CryptoCurrency quiz 1

Crowdfunding

Raising small amounts of capital from a large number of individuals, usually via online platforms, to fund a project, business, or venture.

Three Types of Crowdfunding

Donation-based (no return expected), Reward-based (perks/goods in return), Equity-based (investors receive shares/ownership).

Pros and Cons of Donation-based Crowdfunding

Pros: No repayment/equity given, builds community; Cons: No financial return for donors, relies on goodwill.

Pros and Cons of Reward-based Crowdfunding

Pros: Tangible perks motivate backers, tests market demand; Cons: Fulfillment costs/delays, no ownership for backers.

Pros and Cons of Equity-based Crowdfunding

Pros: Access to capital without debt, broad investor base; Cons: Dilution of ownership, regulatory compliance, illiquidity.

Regulation Crowdfunding (Reg CF)

SEC exemption allowing companies to raise up to $5 million in 12 months from accredited and non-accredited investors via registered platforms (increased from $1.07M in 2021 amendments).

Difference: Regulation Crowdfunding vs Regulation A+

Reg CF: Up to $5M cap, must use intermediary platform, simpler disclosures, no general solicitation beyond platform, 1-year resale restriction. Reg A+ (mini-IPO): Up to $75M (Tier 2) or $20M (Tier 1), broader advertising allowed, SEC qualification required, preempts state blue sky laws in Tier 2, ongoing reporting (annual/semiannual for Tier 2), better liquidity potential.

Mini IPO

Term for Regulation A+ offerings, allowing public-like capital raising with reduced SEC requirements compared to full IPO, often called "mini-IPO" for smaller companies.

Testing the Waters

Provision allowing companies to gauge investor interest (solicit indications) before full filing/qualification, reducing risk of failed offerings in Reg A+ and similar exemptions.

2021 Regulation Changes for Crowdfunding

SEC amendments increased Reg CF cap to $5M (from $1.07M), raised individual investment limits for non-accredited investors (up to greater of $2,500 or 5-10% of income/net worth, capped at $107K), eased some disclosure/auditing rules, improving access for issuers and investors.

Blue Sky Laws

State securities regulations; apply to Reg CF (no federal preemption) and Reg A+ Tier 1, but preempted for Reg A+ Tier 2 (no state qualification needed).

Liquidity in Crowdfunding Platforms

Low/illiquid: Securities often restricted (1-year hold for Reg CF), limited secondary markets, no active trading like stocks. Vs. money market investments (e.g., funds/accounts): High liquidity (same/next-day access, no lockups, redeemable daily).

Reporting Requirements for Crowdfunding Companies

Annual report (Form C-AR) within 120 days of fiscal year-end, progress updates (Form C-U at offering close), financial statements (audited if >$1.07M raised pre-2021 rules, but simplified post-amendments), posted on issuer website and EDGAR.

Lego Works Fixed Transaction Fee

50,000 transactions × $0.35 = $17,500 (fixed per-transaction fee, regardless of payment method).Role of ACH

Entities Responsible for ACH

NACHA (governs rules/standards), Federal Reserve and The Clearing House (operate processing networks).

Examples of ACH Transfers

Direct deposit of payroll, bill payments, person-to-person transfers, government benefits.

Routing Number vs SWIFT Code

Routing: 9-digit US domestic bank identifier; SWIFT: International bank identifier (BIC) for cross-border.

Wire Transfers Used For

Large, urgent/high-value payments (e.g., home purchase, international); drawbacks: expensive ($10-50+ fees), irreversible, slower for cross-border.

Advantages of Mobile/Digital Wallets

Convenience, speed, contactless, rewards integration, tokenization for security.

Mobile Wallet Secure Contactless Payments

Tokenization replaces card number with token, encryption, biometrics, NFC limits range.

Benefits of Payment Processing Systems

Faster settlements, fraud reduction, multi-method support, analytics.

Entities in Credit Card Processing

Issuer bank, acquirer bank, card network (Visa/MC), merchant, gateway/PSP.

PCI DSS 12 Requirements

Mandatory for card handlers: Firewall, no defaults, protect data, encrypt transmission, antivirus, secure systems, access control, unique IDs, physical access, monitoring, testing, policy.

Benefits of PCI DSS Compliance

Reduced breach risk, trust, lower fines/insurance.

Problems from Non-Compliance

Fines, lawsuits, card brand penalties, reputation damage, potential loss of processing rights.

Wholesale vs Retail Cross-Border Transactions

Wholesale: Large interbank; Retail: Consumer/small business; retail often slower/more expensive.

Cross-Border Payment Process

Originating bank → correspondent banks → beneficiary bank via SWIFT; multiple intermediaries.

Drawbacks of Legacy Cross-Border

High fees, slow (days), opaque tracking, FX costs.

G20 Role in Cross-Border

Pushing for faster/cheaper standards (e.g., targets for cost <3%, same-day).

Visa Direct / Mastercard Send

Real-time push payments, enabling instant transfers, improving retail cross-border.

SWIFT GPI Innovations

End-to-end tracking, faster processing, transparency.

API Definition

Set of protocols for software to communicate/interact.

API Benefits

Faster integration, scalability, innovation, open ecosystems.

API Role in Payment Processing

Enables seamless connections (e.g., Plaid for bank links, Stripe APIs).

API in Investment/P2P Lending

Robo-advisors use for portfolio management; P2P platforms for loan matching/funding.

White Label Banking

Fintech offers branded bank products via partner bank's backend.

PSD2 Regulation

EU open banking rule; forces banks to share data via APIs, enabling third-party services.

BaaS (Banking as a Service)

Banks provide regulated backend via APIs; benefits banks (revenue), fintechs (speed/no license).

Examples of BaaS/SaaS Integration

Companies like Stripe Treasury, Unit, or Solaris increased revenues by embedding banking (e.g., higher fees, user retention).

QR Codes in Payments

Scan-to-pay; low-cost, contactless, used in apps like Venmo/WeChat.

Why QR Codes Increased Post-1994

COVID hygiene needs, mobile adoption, low infrastructure cost in emerging markets.

BNPL (Buy Now Pay Later)

Installment payments at checkout; boosts sales/conversion, but fees to merchants; players: Affirm, Klarna, Afterpay; pros: higher cart value; cons: debt risk; higher rates hurt demand.

Embedded Finance

Financial services inside non-fin platforms (e.g., Shopify loans); shifts revenue from banks to platforms.

Blockchain in Payments

Decentralized, fast/cheap cross-border (e.g., Stellar low fees, fast settlement, cross-asset).

Insurtech

Tech-driven insurance innovation (underwriting, claims, distribution).

Peer-to-Peer Insurance

Policyholders pool premiums; unused returned; differs from traditional by reducing insurer profit motive.

On-Demand/Shared/Gig Economy

On-demand: instant services; Shared: asset sharing; Gig: freelance/short-term work.

Usage-Based vs Traditional Insurance

Usage: Premiums from real data (telematics); Traditional: Flat based on demographics.

Continuous Underwriting

Real-time risk assessment via data streams vs. periodic traditional.

Microinsurance

Small, affordable policies for low-income; benefits access in developing countries.

Embedded Insurance

Insurance bundled in purchase (e.g., travel protection); related to micro via on-demand/micro scale.

Connected Homes

IoT-enabled smart homes (sensors, automation); advantages: efficiency/safety; disadvantages: privacy/hacking risks.

Telematics in Insurance

Usage data (driving behavior) lowers premiums for safe drivers.

V2V/V2P/V2I/V2X

Vehicle-to-vehicle/person/infrastructure/everything; reduces accidents, enables dynamic insurance.

Blockchain in Insurance

Smart contracts automate claims; prevents double dipping (multiple claims same loss); protects data integrity.

Double Dipping

Claiming same loss multiple times; blockchain ledger prevents via immutable records.

R3 Claimshare

Uses Corda/Conclave blockchain to share claims data, detect duplicates.

Future of Insurtech

Hyper-personalized, real-time, blockchain-integrated, embedded/micro focus.

Turing Test

Test if machine can mimic human conversation indistinguishably; Eugene Goostman "won" 2014 (controversial).

AI Coined

1956 at Dartmouth Conference.

AI Definition

Simulation of human intelligence (learning, reasoning) in machines.

AI Winters

Funding/interest drops after hype (1974-1980, 1987-1993) due to unmet expectations.

Dendral/Mycin

Early expert systems: Dendral (chemistry molecule ID, 1960s), Mycin (medical diagnosis, 1970s).

AI/ML/Deep Learning

AI: broad field; ML: subset learning from data; DL: ML with deep neural nets.

Supervised/Unsupervised/Semi/Reinforcement

Supervised: labeled data; Unsupervised: patterns in unlabeled; Semi: mix; Reinforcement: reward-based learning.

Recommender Systems

Content-based/collaborative filtering; drive sales via personalization.

Cold Start Problem

New users/items lack data; worse in collaborative filtering.

Robotic Wealth Management

Automated portfolio management via algorithms; players: Betterment, Wealthfront (low fees, diversification).

RPA vs AI in Robo

RPA: rule-based automation; AI: predictive/intelligent decisions.

Generative AI

AI creating new content (text/images); tech: transformers/large language models; use cases: content creation, code, art.

Parameters in GenAI

Model weights; larger = better capability but higher compute.

ChatGPT-4o Features (2024)

Multimodal (text/voice/vision), faster, improved reasoning.

Context Window (Gemini)

Amount of text model processes at once; larger = better long-context handling.

Parameters vs Tokens

Parameters: model learnable weights; Tokens: units of text processed.

Regtech

Tech for regulatory compliance/monitoring; helps firms (efficiency) and regulators (oversight).

Howey Test

Four prongs: investment of money, common enterprise, expectation of profits, from others' efforts.

Dodd-Frank 2010

Enhanced consumer protection (CFPB), systemic risk oversight, investor safeguards post-2008.