What are stable coins? Cryptocurrency Q&A with Rich Lyons

Cryptocurrency - stable coin illustration

 

Cryptocurrencies are not investments for the faint of heart. As anyone who has followed the Bitcoin saga knows, the rollercoaster price movements of these digital assets are only for those with strong stomachs (or who want to conceal their transactions). In recent years, however, a new form of cryptocurrency has emerged with the promise of much less volatility. So-called stable coins, such as Tether, the stable coin market leader, are pegged one-to-one to the U.S. dollar or other asset, in theory making them safer.

Berkeley Haas News spoke to Rich Lyons, professor of finance and economics who served as Haas dean from 2008 to 2018 and is now UC Berkeley’s first chief innovation and entrepreneurship officer, about this new wrinkle in cryptocurrencies. Lyons, an expert in currency exchange rates who holds the William & Janet Cronk Chair in Innovative Leadership, recently co-authored a paper with Ganesh Viswanath-Natraj of England’s Warwick Business School examining what keeps stable coins stable.

Among their conclusions: Stable coins could open the door to the wider crypto world without the wild price swings of free-floating cryptocurrencies like Bitcoin. Even so, as Lyons stresses, stable coins are not necessarily the safe havens they are advertised to be.

If you look at a price chart of Bitcoin over the past few years, it looks like a trek through the Himalayas, with enormous peaks and valleys. Why are cryptocurrencies so much more volatile than traditional currencies?

We can answer that question by thinking about the dollar-euro exchange rate, which is more volatile than people originally thought it would be. The issue is that the euro’s fundamental value is a difficult thing to pin down, leaving a lot of room for speculation. Instability like that gets magnified in the world of cryptocurrency. At the end of the day, the Bitcoin-dollar exchange rate is just another exchange rate, and a lot of those same speculative dynamics are there.

But why are Bitcoin’s price movements so much greater than those of traditional currencies?

The big issue is that the fundamental value of Bitcoin is even more nebulous than that of the euro. We can at least start to think about the fundamentals of the dollar-euro exchange rate, like the growth rate in Europe versus the U.S. With a cryptocurrency like Bitcoin, the fundamental picture is much harder to pin down. You have the same speculative dynamics as in a regular currency market, but with much fuzzier fundamentals.

Cryptocurrency illustration

What exactly are cryptocurrencies?

Over the past five-to-ten years, what some people are calling the digital asset economy has emerged. The digital asset economy lies outside the traditional banking system and is generally housed on a blockchain, which is a secure, decentralized electronic ledger used to record transactions. The digital asset economy includes cryptocurrencies like Bitcoin and so-called initial coin offerings. These assets serve multiple purposes. For example, I could issue 100 tokens, and by buying one, you could own one one-hundredth of a work of art. We can break up lumpy assets and give people ownership of small slices. In addition, this digital asset economy gives people in countries that might not be able to hold assets because of capital controls or other restrictions access to more of the world’s assets.

What’s the purpose of stable coins?

Because this digital asset economy is largely outside the traditional banking system, the issuers and traders of these assets aren’t like regulated financial institutions. They don’t have “know-your-customer” rules or anti-money-laundering regulations. At first, this digital asset economy lacked a store of value, that is, assets with relatively low volatility that people could hold knowing the value wouldn’t change drastically. Because Tether and other stable coins are pegged to traditional currencies, they have become stores of value in that alternative financial world that otherwise lacks a store of value.

Prof. Rich Lyons
Prof. Rich Lyons (Photo Copyright Noah Berger)

Haven’t stable coins been controversial?

Yes. For example, there was a question of whether the issuers of Tether were manipulating the price of Bitcoin. Part of the reason that scenario is possible is that Tether is used as the medium of exchange in over 50% of Bitcoin transactions. When people are buying and selling bitcoins, more often than not they are trading tether for bitcoins. One reason is that when you go from dollars to bitcoins, you are also going from inside to outside the banking system. That has high transaction costs. Tether is already outside the banking system, which makes it a much cheaper and more frictionless way to go in and out of Bitcoin.

Most people see the cryptocurrency world as pretty wild and woolly. Are stable coins as safe as claimed?

Tether is pegged to the dollar at one-to-one, and its price has generally traded within 1% of one-to-one. But about a year-and-a-half ago, there was some concern in the market that Tether was not backed one-to-one with assets; i.e., if there was a mass redemption of Tether, the collateral would not be sufficient to cover the full amount. This concern led the price to fall as low as 95 cents to the dollar. There was an audit, which was not 100% transparent, but it did restore confidence in the marketplace.

What kinds of questions should we be asking about stable coins?

Stable coins come in a number of different flavors. Some purport to be 100% backed by redeemable collateral that’s in escrow, collateral that can’t be captured and run away with. But part of the question, even with Tether, is whether it really is 100% collateralized. And is all that collateral really liquid? If you have to sell in fire-sale conditions, even a “100% collateralized” asset may not turn out genuinely to be 100% collateralized.

What are the long-term prospects for stable coins and cryptocurrencies generally?

There will be a lot of shakeout. The stable coins that have the greatest market confidence concerning the legitimacy and liquidity of their collateral will win out. Meanwhile, if you think about the literally thousands of initial coin offerings, all the tokens, all the cryptocurrencies—90% of them will be valueless in 10 years, in my judgment.

In a shakeout scenario, do stable coins have an advantage?

Most stable coins have collateral. So, if a stable coin fails, it won’t be a complete cataclysm. Whatever collateral is left after liquidation costs will go to the holders. But, when you talk about cryptocurrencies that don’t have any collateral—the Bitcoins and ICOs that don’t have any fundamental value backing them—when those go away, their value goes to zero. I’m not predicting that Bitcoin will necessarily go to zero, but certainly there are a lot of assets in the digital economy that will go to zero over the next 10 years. At the same time, you’re seeing assets in the digital economy that are getting 10 times the valuation they had two years ago. You’ve just got to be in the right place. And it’s anybody’s guess what the right place looks like.

How are cryptocurrencies in general and stable coins in particular evolving?

This idea of inside the banking system versus outside the banking system—that’s a pretty bright line right now. But when central banks move into the digital asset world, the line won’t be as clear. A well-functioning stable coin adds a lot of value, and all of the big central banks are doing a lot of research on cryptocurrencies. Many of them are saying they will launch a digital currency in the next five years. My prediction is in 10 years we will have three or four important stable-coin digital currencies, based in blockchain, and issued by central banks. They will live more in the traditional regulated banking system. That will fill in the continuum.

You and Ganesh Viswanath-Natraj just released a paper titled “What Keeps Stable Coins Stable?” What questions were you looking at?

We wanted to look at how tightly the price of Tether was pegged to the dollar. What we found was somewhat surprising. Tether trades at both a discount and a premium to the dollar. You might think a stable coin would trade like the Argentine peso in the early 2000s, when the peso was pegged to the dollar. But people didn’t have full confidence that the Argentine central bank would support the peso, so the peso consistently traded at a discount, sometimes substantially so.

What might explain Tether trading at a premium to the dollar?

There is this vehicle currency demand that can cause Tether to trade at a premium. If I as an investor can get into Bitcoin by either using dollars or Tether, but it is expensive to get into Bitcoin using dollars because transaction costs are higher, than I’d much rather buy bitcoin using Tether because it gives me a near costless option for getting into Bitcoin whenever I want. That “vehicle-currency demand” for Tether is what pushes its price above one US dollar.

 

Startup Roundup: TomoCredit and SuiteSocial

The startup roundup series spotlights students and recent alumni who are starting a new business or enterprise.

Woman holds green credit card
Kristy Kim, Co-founder of TomoCredit, participates in Barclays Accelerator, powered by Techstars Program in New York. Photo courtesy: Kristy Kim.

TomoCredit
Co-founders: Kristy Kim, MBA 20 and Dmitry Kashlev, (of MIT/Media Lab)

 All Kristy Kim, MBA 20, wanted to do after she finished her undergraduate program at Berkeley was buy a car to travel for her new job as a mergers and acquisitions analyst.

 But every time she applied for an auto loan, she was denied for the same reason: she had no credit history in the U.S., a common problem for international students and 20-somethings.

She decided to solve it with her new company TomoCredit. Unlike traditional credit card companies that issue credit based on history and FICO scores, which are used to assess credit risk, TomoCredit uses cash flow data to determine an applicant’s creditworthiness. Using a data aggregator called Plaid, Kim and her team can evaluate six-month’s worth of banking data to determine if a person qualifies for the credit card and sets a credit limit.

 “I want TomoCredit to be the go-to credit card for millennials,” Kim said. “We are taking a really bold step by saying no to the industry and the FICO score system and instead relying on cash data to make credit decisions. We think it’s the right way for the new generation.”

 In partnership with Evolve Bank & Trust and Mastercard, TomoCredit launched on October 15. Customers can apply for the card by signing up on the website

Image of TomoCredit website

 TomoCredit, short for Tomorrow’s credit, offers consumer benefits, including up to 20 percent cash back and discounts with select retail stores, Kim said. The company makes a profit through interchange fees, which merchants pay every time a customer uses a credit card.

 TomoCredit was one of nine startups included in this year’s Barclays Accelerator, powered by Techstars Program. The 13-week program provides access to mentors and investors from the most influential FinTech and startup companies in the U.S.

 “Barclays Accelerator is the top FinTech accelerator in the world, offering resources that we simply don’t have in the Bay Area,” said Rhonda Shrader, executive director of the Berkeley Haas Entrepreneurship Program. “Since their inception, I’ve worked with them to propose several UC Berkeley teams, but none were the perfect fit until now. Kim is solving a huge problem in a unique way—that’s an irresistible combination that can best leverage the network and resources in a global financial hub like New York.”

 Kim credits Lecturers Kurt Beyer and Gregory La Blanc for helping her to develop and refine TomoCredit’s business model. 

 “His Entrepreneurship and Innovation course was the best class I took in my undergraduate career because he invited entrepreneurs to campus and that was really cool,” she said. “It was the first time I thought about starting my own startup.”

 Years later, Kim co-lectured Blockchain and Cryptoeconomics with La Blanc and surveyed roughly 200 students about their experiences with accessing credit. Those surveys would serve as market research for her fledgling company.

 Kim has secured seed funding from high profile FinTech investors in New York and Silicon Valley and has collaborated with micro-influencers through SuiteSocial, (see below) an online marketplace for influencers founded by Haas alumni, to get the word out about her credit card.

 “We hope more people will think of us and use TomoCredit as their primary card.” Kim said. “Once you find a credit card that knows how to underwrite you, you’ll never want to go back.”


SuiteSocial
Co-founders: Jennifer DeAngelis, MBA 19 and Lea Yanhui Li, EMBA 19

Woman giving a presentation.
Jennifer DeAngelis presenting at TechCrunch Disrupt. Photo credit: David C. Hill.

When Jennifer DeAngelis worked in digital media, she kept hearing from clients concerned about trust issues: brand owners felt that influencers didn’t do enough for the amount of pay they received. Influencers said brands expected too much for the pay they were willing to give. 

 “On top of that, there was the issue of fraud: influencers buying followers to attract brands,” she said.

DeAngelis thought she could offer something better. She connected with Lea Yanhui Li, EMBA 19, a former Oracle software and technology engineer, and together they created SuiteSocial—an online marketplace that influencers and brands can use to collaborate. Using artificial intelligence, SuiteSocial helps brands find relevant influencers for their online campaigns and empowers influencers to promote their talents and assess a fair payment for their posts.

DeAngelis knows how to think and act as both a social media influencer and brand strategist. When she was 21, she vlogged about her Peace Corps experience in Albania on YouTube. After her video received more than 100,000 views, she realized that she had a knack for creating engaging content. She previously worked creating digital campaigns for Hilton Hotels & Resorts, The Four Seasons, and Bass Pro Shops. Today, she is considered a “micro-influencer,” someone who has 10,000-30,000 followers on her social media platforms.

 At Haas, she took Entrepreneurship 295 and Network Effects with Lecturers Kurt Beyer and Prashant Fuloria, which gave her the confidence and business acumen to develop SuiteSocial. 

Along the way, she sought advice from mentors, including Michael Wilson, eBay’s employee #5, and Rhonda Shrader, executive director of the Berkeley Haas Entrepreneurship Program. It was Shrader who encouraged DeAngelis to participate in the LAUNCH Accelerator Program, where she won $10,000 in seed funding. Thereafter, DeAngelis won $5,000 from the Trione Student Venture. Soon, she plans to begin fundraising for more capital.

Two women pose for picture.
Co-founders Lea Yanhui Li and Jennifer DeAngelis at Techstars LaunchPad Propel Day.

Since launching SuiteSocial, DeAngelis and Yanhui Li have acquired five clients, including credit card company TomoCredit, on-demand car rental startup Kyte, and New York-based barbecue restaurant, Smok-Haus. (TomoCredit and Kyte were founded by current and former Haas students.)

TomoCredit’s CEO Kristy Kim said SuiteSocial has been a great platform to promote her credit card. “Thanks to SuiteSocial, TomoCredit was able to find the right Instagram influencers to work with.”

Ultimately, DeAngelis’ wants SuiteSocial to be a one-stop shop for content creators and brands. “We want to be so much more than just matching brands and influencers,” she said. “We want to be the platform destination where brands and influencers can go and fulfill all their business needs, replacing traditional agencies.”

Berkeley Haas a key player in Blockchain Week

Top blockchain technology researchers and industry leaders from around the world will gather in Berkeley for the Crypto Economics Security Conference (CESC) this month, part of the massive San Francisco Blockchain Week taking place Oct. 28 to Nov. 3 on both sides of the bay.

About 5,000 people are expected to attend the full week of events, with Berkeley Haas co-hosting the conference and a Blockchain Career Fair during the first half of the week, followed by the San Francisco Blockchain Week Epicenter event at the San Francisco Marriott Marquis on Thursday and Friday and the DeFi Hackathon over the weekend.

Haas professors to share research

Haas Profs. Christine Parlour and Steven Tadelis are among the researchers speaking at the Crypto Economics Security Conference on Oct. 28 and 29 in UC Berkeley’s Pauley Ballroom. The conference will explore the economic security aspects of blockchain technology, including game theory, incentive design, mechanism design, and market design.

Parlour, the Sylvan C. Coleman Chair in Finance and Accounting, will present her research on the investment characteristics of a sample of 64 initial coin offerings, and discuss asset pricing properties of cryptocurrencies. (Read a Q&A with Parlour here). Tadelis, the Sarin Chair in Leadership and Strategy, will outline how feedback and reputation systems work for online marketplaces like eBay and Uber, highlighting some of the bias in feedback and reputation systems.

Speakers at the conference, now in its third year, will hold sessions simultaneously on two ballroom stages. “It will be much more intimate than many tech conferences,” said UC Berkeley undergraduate student Liam DiGregorio, BS 21, who is a SF Blockchain Week co-organizer and head of external partnerships and business development for Blockchain at Berkeley, which is also a host of the week’s events.

Kate Tomlinson, MBA 20 and a business consultant at Blockchain at Berkeley, said she’s looking forward to a few days of immersing herself in blockchain. “One of the things I liked about the conference last year was the opportunity to meet people working on projects that we’ve been working on at Blockchain at Berkeley,” she said. “The conference also connects you to people who are really building this stuff and are at the forefront of what’s going on. The conference helps me to understand what’s really happening.”

Along with the security conference, Haas is co-hosting the Blockchain Career Fair at International House on Oct. 30 from 3:00 to 7:30pm, where more than 40 companies will be looking for blockchain talent. Last year, about 1,500 people submitted resumes online and 170 people landed jobs, DiGregorio said.

Epicenter Event and Hackathon

Following the conference and and career fair at Berkeley, the week’s events shift to San Francisco for the Epicenter Event, bringing together companies, developers, investors, and researchers. Among the speakers throughout the week are Ethereum founder and industry leader Vitalik Buterin and the founders of NuCypher, Forte, and Kabam. UC Berkeley Prof. Shafrira “Shafi” Goldwasser, director of the Simons Institute at UC Berkeley and the winner of the ACM Turing Award in 2012, will speak at the Epicenter Conference at San Francisco’s Marriott Marquis.

Researchers from Vanderbilt, Carnegie Mellon, Cornell, UC Santa Barbara, the University of Edinburgh, Northeastern University, New York University, and McGill will also attend.

The week wraps up with the DeFI Hackathon, open to developers of all ages, on Nov. 1-3 at San Francisco’s Terra Gallery. “We’ll have mentors onsite to jump-start the learning experience,” DiGregorio said.

Haas’ participation in blockchain week is part of the school’s ongoing commitment to blockchain research. Haas is one of  34 universities that participate in the University Blockchain Research Initiative,  created by Ripple to support academic research; technical development; and innovation in blockchain, cryptocurrency, and digital payments. Through the initiative, Haas received a five-year, multi-million dollar grant to support faculty and student research, along with events like the conference and job fair, said Karin Bauer, program manager for the Berkeley Haas Blockchain Initiative. “We are able to support independent research in areas of innovation in blockchain, cryptocurrency, and finance that might not otherwise be funded,” she said.

Use the promo code Haas20  to receive 20% off tickets for the CESC or Epicenter conference. The Career Fair and DeFi Hackathon are both free and open to the public upon completion of the applications on SFBlockchainWeek.io.

Blockchain in bloom: New initiative drives research grants, incubator, courses

Clockwise from top left: Bosun Adebaki, MBA 19, Karin Bauer, program manager for the Berkeley Haas Blockchain Initiative, high school students attending a She256 event, Asst. Prof. Giovanni Compiani, Kate Tomlinson, MBA 20, and Adam Sterling, executive director of the Berkeley Center for Law and Business.
Clockwise from top left: Bosun Adebaki, MBA 19, Karin Bauer, program manager for the Berkeley Haas Blockchain Initiative; Asst. Prof. Giovanni Compiani; Adam Sterling, executive director of the Berkeley Center for Law and Business; Kate Tomlinson, MBA 20,  and high school students attending a She256 event.

Bosun Adebaki, MBA 19, will spend time this spring researching the merits of Central Bank Digital Currency (CBDC), a form of digital money that’s being tested by governments and central banks worldwide. His goal is to determine how central banks can use digital currencies to become more competitive, flexible, and efficient.

Adebaki, a fellow with the Berkeley Blockchain Xcelerator, is among eight graduate students and seven faculty members from across UC Berkeley who received the first round of grants from the Berkeley Haas Blockchain Initiative, a new program funded by a grant from blockchain industry leader Ripple.

“We’re moving quickly to become a hub for all of this innovation that we believe will lead to new research discoveries and technologies that seek to solve the world’s most pressing business and societal problems,” said Karin Bauer, program manager for the Berkeley Haas Blockchain Initiative.

Ripple chose Haas last June as a partner in its $50 million University Blockchain Research Initiative (UBRI), an effort that has expanded to include 29 prestigious universities around the world. Haas received a multi-year, multi-million-dollar grant to support research in blockchain, cryptocurrency, and digital payments. The Berkeley Haas Blockchain Initiative is housed in the Institute for Business and Social Impact (IBSI) at Haas and reaches across all of UC Berkeley.

A global research network

Laura Tyson
Laura Tyson, faculty director of IBSI and former Haas dean

“It’s exciting to watch the Ripple UBRI Partnership gather momentum at Haas and across the Berkeley campus,” said Prof. Laura Tyson, faculty director of IBSI and former dean of the Haas School. “Individual companies and researchers can only accomplish so much. But by supporting a research network that spans across so many great universities and over five continents, Ripple is building a powerful program that could lead to important advances for not only the entire sector, but for the world.”

Blockchain, originally developed to securely and transparently record transactions involving bitcoin and other cryptocurrencies, has become one of the hottest areas in business because it represents a fundamentally new way of handling large volumes of sensitive data. Blockchain keeps encrypted records in widely scattered networks of devices, and its advocate say it’s less vulnerable to manipulation and fraud, and is well suited for delicate operations such as money transfers and title searches.

The Berkeley Haas initiative is supporting pioneering academic research to examine the changes these technologies are bringing to a wide range of industries and the financial system, and also how they might be harnessed to reduce poverty and enhance the greater good. In addition to awarding research grants, the initiative is partnering on the new Berkeley Blockchain Xcelerator, a  joint venture of Berkeley Engineering’s Sutardja Center for Entrepreneurship & Technology, the Haas School, and Blockchain at Berkeley to incubate blockchain startups. In addition, the initiative has a pool of funds to distribute to students organizing blockchain-themed events, such as speaker series and conferences.

“Ripple’s generous gift to Haas is in recognition of our ability to drive innovation and inspire research collaboration across different professional schools and programs at UC Berkeley in blockchain, cryptocurrency, and digital payments,” Bauer said.

Fifteen research grants awarded

The first round of grants went to professors from Berkeley Engineering, the School of Information, and Haas, as well researchers from the Berkeley Center for Long-Term Cybersecurity and the Simons Institute for the Theory of Computing. Haas Prof. Paul Gertler received funding for research focused on adoption of digital payment systems by small businesses in emerging markets, and Asst. Prof. Giovanni Compiani received a grant to study what drives demand for cryptocurrencies among both individual and institutional investors. Blockchain courses taught by Adam Sterling, executive director of the Berkeley Center for Law and Business, and Ikhlaq Sidhu, chief scientist and faculty director of the Sutardja Center for Entrepreneurship and Technology, also received grants.

Eight students from Berkeley Law, Berkeley Engineering, the School of Information, the Department of Economics, and Haas each received smaller grants that will allow them to complete research projects within a semester.

She256 advocates for diversity in blockchain.
She256 advocates for diversity in blockchain.

Haas students participating, in addition to Adebaki, include Kate Tomlinson, MBA 20, and a business consultant for Blockchain@Berkeley, who will be researching applications of blockchain within the energy sector. Her project will dive deeper into the specific challenges of financial reconciliation, hardware integration, and data sharing as they apply to the energy sector. Lauren Fu, MBA 19, will research ways to assign vehicle accident liability by collecting and storing accident data using blockchain—so that the data collected will be auditable and tamper-free.

She256, co-founded by Sara Reynolds, BS EECS 21 and a Blockchain@Berkeley consultant, also received a grant to continue to develop the reach of the organization, a movement to increase diversity and break down barriers to entry in the blockchain space. The annual she256 conference will be held on Sunday, April 28, at Haas.

Supporting the Berkeley Blockchain Xcelerator

The Berkeley Haas initiative is also providing entrepreneurship training for teams accepted into the brand new Berkeley Blockchain Xcelerator, funded by the Berkeley XLab. The Xcelerator provides money, mentorship, and resources to teams building blockchain enterprises.

Neeraj Goyal, MBA 19, and Ije Anusionwu, MBA 20, wanted to use blockchain to help refugees track and sell valuables that they leave behind when they are uprooted. The pair have applied for a grant through the Xcelerator program to help build a startup based on the idea. (Grants will be announced this spring.) “Capital will be important, but we also need the expertise of people who have founded companies successfully,” said Goyal.

Working with the Sutardja Center on blockchain makes sense, says Rhonda Shrader, executive director of the Berkeley Haas Entrepreneurship Program. “We teach complementary skills that are critical for commercializing any technology,” said Shrader, who will teach courses through the program. “At Haas, we take what we know about business management and apply it to frontier technologies in a systematic and methodical way. Cooperating with Berkeley Engineering on projects large and small is what Haas students want.”

Student Startup Roundup: Vidi, Ping, Cryptonite

The Startup Roundup series spotlights students and alumni who are starting a new business or enterprise.

Vidi

Vidi logoCo-founders:

Federico Alvarez del Blanco, MBA 18
John Kim, PhD 18 (UC Berkeley/UCSF Bioengineering)
Hector Neira. PhD 18 (UC Berkeley/UCSF Bioengineering)
Robert Kim PhD candidate (UCSD MD/PhD, Neuroscience)

It’s not unheard of for busy surgical teams to inadvertently leave an instrument inside a patient—it’s estimated to happen about 1,500 times a year in the U.S. alone, according to research. Less frightening, but still problematic, is the considerable cost to hospitals of instruments that are brought into an operating room and never used, but still must be sterilized or restocked, as well as the delays that happen when the required instruments fail to make it to the surgical tray.

Solving those problems is the focus of Vidi, a fledgling company launched last November by Federico Alvarez del Blanco, MBA 18, and three other University of California graduates. “Tracking surgical instruments, is slow, manual, and error-prone,” Alvarez del Blanco says.

Team VIDI
Team Vidi, left to right: Hector Neira, Federico Alvarez del Blanco, and John J. Kim

The team’s inspiration came while they were attending a workshop on visual recognition sponsored by information technology company NEC on the Cal campus. “We realized that the technology being used to develop self-driving cars could have wider applications in the medical field,” he says.

The heart of the Vidi system is a camera mounted in the operating room and connected to a computer. The system scans the surgical tray, recognizes the instruments on it, and keeps track of them. When the surgery is concluded, the system gives the team a readout of each item that was in the cart at the beginning of the procedure and lets them know if anything is missing.

The really difficult part of developing the system is training machines to correctly recognize hundreds of instruments, Alvarez del Blanco says. It’s similar to the technology self-driving cars need to recognize objects and react accordingly. That’s why Vidi team members have advanced degrees in fields such as bioengineering, neuroscience, and image recognition.

Although Vidi, which means “to see” in Latin, is very young, it has already gained a good deal of recognition. The team was awarded a Haas Dean’s Seed Fund grant last year; earned a second-place win at the University of California Big Ideas Competition in 2018; and won awards from NEC and the National Science Foundation’s I-Corps program.

Alvarez Del  Blanco says his time in the MBA program helped him build the connections he needed to launch Vidi. “Haas has an interdisciplinary approach that gave me access to ideas and people across the entire University of California system,” del Blanco says.

 

Ping

Co-founders:

Kourosh Zamanizadeh, BS 09, MBA 18
Ryan Alshak, BS 09 (Political Science)
Matt Bordas
Janesh Gupta
Eric Zaarour

If you’ve ever had dealings with a law firm, you’ve probably gotten a detailed bill with line items for everything from reviewing files to drafting documents to answering emails. While it may seem cut-and-dried, billing clients is actually a burdensome, error-prone task that costs law firms potentially billions in wasted time and lost revenue, says Kourosh Zamanizadeh, MBA 18, co-founder and COO of Ping.

A Berkeley Haas-nurtured startup, Ping uses artificial intelligence, machine learning, and cloud computing to automate legal billing. The software tracks, stores, and analyzes the time attorneys spend on a case, and then creates client-ready bills. It’s early days, but Ping has already attracted significant funding from top-tier venture capital firms (a public announcement is pending), along with a $5,000 grant from the Dean’s Seed Fund. It was named “Legal Tech Startup of the Year” in 2017 by the American Bar Association.

Ping has landed its first large client, Mishcon de Reya, a London-based law firm employing more than 800 people, says Zamanizadeh. Ping has already run a successful pilot and the firm has committed to expanding it company-wide within the year. Zamanizadeh also expects to start trials with a number of other global law firms later this year—a business expansion that will require a larger technology team.

The Ping team, left to right: Matt Bordas, Eric Zaarour, Ryan Alshak, Janesh Gupta, and Kourosh Zamanizadeh

Zamanizadeh and co-founder Ryan Alshak met while undergraduates and fraternity brothers at Cal a decade ago. “We always dreamed of starting a company together and decide to take the leap in 2016,” he says. “We both left our careers and just went for it.” The startup team has a deep lineup of relevant talent: Alshak is a former lawyer; Matt Bordas and Janesh Gupta are software engineers; Eric Zaarour is a designer; and Zamanizadeh has experience in business development and investment management.

This is the second startup for the five-member team, who made an earlier, unsuccessful attempt to build a company around an app for exchanging contacts. The team hit upon the idea of focusing on legal technology and they were accepted by Skydeck, the accelerator run by Berkeley Haas, the College of Engineering, and UC Berkeley, where they had a home base to develop their idea further.

“The startup ecosystem at Berkeley has very much matured since Ryan and I first met as undergrads. It’s truly world-class,” says Zamanizadeh, who credits Skydeck Executive Director Caroline Winnett and Ikhlaq Sidhu, chief scientist and founding director of the Sutarja Center for Entrepreneurship & Technology, for their extra support. “The environment has been very empowering and the help we’ve received couldn’t be any more genuine.”

 

Cryptonite

Co-founders:

Cryptonite logoDustin Seely, EWMBA 18
Michael Brenndoerfer, M.Eng 18

Efficiently buying and selling bitcoins and hundreds of other cryptocurrencies is not a problem most people have. But as these hypermodern currencies become more of an investment and less of a curiosity, investors will need a simple way to manage their crypto-portfolios.

That’s the market Dustin Seely EWMBA 18, co-founder of Cryptonite, is going after. “We’re going to give investors a way to invest in the entire cryptocurrency market in one place, and do it in U.S. dollars,” he says.

Dustin Seely
Dustin Seely

Seely and co-founder Michael Brenndoerfer met in a Berkeley Haas entrepreneurship class, and then took the new, multidisciplinary “Blockchain and the Future of Technology, Business and the Law” course last spring, where they learned more about the technology underlying cryptocurrencies. Their young company was awarded a Dean’s Seed Fund grant and is expected to go live in the fall.

The cryptocurrency market is volatile and expanding, with a market cap of about $250 billion in mid-July (down from a peak of more than $800 billion in January). Although bitcoin is the most valuable and most widely known, there are now more than 1,600 cryptocurrencies sold on almost 12,000 scattered exchanges, according to CoinMarketCap. What’s more, many of those exchanges do not accept dollars, so doing business with them requires buyers to slog through complicated, multi-step trading procedures. Buying a cryptocurrency called Zilliqa, for example, means buying a bitcoin in dollars, and then using the Bitcoin to purchase the Zilliqa, Seely explains.

Michael Brenndoerfer
Michael Brenndoerfer

Cryptonite will serve as a middleman between investors and other exchanges. Account holders will be able to buy cryptos in dollars without dealing directly with other exchanges, and manage their portfolio on a mobile device, Seely says.

At the moment, cryptocurrencies are only lightly regulated, but Cryptonite is preparing for the future. “Securities regulations are coming to the space and we welcome it,” Seely says. “Regulation will give further legitimacy to the market and we can use it as a competitive advantage when we become fully compliant.”

 

MBA grad leads the way on blockchain

Ashley Lannquist established herself as an up and coming fintech leader well before she crossed the stage at commencement at the Greek Theatre last week.

Aside from penning a popular blog about blockchain, serving as co-president of the Haas FinTech Club, investing in more than a dozen cryptocurrencies, and consulting and interning in the industry, Lannquist, MBA 18, is now deeply involved with a new global blockchain venture backed by some of the world’s largest auto companies.

Earlier this month, she helped launch the Mobility Open Blockchain Initiative (MOBI), a consortium aimed at developing applications for blockchain in the auto and related industries. She was also appointed to the board of directors of MOBI, which is backed by BMW, Ford, General Motors, and Renault, as well as an A-list group of suppliers, consultancies, and technology companies.

“We’re setting technology and data standards, and developing them with multiple hands on deck to address industry-wide problems,”  said Lannquist, who serves as MOBI’s treasurer. “More than 70 percent of global vehicle production is represented in MOBI.”

Blockchain’s big auto move

Blockchain is one of the hottest areas of development in the field of financial technology, or fintech. Blockchain started as a decentralized electronic ledger system for transactions involving bitcoin, the leading digital cryptocurrency. The technology’s association with the cryptocurrency world has given it a dubious image in some circles. But proponents stress that blockchain’s underlying technology of transparent and secure digital records shared in networks of computers has the potential to revolutionize the economy.

In the automotive field, blockchain may someday be used to track auto parts through the supply chain, or to verify odometer settings and repair and maintenance records to stamp out fraud in used-vehicle sales, Lannquist said. Blockchain may also pave the way for decentralized ride-sharing apps, with drivers and riders using peer-to-peer technology instead of going through services like Uber and Lyft.

A South Florida native and former Florida state taekwondo champion, Lannquist arrived at Haas with her sights set on fintech. She was awarded the Haas School’s C & J White Fellowship based on her essay about wanting to help start a fintech club at Berkeley, which she proceed to do before she matriculated.

“She started that essay with a (William Gibson) quote that is strikingly prescient:  ‘The future is already here — it’s just not evenly distributed,’” said William Rindfuss, executive director for strategic programs in the Haas Finance Group. “I’m incredibly proud of what Ashley has achieved as a Haas student.”

A digital currency investment pays off

During her first year at Haas, Lannquist joined Blockchain at Berkeley, a student-run organization drawing members from across the university. She took a blockchain course sponsored by the group called “Blockchain Fundamentals” and was hooked. One of her assignments was to open a cryptocurrency investing account and buy some bitcoin. The timing was perfect. Lannquist had started investing just before bitcoin and other digital currencies started their epic bull run.

The profits she pocketed paid her tuition and allowed her to cover the cost of an independent study on blockchain in Germany and Denmark last summer.  While there, she wrote and published a three-part blockchain series on Medium, which is still widely read.

While in Germany, she met a blockchain expert working for Daimler, the German automaker, who introduced her to the automotive uses of the technology.

Founding MOBI

When Lannquist returned to Berkeley, Ronen Kirsh, Blockchain at Berkeley’s co-head of consulting, asked her to lead a project to help BMW develop its blockchain strategy. In that role, she met Chris Ballinger, CFO of the Toyota Research Institute in Los Altos, who asked her to help him organize an industry-wide blockchain consortium. Since last November, she and Ballinger have met monthly with automakers and industry startups from Detroit, Europe, and Japan, contacts that led to the foundation of MOBI.

Meanwhile, Lannquist also publishes a widely followed blockchain blog and advises a venture capital fund and a hedge fund on blockchain strategy. While at Haas, she initiated and helped teach a three-day executive education course in blockchain at the UC Berkeley School of Law.

These efforts have made her a rising star in the burgeoning blockchain community and won her a dream job. After graduating, she will work as a blockchain project lead in the San Francisco office of the World Economic Forum, the foundation famous for its elite annual conference in Davos, Switzerland.

There is no question but that diving into blockchain was a great career move. But for Lannquist, it was a natural progression. “I was just interested and excited about the technology,” she stressed. “It was compelling and I was excited to be involved with it.”

Pioneering new course looks at business, tech, and law surrounding blockchain

Berkeley Haas offers new Blockchain course

It’s easy enough to find a computer science class that covers the bits and bytes behind blockchain—the global digital ledger that’s linked and secured using cryptography. More difficult is finding a curriculum that tackles the potentially disruptive business, legal, and regulatory implications of the complex new technology.

That’s about to change, as Berkeley Haas in spring 2018 offers a cross-listed class to business, engineering and law students. Called “Blockchain and the Future of Technology, Business, and Law,” the new course will provide an overview of the technology behind blockchain and explore the huge range of current and potential real-world applications.

“Blockchain is one of the most significant technologies to impact business in many years, but there’s a lack of understanding about what it means to business and law,” said Haas Lecturer Greg La Blanc. “Engineering students think that money simply grows on bits, but have no idea what the business model is. Law and business students are confused about the technology.

Greg LaBlanc
Greg La Blanc

The course is limited to 60 students, 20 each from Haas, Berkeley Engineering, and Berkeley Law. They’ll work in mixed teams of six to produce a proposal for a workable blockchain-related business plan by semester’s end.

What is blockchain?

Blockchain is a decentralized and encrypted method of tracking digital assets. It’s designed to operate without any central company or government in charge, so that no single party can change records they didn’t create. Blockchain is often associated with digital currencies such as Bitcoin—but the technology covers far wider territory. Blockchains are being used to do everything from protecting digital identities in Estonia to removing contaminated turkeys from the supply chain in Texas—and it’s become a trendy investment in Silicon Valley.

La Blanc, who teaches finance and strategy at Haas, is the course co-founder, along with Adam Sterling, executive director of the law school’s Berkeley Center for Law, Business and the Economy, and Engineering Professor Dawn Song, a MacArthur Foundation Fellow. All three will teach during throughout the course, along with engineering post-doc Raymond Cheng.

Sterling, JD/MBA 13, who enrolled in La Blanc’s finance class as a Berkeley MBA student, said the two have stayed in touch, working on various projects since he left. The new course came out of a meeting the two held with Song. “We saw so much overlap in what we were doing,” Sterling said.

Adam Sterling

La Blanc said the 15-week course will include lectures on topics such as the history of money and currency, the founding of Bitcoin, and the stories behind the industry experts who are building cryptocurrency products. The course will include a variety of guest speakers.

Pitching to VCs

By the end of the course, each student team will create a blockchain-related business plan “that is technically feasible and regulatory compliant,” Sterling said. Members of the VC community will judge the students’ pitch decks and their computer code, as well as their legal memos.

Interest in the course and in blockchain across campus is strong. Blockchain at Berkeley, founded a year ago, now has 100 members and more than 1,600 people participating in the club’s events and activities, says Ashley Lannquist, MBA 18, one of the group’s consulting managers.

“Students see this as a very impactful emerging technology that will play large role in the future, and they want to understand it and effectively participate,” Lannquist says.

“Blockchain does have the potential to be a really disruptive technology for many industries,” Sterling said. “There’s a lot of excitement around the early applications, but we’re especially excited for the long-term implications and that’s what we want to equip our students to understand.”