[WATCH] What is Smart Money? At AIBC Europe

Category: Europe Executive Interview Fintech

Necessity is the mother of invention and, with the current chaos in the global financial sector, there may have never been a greater need for Smart Money. This being said, one needs to first pin down the elusive concept before it’s true potential can be unlocked

Moderated by James Bowater, the global ambassador of World Mobile and founder of Crypto AM, the panel was composed of Eric Wall, the CIO at Arcane Assets, and Luis Carbajo, founder and CEO at Vottun. These three industry leaders endeavored to shed light on both the definition of the admittedly nebulous term “Smart Money” as well laying out potential roadmaps for this emerging sector to reach its full potential. Bowater began by flooring the question but also highlighting how current issues were hyper-accelerating the mass adoption of Blockchain-based technologies.

Smart money is a bit of a confusing title but I think one of the things that’s actually been quite astonishing is how, during the pandemic, we’ve seen the transformation and the advent of DeFi and the move away from cash. So what we’re now looking at is what’s going on now.

Wall joined the conversation by illustrating these changes through the success that the likes of Bitcoin has had when compared to fiat currencies.

One of the obvious data points for that is obviously the price of Bitcoin but along with that also came an acceleration of DeFi. So in the end of 2019, DeFi was just a buzzword but by the summer of 2020, shortly after the pandemic had become taking hold of the entire world, then all of a sudden you have people from all over the world participating in the decentralized finance economy, and we’ve seen an absolute explosion of applications and decentralized exchanges lending markets, NFTs financial derivatives margin trading.

Carbajo chimed in by noting that the idiosyncrasies of the Pandemic have also strengthened the growth of the industry by allowing more and more people to have the time to learn about the sector and to experiment with novel experiences like play-to-earn games.

So what is Smart Money?

Bowater returned to the question by noting how, given how we were living in times of extraordinary transition. With the Metaverse and crypto mass adoption on the horizon, we may see a complete paradigm shift when it comes to daily finance.

Cash is no longer king because it’s toxic. Literally, that’s the infusion in the mind. You’ve got people, who never knew what a QR code was, now using them every day of their bloody lives…the speed of transition is so fast that none of us really can keep up with anything.

Wall rose to the challenge of defining the term.

You could perhaps argue that hard money is an asset class. Smart money is the money that invests in hard money.

Carbajo then elaborated on this foundational definition in more detail.

Smart money is smart because it’s run through smart contracts. But I think that is everything that is behind that term that is important. It’s the fact that people realize that they are just halfway in the data world and they can use data money in different ways and earn money in different ways, not just tied to the banking system.

Bowater then elaborated on the need for infrastructure in place to connect previously unconnected demographics to the digital world. With half of the globe not being connected to any digital infrastructure, there is a pressing need for international development in order for this overhaul to come to pass.

If you have to travel 10 kilometers to go and download something or get bandwidth to do something, you can’t certainly pay with it at the time you need access. Cash still has its absolute place.

Smart Money
The need for digital infrastructure means that the proliferation of Smart money is heavily dependent on how well-connected a place is to cyberspace.

The future of finance

Returning to the definition as elicited by Bowater, Wall argued that the concept of “Smart money” is built on three main pillars. The first is an investor profile, or the type of money that gets invested into Blockchain-aligned technologies. The second is technological integration.

For example, with Bitcoin, if I wanted to take all my money from one country to another, I can do it with Bitcoin just by memorizing words. So if I’m a Venezuelan citizen and the government imposes a highly inflationary currency upon me, It’s very hard to transport the amount of wealth that you have acquired to another country and exchange it for something else. On the other hand, with Bitcoin, you can just memorize 12 words and walk across any border in the world, and there’s no central bank that can inflate the value that you have.

The final aspect was the existence of smart contacts, which allow users more flexibility when it comes to the usage of their money when it comes to both legal and logistical issues as well as the types of applications that could be built.

Let’s say you have a mountain of wealth, and you want to make sure that this mountain of wealth gets distributed according to your will. You can embed the rules of your will in a smart contract language. So you can say, for instance, only 2% of my wealth shall get allocated to my children after I die. You can have a smart contract that imposes those rules upon the money that you have left after you die. That’s not possible to do in the existing system.

Bowater also noted that we may be far off from full legal clarity when it comes to smart contracts due to the fact that the process of writing and auditing these contracts may have not entered legal consensus yet.

The panel concluded with an exploration on the future of NFTs and how the tokenized economy could end up being a vital pillar of the future economy beyond simply augmenting the monetary system. Examples included the tokenization of time and the rise of X-to-earn business models that have only been strengthened by the pandemic.

Smart money
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AIBC returns to the United Arab Emirates:

Drawing the leading figures of the emerging tech world to the Middle Eastern metropoles for cutting edge technology, the 2022 AIBC UAE expo plans to unite the policy-makers, developers, C-suite executives, and legal experts of the burgeoning AI and Blockchain sectors. Through three days of educational panels, inspiring keynote speeches, workshops, and networking events, the expo seeks to create the foundation that the Industrial Revolution 4.0 can be built upon. Join us from the 20th to 23rd March 2022, in UAE.