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Monday, 23 February 2015 00:00

DACe, Disintermediation and the Death of Wall Street Featured

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“47% of all jobs will be automated by 2034, and no government is prepared.” -Economist 

“In the next 10-20 years, 58% of financial advisors will be replaced by robots and AI.”-Frey and Osborne, Oxford University.

This article's goal is to demonstrate how true those statements are. Below you will find the face of today's investment bank as pictured by the article "Yes, Goldman Sachs is a great place to work"...


... and this is the face of invesment banking tomorrow:

//// Have the payee sign the resolution transaction and send it back over the wire
LetterOfCredit.signInchoateTx(new_tx, lc_tx_script_pub_key, this._payee_key_priv);
new_tx = new Transaction(LetterOfCreditTest.params, new_tx.bitcoinSerialize());
Set<ECKey>[] keys = LetterOfCredit.checkInchoateTx(orig_tx, new_tx, lc_tx_script_pub_key);
Set<ECKey> signed = keys[0];
Set<ECKey> candidates = keys[1];
Assert.assertEquals(1, signed.size());
Assert.assertEquals(2, candidates.size());

Introducing DACe 

Decentralized -  dispersed functions, powers and assets away from a central location or authority

Autonomous - self-governing; independent; subject to its own laws only

Commercial - of or relating to a system of voluntary exchange of products and services to the market

entity -  something that exists as distinct, independent, and/or self-contained

DACe (pronounced “dak-ee”) - A network-based logical business entity that replicates the functions of centralized legacy businesses and business operations profitably and at substantially lower costs through disintermediation. Disintermediation is: the reduction of rent seeking by connecting natural producers and natural consumers of products and services directly (in our case, peer-to-peer) while providing the ability for said actors to facilitate the required business functions through decentralized software designed exclusively for network-based, distributed use with appropriate failsafes for both temporary and catastrophic failures.

UltraCoin is an example of a DACe. It is essentially an investment bank/brokerage in the cloud without the bank and brokerage components. It consists entirely of computer code. It currently facilitates the trading of the exposures of over 45,000 tickers, long, short or in unique relative combinations, and can do so while offering up to 10,000x leverage without the risk of default, negative equity, non-payment or margin calls. It provides its own exchange and rents space along the Blockchain rails with which it often does business. Best yet, it is totally transparent by allowing all users to track their assets at any time, and it never, ever holds or has any control over customer assets. Your capital stays either in your wallet or the blockchain (of which I will define below) at all times. Users are never exposed to our balance sheet, or the counterparty risks inherent therein. Deals are done in basis points, negating the need for gouging to support billions of dollars annually in salaries and bonuses - and computer code has no incentive to Bernie Madoff, and abscond with your money.


UltraCoin’s aim is to disintermediate the banking system by congealing the business processes of Wall Street banks into software and code that lives and thrives in the cloud, and the blockchain in particular.


smartcontrats infographic


This DACe in the cloud allows disparate consumers of banking products and services to purchase said services directly from each other through UltraCoin using unbreachable smart contracts as the medium.


 smartcontrats infographic1


Through the disintermediation of investment banks and brokerages, the nominal and economic profits of rent seekers are now redistributed to consumers as “inefficiency rebates” - or extreme discounts to products and services in the absence of the rent seeking middlemen who charge for what software can now do better, cheaper, safer and more efficiently. These inefficiency rebates reallocated to consumers can be, and are substantial. Wall Street banks compensation and benefits as a percentage of revenues range from 35-50%.


A few months ago, I approached several of the big banks to discuss partnership, and relayed the reaction of one of them in the post, "Reggie Middleton's Open Letter of Commoditization and Disintermediation to Wall Street: Pay Attention Jamie Dimon!". Further to that point, this downloadable research document forensically describes the specific weak points in the banking business model, to wit:   Banking Risks, Rewards & Demise: The Rise of Programmable Currencies & Smart Contracts 

Stress Test on [This Bank’s] Earnings Resulting from the Introduction of Smart Contract Platforms as an Alternate Value Transaction System

We have carried out a stress test on [This Bank]’s 2013 earnings to assess the potential impact of digital currency transaction platforms on the bank’s future earnings. The revenue of the banks is categorized into interest income (net of interest expense) and non-interest income that comprises income from investment banking operations, asset management business, trading income, insurance, and other commission or fee based businesses.

Impact Analysis

[This Bank] derives more than 60% of its total revenues from net interest income, and less than 40% from non-interest income. Net interest income depends upon the bank’s net interest margin and volume of loans and advances as well as deposits with the bank. A decrease in margins and volume could significantly impact net interest income, due to [This Bank]’s heavy reliance on interest earning assets for revenue.

In assessing the impact of an alternate digital currency transaction system on the bank’s annual revenues and profitability, our analysis assumes a certain percentage of business that is vulnerable and a certain percentage reduction in fees (see below).

Key points:

  • [This Bank] could see around 3% decline in its non-interest income. The bank’s net interest income could fall by 7-8% from a contraction in its net interest margin.

  • The bank could see lower charge on account of compensation benefits for employees (due to decrease in variable pay). However, this will not be enough to offset the decline in revenues.

  • Net income could drop by as much as 21%.



 Veritaseum’s UltraCoin is not a concept, nor a whitepaper or even a prototype. It is a functional, ongoing business in the form of a nascent start-up. Here is a snapshot of revenue ramp-up before the official launch. The provervial "hickey stick"!.

The hockey stick

Update: ...and this is what it looked like the day after this post was made...

image 5

We are on the lookout for financial and strategic partners, liquidity providers and traders. If you qualify of any or all of those, I'd love to hear from you. You can Download the UtlraCoin client here.

Read 6594 times Last modified on Thursday, 26 February 2015 09:35
Reggie Middleton

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