Three reasons why I expect “digital currency” to be a game changer

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I read the Keynote Address by Mr Ravi Menon in MAS 1 last week.  He pointed out digital currency as one of the six major technological breakthrough in the financial industry. He says “Digital currencies – like Bitcoins – have attracted much interest.”.

In my view,  digital currency has a potential to change our daily lives. There are three reasons as follows.

 

1.  Digital currency is completely digital information

Digital currency does not need to record it on paper.  There are no physical notes and coins.  It can be exchanged as just data.  It means that it can be operated highly efficiently and in real time basis. More importantly, these data can be analyzed by machine learning, which is developing at an astonishing rate recently.   It might enable fintech startups to generate numerous financial services in the future. This must be exciting.

 

2.  Digital currency can be issued without Central banks

Central banks usually have the exclusive right to authorize the issuance of its currency. The US dollar is authorized by the Federal reserve system.  The euro is authorized by the European central bank.  The Japanese Yen is authorized by Bank of Japan.  Therefore the traditional currency could be backed ultimately by country creditworthiness. However, digital currency can be issued without authorization by any central banks. It has advantages because digital currency could be used as alternative currencies in emerging countries which do not have strong financial systems and good creditworthiness. In such countries, the value of their currencies declines when creditworthiness of countries can not be sustained.  But digital currencies have nothing to do with their creditworthiness because they can be issued independently.  So digital currency can operate beyond the country creditworthiness constrain.

 

3. Digital currency can be exchanged on peer to peer basis

One of the major differences between traditional currency and digital one is that there is no central organization for recording transactions.  So digital currency is considered  as de-centralized currency.  A technology called ” Block chain” enables it to operate effectively.  This technology can be applied beyond digital currency.  Contracts can be processed by using this technology, too. , Co-founder of Linkedin says “It enables the trustees exchange of any kind of digital asset – domain name signatures, digital contracts, digital titles to physical assets like cars and houses.”.2  This is amazing!  “Peer to peer basis society” could be realized by block chain in future.

 

 

MAS announced that a new organization called “FinTech & Innovation Group” will be set up on 1st August 2015 to enhance financial technology3. Not only private companies but also regulators realized the importance of digital currency.  In the US,  MIT Media Lab established Digital Currency Initiative to research digital currency4.  I would like to keep watching what is going on closely in this field.

Would you like to use digital currency in the future?

 

 

Source

1. “A Smart Financial Centre” – Keynote Address by Mr Ravi Menon, Managing Director, Monetary Authority of Singapore, at Global Technology Law Conference 2015 on 29 Jun 2015

2. The Future of the Bitcoin Ecosystem and “Trustless Trust” – Why I Invested in Blockstream,  Reid Hoffman, Pulse in Linkedin, 17 Nov 2014

3. MAS sets up new FinTech & Innovation Group,  MAS website, 27 July 2015

4. Launching a Digital Currency Initiative,  Brian Forde, the Direcotr of Digital Currency at the MIT Media Lab, 15 April 2015

 

Note: Toshifumi Kuga’s opinions and analyses are personal views and are intended to be for informational purposes and general interest only and should not be construed as individual investment advice or solicitation to buy, sell or hold any security or to adopt any investment strategy.  The information in this article is rendered as at publication date and may change without notice and it is not intended as a complete analysis of every material fact regarding any country, region market or investment.

Data from third-party sources may have been used in the preparation of this material and I, Author of the article has not independently verified, validated such data. I accept no liability whatsoever for any loss arising from the use of this information and relies upon the comments, opinions and analyses in the material is at the sole discretion of the user. 

Would you like to use “Emoji” in social networks?

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Emoji is a kind of communication tool which are frequently used in emails and instant messaging.  Word of “Emoji” is a Japanese one. “E” means pictures and “moji” means character or letter.  As you know, unlike other Asian countries,  LINE is the most popular  instant messaging apps in Japan.  LINE has a lot of “stamp” to convey messages and emotion without texts.  This stamp is “embedded graphics”,  therefore we can communicate with stamp only. Most of young generations from high school students to young business men/women in Japan use LINE and its stamps very frequently. It was started in  June 2011 and  its stamp has been getting popular with younger generations 1. Now emoji is international and used all over the world.  If you go to the Emojipedia, you can find a lot of emoji there.  Yes, some of my article readers use emoji because I received the greetings with emoji from them in Linkedin.

 

In my view,  there are several reasons why emoji was so popular with younger generations.  The biggest one is “Comics” which is called “Manga” in Japanese. From TV programs to magazines, there are so many characters in Manga. “Doraemon“2 is one of the most famous characters.  Some of them are older than I am.  Therefore the younger generation in Japan can be very familiar with emoji because they are very similar each other.

 

As emoji usually has no words, it can be automatically international.  It is easy to use and effective to communicate beyond language barriers.  Recently emoji is used in international business.  🌍🌎🌏

 

Before the internet appeared,  the way to communicate was very limited. The telephone was mainly used and letters were not so convenient as it took time to communicate. When the internet appeared and emails started being used,  the method of communication was completely changed.  Text could be exchanged instantly all over the world.  Now we are in the age of instant messaging apps. Emoji becomes one of the new wave to enhance communications. 👍👍👍

 

I think emoji is getting more popular all over the world.  In addition to that, new tools of communications might be introduced in the future as technologies are developed.  I am not so sure what comes next so far.  One of the candidates is images and short movies. But we need more consideration how they can be implemented in order to  convey our message and emotions effectively.  It is difficult to answer.  With artificial intelligence, it might get breakthrough to do that.

 

17th July is World Emoji Day, so would you like to start using emoji?  Yes, I will try it anyway, even though I am a beginner of emoji. 😀😀😀

 

 

Source

1.  LINE Corporation website,  http://linecorp.com/en/company/info

2. Doraemon is a Japanese manga series written and illustrated by the manga writing team Fujiko Fujio.  Wikipedia,  https://en.wikipedia.org/wiki/Doraemon

 

Note: Toshifumi Kuga’s opinions and analyses are personal views and are intended to be for informational purposes and general interest only and should not be construed as individual investment advice or solicitation to buy, sell or hold any security or to adopt any investment strategy.  The information in this article is rendered as at publication date and may change without notice and it is not intended as a complete analysis of every material fact regarding any country, region market or investment.

Data from third-party sources may have been used in the preparation of this material and I, Author of the article has not independently verified, validated such data. I accept no liability whatsoever for any loss arising from the use of this information and relies upon the comments, opinions and analyses in the material is at the sole discretion of the user. 

Could you be a fashion model in virtual reality, near future?

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I found that nice short movie, 1 on YouTube.  It looks real world because I felt that I was inside the room. But it is a kind of artificial world created based on a few real images.  This technology is a little complicated.  In short, we can create a 3D world  from 2D data as shown in the movie. It is amazing!

 

According to this paper, 2 this movie created by an artificial intelligence by Google. This system is called “Deep stereo”.  When we look at Google street view, we do not feel this looks real because these images are limited by angles where they are taken.  In order to make it look real,  deep stereo synthesizes original images which are taken from several different angles and fill out the missing parts. It is said that “To our knowledge, our work is the first to apply deep learning to the problem of new view synthesis from sets of real world, natural imagery.” in the paper.

 

スクリーンショット 2015-07-15 11.09.06

The figure above is taken from the paper (p3). When we have pictures taken from angles of V1 and V2,  we can synthesize them to create the image seen from position C.  It needs a lot of computations so it takes time to be completed. It should be improved in terms of speed if this technology is used in a real-time basis, according to the paper.

 

It means that when we have a few photos about one object, we might create our artificial world which looks so real.  For example, when you have your own photos in new fashion, you could create your promotional video as a 3D movie.  We could consider many applications.  In restaurants, we could have electronic menus where each dish looks so real.   For travel industries, they could present courses of journeys as if we could experience unknown real world.  For real estate industries, they could provide the experience inside houses to potential buyers before it starts being constructed.

 

Therefore, this technology has huge potentials.  Artificial intelligence is currently used for machine translation, face recognition, autonomous-driving and so on.  This synthesized world creation is also expected to develop rapidly because big IT companies, such as Google, Facebook, Microsoft are investing a lot money in technologies of Virtual Reality and Augmented Reality.  These are expected to make huge markets in the future.

 

Now many people enjoy taking their own pictures by themselves.  We might create a 3D world based on these pictures in the future. We could zoom in and out with angles, which are different from angles where pictures were taken. So everyone could create a promotional video for him/herself.  Is it fun, isn’t it?

 

Source

1.  Google’s ‘Deep Stereo’ could transform Street View into an immersive digital world,  YouTube, 7 July 2015

2. DeepStereo: Learning to Predict New Views from the World’s Imagery, arXiv:1506.06825, 22 June 2015

 

 

Note: Toshifumi Kuga’s opinions and analyses are personal views and are intended to be for informational purposes and general interest only and should not be construed as individual investment advice or solicitation to buy, sell or hold any security or to adopt any investment strategy.  The information in this article is rendered as at publication date and may change without notice and it is not intended as a complete analysis of every material fact regarding any country, region market or investment.

Data from third-party sources may have been used in the preparation of this material and I, Author of the article has not independently verified, validated such data. I accept no liability whatsoever for any loss arising from the use of this information and relies upon the comments, opinions and analyses in the material is at the sole discretion of the user. 

 

How can we communicate with computers in the future?

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I sometimes have opportunities to teach data analysis to business men/women.  I send emails to learners in order to explain  how it works. Then I am wondering whether computers can do the same things as I do in the future.  It is called “Question answering system”.   Based on the progress of technologies, it may be “Yes” and not too far away from now. Let us consider it for a while.

 

1.  Can computers understand our natural languages as we do?

In order to communicate with us, computers should learn how we use natural languages, such as English, Malay, Chinese, Japanese, and so on.  It is very difficult for computers to do that.  But with technological breakthrough, it might be possible in near future.  This is called “thought vectors”.  The technology is led by Dr. Hinton, who is a professor in the computer science Dept at the University of Toronto. His explanation 1 is a little complicated. In short, our sentences are mapped to vectors by using numbers so that computers can understand and calculate the meaning of them.  For example,  “Kuala Lumpur – Malaysia + Japan = Tokyo”.  This kind of calculation might be possible by using “thought vectors” according to the article 2.  A translation could be more accurate by “thought vectors” because they can be a bridge between one language  to another. He said “Computers will have developed common sense within a decade” in this article.  I think that is revolutionary!

 

2.  Would we like to talk to computers?

Someone is wondering whether people like talking with computers or not.   I think “yes”.  Now computers can be a brain in robots. Robots have looked so cute recently.  Pepper, developed by Aldebaran Robotics and SoftBank Group, is very popular in Japan. Last month, pepper started to be sold in retails there. But 1,000 units of pepper were sold out 3 in just a minute, even though it is not cheap. I think they can be people’s friends,  just like a dog.

 

3. How it will impact our businesses and society?

It is very difficult to imagine what the impacts of this technology are in our business and society.  This is a kind of revolution about how our knowledge and intelligence are used in our lives.  Simple task might be done by computers and people will create new “knowledge and intelligence” which do not exist now, supported by computers.  By using conversations with computers, people can obtain information and insights of new things because computers can keep massive amounts of data as a form of text, image, sound and voice, etc. It must be exciting, isn’t it?

 

 

Do you know the humanoid robot called “C3PO’ in the movie “STAR WARS“.  It might appear in front of us in near future?!  C3PO can translate many kinds of  languages among universe and answer questions from people. I hope I can buy him just like Luke Skywalker in the future. How about you?

 

 

Source

1. ‘Thought vectors’ could revolutionize artificial intelligence, EXTREME TECH, 27 May 2015

2. Google a step closer to developing machines with human-like intelligence, The Guardian, 21 May 2015

3. ‘Emotional’ robot sells out in a minute, CNN, 23 June 2015

 

Note: Toshifumi Kuga’s opinions and analyses are personal views and are intended to be for informational purposes and general interest only and should not be construed as individual investment advice or solicitation to buy, sell or hold any security or to adopt any investment strategy.  The information in this article is rendered as at publication date and may change without notice and it is not intended as a complete analysis of every material fact regarding any country, region market or investment.

Data from third party sources may have been used in the preparation of this material and I, Autor of the article has not independently verified, validated such data. I accept no liability whatsoever for any loss arising from the use of this information and relies upon the comments, opinions and analyses in the material is at the sole discretion of the user. 

Lesson from Greece : sovereign risk and its productivity

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Greece has a lot of difficulties about financial conditions now. Banks are shut down. There is no cash beyond the limited amount when people withdraw money from ATM there.  Capital control is already imposed. People in Greece cannot obtain enough cash to pay the bill. No one knows exactly what happens in Greece in the future.  This kind of risk is sometimes called “sovereign risk“.  Simple lesson from Greece is ” Do not have too much debt compared to earnings”. It is so simple that we can apply this lesson not only to counties, but also to individuals and companies.

 

Let us consider it in more details.  The key things are “Debt” and “Earning”.  It is easy to measure the size of debt as long as financial statements are accurate. On the other hand,  earning is a little different.  Earnings should be interpreted as the ability to earn money in the long run because some of corresponding debts are also long term debts.  This makes things a little complicated.  It is rarely said that “My company or my country is in danger because of huge debts” as the statement of responsible personnel.  The size of debts can be assessed only by comparing with its earnings.  If  companies or countries have the ability to earn money,  there is no problem to have debts because debts can be repaid by future cash flows generated by companies or countries.

 

The problem is that it is very difficult to predict the ability to earn money in the long run.  Economists may use “productivity” in order to measure the ability to earn money quantitatively. If productivity is high,  we have more outputs from less inputs at the result of economic activities, vice versa.  If the company has high productivity,  it has more revenue and less cost.  It means that the company generates enough money to repay debts. It sounds good.

 

Then the question arises “How can productivity be increased?”.  It is very difficult to answer.  Someone says educations are important and others say investments are needed.  Legal system and financial system are sometimes mentioned.  But situations are different between countries, so there is no concrete answer yet.  Greek debt crisis happened in 2009.  I imagined that since then a lot of discussions have been made to improve productivity of Greece.  Unfortunately, situations are not changed enough to convince the creditors to keep supporting this country.  Now people all over the world realized that “It is very difficult to increase its productivity enough to repay debts”.

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Figure : Growth in labor productivity (GDP per hour worked, total economy, percentage change at annual rate, GRC:Greece)

Source :OECD Productivity database, January 2015

 

Therefore, I always worry about Japan in the future. This country is going to aging society rapidly. Debt to GDP ratio of Japan is worse than the ratio of Greece.  Some people say Japan is OK as it is different from Greece in terms of  the size of GDP,  technologies  and so on.  But I can not agree with this opinion because sovereign risk can be emerge in the same way as Greece. Just like Greece, it is very difficult to increase its productivity in a short period. Although the Japanese government says “Japanese fiscal condition is sustainable”,  I am not so sure that financial markets will continue to agree with that in the future.

 

 

 

Note: Toshi’s opinions and analyses are personal views and are intended to be for informational purposes and general interest only and should not be construed as individual investment advice or solicitation to buy, sell or hold any security or to adopt any investment strategy.  The information in this article is rendered as at publication date and may change without notice and it is not intended as a complete analysis of every material fact regarding any country, region market or investment.

Data from third party sources may have been used in the preparation of this material and I, Autor of the article has not independently verified, validated such data. I accept no liability whatsoever for any loss arising from the use of this information and relies upon the comments, opinions and analyses in the material is at the sole discretion of the user.