Goldman Sachs reinvents Bitcoin
oldman Sachs has developed its own cryptocurrency for a settlement system for trading stocks, bonds and other assets, according to a recently published patent filing.
The New York-based financial giant made a patent application last year for a new virtual currency called SETLCoin, which makes it easier and faster to trade securities and settle those trades. (The patent application was published only recently, a typical lag between patent applications and when they are made public by the US Patent and Trademark Office.) The patent was first reported by Bitcoin Magazine.
Balaji Srinivasan, CEO of 21 Inc., and board partner at Andreessen Horowitz, along with Jerry Brito, executive director of Coin Center, which focuses on public policy issues for digital currency, discussed the evolution of Bitcoin and its long-term potential.
On Bitcoin’s revolutionary implications: “Bitcoin converts [a simple payment] into a decentralized system where the intermediary is no longer a number of banks – it’s the Bitcoin distributed network…it’s a completely different set of payment rails.”
On Bitcoin’s potential for long-term innovation: “The early Internet was meant to transfer web pages, not everything we do with it today. Because it became popular enough, it was retrofitted with all kinds of capabilities, and that’s going to happen with Bitcoin. It’s become pervasive enough that we will build on it rather than try to replace it.”
On the future adoption of Bitcoin: “Entrepreneurs [who adopt Bitcoin] now know that they can build with confidence, and they don’t have to be quite as brave as the early adopters. You’re going to see a lot more of them involved.”
Goldman Sachs and IDG Capital Partners co-led a $50 million strategic investment round in Bitcoin company Circle in late April of this year. This was the first publicly announced cryptocurrency investment by Goldman. However, as reported by CB Insights, Goldman’s investment activity into fintech startups has been intensifying.
According to the Federal Financial Institutions Examination Council (FFIEC), Goldman is the fifth largest bank holding company with $859.93 billion in assets as of June 2015. The cryptocurrency technology patent was filed prior to Goldman’s membership in R3 CEV. R3 is working on a common blockchain standard for its members (which includes many of the banks listed in FFIEC).
By KRISTEN SCHOLER CONNECT Goldman Sachs Group Inc.GS +2.59% looked deep into its crystal ball and saw space travel, flash crashes and bitcoin’s blockchain.
Those were three of the seven “themes, dreams and flying machines” the bank flagged in a note to clients Wednesday, as the company highlighted some emerging trends that it said need to be on the radar for investors.
The seven topics Goldman explores: how the blockchain could disrupt everything, a new frontier in space, the value of college, the effect of America’s youngest cohort Gen Z, the likelihood of another Flash Crash, lithium as the new gasoline and how the cloud can help cure cancer.
1 Blockchain’s prospects. Goldman writes that there are expectations that the blockchain could revolutionize “everything,” though roadblocks remain. The blockchain, which is the digital public ledger underlying bitcoin, is these days “taking center stage” from the currency it was supposed to support, Goldman wrote. It’s “promising an ushering in of a new set of tools to cut costs and challenge the profit poll of the middle-man with a promise to make centralized institutions obsolete.” In doing so, it has the potential to make interactions quicker, less expensive and safer.
In addition to bitcoin’s blockchain, Goldman said there are growing sets of private and permission-driven shared ledgers gaining traction and worth focusing on. But, like any new technology, the bank added that the hype cycle is building with no real legislative or regulatory framework.
2 Space race heats up. To infinity and beyond? The space race is reigniting and Goldman said it sees investment opportunities. “As the barrier and costs to deploying space technologies are lowered, we believe [aerospace and defense] companies will see accelerated growth in their space business lines, while commercial satellite operators may be disrupted by lower-cost alternatives,” wrote Goldman analyst Noah Poponak.
3 Is college worth it? Amid rising costs and dismal wage growth, the average return on college is falling. Goldman said that, for the typical student, the number of years to break even on the cost of college has grown to nine today from eight in 2010. If current costs and wage growth persist, Goldman said students starting college in 2030 will have to wait 11 years post school to break even.
There’s increasing unmet demand for specialized, or skilled, work. But Goldman said the labor market is moving faster than education, broadly speaking, can respond. Because of that, it sees “clear growth” opportunities in professional training programs via LinkedIn Corp.LNKD +0.86%, Coursera and edX.
4 Tapping in to Gen Z. As the oldest Gen Z’ers enter their mid- to late-teens, Goldman said this cohort will soon surpass Millenials in size and that their influence is already evident. The group is the most diverse to date, digital is at its core and it’s decidedly financially conservative, according to Goldman analyst Christopher Wolf. “While not the first generation of youths with a desire to be heard, Gen-Z is arguably the first with the means,” he added.
5 More flash crashes in store? Goldman said that while investors have become more used to greater volatility, the specter of another flash crash happening is top of mind for people. Recently, on Aug. 24, the stock market didn’t fully open at 9:30 a.m. Eastern time as liquidity issues and selling pressure in the futures market spilled over into the stock market. When stocks did open, many securities traded off sharply and the largest number of Limit Up Limit Down trading halts to date were triggered.
6 Lithium’s increasing use. Take a look at Tesla Motors Inc.’sTSLA -1.00% stock over the past few years, and you’ll see a lot of hype around battery-powered electric vehicles. Against this backdrop, Goldman said that the unique properties of lithium position it for portable energy storage applications that “will be a key enabler of the electric car revolution and replace gasoline as the primary source of transportation fuel.”
Lithium is the earth’s lightest solid element with double the energy density of the next closest alternative. It is one of the most abundant elements on earth too.
7 Cancer’s cure: the cloud? The last topic Goldman looks at is how the cloud has the potential to improve cancer treatment over the next decade. “Rapid reductions in cloud storage costs and [better] DNA sequencing technology will soon merge with the proliferation of electronic medical records to enable a new paradigm in cancer treatment,” wrote Goldman analyst Isaac Ro.
Mr. Ro said the combination of lower cloud costs, improved DNA sequencing and the increase in electronic medical records should make it easier for physicians to analyze data and assess individual patient treatment options. For drug companies and scientists, it should cause them to develop drugs faster and cheaper. And for payers, the emergence of electronic medical records should help them better allocate health-care spend for both preventative and ongoing treatment-based applications.