Douglas Castro

ADC Wealth Management, LLC

30D Broadaway, Suite 200

Massapequa, NY 11758


Let's Talk Tech

Crypto this, NFT that…over the past few years these words have entered the vocabulary of many, so let’s break it down and go over what it all means, its role in today’s society, and where the future of technology is headed in regards to the finance world, also known as ‘fintech’.

One of the main obstacles for people who want to learn and be involved in this new age of the combination of technology and business is the associated terminology which almost creates a barrier of entry for those who lack the knowledge. To be completely transparent, as someone who is a part of the new generation leading this technological evolution, my peers and I also feel that there is a learning curve to which we need to actively stay on top of in order to not be left behind. Universities are ensuring that those majoring in the field associated with technology are taking classes that teach these terms and expose them to the fact that technology is constantly evolving. But what about those not majoring in the related field? What about the pre-med
students focusing on studying for their MCAT? What about the previous generation, who graduated from college decades ago well before the word ‘fintech’ was popular? Perhaps you fall into one of those categories and maybe this memo can answer some questions you have.
Defined by the Washington State Department of Financial Institutions, here are some common terms you may have heard of (with italicized descriptions to help give a better understanding):

Cryptocurrency: The native asset of a decentralized network that can be traded, utilized as a medium of exchange, and used as a store of value. A                     cryptocurrency is issued directly by the decentralized protocol on which it runs. Examples include Bitcoin and Ether.

Bitcoin: The original digital asset that can be sent peer-to-peer without intermediaries.

Before I begin, I’m going to define the term ‘blockchain’ which can also be found below. Blockchain is, “an open distributed ledger that records transactions in code. In practice it’s like a little checkbook that’s distributed across countless computers around the world. Transactions are recorded in ‘blocks’ that are then linked together on a ‘chain’ of previous cryptocurrency transactions” (Ashford). Cryptocurrency is not backed by a government or bank, and has a maximum supply. The value is determined by supply and demand, as we have seen with BitCoin surging in value over the past few years. By using a cryptocurrency, such as BitCoin, transactions may be done more easily since there is no institution that oversees the use of it, and the blockchain keeps track of the past transactions.

NFT (Non-fungible token): A certificate of authenticity for digital artifacts. Each NFT is stored on an open blockchain (often Ethereum’s) and anyone interested can track them as they’re created, sold, and resold.

Token: Units of value that blockchain-based organizations or projects develop on top of existing blockchain networks.

 Blockchain: A type of distributed ledger that requires entries to be confirmed and encrypted via an advanced encryption technique called                                           cryptography, which makes the entries very difficult to change or hack.

Now I know it does not help to define a term with a bunch of other terms that are confusing, so let me try to explain NFTs in the most simple way possible. The ‘non-fungible’ part of NFTs means that each one is unique, unlike two people swapping a ten dollar bill in an equal exchange. NFTs are digital assets – digital artwork, a photo, a video, a tweet – it could be anything digital. Now you may ask, ‘how do NFTs come into place when I can text someone a picture I found on the internet and they can send it to hundreds of other people?’ NFTs prove ownership (or rights) to the original digital asset. Here’s a non-digital

the banking sector represents roughly 14% of total stock market capitalization

analogy: Say that Picasso came back to life and painted a new piece of art on canvas that he named ‘Reborn’. With the painting comes a magically indestructible piece of paper that does not leave the paintings’ side, Picasso signs his name in pen at the very top indicating that he was the original owner of it. Picasso then decides he wants to auction his painting off. On the piece of paper, in pen below his signature, Picasso writes that ‘Reborn’ was sold to Beyonce for $100 million. Beyonce now has ownership of ‘Reborn’ and has that piece of paper to prove it. Other artists can attempt to create copies of ‘Reborn’, and anyone can go view this painting in the museum where Picasso wanted it to live, however only Beyonce holds that piece of paper stating that she owns the version in the museum created by Picasso. Now please take this analogy very lightly, as it gets more complex than this, seeing as NFTs are digital which creates varying complexities, and the analogy given was quite surface level. NFTs are worth however much the buyer is willing to pay for it – with cryptocurrency only – and basically allows someone to own an original digital asset. The benefits to it? That depends on how you value owning something unique despite that thing being digital. Who cares if the Louvre houses the original Mona Lisa when you can look up pictures of the Mona Lisa online? As a museum though, isn’t it cool to say you have the original Mona Lisa on display which attracts people from all over the world?

 Peer-to-peer: Decentralized system where two persons interact with each other without a third-party intermediary. Example: I send money directly from my digital wallet to yours.

Distributed ledger: A database that is consensually shared and synchronized across multiple sites, institutions, or geographies, accessible by multiple                     people. It allows transactions to have public “witnesses”.

The Role of Fintech in Today’s World
If you have made it this far, congratulations. Things in this section are more digestible and relatable due to the fact that technology in finance has been so deeply integrated into today’s world. Fintech is, “software, algorithms, applications for desktop and mobile. Enable depositing checks, moving money between accounts, paying bills, applying for financial aid, peer-to-peer lending and crypto exchanges” (Walden). Sounds familiar, right? Companies such as American
Express, PayPal, and Vanguard all combine technology and finance in order to give their customers a more efficient experience when dealing with their finances. Long gone are the days where it would take longer than thirty seconds to transfer money to another person, or having to go into the bank for any miniscule transaction, and so much more. Fintech has not only created a reality that expedites so many processes that used to take bouts of time out of a person’s day, but also allows businesses to work in ways that benefit themselves and also their customers.

Regulations Concerning Fintech
A major concern for fintech is regulation and the role of how data/privacy is protected. As we discussed earlier, cryptocurrency is not backed by a government or bank. I won’t go too heavily into detail, but natural compliance with the current SEC and CFTC has been difficult due to cryptocurrency being new territory (Clayton and Massad). With that being said, because it looks like cryptocurrency is here to stay, all platforms involved need to work together in order to come
to a resolution. In regards to privacy, many companies keep customer protection in mind, “consumer protection, which emerged as the main concern for 10% of respondents – a lack of proper protection can have a significant detrimental effect on consumer loyalty” (Salman, et al. 16). Both companies and regulators across the globe are working to create a safe and compliant atmosphere in this new world of technology.

Future of Fintech
It has been made clear with technology – in any field, not just finance – that so much is possible and engineers and developers will continue to push the limits in order to remain competitive but also benefit society in numerous ways. These fintech companies are teaching children to manage their finances in a non-intimidating way so that they are financially literate at a young age (Adedoyin). Many high schools and colleges lack the basic fundamental knowledge that teach all of their students how to not succumb to credit card debt, pay their taxes, manage any loans they may have, and so much more. It is not uncommon to hear of older teenagers nearing their twenties who do not have access to their bank accounts and have to text their parents if they need money transferred. When are they supposed to learn how to be responsible with their money? When they have real bills to pay and more is at risk? Many of these apps introduce responsible spending and encourage saving in a simple way. Teen accounts exist that allow parental supervision and restrictions to allow some freedom but not too much. The way in which technology will be further integrated into finance will be interesting to watch, but it is important to remain cognizant and keep learning about new developments in order to not be left behind