled in fiat currency
2. Cash-out to Visa credentials credentials 1. Buy, hold, and sell Bitcoin
Products 3. Crypto APIs 2. Cash-out to Mastercard credentials
2. Buy, hold, and sell Bitcoin, Bitcoin Cash,
2. P2P transfers
Litecoin, and Ethereum
4. Direct settlement in USDC 3. Crypto APIs
No Balance sheet exposure Balance sheet: holds $220m in Bitcoin

Looking for consumer protections, strict
No direct exposure to crypto as Visa Product exposures: benefits from buying Product exposures: benefits from buying
compliance protocols with regulations, and
Risk exposure enables partners to leverage crypto APIs
pure payment not as an investment in
and selling via third-party Paxos. No and selling of consumers without volatility
and access its network exposure to the volatility of underlying exposure. Square earns spread from buying
potential crypto-assets
crypto-assets and selling
1. Visa network to facilitate access for 1. Mastercard network to facilitate access

partners to crypto APIs and transaction for partners to blockchain APIs (smart
Customer segment settlement contracts, fast pay network in P2P, P2M, PayPal users - Retail consumers Square users - Retail consumers
2. B2B Visa Connect for blockchain cross- and B2B)
border payments 2. Stablecoins settlement in 2021
Visa sees a global opportunity in crypto,

besides China, which is restricted by Union
Launch in the US first
Geographies Mastercard network Launch in the US
Schulte Research
UK rollout in Q3 2021
network
Visa Research Team to improve scalability Transactions settled in fiat currency only
Transactions are settled in fiat currency Withdrawing to an external wallet possible
and offline use of digital currencies 89 blockchain patents granted, 285
Other CryptoPunk pending
No private key issued: impossible to transfer Plans for decentralized exchange
crypto out of digital wallet
Plans crypto services integration in Brazil Acquisition CipherTrade for crypto analytics
Sources: PayPal public filings, Capital IQ, Credit Suisse, CNBC, Wall Street Journal, Pymnts, Financial Times
49
Figure 31
PayPal approach to crypto

Safe rollout on/off ramp to traditional crypto products in the US and in the UK
Crypto products: Crypto Checkout and PayPal Crypto
PayPal Crypto: Buy, hold, and sell experience since Q3 2020 in the US on PayPal, Q2 2021 through Venmo
Products Overview
Crypto Checkout: Launch Q2 2021, cryptocurrency as a funding source to pay. Transactions settled with fiat currency1
Cryptocurrencies Bitcoin, Bitcoin Cash, Ethereum, and Litecoin
International Expansion Planned in H1 2021
Rationale Adds a lower cost funding for PayPal. More supportive of users & engagement
Regulation BitLicense from the NYState Department of Financial Services in Q4 2020
PayPal Crypto: ~2.5% take rate including variable fee based on the amount from 150bps to 230bps and a spread of ~50bps
Transaction fees
Crypto Checkout: only spread on the conversion from crypto to US$
Schulte Research
User engagement Crypto users sign into the app twice as much as they did before buying crypto on PayPal
Cannot transfer crypto in and out of the wallet

Limitations
Limited crypto-assets available
51
Figure 32
PayPal crypto investments

Indirect exposure to digital assets and blockchain-related companies via acquisitions, investments, and partnerships
Investments in the Crypto space
Company Transaction Details
Acquisition announced Q1 2021 Cloud-based wallet for storing and protecting digital assets using cryptography
Estimated ~$200 million Bring secure-storage expertise
Private investment
Cryptocurrency tax software solutions for consumers and enterprises
Undisclosed amount
Serves regulatory agencies worldwide
Q1 2021
Partnership since Q3 2020

Powers crypto service enabling US users to buy, hold, and sell crypto
PayPal participated in Series C funding in Q4 2020
APIs, market expertise, and regulatory framework
PayPal participated in Series D funding in Q2 2021
Crypto compliance and Risk Management

Private investment Q4 2019
Anti-money laundering, prevent fraud, and compliance
Acquired by Blockchains Management in Q4 2020

Blockchain-based identity management and compliance software solutions for
Schulte Research
financial institutions
Private investment in Q4 2019
Deal fell through Q4 2020

Crypto custody and trading firm
Estimated ~$750
52
Figure 33
11
Visa approach to Crypto

Crypto steps as partnerships instead of solo initiatives, with the aim to provide ecosystem infrastructure surrounding crypto
Late implication but significant impact in the crypto space Visa Research Team
Visa approach to crypto came later than its direct competitors Created Zether1 & Fly Client2
Different approach than Square or PayPal, as in Visa takes crypto steps as Team is now focused on new mechanisms to improve scalability and
partnerships instead of solo initiatives enable offline digital currency transactions
Collaboration with the World Economic Forum on a set of policy Offline use of CBDC transactions via Bluetooth or NFC to
recommendations for central banks exploring CBDC expand financial inclusion by helping unbanked individuals
2016 2018 2020
Announced B2B Connect with Chain Core, Partnership IBM Engagement with World Economic Forum
enterprise blockchain infrastructure Integration open source Hyperledger Fabric Circle joined Visa Fintech Fast Track
Patent blockchain-based transaction system Settlement of USDC in fiat currency
Partnership BTL cross-border settlement
Pilot phase B2B Connect in collaboration with FIS integrated Visa B2B Connect Settlement in USDC directly
Schulte Research
Commerce Bank, Shinhan Bank, Union Bank, Commercial launch B2B Connect Launch API Offerings for First Boulevard
and United Overseas Bank Collaboration Infosys Partnership with Tala for API Offerings
Patent for digital fiat currency
2017 2019 2021
Sources: Visa public filings

(1) Zether is a privacy-preserving payment mechanism. JP Morgan Chase announced plans to integrate into its own blockchain efforts.
(2) FlyClient is a framework that makes it easier for mobile devices to validate blockchain transactions
54
Figure 34
Visa crypto and blockchain partnerships

Visa estimates that these partnerships could yield 50m+ new Visa credentials1
35 partnerships in the Crypto space2
Details Details
Transactions settled in UDSC, stablecoin powered by Ethereum

Improve process of interest disbursements and create new crypto
Circle Visa Corporate Card to spend USDC
products
First Federally Chartered Digital Asset Bank World Visa engaged with policy makers and organizations to shape the
Powers Visa crypto-native settlement with USDC through APIs Economic future of digital currencies
Exclusive relationship with Visa2 Forum Visa provided set of policy recommendations for CBDC
Fiat lending with crypto collateral via Crypto.com Visa Card at 9.9%
interest. Up to 8% cashback on purchases
10 million users Visa Cards
USDC co-founded with Circle
Rewards program of 4% in Stellar or 1% in Bitcoin

Visa Blockchain based solution for cross-border money transfer
International B2B Payment Solution
Innovation Log sentinel: Secure audit trail solutions through blockchain
technology since 2017
Program Mobile blockchain-based loyalty program
Partnership for development of new Fintech solutions powered by Visa Fintech

pay with Visa at over 70m+ merchants
blockchain technology for B2B and cross-border payments Fast Track
Most crypto partnerships have been borne out of this program
Schulte Research
Example Visa leveraging partnerships
Co-founded Created USDC Anchorage powers Partnership 1st USDC-settled Card
Sources: Anchorage, Business Insider, Circle, Crypto.com, Coinbase, BlockFi, Fold, Binance, Xapo, Line, Visa public filings, Nasdaq, Centre, Paytm, Bitpanda, Lastbit, Coinzoom
(1) Table is non-exhaustive. 35 digital currency platforms and wallets. Alfred Kelly, Visa CEO at Q2 2021 Earnings Call on 27th April 2021
(2) Ryan McInerney, Visa President at KBW Fintech Payments Conference on 23rd February 2021
55
Figure 35
Wallets and exchanges to use Visa credentials to purchase cryptocurrencies

Purchase
Differentiated value: brand, capabilities, reputation, safety, security, and experience1
Visa Key Partnerships
Working crypto exchanges and wallets to allow customers to cash-out onto a Visa credential
Cash-out
Opportunities in the cross-border B2B space
APIs to offer the ability to purchase, custody, and trade cryptocurrencies

APIs2
Partnership with Anchorage to provide back-office infrastructure
Schulte Research
Settle in digital currency starting with USDC stablecoin

Settlement
Potential for crypto settlements for their B2B Connect product

(1) Alfred Kelly, Visa CEO at Goldman Sachs Technology & Internet Virtual Conference on 11th February 2021
etwork for the neobank and clients
s customers will have access to USDC for remittances
56
Figure 36
12
Paul Schulte
Stablecoins settlement and Anchorage

Coinbase, Visa, Circle, and Anchorage working together to bridge the gap for USDC adoption via settlement on Visa Card
Stablecoins Anchorage partnership
Visa started investing in stablecoins backed 1:1 with fiat currencies over First federally chartered digital asset bank
20 months ago1
Exclusive Visa digital currency settlement partner to provide back-office
Visa upgraded infrastructure to enable partners to settle in digital currency infrastructure, such as custodial, security services, accounts tracking, etc.
starting with USDC stablecoin
Launched pilot of USDC settlement with Crypto.com Visa Card
Increased conversation with central banks about designing CBDCs2
Anchorage and Visa plan to expand to other partners soon
Visa sees potential for crypto settlements for their B2B Connect product3,
leveraging Circle partnership to enable payments with crypto wallets3 Besides Crypto.com Visa Card, USDC standard settlement process requires
partners to settle in a traditional fiat currency
Share of Total Stablecoin Supply Total Stablecoin supply in US$ bn

Schulte Research
Sources: Visa public filings, Coin metrics

(2) Oliver Jenkyn, Visa Executive President at Morgan Stanley TMT Conference on 1st March 2021
(3) Vasant Prabhu, Visa CFO at Wolf Research Fintech Forum on 10th March 2021
57
Figure 37
Visa vs. PayPal. Figure 31 to Figure 37 review our work comparing Visa, Master-
Card, PayPal, and Square. Every time you turn around, Visa is in the right place and
at the right time. Figure 34 to Figure 37 review the partnerships and product launches
that allow Visa to go from strength to strength and remain highly relevant and prof-
itable. It is a marvel how a monolithic credit card company managed to pull this off.
And valuations are simply not demanding. As the Cold War with China accelerates
and the NATO alliance takes a much more aggressive line toward China not only to
contain it but to weaken it, Visa is in an advantageous position to challenge Alibaba
and Tencent.
BOTTOM LINE: Blockchain confirms identity, so we need digital theft in-

surance (for cases like blackmail and kidnapping). It ensures trades, so we need
digital fraud insurance. It proves property ownership, so we need digital property
insurance. It confirms intellectual property, so we need digital insurance remedies
for corporates, patents, trademarks, and copyrights. It secures smart contracts, so
we need insurance for digital breaches of smart contracts. And blockchain CBDC
will require a substantial new market for digital insurance for sovereign CBDC dis-
tribution (counterfeit insurance), store of value (deposit insurance), and means of
exchange (fraud and larceny).
This is the real Insurtech that the world craves. It is nowhere in the current
crop of Insurtech. Our real worry is that by the time this generation of Insurtech
13
makes the transition from a “half in and half out” approach involving off-the-shelf
digital solutions to physical harms, they will have missed the boat when it comes to
the purely digital world of blockchain-based solutions. This is true terra incognita
where there are NO incumbents. Entities like Sygnum and Silvergate are quickly
filling this void.
Section 3: The new crypto exchanges and banks have finally gotten big enough to
merit their sector.
Company overview
Towards full-stack crypto platform, from trading crypto to providing services for DeFi, NFTs, cloud, lending, and derivatives
Business model Go-to-market strategy
Easy-to-use platform for accessing the broader cryptoeconomy by Retail: provides investments, storage, spending, earning, and use of crypto
investing, spending, saving, earning, and using crypto assets
Build brand as trusted space Institutions: provides hedge funds, money managers, and corporations a
one-stop-shop for accessing crypto markets through advanced trading
Focus Coinbase Cloud, equivalent to Amazon Web Services (AWS) for the and custody technology
global cryptoeconomy
Ecosystem partners: provides developers, merchants, and asset issuers a
Continuous development of new products and services to enhance value platform with technology and services that enables them to build
for consumer and business partners applications that leverage crypto protocols, participate in crypto networks,
and securely accept crypto as payments
Since inception, c.US$3.4 bn in revenue, largely from transaction fees
earned from volume-based trades by retail users and institutions
Goals Limitations
Create a one-stop shop for institutional investors and solve ecosystem Due to a different standard of regulatory scrutiny, competitors:
issues:
1. Operate under less stringent local rules and regulations;
Lack distribution, trust and usability
2. Can more quickly adapt to trends;
Availability of easy-to-use and scalable infrastructure
3. Support a greater number of crypto assets; and
Offset effects of any future fee pressure due to economies of scale
Schulte Research
4. Develop new crypto-based products and services faster

Proprietary full-stack scalable infrastructure surrounding crypto (e.g.,
blockchain integrations, crypto compliance infrastructure, cybersecurity, Reliant on crypto asset volatility
cryptography)
Uncertainty regarding regulatory framework globally
Sources: Coinbase public filings
60
Figure 38
Future prospects, products, and services

8.8m Monthly Transacting Users, 9k institutions, and 160k ecosystem partners as of Q2 2021
Coinbase direct listing implications New products and services developments
Coinbase Asset Hub to help asset issuers integrate tokens with Coinbase
1. Public listings amongst crypto firms; Bitcoin-collateralized loan product and a staking product 6% APR for staked
ETH2
2. Greater legitimacy of crypto within global finance;
Coinbase Cloud powered by Bison Trails for new suite of cloud-based crypto
3. Bridging the gap between crypto and traditional investors; computing services (similar to AWS)
4. Playing a pivotal role in ; and Smart order router product for institutional investors, routing orders to the
exchange with the best pricing amongst 10 liquidity venues
5. Increasing the market capitalization of large crypto assets through
enhanced investor participation Launch Crypto Council for Innovation in partnership with Fidelity, Paradigm,
and Square: help regulators, policy makers to understand crypto
Outlook and future potential for growth Recent partnerships with PNC Bank, SpaceX, Tesla, Third Point, and
WisdomTree Investments
Non-fungible tokens (NFTs) represent unique opportunity to transform the
relationship between creators and consumers Now offers reward across six tokens, including ETH2 staking
Diversification revenue streams with addition of new products and services, Launch Coinbase Card and Coinbase Prime brokerage
notably Coinbase Cloud
Acquired Skew for institutional data analytics
Future growth in nascent services for institutional investors such as Borrow &
Schulte Research
Lend in addition to Trading and Custody
Crypto long-term prospects (i) crypto as an investment; (ii) as a financial

service with the rise of DeFi; and (iii) as an app platform such as NFT usage
Lending with Ethereum as collateral provided enough liquidity

61
Figure 39
14
Paul Schulte
Quarterly catalysts 2021 earnings
Catalysts Q1 2021 earnings Catalysts Q2 2021 earnings

Higher MTUs and elevated trading volumes per MTU MTUs +44% QoQ to 8.8m
Addition 7 new assets for trading and 13 new assets for custody High volatility with Bitcoin reaching c.US$64k in April followed by c.45% drop
to c.US$30k
Growth institutional trading customers and volume traded per institution
Assets on Platform c.US$180 bn, -19.3% QoQ
Growth institutional interest in Ethereum and other crypto assets for
commerce, payroll, and custom white label solutions Elevated Trading Volume at c.US462 bn, +37.9% QoQ driving trading
revenue growth
Substantial growth Subscription and services revenue
Increase interest in stablecoins, added support for Tether
Top 10 free app on iOS and Android
Outlook Q3/Q4 2021
Lower MTUs and

Lo d ttotal
t l Tradi
Trading Vol
Volume iin Q3 compared
d tto Q2
Schulte Research
Meaningful growth institutional revenue in 2021 driven by transaction and

custody
Increase ARPU compared to historical US$34 45 per month
62
Figure 40
Coinbase has been a preferred holding for us, but we must admit there is much
resistance among our client base. Its move from higher-margin consumer to lower mar-
gin but more reliable (and much higher volume longer-term) enterprise customer has
investors nervous. Also, Coinbase’s strategy of bigness and cartel structure is the kind of
structure that crypto is precisely designed to undermine. We do not see “strong hands”
holding Coinbase despite compelling valuations – Figure 38, Figure 39, and Figure 40.
SEN Leverage product

Access to capital through US$ loans collateralized by bitcoin
Provides credit
Enters into an Exchange uses SEN to
agreement with the
Bank to borrow US$ to Holds/moves leverage account on its
deposit at exchange assets platform
US$
EXCHANGE
EX
TRADER
ADER Settlements
Executes tradess M
Maintains order
book
Moves assets
US$ & Bitcoin Holds assets
(Collateral)
Schulte Research
US$ & Bitcoin
Trading activity
SEN US$ Transfers

Sources: Silvergate public filings
65
Figure 41
Silvergate vs. Sygnum. These are the first two purely “digital universal banks”.
Among its similar peers, Silvergate is trading at a sharp premium on P/E and P/B, so
we think it may have a breather here. It has a solid business model and a good product
line. Figure 41 explains the business model very simply.
15
approach to digital assets: custody as

first layer
Create series of global partnerships to launch a comprehensive suite of crypto products and services
Institutional-grade security to invest in the digital asset economy

Development
Launched institutional-grade access to DeFi in Q2 2021
Partners Co-developed custody platform with Custodigit, a joint venture with Swisscom
Competitors
Schulte Research
Examples
cryptocurrencies
supported
Bitcoin Aave Ethereum 1inch Ripple ICP Litecoin Maker Tezos Uniswap
Sources: Sygnum public filings
69
Figure 42
Brokerage and trading: 2nd layer;

Lending: 3rd layer
Extending to brokerage and trading for crypto, and lending via crypto-collateralized LTV
2nd layer: brokerage
Brokerage and trading services for digital assets in a secure and seamless way
Brokerage Trade BTC, ETH, XRP, XTZ, LTC, BCH, and DeFi tokens
Exchange from major fiat currencies (e.g., CHF, EUR, SGD, USD)
Settlement within Sygnum platform

Functionalities
Regulated European OTC options for BTC and ETH
Increase fiat liquidity against digital assets (e.g., Bitcoin, Ethereum, XRP, Litecoin, Bitcoin Cash, and Tezos)
3rd layer: lending
Investors
Interest paid on actual drawings to dynamically adjust liquidity based on current needs
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Flexible Loan-To-Value (LTV) to optimize interest rates charged on loan amount

Flexible LTV
Achieved through LTV of c.40%

Sources
70
Figure 43
Asset management and DeFi: 4th layer

Focus on asset management: vehicle for digital asset and high net worth investors
Asset management
First focus on digital asset investors, second for high-net-worth investors via ETP
Customer segment
Provides range asset management investment products including alpha-oriented multi-manager fund
Tracks index leading protocol tokens, dynamically weighted by real world adoption, tracking the network effect
Sygnum Platform of the investor, user, and developer communities
Winners Index ETP
Fully collateralized and physically backed, beta exposure to blockchain protocols
Launched regulated banking services for DeFi tokens, first step in ambition
Next focus on suite of DeFi yield-generating products and services across banking and asset management
Platform DeFi offering
Finally, custom solutions for clients with selected DeFi partners

DeFi
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DeFi tokens Aave, Aragon, Curve, Maker, Synthetix, Uniswap, 1inch Network, USDC, Bancor, Chainlink, Compound, Polygon

Sources
71
Figure 44
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Paul Schulte
Tokenization of physical assets and Bank-to-

bank white-label as 5th and 6th layer
Tokenization of physical and digital assets and white-label for traditional financial intermediaries
Tokenization physical and digital assets, focus on equity shares next

Tokenization For example, Digital Swiss Franc (DCHF), wine in collaboration with Fine Wine Capital, and Fillette au by Picasso with
Artemundi
Primary market issuance platform
Desygnate Digital securitization of assets on the blockchain
Increases efficiency of capital raising and automates corporate housekeeping processes
Secondary market trading venue
SygnEx Access to Venture Capital, Mid Cap, Real Estate, and Arts & Collectibles
Payment and settlement instant and direct with Digital CHF token
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Provides regulated digital asset products and services through B2B banking and operational compliance services
One-stop-shop modular suite of banking services including accounts, payments and custody, brokerage, tokenization,
Bank-to-bank activity lending, and asset management
Partners can broaden offering and access new client segment, with wallets segregated off balance sheet
72
Figure 45
Silvergate also has impressive marquee partnerships. Sygnum also has an im-
pressive array of partnerships – Figure 42. Sygnum, as we see it, is looking to act
as a global crypto exchange to legitimate the coming world of NFTs. It uses its
exchanges to create liquidity, increase product range, offer leverage, and become a
significant asset manager of crypto assets – Figure 43 and Figure 44. In Figure 45,
it also wants to become a white label connector between crypto and banks. Syg-
num is finishing a Series A imminently but is in the right place at the right time
and working very closely with Swiss and Singapore regulators to embed crypto
into the financial system as a legitimate asset class with which regulators can feel
comfortable.
Exchange revenue model

Redesigned the exchange to benefit asset holders, enable traders, & increase market integrity
Generated from trading activity
Generated from trading activity on the
G
attributed to margin trading and Margin interest fees Market making fees
hybrid order book
interest received
Spot (Maker) fees: 10bp

spread Net revenues
Liquidity
Traders Charge 25% on all revenues
providers
No taker fees Share weighted
Bullish Treasury
Schulte Research
Sources: Bullish SPAC Investor Presentation
78
Figure 46
17
Circle and Bullish are hybrid entities — think of Cisco and BAML for crypto.
Circle can be a powerhouse in this space, but its valuation out of the SPAC gate is
very rich, and it has a narrow pool of customers. It is bleeding losses also. Circle is
an important player, but the stink of SPAC lingers. Circle is no exception. Beware.
Lastly, we look at Bullish. It is a pure-play — for now — on its holdings of BTC and
Brendan Blumer’s EOS. Its platform will be operational sometime in 2021. The ex-
change model is in Figure 46. Is this another potentially great company that lists too
early when it is only half-baked?
Section 4: Additional research in PowerPoint format.
Chapter I: NFTs and Crypto

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13
Global Summary:
Blockchain as the railroad, Big Data as the cars
Fixing transparency, traceability, AML, KYC for future advancements in data analytics (e.g., edge/quantum computing)
US key players NFT

Intellectual property
Property
Crypto Fintech Money
Insurance
Art/Wine/Sports
NFTs Gaming
Rewards and incentives
China key players Insurtech Proptech Risks

Monopoly behavior
Antitrust hindering
development
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Incentives to develop
Railroads Required proprietary technology
Blockchain (e.g., BSN) Fragmented data

Central Bank Digital Currency
Public trust
14
18
Paul Schulte
Stablecoin use cases

Stablecoin is faster, lower cost, borderless, transparent, and programmable
Payments Settlement
Avoid transaction fees that Operates 24/7 allowing instant
accompany the intermediary transaction
processing fees
Remittance Lending & Alternative Banking

Avoid high fees related to cross- Lending is high yield opportunity for
border payments debt investor
Inherent price stability could lower Only need internet access to own a
fees further stablecoin bank account, increasing
bank accessibility
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Payroll Escrow
Streamline sending and converting Automate escrow process through
payroll smart contracts
Sources: Medium.com
15
Stablecoin categories
Growing base of stablecoins displaying a movement beyond traditional crypto use cases
Fiat-backed Coins backed by a corresponding US$ in a treasury
Crypto collateralized Stablecoin collateralized by other digital assets (e.g., ETH, BAT, USDC)
Interest-bearing Token created to represent stablecoin deposit earning interest
Backed by SNX holders who are rewarded for providing collateral and stability
Synthetic with fees generated by Synth transactions
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Algorithmic Coin programmed to optimize search of highest yield opportunities
16
DEX Volume Growth

DeFi has gained immense traction automates exchanges, portfolio management, lending, and market-making functions
DEX Volume1
Data in US$ bn
162.8
142.0
92.7 95.3
86.2 87.0
62.3
49.5
39.5
30.9
26.3
21.4
18.1
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14.0
1.9 4.9
0.7 1.5 1.7 1.0 1.2
1-Jan-20 1-Feb-20 1-Mar-20 1-Apr-20 1-May-20 1-Jun-20 1-Jul-20 1-Aug-20 1-Sep-20 1-Oct-20 1-Nov-20 1-Dec-20 1-Jan-21 1-Feb-21 1-Mar-21 1-Apr-21 1-May-21 1-Jun-21 1-Jul-21 1-Aug-21 1-Sep-21
Sources: Dune Analytics

(1) DEX is a decentralized exchange volume tracker provided by Dune Analytics
17
19
Crypto lending
Crypto lending booming a trend picked up by blockchain projects
Deposits crypto assets as collateral Deposits fiat currency

Borrower
Lender
DeFi Lending
Obtains crypto loans
Platform
Repays the loans with interest

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Receives collateral back after Receives funds back with interest

repayment (passive income)
Sources: Medium.com
18

Data in US$ m
Collectibles Sports Games Art Utility Metaverses
$2,929.2
5% 3%
11%
40%
10%
31%
$503.9
$424.0
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$9.2 $7.7 $18.4 $31.6
Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021

19

CBDCs as the first step to democratization of digital currencies
Remarks Primary role for a crypto in a portfolio or treasury account
Issuance of CBDCs necessary to establish functioning market for new The Economist survey of 200 institutional investor and corporate treasury management
financial instruments
Capital appreciation, 33%
will increase demand for other forms of
digital currencies
Alternative asset diversification, 31%
Institutions sees a demand for international institutional-only currency
exchange platform Monetary transfers for large settlements, 29%
Increased regulatory clarity needed F/X or currency exchange, 28%
Preference for transactional use in the future, but currently used as a store of
Hedge against inflation, 28%
value
Governments and regulatory entities: Hedge against low interest rates, 27%
1. must work together to bring clarity and investor protection when
investing in crypto-assets; and Protection against geopolitical uncertainty, 25%
2. must educate and provide guarantees for both investment in
crypto-assets as a store of value and as a medium of exchange
Simplified digital settlement/transaction only, 24%
Speculation, 21%
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Deflation protection, 16%
They should have no role, 1%
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Paul Schulte

Catalysts and obstacles to acceptance of digital currencies
Primary triggers to enhanced activity in digital currencies Primary obstacles to institutional investor of digital currencies
The Economist survey of 200 institutional investor and corporate treasury management The Economist survey of 200 institutional investor and corporate treasury management
Wider adoption of CDBCs, 31%

Market trust or understanding of digital currencies/assets, 47%
Availability institutional-only digital currency exchange, 29%

Financial market structures, 43%
More robust AML controls, 25%
Increased economic instability, 25% Asset volatility, 36%
Sharp rise in other asset prices, 23%
Provide regulatory Internal technological challenges, 32%

Support digital currencies by leading corporations, 23%
framework and
Reduction purchasing power, 21% institutional investor Regulations, 32%
protection
Sharp fall in other asset prices, 21%
Lack of related digital financial services, 27%
New regulatory framework, 21%
Rising interest rates, 19% Lack of corporate support, 24%

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Continued low negative interest rates, 18%

Insufficient interoperability, 19%
Significant social unrest, 13%
21
Digital currency: consumers

Need to educate consumers on the benefits of cashless society as catalyst to widespread acceptance of digital currencies
Remarks Consumer expectations of major barriers to cashless society
Covid-19 heightened use case for digital currencies/assets especially The Economist survey of 3,053 people in February and March 2021
CBDCs and open-source digital currencies
Habits with physical cash, 40%
Actual public use of CBDCs is extremely limited and primarily in test phases
Move to cashless society increasingly accepted and anticipated by Understanding of the technology, 38%
consumers
Data privacy concerns, 36%
Governments and Businesses as key players for the current trend towards
digital cash
Low customer acceptance, 29%
Benefits include contactless transactions, real-time monitoring, and

improved money laundering initiatives Unable to pay small transactions, 25%
Risks include asset volatility and uncertainty regarding market structures and Government regulations, 20%
regulations Need to educate
Unproven technology, 14%
consumers on the
benefits of cashless
society
Low business acceptance, 13%
Ease of use inadequate, 12%

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Don't know, 5%
Other, 2%
22
21
Section 1: NFT landscape

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23
Summary
Special benefits, opportunities, and use-cases
Enable price-fixing, royalties, loyalty

Validity, uniqueness, and properties
Authenticity are immortal and decentralized Smart contracts rewards, and infinitely many other
functions
Immediate access to creators, Incentivise fans and encourage

Connectivity buyers, and sellers globally Fresh engagement repeat-purchase of other products
Assets owned on public keys, visible

Transparency, yet and tracked, without direct
Decentralized Provide voting rights, with all of the
anonymity identification governance above benefits
A key step towards a digital,

tokenised world. More
Immutability Once minted, an NFT is immutable Metaverse immersion interoperability and sectors must
follow
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Ownership is validated by the Involvement of the general public

Security underlying blockchain Inclusion into any space
24
NFTs unique representation of a digital file

Exist on the blockchain: capable of exchange and ownership, with the benefits of immutability, traceability, and security
Anyone can purchase (or even create) an NFT

Accessibility
Most popular public marketplaces: OpenSea and Rarible
Unique: can not be interchanged with another

Uniqueness NFT
Underlying digital file allocated to single owner on the blockchain
Controlled by private Similar to cryptocurrencies

cryptographic key Most users connect to a wallet (i.e., Coinbase) to the marketplace, allowing non-custodial storage
Laws and regulations The nascency of NFTs limits the associated laws and regulation currently
Minting Process of converting a file to an NFT

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Smart contract Usage and ownership of an NFT igoverned by smart contracts
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Paul Schulte


Collecting

Creation

Governance

Gambling

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Gaming
26
NFTs trends: integrate financial frameworks

Integration into DeFi and Portfolio management
Virtual objects type of cultural capital

Traditional and emerging art expected to be integrated into emerging financial frameworks
DeFi Portfolio management

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Collateral for borrowing or Attached to fixed income

fractionalized Government participation tokens
instruments
27
NFTs trends: metaverse, DAOs, digital museums

Difficult to implement in the fiat universe
Decentralized autonomous
Ethereum Applications
organizations
Software-defined investment
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to send and lock NFTs to individual collectives that bid on the acquisition
addresses of artistic expressions
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23
NFTs trends to watch: multichain and institutional

protocols & networks
IPFS and multi-chain support to avoid losses of digital assets in case of blockchain discontinuity
IPFS and multi-chain support Enterprise IP networks and emerging media
Token market collapse in 2018 caused majority of crypto community

NFTs allow ownership of a reference to a file stored on IPFS to shift focus to institutional enablement models
Led to proprietary protocols and networks

Problem: if business ceases to exist, unclear what happens
to your digital asset
Resulted in digital asset and consultancy programs aimed

at developing blockchain controlled operations
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Expect similar chain of events in traditional media: film, music, and

Possible solution: IPFS secures NFTs in the multichain world
art
29
NFTs provide new opportunities within

entertainment
Secure and reliable revenue stream, providing traceability, engagement, and governance
Fans are willing to pay to for inclusion and interaction

New revenue stream
Offerings and transactions can continue outside of the sporting-season
Security and traceability of all tickets

Ticketing
Tickets with fixed price on the blockchain, preventing scalping and touting
Fan engagement Exclusive offers and loyalty rewards tracked and distributed via ownership of NFTs
Data value at the core

Customer relationship
management Ownership segmentation, quantity, and composition within a wallet offer insights to the customer base. Leveraged for
tracking improvement, advertising, and collaborations
Advertisement High-profile NFTs draw attention to the underlying entertainment (e.g., NBA Top Shop for the NBA)
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Governance Fans can contribute to decisions: revenue generation and benefit from wisdom of the crowd
30
Crypto is the cashflow, NFTs are the assets

Nascent market expanding at a rate that can not be ignored
Transaction volume c.US$2.5 bn of sales in H1 2021
CryptoPunks have had more than US$1 bn in volume

Famous NFTs
Beeple Everydays the most expensive NFT ever sold for US$69 m
How can it be pictured in this PowerPoint, yet sold for US$69 m?

Ownership of a file?
Comparable to photographing or copying the Mona Lisa: the value is in unique ownership
Schulte Research
The pause in entertainment and sport required a new way to engage and monetise fans worldwide
Pandemic as a catalyst
Aligning with the surge in blockchain-based products
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24
Paul Schulte
Ethereum and Flow as primary contenders for

the underlying blockchain
Optimal choice of blockchain depends on the purpose of the NFT
Majority of NFTs are built upon Ethereum
2nd largest market capitalization cryptocurrency, robust ecosystem of users, developers, wallets, and applications
Ethereum Transaction fees are high, due to gas fees (compensation for miners in the Proof-of-Work blockchain validation)
Ethereum moving to Proof-of-Stake consensus mechanism
Some companies opt for a 2nd layer network on top of Ethereum, to achieve lower fees and higher transaction speed
Hosts NBA Top Shot
Energy-efficient blockchain transaction validation approach. Lowering gas costs, to encourage developers and customers
Built to have a greater throughput
Early-stage, causing limited developer and application ecosystem
Proof-of-Stake mechanism causes energy/environmental advantage over Ethereum (temporary advantage)

Schulte Research
Considerations include transaction costs, throughput, applications and developer ecosystem, extent of decentralisation, and degree of focus on NFTs
In the future, NFT infrastructure could become interoperable inter-blockchain

32
Minting protocol to access public ledger, become immutable, and tamper-proof digital art
Minting Storage
Digital contents decided for the NFT Directly on the blockchain: however, limited storage capacity limits
size file to avoid large costs
Cryptographic key generated to create token on the blockchain
Decentralized: NFT content spread across distributed network (P2P
Properties (i.e., name, description edition, and file size) included in storage)
the minting
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Centralized: Cloud storage cheap and readily available, however
NFT becomes immortal and immutable on the blockchain trust and reliability required to avoid losing NFT on discontinued
blockchain
Minting dictates the smart contract: governs future behaviour of the
NFT, including royalties, provenance, and functionality Custodial and non-custodial wallets: easy access for the general
public with security reliant on wallet-provider
NFT minting platforms suitable for particular needs (e.g., Rarible to
Bitski NFT drop for Adidas offerings)
Minting can contain reference to the digital file instead of the

complete digital file
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33
Marketplace is another decision for NFTs
Anyone can create then sell NFTs

Open marketplaces
Cryptocurrency only for transactions
Crypto native curated

Similar functionality to open marketplaces, except that creators require approval
marketplaces
Existing closed More general-public focused

marketplaces Custodial and accepting of fiat currency (often via card payment)
White-labelled
Varying levels of infrastructure, including a storefront, branding, and back-end
marketplaces
Largest and oldest (2017) NFT marketplace

Schulte Research
Community-centric (2020)
RARI token provides governance rights to holders

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25
Further opportunities for NFTs
Incentivize habits and behaviour of fans

Loyalty
Smart contracts facilitate rewards for tailored actions
Gamifying Tokens can make attendance (and spending on related products) quest-like, again driving engagement
Fans gain voting rights and can compete in online leaderboards (e.g., choosing a fantasy team)
Governance
Offers revenue stream and enhanced engagement
Immerse fans into a virtual world

Metaverse cohesion
Harness collaborations with other NFTs
Analyze fan data with identity

pseudo-anonymity
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Marketing strategies can be evaluated
Before the event, it can regain royalties on secondary sales and has clear validity
Ticketing
Post-event it survives as a collectible/memento
35
Key risks associated with NFTs rollout
NFTs are difficult/impossible to value, due to their unique nature. Combined with rapid and global exchange; prices
Volatility change quickly
Ethereum, currently the leading blockchain for NFTs, demands vast amounts of energy for its Proof-of-Work structure
Environmental
Ethereum switching to Proof-of-Stake consensus mechanism
Owners-rights are dependent on the marketplace and NFT, these should be reviewed prior to purchase
Licensing
Newer projects are offering more commercial rights
Novelty, uniqueness, and complexity combine to uncertainty of future regulation and laws for NFTs
Regulatory
Global reach and semi-anonymity further disrupts regulation
Criminal activity
Schulte Research
Blockchain transactions fees, marketplace fees, and infrastructure costs cause expenditure upon purchasing an NFT
High fees (typically between 1-10% of the price)
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26
Paul Schulte
Section 2: Metaverse case study: Somnium Space

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What is Somnium?
Metaverse: collectively shared virtual space that arises through convergence of virtual and augmented reality, and Internet
Somnium is a metaverse implementation

Open, social, and persistent VR world with its own economy and currency, marketplace, social
experiences, games, land ownership, and more
Open, social, persistent Blockchain VR metaverse Built with proven/secured standards
Variety of creative tools: software development kit (SDK),

Ownership security
Builder, etc.
Origin authenticity Cross-platform VR client

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Tradable/translatable via decentralized marketplaces
38
Metaverse mechanics
A metaverse VR world on Ethereum
Cross-platform usability All major VR headsets Social Persistent social VR world
Somnium users create and manage

Customizable PC client own layout setup for quick and easy Ownership Ownership of virtual land
in-game interactions
users can program/develop personal

automated recording mode for
experiences within the Somnium
-game avatars on their Programmability /
Long-term livability universe, as well as monetize these
properties that enables an AI-based scriptability developments via the asset store or
analysis to bring avatars to life
on their property
operates on top of the Ethereum
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blockchain network, which enables

transparency and authenticity for
fully programmatic VR advertisement
transactions, thus verification of
plug-in enables users/developers to
Blockchain integration ownership of a wide variety of digital Space monetization capture and analyze gaze tracking,
assets across the platform including
engagement, and conversion rates
virtual land, avatars, wearable
items/accessories, and other digital
goods
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27
Metaverse mechanics
A metaverse VR world on Ethereum
Program/develop personal experiences within the
Programmability / Somnium universe Cross-platform
All major VR headsets
scriptability usability
Monetize asset store or on property
Fully programmatic VR advertisement plug-in Create and manage

Customizable PC own layout setup for
Space monetization Capture and analyze gaze tracking, engagement, and client quick and easy in-game
conversion rates interactions
Automated recording mode of avatars on properties

Long-term livability Social Persistent social VR world
Enables AI-based analysis to bring avatars to life
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Powered by Ethereum blockchain for transparency and

authenticity of transaction
Blockchain integration Ownership Ownership of virtual land
Verification of ownership of digital assets
40
Technology stack
Compatibliity with all major VR headsets, including Oculus,

VR Headsets HTC VIVE, HP, Valve, all Windows Mixed Reality headsets, Karma
and others
Social status and how others perceive them in the

metaverse. Karma level is calculated through a
Most well-equipped/featured with respect to the desktop, variety of factors:
Native builder where included native assets enable users to build a wide-
variety of things as desired Building activity on parcels
Organization and participation in events
Total play time

In-house server architecture enables thousands of users to
In-house server simultaneously interact in the same, persistent VR world World discovery rate
architecture without the need for network sharding via sub-servers or
Land ownership
mirrored instances
Active engagement in economic
activities/transactions
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Ratings from other Somnium Space users

Somnium supports the creation of bespoke, unique user
Unity-based SDK avatars via imports and a Unity-based SDK enabling high-
level of design flexibility
41
Partners of Somnium
Pimax -level specifications
Somnium has partnered with Pimax -based domain
Somnium has partnered with Sony via their state-of-the-art 3D model creation technology
In addition, Sony houses a VR-based store within the Somnium universe that is one of the first in the world
Somnium is a part of the specialized Microsoft for Startups program.
Bring advertising revenue for users on the platform

Schulte Research
-two solution offers speed and near-zero transaction costs for Somnium users with respect to on-
platform transactions.
42
28
Paul Schulte
Partners of Somnium
OpenSea provides an accessibility, highly-liquid marketplace to empower these new economies, and offers tools that
permit developers to build such marketplaces for their digital assets
VR Education uses the Somnium space VR platform to enhance experiences and drive more education with respect to VR
adoption
Collaborative efforts towards constructing a truly decentralized and immersive metaverse
Enabling teleportation between VR worlds

Schulte Research
One of the most trusted and secure digital currency exchanges/custodians globally enabling customers to transact and
store digital assets
43
Economy in Somnium
Product/service offerings that allow platform users to generate revenue
Characteristics Economic activities
VR-based economies are unfettered by restrictions such as physics Tokenizing and selling their productions directly via open
and geography marketplaces
Owning and monetizing broader digital assets within the Somnium

Applications involving blockchain and digital asset
Economy
Safety, privacy, encryption, traceability, and verifiability of ownership

VR world navigable by thousands of users simultaneously
of digital items/asset transacted on platform via the network.
Schulte Research
Users to maintain full ownership over their digital assets/possessions in

Creation, building, and monetization of land
the form of NFTs.
44

models
Developers Developers selling tokenized digital assets and avatars

Cornerstone principles
Tokenization of virtual land

Sominium Economy
NFT collectors exhibiting their collections on their land as Tokenization of digital

Collectors well trading amongst each other assets/experiences
Decentralized marketplaces
Entrepreneurs Entrepreneurs can build and sell digital/tangible goods
Traditional companies Traditional companies and businesses creating a store presence within the Somnium Space
Schulte Research
Game developers Game developers inserting short/large demos or gaming experiences into the Somnium Space
45
29

models
Content creators can showcase a variety of virtual Native token of Somnium: Somnium CUBEs
Content creators experiences (e.g., vlogs, commentary, etc.) and monetize
them within the Somnium Space/platform
CUBEs can be used for a broad array of product/service
offerings including:
Universities and other higher-learning institutions building interacting in entertainment (e.g., race cars)
Universities courses and experiences such as an immersive
planetarium
land purchases or renting
digital asset/item sales in the marketplace

Artists can showcase a variety of creations such as 2D/3D
Artists paintings and sculptures
eCommerce
Streamers Streamers (e.g., Twitch, etc.) having their own virtual studio from which they can record within the Somnium Space
Schulte Research
Developers can build anything - for fees or otherwise - and upload it via the Somnium Unity SDK for other users to engage,
Unity SDK interact, and transact with
46
Investing, Buying & Renting Land

Brand new area of virtual real estate
Overview Value of parcels
Each land parcel is unique, unreplicable, non-forgeable, and has verifiable The value of various parcels within the Somnium Space varies as a function
ownership. of factors: popularity of areas, the view of different areas, size, etc.
Owners of these NFT-based land parcels have direct autonomy over The average land parcel in the Somnium Space across the different size
contents that are built on top of their land parcels ranges sold for roughly 6.57 ETH, or equivalently US$14,560
Throughout the COVID-19 pandemic, as more users enter the Somnium
scarce digital real estate within the Somnium Space will continue to
increase in value.
Metaverse Property: the first VR-based real estate company in the entire industry
Property Management
Property Development
Renting property to clients, maintenance of
Architecting, designing, and developing the build, as well
technical and visual aesthetic, collecting rents from
as establishing on-map development
clients
Consulting Marketing
Schulte Research
Helping property owners/renters make important Metaverse Property has strong access to the burgeoning
decisions in VR-based real estate using their advertising network that exists across the various
knowledge of virtual land across metaverses metaverses
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30
Paul Schulte
Section 3: Visa, PayPal, Square, and Mastercard in

the crypto space
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Visa vs. Mastercard vs. PayPal vs. Square

Content/Section Title
Through partnerships and collaboration

Through partnerships and collaboration Cryptocurrency trading and as a funding Cryptocurrency trading and as a funding
Issuance of Mastercard credit cards with
Issuance of Visa credit cards with crypto- source source
Crypto approach related rewards
crypto-related rewards
Adds a lower cost of funding for PayPal Buys and sell crypto directly from its
Plans on rolling out stablecoins settlement
Involvement in stablecoins Supportive of users & engagement customers
in 2021
1. Buy, hold, sell using Visa credentials 1. Buy, hold, sell using Mastercard
1. Crypto Checkout: settled in fiat currency
2. Cash-out to Visa credentials credentials 1. Buy, hold, and sell Bitcoin
Products 3. Crypto APIs 2. Cash-out to Mastercard credentials
2. Buy, hold, and sell Bitcoin, Bitcoin Cash,
2. P2P transfers
Litecoin, and Ethereum
4. Direct settlement in USDC 3. Crypto APIs
No Balance sheet exposure Balance sheet: holds $220m in Bitcoin

Looking for consumer protections, strict
No direct exposure to crypto as Visa Product exposures: benefits from buying Product exposures: benefits from buying
compliance protocols with regulations, and
Risk exposure enables partners to leverage crypto APIs
pure payment not as an investment in
and selling via third-party Paxos. No and selling of consumers without volatility
and access its network exposure to the volatility of underlying exposure. Square earns spread from buying
potential crypto-assets
crypto-assets and selling
1. Visa network to facilitate access for 1. Mastercard network to facilitate access

partners to crypto APIs and transaction for partners to blockchain APIs (smart
Customer segment settlement contracts, fast pay network in P2P, P2M, PayPal users - Retail consumers Square users - Retail consumers
2. B2B Visa Connect for blockchain cross- and B2B)
border payments 2. Stablecoins settlement in 2021
Visa sees a global opportunity in crypto,

besides China, which is restricted by Union
Launch in the US first
Geographies Mastercard network Launch in the US
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UK rollout in Q3 2021
network
Visa Research Team to improve scalability Transactions settled in fiat currency only
Transactions are settled in fiat currency Withdrawing to an external wallet possible
and offline use of digital currencies 89 blockchain patents granted, 285
Other CryptoPunk pending
No private key issued: impossible to transfer Plans for decentralized exchange
crypto out of digital wallet
Plans crypto services integration in Brazil Acquisition CipherTrade for crypto analytics
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Case Study PayPal in the Crypto space

Schulte Research
50
Case study 1 - PayPal in the crypto space
PayPal approach to crypto

Safe rollout on/off ramp to traditional crypto products in the US and in the UK
Crypto products: Crypto Checkout and PayPal Crypto
PayPal Crypto: Buy, hold, and sell experience since Q3 2020 in the US on PayPal, Q2 2021 through Venmo
Products Overview
Crypto Checkout: Launch Q2 2021, cryptocurrency as a funding source to pay. Transactions settled with fiat currency1
Cryptocurrencies Bitcoin, Bitcoin Cash, Ethereum, and Litecoin
International Expansion Planned in H1 2021
Rationale Adds a lower cost funding for PayPal. More supportive of users & engagement
Regulation BitLicense from the NYState Department of Financial Services in Q4 2020
PayPal Crypto: ~2.5% take rate including variable fee based on the amount from 150bps to 230bps and a spread of ~50bps
Transaction fees
Crypto Checkout: only spread on the conversion from crypto to US$
Schulte Research
User engagement Crypto users sign into the app twice as much as they did before buying crypto on PayPal
Cannot transfer crypto in and out of the wallet

Limitations
Limited crypto-assets available
51
PayPal crypto investments

Indirect exposure to digital assets and blockchain-related companies via acquisitions, investments, and partnerships
Investments in the Crypto space
Company Transaction Details
Acquisition announced Q1 2021 Cloud-based wallet for storing and protecting digital assets using cryptography
Estimated ~$200 million Bring secure-storage expertise
Private investment
Cryptocurrency tax software solutions for consumers and enterprises
Undisclosed amount
Serves regulatory agencies worldwide
Q1 2021
Partnership since Q3 2020

Powers crypto service enabling US users to buy, hold, and sell crypto
PayPal participated in Series C funding in Q4 2020
APIs, market expertise, and regulatory framework
PayPal participated in Series D funding in Q2 2021
Crypto compliance and Risk Management

Private investment Q4 2019
Anti-money laundering, prevent fraud, and compliance
Acquired by Blockchains Management in Q4 2020

Blockchain-based identity management and compliance software solutions for
Schulte Research
financial institutions
Private investment in Q4 2019
Deal fell through Q4 2020

Crypto custody and trading firm
Estimated ~$750
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Paul Schulte
Case Study Visa in the Crypto space

Schulte Research
53
Case study 2 - Visa in the crypto space
Visa approach to Crypto

Crypto steps as partnerships instead of solo initiatives, with the aim to provide ecosystem infrastructure surrounding crypto
Late implication but significant impact in the crypto space Visa Research Team
Visa approach to crypto came later than its direct competitors Created Zether1 & Fly Client2
Different approach than Square or PayPal, as in Visa takes crypto steps as Team is now focused on new mechanisms to improve scalability and
partnerships instead of solo initiatives enable offline digital currency transactions
Collaboration with the World Economic Forum on a set of policy Offline use of CBDC transactions via Bluetooth or NFC to
recommendations for central banks exploring CBDC expand financial inclusion by helping unbanked individuals
2016 2018 2020
Announced B2B Connect with Chain Core, Partnership IBM Engagement with World Economic Forum
enterprise blockchain infrastructure Integration open source Hyperledger Fabric Circle joined Visa Fintech Fast Track
Patent blockchain-based transaction system Settlement of USDC in fiat currency
Partnership BTL cross-border settlement
Pilot phase B2B Connect in collaboration with FIS integrated Visa B2B Connect Settlement in USDC directly
Schulte Research
Commerce Bank, Shinhan Bank, Union Bank, Commercial launch B2B Connect Launch API Offerings for First Boulevard
and United Overseas Bank Collaboration Infosys Partnership with Tala for API Offerings
Patent for digital fiat currency
2017 2019 2021

(1) Zether is a privacy-preserving payment mechanism. JP Morgan Chase announced plans to integrate into its own blockchain efforts.
(2) FlyClient is a framework that makes it easier for mobile devices to validate blockchain transactions
54
Visa crypto and blockchain partnerships

Visa estimates that these partnerships could yield 50m+ new Visa credentials1
35 partnerships in the Crypto space2
Details Details
Transactions settled in UDSC, stablecoin powered by Ethereum

Improve process of interest disbursements and create new crypto
Circle Visa Corporate Card to spend USDC
products
First Federally Chartered Digital Asset Bank World Visa engaged with policy makers and organizations to shape the
Powers Visa crypto-native settlement with USDC through APIs Economic future of digital currencies
Exclusive relationship with Visa2 Forum Visa provided set of policy recommendations for CBDC
Fiat lending with crypto collateral via Crypto.com Visa Card at 9.9%
interest. Up to 8% cashback on purchases
10 million users Visa Cards
USDC co-founded with Circle
Rewards program of 4% in Stellar or 1% in Bitcoin

Visa Blockchain based solution for cross-border money transfer
International B2B Payment Solution
Innovation Log sentinel: Secure audit trail solutions through blockchain
technology since 2017
Program Mobile blockchain-based loyalty program
Partnership for development of new Fintech solutions powered by Visa Fintech

pay with Visa at over 70m+ merchants
blockchain technology for B2B and cross-border payments Fast Track
Most crypto partnerships have been borne out of this program
Schulte Research
Example Visa leveraging partnerships
Co-founded Created USDC Anchorage powers Partnership 1st USDC-settled Card
Sources: Anchorage, Business Insider, Circle, Crypto.com, Coinbase, BlockFi, Fold, Binance, Xapo, Line, Visa public filings, Nasdaq, Centre, Paytm, Bitpanda, Lastbit, Coinzoom
(1) Table is non-exhaustive. 35 digital currency platforms and wallets. Alfred Kelly, Visa CEO at Q2 2021 Earnings Call on 27th April 2021
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33
Wallets and exchanges to use Visa credentials to purchase cryptocurrencies

Purchase
Differentiated value: brand, capabilities, reputation, safety, security, and experience1
Visa Key Partnerships

Working crypto exchanges and wallets to allow customers to cash-out onto a Visa credential
Cash-out
Opportunities in the cross-border B2B space
APIs to offer the ability to purchase, custody, and trade cryptocurrencies

APIs2
Partnership with Anchorage to provide back-office infrastructure
Schulte Research
Settle in digital currency starting with USDC stablecoin

Settlement
Potential for crypto settlements for their B2B Connect product

(1) Alfred Kelly, Visa CEO at Goldman Sachs Technology & Internet Virtual Conference on 11th February 2021
etwork for the neobank and clients
s customers will have access to USDC for remittances
56
Stablecoins settlement and Anchorage

Coinbase, Visa, Circle, and Anchorage working together to bridge the gap for USDC adoption via settlement on Visa Card
Stablecoins Anchorage partnership
Visa started investing in stablecoins backed 1:1 with fiat currencies over First federally chartered digital asset bank
20 months ago1
Exclusive Visa digital currency settlement partner to provide back-office
Visa upgraded infrastructure to enable partners to settle in digital currency infrastructure, such as custodial, security services, accounts tracking, etc.
starting with USDC stablecoin
Launched pilot of USDC settlement with Crypto.com Visa Card
Increased conversation with central banks about designing CBDCs2
Anchorage and Visa plan to expand to other partners soon
Visa sees potential for crypto settlements for their B2B Connect product3,
leveraging Circle partnership to enable payments with crypto wallets3 Besides Crypto.com Visa Card, USDC standard settlement process requires
partners to settle in a traditional fiat currency
Share of Total Stablecoin Supply Total Stablecoin supply in US$ bn

Schulte Research
Sources: Visa public filings, Coin metrics

(2) Oliver Jenkyn, Visa Executive President at Morgan Stanley TMT Conference on 1st March 2021
(3) Vasant Prabhu, Visa CFO at Wolf Research Fintech Forum on 10th March 2021
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34
Paul Schulte
Section 4: US corporate
Schulte Research
58
Case Study Coinbase

Schulte Research
59
Case study 3 - Coinbase
Company overview
Towards full-stack crypto platform, from trading crypto to providing services for DeFi, NFTs, cloud, lending, and derivatives
Easy-to-use platform for accessing the broader cryptoeconomy by Retail: provides investments, storage, spending, earning, and use of crypto
investing, spending, saving, earning, and using crypto assets
Build brand as trusted space Institutions: provides hedge funds, money managers, and corporations a
one-stop-shop for accessing crypto markets through advanced trading
Focus Coinbase Cloud, equivalent to Amazon Web Services (AWS) for the and custody technology
global cryptoeconomy
Ecosystem partners: provides developers, merchants, and asset issuers a
Continuous development of new products and services to enhance value platform with technology and services that enables them to build
for consumer and business partners applications that leverage crypto protocols, participate in crypto networks,
and securely accept crypto as payments
Since inception, c.US$3.4 bn in revenue, largely from transaction fees
earned from volume-based trades by retail users and institutions
Goals Limitations
Create a one-stop shop for institutional investors and solve ecosystem Due to a different standard of regulatory scrutiny, competitors:
issues:
1. Operate under less stringent local rules and regulations;
Lack distribution, trust and usability
2. Can more quickly adapt to trends;
Availability of easy-to-use and scalable infrastructure
3. Support a greater number of crypto assets; and
Offset effects of any future fee pressure due to economies of scale
Schulte Research
4. Develop new crypto-based products and services faster

Proprietary full-stack scalable infrastructure surrounding crypto (e.g.,
blockchain integrations, crypto compliance infrastructure, cybersecurity, Reliant on crypto asset volatility
cryptography)
Uncertainty regarding regulatory framework globally
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35
Future prospects, products, and services

8.8m Monthly Transacting Users, 9k institutions, and 160k ecosystem partners as of Q2 2021
Coinbase direct listing implications New products and services developments
Coinbase Asset Hub to help asset issuers integrate tokens with Coinbase
1. Public listings amongst crypto firms; Bitcoin-collateralized loan product and a staking product 6% APR for staked
ETH2
2. Greater legitimacy of crypto within global finance;
Coinbase Cloud powered by Bison Trails for new suite of cloud-based crypto
3. Bridging the gap between crypto and traditional investors; computing services (similar to AWS)
4. Playing a pivotal role in ; and Smart order router product for institutional investors, routing orders to the
exchange with the best pricing amongst 10 liquidity venues
5. Increasing the market capitalization of large crypto assets through
enhanced investor participation Launch Crypto Council for Innovation in partnership with Fidelity, Paradigm,
and Square: help regulators, policy makers to understand crypto
Outlook and future potential for growth Recent partnerships with PNC Bank, SpaceX, Tesla, Third Point, and
WisdomTree Investments
Non-fungible tokens (NFTs) represent unique opportunity to transform the
relationship between creators and consumers Now offers reward across six tokens, including ETH2 staking
Diversification revenue streams with addition of new products and services, Launch Coinbase Card and Coinbase Prime brokerage
notably Coinbase Cloud
Acquired Skew for institutional data analytics
Future growth in nascent services for institutional investors such as Borrow &
Schulte Research
Lend in addition to Trading and Custody
Crypto long-term prospects (i) crypto as an investment; (ii) as a financial

service with the rise of DeFi; and (iii) as an app platform such as NFT usage
Lending with Ethereum as collateral provided enough liquidity

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Quarterly catalysts 2021 earnings
Catalysts Q1 2021 earnings Catalysts Q2 2021 earnings

Higher MTUs and elevated trading volumes per MTU MTUs +44% QoQ to 8.8m
Addition 7 new assets for trading and 13 new assets for custody High volatility with Bitcoin reaching c.US$64k in April followed by c.45% drop
to c.US$30k
Growth institutional trading customers and volume traded per institution
Assets on Platform c.US$180 bn, -19.3% QoQ
Growth institutional interest in Ethereum and other crypto assets for
commerce, payroll, and custom white label solutions Elevated Trading Volume at c.US462 bn, +37.9% QoQ driving trading
revenue growth
Substantial growth Subscription and services revenue
Increase interest in stablecoins, added support for Tether
Top 10 free app on iOS and Android
Outlook Q3/Q4 2021
Lower MTUs and

Lo d ttotal
t l Trading
Tradi Volume
Vol in
i Q3 compared
d tto Q2
Schulte Research
Meaningful growth institutional revenue in 2021 driven by transaction and

custody
Increase ARPU compared to historical US$34 45 per month
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Paul Schulte
Case Study Silvergate

Schulte Research
63
Case study 4 - Silvergate
Company overview
Cash management services for digital currency-related businesses on top of traditional banking products and services
Traditional finance: Business checking, Business savings, Commercial real Precise targets:
estate, Cash management, Personal banking
Digital currency exchanges: advanced integration and support
Digital currency business: services for well-established digital currency exchanges
Silvergate Exchange Network (SEN) enables digital currency real- Institutional investors: bank accounts, services, and support tailored
time settlement in US$ between counterparties to the unique needs of digital currency investors
c.US$239.6 bn transaction volume in Q2 2021, +44% QoQ and Software developers: bank accounts, advanced APIs, and expert
+968% YoY support for digital currency developers
Exchanges tied into the SEN via an API, connecting SEN deposit Fintech companies: bank accounts, services, and support designed
clients to meet the needs of Fintech companies
Goals Limitations
Leading provider of innovative financial infrastructure solutions and services Growing competitive landscape from incumbents (e.g., JP Morgan
for the growing digital currency industry accepting Coinbase and Gemini as digital asset customers)
Develop and deploy fee-based solutions in connection with their digital Regulations surrounding digital currencies, especially SEN Leverage (e.g.,
currency initiative SEC threatened to sue Coinbase over lending product)
Expand solutions and collaborations with Fintech companies, Institutional Downturn in digital currencies market, volatility, and regulations intensifying
Schulte Research
investors, Digital currency exchanges, and Software developers

Requires frequent funding to increase loans provided (e.g., ATM equity
On/off ramp network for institutional investors to access digital currenci

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Money Metaverse:

How Crypto Is Reinventing

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Chapter 1: NFTs and crypto����������������������������������������������������������������������������������� 1

Chapter 2: Fintech and Blockchain����������������������������������������������������������������������� 43

Chapter 3: Insurtech and blockchain��������������������������������������������������������������������� 95

Chapter 4: Proptech and Blockchain������������������������������������������������������������������� 131

ABOUT THE AUTHORS��������������������������������������������������������������������������������� 160

This leads us to the C of ABCD: cryptocurrencies. In the metaverse, crypto is the

Crypto is the currency of choice to interact within the metaverse. It relies on

Recently, these companies confronted political risk underpinning the Chinese

­ olicymakers, and central bankers to gauge success or failure on a corporate or na-

David Lee, Ph.D.

We submit that the acceptance and integration of blockchain technologies in finance,

Centralized blockchain infrastructure

Banking and Financial

Healthcare Securely share data across Healthcare institutions

Research & Clinical

Public transportation Commuting and transit data to improve transportation systems

Claims management Improve back-end healthcare and insurance infrastructures

Sources: Schulte Research

As 2021 draws to a close, we think a new phenomenon will become standard

Initial applications of NFTs

Entertainment Own sporting moments, film characters, or amateur memes

Store assets safely, relying on underlying wallet

Anyone can share their talent publicly and own it indefinitely

Voting functions (i.e., choosing next signing for sport team)

Offers a new item to wager the digital file itself

Investing Uniqueness of assets leads to appreciation in price as popularity grows

Both in gambling format and with a more recreational focus

Welcome to the money metaverse.

Key issues in Blockchain infrastructure:

Will the development of Blockchain-based infrastructure be led by privately-owned entities,

Sources: Schulte Research

Key issues in Blockchain infrastructure:

Private infrastructure Public infrastructure

Threat of monopoly behavior can lead to antitrust

Fragmented market leads to inefficiencies in the

Centralized control in China lead to faster advancements

Key issues in Blockchain infrastructure:

Data in the US does not have consolidated

Blockchain in the US now heavily funded by the

Data are the cars on the railroads, Blockchain is the railroad

Fintech giant Visa spearheads trading multiple rankings

Fintech companies are seeking a path to profitability;

They need headway to reach scale and market;

Operating metrics Fintech is an industry characterised by high technological barriers;

Meanwhile, Insurtech is struggling to reach profitability;

Fintech, Insurtech, Crypto, and Proptech

Sources: Schulte Research

Decentralisation and data as a store of value are hot emerging topics

US and China at cross roads on regulation

Sources: Schulte Research

US key players NFT

Rewards and incentives

China key players Insurtech Proptech Risks

Blockchain (e.g., BSN) Fragmented data

Sources: Schulte Research

of commandeering much of the activity of railroad stations. PayPal is catching up

Digital currency: institutional investors

Increased regulatory clarity needed F/X or currency exchange, 28%

Deflation protection, 16%

They should have no role, 1%

Chapter 1: NFTs and crypto�� 1

Chapter 2: Fintech and Blockchain�� 43

Chapter 3: Insurtech and blockchain�� 95

Chapter 4: Proptech and Blockchain�� 131

ABOUT THE AUTHORS�� 160

olicymakers, and central bankers to gauge success or failure on a corporate or na-