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Enterprise blockchain of today: While some fail, others show potential value

Enterprise blockchain startup Insolar ceases operations, but what went wrong?
While the price of Bitcoin (BTC) continues to reach record-breaking all-time highs, the hype around enterprise blockchain adoption may seem like it’s dwindli

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Enterprise blockchain startup Insolar ceases operations, but what went wrong?

While the price of Bitcoin (BTC) continues to reach record-breaking all-time highs, the hype around enterprise blockchain adoption may seem like it’s dwindling. 

Enterprise blockchain started gaining traction in 2017 when Bitcoin’s price hit a high of nearly $20,000. It was during this time that blue-chip companies, such as IBM, JP Morgan and Walmart, announced plans to incorporate blockchain networks into business processes like supply chain management. A number of innovative startups also began building their own blockchain networks for enterprise use.

One of these startups was Insolar, a company founded in 2018 with the aim of bringing transparent and efficient business networks to enterprises through blockchain systems. Peter Fedchenkov, chief revenue officer and co-founder of Insolar, told Cointelegraph that the company initially began as an Ethereum ERC-20 token intended to power a decentralized grocery marketplace. Fedchenkov, however, realized that the Ethereum blockchain was incapable of facilitating this project, so the company transitioned to enterprise blockchain development.

Initially, Insolar was successful. According to Fedchenkov, the company signed an agreement with a Fortune 500 client in 2019 to implement Insolar’s “Assured Ledger Technology,” a framework that provides interoperability, nodeless deployment and other capabilities designed to make blockchain implementation easy for companies.

Nearly two years later, Fedchenkov shared that Insolar has ceased operations due to what he believes to be a lack of enterprise blockchain adoption:

“During our first year, we noticed that everyone was excited about blockchain and what it could do for certain business processes like supply chain management. But what we have seen recently is that blockchain lagged on the expectations.”

Fedchenkov explained that the COVID-19 pandemic has been a large reason for a lag in enterprise blockchain adoption, noting that budgets for proofs-of-concept have been slashed. In turn, Insolar — once a promising blockchain startup with a wide range of partnerships with companies, such as Uranium One and universities such as the University of California, Berkeley — has been unable to raise additional funding. “We tried in vain to hold a venture capitalist round, but due to the current climate and sentiment around enterprise blockchain, we were unable to find backers,” said Fedchenkov.

Fedchenkov further noted in a company blog post that “blockchain technology spent 2020 languishing in the trough of disillusionment along the Gartner hype cycle.”

Enterprise blockchain is not dead

But is this really the case for all enterprise blockchain companies? Martha Bennett, vice president and principal analyst at Forrester, told Cointelegraph that her optimistic observations from mid-2020 still hold true:

“The pandemic has resulted in a shake-out of both startups and company-internal projects. Some lost budget and funding, but others are thriving. I regularly speak with startups that continued to receive additional funding during 2020, and who’ve started 2021 taking calls from potential investors; I’ve seen some double in size during 2020.”

According to Bennett, the blockchain startups that are finding success regardless of the pandemic are situated within different industries, each catering to specific use cases. While these companies differ, Bennett explained that each of them shares certain characteristics.

First and foremost, Bennett pointed out that these companies do not lead with “blockchain,” noting that enterprises, on the whole, have gotten over the buzzword hype and are more focused on solutions and outcomes:

“Having a clear value proposition and benefits statement is essential. Some of these startups don’t even mention that they have a blockchain element in their stack during the sales process unless they’re asked specifically.”

To Bennett’s point, Fedchenkov mentioned that one mistake Insolar had made was focusing primarily on the technology and IP around it. He remarked that the company should have been discussing actual use cases and business applications with clients.

Additionally, Bennett believes that successful companies today typically offer solutions where blockchain is only one essential part within a deeper and wider stack. Other technologies, such as artificial intelligence or data analytics, are also needed to deliver the full value proposition.

Although Insolar built a groundbreaking proposition, Fedchenkov shared that enterprises are not yet ready to adopt a pure blockchain-based solution due to the lack of proven value and complexity of the technology.

Finally, Bennett explained that companies interested in blockchain-based solutions already understand what “enterprise-grade” means in terms of scale, security, maintenance, etc. In addition, these companies are aware of the regulatory mandates and industry-specific requirements of their prospective customers.

Clearly, product market fit is a crucial element for enterprise blockchain companies to be successful. Unfortunately, Fedchenkov remarked that Insolar was spread thin from the start, as the company attempted to pursue multiple markets (supply chain, financial services, energy) simultaneously. “Even saying ‘I’m focused on supply chain isn’t enough.’ You have to be more specific. This was our mistake, as we wanted to cover the entire market,” said Fedchenkov.

Are private blockchain networks doomed?

While some enterprise blockchain companies boasting private, permission networks seem to be struggling, solutions that incorporate public, open networks appear to be on the rise. According to Fedchenkov, Insolar was a hybrid solution, combining both private and public networks. Although the company has shut down, he remains optimistic that in the next 10 years, enterprises will start to adopt public blockchain models.

While this is hard to predict, Paul Brody, global blockchain lead at Ernst & Young, told Cointelegraph that EY is on track to grow its enterprise blockchain business by over 100% this year. Brody further noted that the firm has seen a huge drop-off in demand for private blockchains:

“Clients are asking for public blockchain solutions based on open standards, and they are looking for solutions that have a future roadmap in an ecosystem. A good example is product traceability — this is in very high demand — but the top users are thinking beyond just traceability towards inventory management, supply chain management and supply chain financing.”

When asked why some companies in the enterprise blockchain space appear to be struggling, Brody explained that private blockchains have a relatively weak value proposition, noting that it’s difficult to build a scalable ecosystem with many participants.

To Brody’s point, Fedchenkov mentioned that one thing he learned from Insolar is that it’s difficult to sell a blockchain solution to the different companies needing to be involved. “Blockchain isn’t needed for just one company, but for many, and that makes it difficult to sell since these companies all have to change their business processes,” he said.

Despite these concerns, Bennett explained that she isn’t seeing a major shift from private to public networks today from an enterprise perspective. She further noted that private blockchain networks are not becoming irrelevant:

“In principle, companies aren’t opposed to the concept but aren’t, on the whole, intending to engage with public permissionless networks until there’s less volatility and more tech maturity. But there’s definitely a more nuanced approach to architecture. For example, you can have your ledger on a private blockchain but use a public blockchain for consensus.”

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Government

Supreme Court Rules Public Officials May Block Their Constituents On Social Media

Supreme Court Rules Public Officials May Block Their Constituents On Social Media

Authored by Matthew Vadum via The Epoch Times (emphasis…

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Supreme Court Rules Public Officials May Block Their Constituents On Social Media

Authored by Matthew Vadum via The Epoch Times (emphasis ours),

Public officials may block people on social media in certain situations, the Supreme Court ruled unanimously on March 15.

People leave the U.S. Supreme Court in Washington on Feb. 21, 2024. (Kevin Dietsch/Getty Images)

At the same time, the court held that public officials who post about topics pertaining to their work on their personal social media accounts are acting on behalf of the government. But such officials can be found liable for violating the First Amendment only when they have been properly authorized by the government to communicate on its behalf.

The case is important because nowadays public officials routinely reach out to voters through social media on the same pages where they discuss personal matters unrelated to government business.

When a government official posts about job-related topics on social media, it can be difficult to tell whether the speech is official or private,” Justice Amy Coney Barrett wrote for the nation’s highest court.

The case is separate from but brings to mind a lawsuit that several individuals previously filed against former President Donald Trump after he blocked them from accessing his social media account on Twitter, which was later renamed X. The Supreme Court dismissed that case, Biden v. Knight First Amendment Institute, in April 2021 as moot because President Trump had already left office.

At the time of the ruling, the then-Twitter had banned President Trump. When Elon Musk took over the company he reversed that policy.

The new decision in Lindke v. Freed was written by Justice Amy Coney Barrett.

Respondent James Freed, the city manager of Port Huron, Michigan, used a public Facebook account to communicate with his constituents. Petitioner Kevin Lindke, a resident of Port Huron, criticized the municipality’s response to the COVID-19 pandemic, including accusations of hypocrisy by local officials.

Mr. Freed blocked Mr. Lindke and others and removed their comments, according to Mr. Lindke’s petition.

The U.S. Court of Appeals for the 6th Circuit ruled for Mr. Freed, finding that he was acting only in a personal capacity and that his activities did not constitute governmental action.

Mr. Freed’s attorney, Victoria Ferres, said during oral arguments before the Supreme Court on Oct. 31, 2023, that her client didn’t give up his rights when using social media.

This country’s 21 million government employees should have the right to talk publicly about their jobs on personal social media accounts like their private-sector counterparts.”

The position advocated by the other side would unfairly punish government officials, and “will result in uncertainty and self-censorship for this country’s government employees despite this Court repeatedly finding that government employees do not lose their rights merely by virtue of public employment,” she said.

In Lindke v. Freed, the Supreme Court found that a public official who prevents a person from comments on the official’s social media pages engages in governmental action under Section 1983 only if the official had “actual authority” to speak on the government’s behalf on a specific matter and if the official claimed to exercise that authority when speaking in the relevant social media posts.

Section 1983 refers to Title 42, U.S. Code, Section 1983, which allows people to sue government actors for deprivation of civil rights.

Justice Barrett wrote that according to the so-called state action doctrine, the test for “actual authority” must be “rooted in written law or longstanding custom to speak for the State.”

“That authority must extend to speech of the sort that caused the alleged rights deprivation. If the plaintiff cannot make this threshold showing of authority, he cannot establish state action.”

“For social-media activity to constitute state action, an official must not only have state authority—he must also purport to use it,” the justice continued.

State officials have a choice about the capacity in which they choose to speak.

Citing previous precedent, Justice Barrett wrote that generally a public employee claiming to speak on behalf of the government acts with state authority when he speaks “in his official capacity or” when he uses his speech to carry out “his responsibilities pursuant to state law.”

“If the public employee does not use his speech in furtherance of his official responsibilities, he is speaking in his own voice.”

The Supreme Court remanded the case to the 6th Circuit with instructions to vacate its judgment and ordered it to conduct “further proceedings consistent with this opinion.”

Also on March 15, the Supreme Court ruled on O’Connor-Ratcliff v. Garnier, a related case. The court’s sparse, unanimous opinion was unsigned.

Petitioners Michelle O’Connor-Ratcliff and T.J. Zane were two elected members of the Poway Unified School District Board of Trustees in California who used their personal Facebook and Twitter accounts to communicate with the public.

Respondents Christopher Garnier and Kimberly Garnier, parents of local students, “spammed Petitioners’ posts and tweets with repetitive comments and replies” so the school board members blocked the respondents from the accounts, according to the petition filed by Ms. O’Connor-Ratcliff and Mr. Zane.

But the Garniers said they were acting in good faith.

“The Garniers left comments exposing financial mismanagement by the former superintendent as well as incidents of racism,” the couple said in a brief.

The U.S. Court of Appeals for the 9th Circuit found in favor of the Garniers, holding that elected officials using social media accounts were participating in a public forum.

The Supreme Court ruled in a three-page opinion that because the 9th Circuit deviated from the standard the high court articulated in Lindke v. Freed, the 9th Circuit’s decision must be vacated.

The case was remanded to the 9th Circuit “for further proceedings consistent with our opinion” in the Lindke case, the Supreme Court stated.

Tyler Durden Sun, 03/17/2024 - 22:10

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International

Home buyers must now navigate higher mortgage rates and prices

Rates under 4% came and went during the Covid pandemic, but home prices soared. Here’s what buyers and sellers face as the housing season ramps up.

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Springtime is spreading across the country. You can see it as daffodil, camellia, tulip and other blossoms start to emerge. 

You can also see it in the increasing number of for sale signs popping up in front of homes, along with the painting, gardening and general sprucing up as buyers get ready to sell. 

Which leads to two questions: 

  • How is the real estate market this spring? 
  • Where are mortgage rates? 

What buyers and sellers face

The housing market is bedeviled with supply shortages, high prices and slow sales.

Mortgage rates are still high and may limit what a buyer can offer and a seller can expect.  

Related: Analyst warns that a TikTok ban could lead to major trouble for Apple, Big Tech

And there's a factor not expected that may affect the sales process. Fixed commission rates on home sales are going away in July.

Reports this week and in a week will make the situation clearer for buyers and sellers. 

The reports are:

  • Housing starts from the U.S. Commerce Department due Tuesday. The consensus estimate is for a seasonally adjusted rate of about 1.4 million homes. These would include apartments, both rentals and condominiums. 
  • Existing home sales, due Thursday from the National Association of Realtors. The consensus estimate is for a seasonally adjusted sales rate of about 4 million homes. In 2023, some 4.1 million homes were sold, the worst sales rate since 1995. 
  • New-home sales and prices, due Monday from the Commerce Department. Analysts are expecting a sales rate of 661,000 homes (including condos), up 1.5% from a year ago.

Here is what buyers and sellers need to know about the situation. 

Mortgage rates will stay above 5% 

That's what most analysts believe. Right now, the rate on a 30-year mortgage is between 6.7% and 7%. 

Rates peaked at 8% in October after the Federal Reserve signaled it was done raising interest rates.

The Freddie Mac Primary Mortgage Market Survey of March 14 was at 6.74%. 

Freddie Mac buys mortgages from lenders and sells securities to investors. The effect is to replenish lenders' cash levels to make more loans. 

A hotter-than-expected Producer Price Index released that day has pushed quotes to 7% or higher, according to data from Mortgage News Daily, which tracks mortgage markets.

Home buyers must navigate higher mortgage rates and prices this spring.

TheStreet

On a median-priced home (price: $380,000) and a 20% down payment, that means a principal and interest rate payment of $2,022. The payment  does not include taxes and insurance.

Last fall when the 30-year rate hit 8%, the payment would have been $2,230. 

In 2021, the average rate was 2.96%, which translated into a payment of $1,275. 

Short of a depression, that's a rate that won't happen in most of our lifetimes. 

Most economists believe current rates will fall to around 6.3% by the end of the year, maybe lower, depending on how many times the Federal Reserve cuts rates this year. 

If 6%, the payment on our median-priced home is $1,823.

But under 5%, absent a nasty recession, fuhgettaboutit.

Supply will be tight, keeping prices up

Two factors are affecting the supply of homes for sale in just about every market.

First: Homeowners who had been able to land a mortgage at 2.96% are very reluctant to sell because they would then have to find a home they could afford with, probably, a higher-cost mortgage.

More economic news:

Second, the combination of high prices and high mortgage rates are freezing out thousands of potential buyers, especially those looking for homes in lower price ranges.

Indeed, The Wall Street Journal noted that online brokerage Redfin said only about 20% of homes for sale in February were affordable for the typical household.

And here mortgage rates can play one last nasty trick. If rates fall, that means a buyer can afford to pay more. Sellers and their real-estate agents know this too, and may ask for a higher price. 

Covid's last laugh: An inflation surge

Mortgage rates jumped to 8% or higher because since 2022 the Federal Reserve has been fighting to knock inflation down to 2% a year. Raising interest rates was the ammunition to battle rising prices.

In June 2022, the consumer price index was 9.1% higher than a year earlier. 

The causes of the worst inflation since the 1970s were: 

  • Covid-19 pandemic, which caused the global economy to shut down in 2020. When Covid ebbed and people got back to living their lives, getting global supply chains back to normal operation proved difficult. 
  • Oil prices jumped to record levels because of the recovery from the pandemic recovery and Russia's invasion of Ukraine.

What the changes in commissions means

The long-standing practice of paying real-estate agents will be retired this summer, after the National Association of Realtors settled a long and bitter legal fight.

No longer will the seller necessarily pay 6% of the sale price to split between buyer and seller agents.

Both sellers and buyers will have to negotiate separately the services agents have charged for 100 years or more. These include pre-screening properties, writing sales contracts, and the like. The change will continue a trend of adding costs and complications to the process of buying or selling a home.

Already, interest rates are a complication. In addition, homeowners insurance has become very pricey, especially in communities vulnerable to hurricanes, tornadoes, and forest fires. Florida homeowners have seen premiums jump more than 102% in the last three years. A policy now costs three times more than the national average.

Related: Veteran fund manager picks favorite stocks for 2024

 

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Default: San Francisco Four Seasons Hotel Investors $3 Million Late On Loan As Foreclosure Looms

Default: San Francisco Four Seasons Hotel Investors $3 Million Late On Loan As Foreclosure Looms

Westbrook Partners, which acquired the San…

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Default: San Francisco Four Seasons Hotel Investors $3 Million Late On Loan As Foreclosure Looms

Westbrook Partners, which acquired the San Francisco Four Seasons luxury hotel building, has been served a notice of default, as the developer has failed to make its monthly loan payment since December, and is currently behind by more than $3 million, the San Francisco Business Times reports.

Westbrook, which acquired the property at 345 California Center in 2019, has 90 days to bring their account current with its lender or face foreclosure.

Related

As SF Gate notes, downtown San Francisco hotel investors have had a terrible few years - with interest rates higher than their pre-pandemic levels, and local tourism continuing to suffer thanks to the city's legendary mismanagement that has resulted in overlapping drug, crime, and homelessness crises (which SF Gate characterizes as "a negative media narrative).

Last summer, the owner of San Francisco’s Hilton Union Square and Parc 55 hotels abandoned its loan in the first major default. Industry insiders speculate that loan defaults like this may become more common given the difficult period for investors.

At a visitor impact summit in August, a senior director of hospitality analytics for the CoStar Group reported that there are 22 active commercial mortgage-backed securities loans for hotels in San Francisco maturing in the next two years. Of these hotel loans, 17 are on CoStar’s “watchlist,” as they are at a higher risk of default, the analyst said. -SF Gate

The 155-room Four Seasons San Francisco at Embarcadero currenly occupies the top 11 floors of the iconic skyscrper. After slow renovations, the hotel officially reopened in the summer of 2021.

"Regarding the landscape of the hotel community in San Francisco, the short term is a challenging situation due to high interest rates, fewer guests compared to pre-pandemic and the relatively high costs attached with doing business here," Alex Bastian, President and CEO of the Hotel Council of San Francisco, told SFGATE.

Heightened Risks

In January, the owner of the Hilton Financial District at 750 Kearny St. - Portsmouth Square's affiliate Justice Operating Company - defaulted on the property, which had a $97 million loan on the 544-room hotel taken out in 2013. The company says it proposed a loan modification agreement which was under review by the servicer, LNR Partners.

Meanwhile last year Park Hotels & Resorts gave up ownership of two properties, Parc 55 and Hilton Union Square - which were transferred to a receiver that assumed management.

In the third quarter of 2023, the most recent data available, the Hilton Financial District reported $11.1 million in revenue, down from $12.3 million from the third quarter of 2022. The hotel had a net operating loss of $1.56 million in the most recent third quarter.

Occupancy fell to 88% with an average daily rate of $218 in the third quarter compared with 94% and $230 in the same period of 2022. -SF Chronicle

According to the Chronicle, San Francisco's 2024 convention calendar is lighter than it was last year - in part due to key events leaving the city for cheaper, less crime-ridden places like Las Vegas

Tyler Durden Sun, 03/17/2024 - 18:05

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