The Abele Group is a finance and technology company leading the financial industry into the digital age. It is made up of two subsidiary business units — Abele Technologies and Abele Asset Management — that work together leveraging blockchain and AI to increase security, efficiency, transparency and adoption of cryptocurrencies and digital assets.
Blockchain and Token Economy
1. What is an intuitive definition of Blockchain?
At ABELE we like this definition: Blockchain is a book whose pages can be written by all the readers and writers that can access that book. Each page of a book contains information relative to a story (text) and information relative to the position of the page in the book (page number). Like a book each block (page) has a specific identifier (page number) that can be used to sort the data (pages) and instantly spot when a block (page) is missing. Thus, a Blockchain is a way to store and access data. When the data is composed (also) by financial transactions the Blockchain defines a shared, networked digital ledger. The transaction data is shared but not copied.
2. What is the scientific definition of Blockchain?
A Blockchain is a digitized, decentralized, public ledger of all digital assets transactions. The Bank of England defines Blockchain as “a technology that allows people who don’t know each other to trust a shared record of events.”
3. Why is it so difficult to understand what Blockchain really is?
Blockchain in its true sense involves trust in cryptography (Vires in Numeris) not specific people or institutions. This is a challenging idea for many who believe that we do not have a place to go or an institution to contact if anything fails. But, Facebook and other data privacy issues show, perhaps relying on complex math is a better solution than relying on fallible people and institutions. One reason Blockchain seems confusing is that the technology behind it redefines the concept of ownership. This is explained clearly within an article by Eric Rykwalder, one of the founders of Chain.com, a startup Blockchain software firm in San Francisco. Rykwalder explains, “[To own something in the traditional sense means either having personal custody of the thing. With Blockchain the case is different. Items on the Blockchain exist as records on a distributed ledger, copies of which are shared by a volunteer network of connected computers. As an example, to ‘own’ a bitcoin simply means having the ability to transfer control of it to someone else by creating a record of the transfer in the Blockchain.]”
4. Why does Blockchain software appear so complicated?
Blockchains typically have no central control, so security of the model depends on having no single part of the network being any more useful, or vulnerable, than others. This security requires a high level of cryptographic capacity to ensure that smart people using fast chips cannot subvert the Blockchain by guessing “secrets” too fast. In plain language, Blockchain requires locks that take computer millions of years to unpick - which makes the network secure for humans and their assets. Thus, the complexity of the Blockchain framework depends on the cryptographic design used to combine blocks.
5. What is a distributed ledger?
The UK Government Chief Scientific Adviser defines distributed ledger as “an asset database that can be shared across a network of multiple sites, geographies and institutions. All participants within a network can have their own identical copy of the ledger. Any changes to the ledger are reflected in all copies in minutes, or in some cases, seconds. […] The security and accuracy of the assets stored in the ledger are maintained cryptographically using keys and signatures to control who can do what within the shared ledger”. (Distributed Ledger Technology: beyond Blockchain – a report of the UK Government Chief Scientific Adviser).
6. What is the difference between public and private Blockchain?
Both are decentralized peer-to-peer networks. The sole distinction between public and private Blockchain is related to who is allowed to participate in the network, execute the consensus protocol and maintain the shared ledger. A public Blockchain network is completely open and anyone can join and participate in the network. A private Blockchain network requires an invitation and must be validated by either the network starter or by a set of rules put in place by the network starter.
7. How difficult is developing and managing Blockchain based software compared to more traditional applications?
The development of Blockchain does not require more technical expertise when compared to building across traditional applications or coding languages. On the other hand, building Blockchain implies a more rigorous process of testing and prototyping. For example, web development and app development are generally quick: different versions of the software are released in a short time frame so that bugs of previous releases are removed or reduced by the new release. An example is the update of the operating system that from time to time is installed into our phones. This type of development and bugs management is not possible with Blockchain software. Blockchains are designed to store transactions and other important customer information. As such they must be robust and bug proof at any release. A bug in a smart contract is very dangerous: it can lower the value of the token, lose the owners of the token money, and lose reputation in the developers behind the token. For that Blockchain software is validated before the deployment through a deep independent validation through the service of independent auditors. Vice versa web software and apps are generally updated by taking into account user’s feedback.
8. What are the biggest risks for using Blockchain technology as opposed to other more traditional IT solutions?
The biggest risk for using Blockchain technology is that the benefits and costs of using Blockchain become unequal for all stakeholders. In this case, either a.) security is compromised because the cost of attacking Blockchain is less than money to be stolen, or b.) the network gradually dies and all parties are not gaining from its use. In fact, the strength of Blockchain is the so-called “network ownership effect” which means the utility of the service and the value of ownership of the service increases for existing users when new users join. As such, a limitation for the Blockchain is the insufficient adoption within the industry.
9. Why has Blockchain surged as one of the most powerful innovation on the Fintech landscape?
Blockchain encourages free, open source, permission-less creation of decentralized systems that directly enable and reward those who are creating them. Blockchain is not really a technical innovation; rather it is a revolution in who and how people trust. J.Ito, N.Narula, and R. Ali on Harvard Business Review (March 08, 2017) state that “the Blockchain will do to the financial system what the Internet did to media”. Indeed like the Internet: • Cryptocurrencies such as Bitcoin are driven by advances in core technologies along with a new, open architecture — the Blockchain; • A new technology is designed to be decentralized, with “layers,” where each layer is built by a shared, non-proprietary interface on top of which companies, as well as individuals, can build products and services. • Blockchain technology is strongest when everyone is using the same network, so in the future we might all be talking about “the” Blockchain; • Fintech investors see the opportunity of reshaping the financial system through Blockchain.
10. What is the Token Economy?
The Token Economy is the outcome of the Blockchain revolution. In fact it refers to the emergence of Blockchain based companies, which provide products and services built on Blockchain technology and b) the diffusion of Blockchain products within existing companies. Two-thirds of companies surveyed by Juniper Research said that they expected Blockchain technology to be integrated into their systems by the end of 2018. Token economy represents several trends coming together in a practical manifestation: movement toward global, decentralized, service-driven economy plus the innovation made possible by cryptocurrencies plus the growth of e-commerce conducted through internet-hosted networks plus the ability to work in remote locations. For example there are tokens to enable remote service workers, food supply chains, social and business reputation, digital content, conversion and escrow of digital money and many, many more. This is a distinct break with existing money, trading and political systems of the old-world economy.
11. What is a real life example of the Token Economy?
One of the most intuitive examples of Token economy revolution is the resurgence of cashless payments in electronic form, which happen with greater speed and lower cost when are using Blockchain technology. Rebecca Spang on the Financial Times gives a nice overview of the revolution of payment systems in the cusp of a cashless society. More information can be found here. https://www.ft.com/content/1accbc00-6199-11e7-8814-0ac7eb84e5f1 Both MasterCard and Visa have made incredible progress on integrating their payment systems with Blockchain applications. For example last year (October 2017) MasterCard announced that payments could now be made on Blockchain through a Blockchain-based business-to-business (B2B) payment service under a new option called the “MasterCard Blockchain API.” Similarly, Visa recently partnered with Chain, a Blockchain enterprise company, to develop Visa B2B Connect, a new near real time transaction system designed for the exchange of high-value international payments between participating banks, on behalf of their corporate clients.
12. What growth rate do you anticipate in the Digital (Crypto) Market?
Conservatively - one times growth every year. Current market capitalization is about $300-400 billion but could reach $10 trillion in the next five years. RBC Capital Markets released a 2018 research report making a bull case for why the future of transactional services will ultimately be decentralized and projected the cryptocurrency market cap to grow to $10 trillion. In our base case, if the market grows 100% each year for the next 5 years then the capitalization will reach $10 trillion. Bitcoin alone grew 1700% in 2017. Today’s market is poised to deliver outsized returns as the Token Economy emerges.
13. Can Blockchain provide more security for client and transaction data compared to traditional data repositories?
Yes. Blockchain in fact are based on unique and persistent identifier associated to a decentralized entity, which cannot be taken away. As an example Blockchain can add a layer of transparency to the social media platform, so that users could monitor their data — whether it’s a post, picture or location — and know precisely whose hands it ends up in. In fact Facebook’s data security meltdown could bolster Blockchain.
14. What is a digital custodian?
A digital custodian is a specialized financial institution responsible for safeguarding a firm's or individual's cryptographic assets (digital coins, tokens and other assets e.g. gaming “skins”). ABELE’s digital custodian will ensure that all assets are identified, tracked and secured such that owners have complete access and control at all times.
15. What is a crypto hedge fund?
Cryptocurrency hedge funds are managed portfolios containing cryptocurrencies and tokens plus, optionally, a mix of other asset types. As of March 2018, more than 300 of these funds currently exist. With the low cost of entry, coupled with fully digital, efficient exchange capability of the token economy, many expect the number of cryptocurrencies to rise into the millions within a few years.
16. What is ABELE Group?
The ABELE Group is a finance and technology company leading the financial industry into the digital age. The organization consists of two subsidiary business units — ABELE Technologies and ABELE Asset Management — that work together. ABELE Technologies will use innovative Blockchain technology to develop Blockchain software for financial institutions. ABELE Asset Management is a crypto hedge fund that will invest in crypto and traditional assets.
17. What problem does ABELE solve?
ABELE TRUST. The current prevailing market practice does not offer a truly independent and secure storage solution for digital assets. ABELE TRADE SOLUTION. Most asset managers do not own their own software or technology infrastructure. This reliance on others significantly increases both the costs and risks associated with managing your money—savings and retirement funds. The current market structure for trade management and fund administration is a jumbled mess of API connections that send formatted and reformatted CSV or EXCEL files from counterparty to service provider in networks that are prone to failure and hacking. Managing and administering funds with today’s prevailing systems is an inefficient and often manual process. If trade reconciliation fails, the asset manager and its service providers spend considerable time looking for the break in the process. There are also many intermediaries, “middlemen,” involved in various stages of trade processing—reconciliation and accounting which often leads to significant errors. Asset managers currently pass these high costs to their investors through operational fees, which significantly lower your long-term investment returns. The ABELE team is focused on the end-consumer and organizing a business around the simple notion that one should remain physically in control of your own money to the greatest extent possible.
18. What will ABELE aim to do with the raised funds?
ABELE will establish its two subsidiary business units: ABELE TECHNOLOGIES and ABELE ASSET MANAGEMENT. ABELE TECHNOLOGIES will create and operate ABELE Trust, one of the world’s first fully digital custodians for ALL investors that exclusively stores and holds in-trust digital coins/ tokens in an institutionally secure manner. This business unit will also develop and distribute trade management software called AbeleTS, which will be built on Blockchain technology and ensure asset management and fund administration is more cost efficient. AbeleTS will also allow asset managers to execute and reconcile financial transactions efficiently and securely, which will result in lower expenses for ALL investors. ABELE ASSET MANAGEMENT will provide ALL investors access to actively managed hedge funds with investments in cryptocurrencies and traditional assets. This token sale is designed to give participants access to risk-managed growth in these markets without requiring the large minimum investment traditionally associated with hedge funds.
19. Where do you fit in the Crypto/Digital space?
Today’s crypto/digital landscape poses several challenges across both current and potential new audiences. Existing crypto players have grown weary of current subscription and trading restrictions, while newcomers lack the time and bandwidth to connect to multiple exchanges and retailers with limited product offerings. In short, consumers do not want “wallets” on multiple websites or with various companies. People want their “money” centralized to them. Through ABELE Trust we will provide storage, security, privacy, and in time connections to multiple exchanges, dark pools, and retailers. We are your first point of entry, and your partner for reliability as ABELE Trust will provide a simpler, more secure path for using the new services and products enabled by Blockchain and Token economy.
20. Who are ABELE Group’s target customers?
ABELE Group through its subsidiaries will target different customers. • ABELE Trust will provide custodial services for cryptocurrencies and digital assets for retail and institutional clients, which will pay custodian fees. • ABELE Technologies will develop Blockchain software for asset managers, hedge funds, banks and brokers. These enterprises control or create most of the world’s assets invested in: Mutual funds, UCITS, Pension Plans, 401k Plans, Hedge Funds, and Private Equity funds. For example, hedge funds and banks could use ABELE Blockchain products which manage: 1. NAV and Position Reconciliation; 2. Investment subscription documents; 3. Asset Auditing; 4. AML / KYC compliance. • ABELE Asset management will target retail and institutional investors.
21. Who is behind the ABELE group?
Phil Woods is the founder of ABELE Group and has been building ABELE with the help of talented professionals, investment bankers, risk managers, quants, AI experts, Blockchain developers, software engineers and architects.
22. How has the team funded current operations to this point?
Phil Woods, founder of ABELE Group, launched the Group with his life’s savings, investments from a few team members, kind favors from complete strangers, support from friends, and faith to fund the team until today.
23. How long has the team worked together?
Many of us have worked together over the past five years at various corporations, on outside projects, or came together specifically for this endeavor. Others have joined more recently as we prepared to launch. And despite our rather lively debates, we truly enjoy each other’s company both online and off.
24. Who is the best coder on the team?
It depends on who you ask: “I still can’t believe people enjoy asking this one when we’re in business meetings or on calls. I think to myself, ‘Are you really trying to start an endless conversation?’ If I had to answer and was a gambling man, then I would say.... ...nope, not answering this one. Will never live it down.” – Phil Woods, founder of ABELE Group “Satoshi Nakamoto. Hands Down.” – Gavin Costin
25. What is an ICO?
The term ICO was modeled on the abbreviation “IPO”, which stands for Initial Public Offering. In ICOs the offerings are in cryptocurrency, therefore the Initial Coin Offering definition. As such an ICO is a (regulated or an unregulated) form of capital raising by which funds are raised for a new venture. The first ICO was done in 2014 for Ethereum's 'ether' coin and raised approximately $18M.
26. What are cryptocurrencies and crypto assets?
Crypto assets (or digital assets) are cryptographic securities like cryptocurrencies (coins) or tokens. Coins function, like traditional money, as a unit of measure, means of exchange and store of value. Tokens are issued for a variety of purposes: to function as currencies, to mark ownership of digital or real world valuable things, to secure access to services and platforms and many other uses. A token is “a unit of value that an organization creates to self-govern its business model, and empower its users to interact with its products, while facilitating the distribution and sharing of rewards and benefits to all of its stakeholders.” (‘The business Blockchain’, W. Mougayar).
27. Why an ICO and not follow the normal Angel, VC, Series A-C, IPO growth track?
An ICO is very much a 21st Century capital raising model and Blockchain technology is truly a gamechanger which unlocks access to capital to fund great ideas at the lowest expense. We believe Blockchain resets the fundraising model and the successful 2017 ICO’s proved this point in dramatic fashion. Venture capital fund Fabric Ventures in their "State of the Token Market" report and cryptocurrency data provider estimated that Startups and projects raised $5.6 billion last year through so-called initial coin offerings (ICOs), according to a new report. "On average, tokens have returned 12.8x the initial investment in dollar terms versus 7.7x for ETH and 4.9x for BTC during 2017," the report notes. ICOs, if conducted fairly and openly, provide free access to innovation and capital growth for even the smallest investors no matter their location. In addition, the digital nature of tokens and smart contracts provides opportunities to hold, exchange, identify and integrate with modern technologies such as mobile phones, online networks and decentralized services.
28. How do ICOs work from a technical standpoint?
An initial coin offering (ICO) makes use of Blockchain and smart contract technology to raise digital assets (e.g. ether, the token that powers the network built on Ethereum Blockchain platform.) in exchange for specific tokens in a new company. The best way to describe smart contracts is considering them as vending machine or robots. More specifically smart contracts are self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code. Smart contracts permit trusted transactions and agreements to be carried out among parties without the need for a central authority, legal system, or external enforcement mechanism. They render transactions traceable and transparent.
29. How do regulators see ICOs?
Regulators may consider tokens as investments if ICOs aim at raising capital or participate in investment opportunities. Regulators have started handling ICO inquiries as follows: • Payment ICOs for ICOs where token is intended to function as means of payment; • Utility ICOs for ICOs where token has the sole purpose to give digital access rights to an application or service; • Asset ICOs for cases where token is a security. As with any investment security, tokens are regulated by regulators. For example, per an United States Securities and Exchange Commission (SEC) report of July 25, 2017, SEC consider their purview to include all investment vehicles regardless of packaging: "U.S. federal securities law may apply to various activities, including distributed ledger technology, depending on the particular facts and circumstances, without regard to the form of the organization or technology used to effectuate a particular offer or sale." Tokens have previously been less regulated than traditional capital markets. Given the recent rise of increased risk of fraud and manipulation, regulators have sought to include tokens and ICOs within its current scope of regulation.
30. Will ABELE be the first regulated ICO?
ABELE completely supports the United States Securities and Exchange Commission’s (SEC) view on regulating ICOs that aim at raising investment capital through tokens. In Q1 2018 ABELE filed an offering statement to the United States Securities and Exchange Commission (SEC) to conduct Regulation A+ securities offering in the United States. Our goal of obtaining regulatory approval has also been one of the biggest challenges. We had no knowledge of other ICOs that previously obtained regulatory approval and thus we could not learn from their experience. So, we reshaped the typical ICO offering process and redesigned the technology that is behind ICOs (e.g. smart contracts, transactions and wallets) in an effort to meet the precise requirements of the SEC. All this might sound trivial, but it is not! A regulated ICO is an amazing example of all the complexity emerging from the combination of regulation body and technology. This combination is usually called “RegTech” and it is incredible to be the first firms to embark upon the path of obtaining regulatory approval. We aim to truly be the first regulated ICO in USA!
31. Why an uncapped token sale?
Brief answer: we have no idea how many tokens you will want to purchase! You might feel a rush of excitement and click the purchase button numerous times. More seriously, we believe that many ICOs have underestimated the capital required to deliver the solution that they have promised. In fact, one of our competitors came to market only looking to raise $3 million. With all due respect, we believe that is simply not enough support to develop and deliver a credible solution.
32. Is the ABELE Token a security or a utility token?
Both - these are not mutually exclusive. The token will be a registered security in the USA upon qualification by the US SEC, the process is underway. The token is a security in that the company will comply with relevant US Securities laws and that we intend to raise money using Public Markets. At the same time, the token has utility within the ABELE Group’s suite of products. Token holders will employ their tokens to access functions and accounts with in the ABELE Group’s suite of products, or to act as proxies representing other account holder value within the workflow of the platform.
33. Does the ABELE Token represent equity in the ABELE Group or any of its subsidiaries?
Not presently. The ABELE Token is like all previous Coins or Tokens created in that it does not represent equity in ABELE Group. The ABELE team took time to think through potential investor protections and register with the US SEC. ABELE believes that regulators might begin to force the crypto market down a more traditional path in the future. In such an event, the ABELE Token will use a conversion process to transition the token from providing holders a portion of profits to an equity share. We have prepared a conversion formula for such a scenario and will release it later, should regulators require this action.
34. Who can participate in your token sale?
You can participate in our token sale if you meet one of the following conditions: a. International investors who reside in countries that do not regulate ICO’s. b. International investors who are deemed Accredited Investors by their local authorities. c. USA investors who are deemed Accredited Investors and participate in our Regulation D rule 506c offering. d. USA investors who are non-accredited and participate in our Reg A+ offering.
35. How do we participate in your token sale?
The ONLY place to purchase ABELE Tokens is on the website token.abelegroup.io. We will publicly alert people through this website-- abelegroup.io, traditional media and social media outlets once the token sale begins.
36. Which financial services can be managed using its ABELE Blockchain based software?
ABELE Technologies will create a digital custody depository— ABELE Trust—that accepts coins and tokens primarily for storage and security. ABELE Trust will provide the market with a highly scalable digital custodian that acts as an industry safe harbor, which is built on, operated by, and secured with Blockchain and Artificial Intelligence. This digital custodial depository safeguards retail and institutional investor’s cryptographic and digital assets. Moreover, AbeleTS will develop Blockchain software that will enhance efficiency and reduce operational costs and overhead by revolutionizing: • FUND AND POSITION RECONCILIATION through a consistent, reliable, reconciled view of all transactions. • INVESTMENT SUBSCRIPTION DOCUMENTS through filing, updating, distributing, approving, and storing all the paperwork involved in investment and fund management. • REGULATIONS AND COMPLIANCE through automating the manually intensive process of AML and KYC compliance. • ASSET AUDITING through preventing fraud with AI algorithms and immutable records on Blockchain. By developing the aforementioned Blockchain software AbeleTS will manage the following key financial services: P2P lending, collateralized margin trading, repo for individuals/entities, factoring, trust services e.g. holding and disposing assets during events such as death, bankruptcy, Blockchain forks, micro-investments in ICOs & funds.
37. What products and services will ABELE TECHNOLOGIES provide?
ABELE TECHNOLOGIES will increase the security, reduce infrastructure middlemen, increase transparency, and establish greater trust in the storage of cryptocurrencies and digital assets. Our Blockchain software will provide our clients with instant transaction settlement, lower costs, transparency, a complete audit chain, and immutable, irrevocable transactions. ABELE Technologies will selectively use Artificial Intelligence (Al) to help market participants reduce costs and increase the security of their services. By doing so ABELE will enable both consumers and institutions to hold and use their digital assets in a trusted, secure way.
38. Your business plan is ambitious. Can you really pull this off?
Absolutely. While most ICOs go to market armed with a whitepaper, some pseudo code and a handful great ideas, the ABELE Group comes to the table with: a. A first of its kind financial/technology solution with the goal of developing a digital custodial depository and suite of financial services b. A credible business plan to support the organizational and operational build with an achievable three-phased approach c. A team of industry experts and advisors with proven experience in navigating the challenges of today’s (and tomorrow’s) fin-tech landscape Though we don’t expect to achieve everything in a single day, month, quarter, or year, our bona fide business plan, proven team experience and structured three-phased approach will deliver both an exceptional platform and full suite of services. We are not just building a software suite though. We are also building an organization that requires a significant amount of financial and capital reserves. You will trust the bank with the largest balance sheet and best customer service experience.
39. Do you know how much it costs to build your products?
We have good estimates on the cost of delivery under various ideal and stressed scenarios. Our team has spent a combined 50 years building trading and risk/reporting systems as the lead developers for Bank of America, Merrill Lynch, DBS, Barclays, JPM, and HSBC. The ABELE team is equipped to budget for large complex technology projects, having estimated and executed on similar size projects many times already. To illustrate, here is a photo of Bob Visnov, one of our team leads, estimating the cost of a development project:
40. What Blockchain do you use?
No single Blockchain currently delivers all that ABELE requires to deliver on its stated ideas. ABELE Group believes that the current state of Blockchain technology is at an inflection point; where the previous designs and experiences in Blockchains over many years have led to some important observations on the advantages and disadvantages for decentralized Blockchains. The observations of the researchers, coders and architects studying Bitcoin since 2009 have helped to generate at least two more generations of Blockchains in the form of Ethereum, NEO, EOS and IOTA, Nano, HashGraph and others. A more innovation and optimization of the technology is required and suitable choices on the balance between decentralization and centralization might lead to more beneficial outcomes for all stakeholders including users, customers and business operators. We will create a fourth generation hybrid Blockchain Abele Chain. This business unit will also develop and distribute trade management software, AbeleTS, built on Blockchain technology, which will make asset management and fund administration more cost - efficient. We look forward to providing new tools and technical options via open source code and private-permissioned projects. The demands of safeguarding and securing “money” lends itself best to a permissioned, rather than a permission - less, Blockchain platform. “Permissioned vs permission-less” is not the same as “public vs private", as many might assume. A permissioned system may allow some items to be publicly visible and gives us the flexibility we need to ensure client and customer data, along with transaction information, will reside in different parts of our architecture with different availability requirements. Our team has experience with several permissioned Blockchains and will select one or more for implementation based on their performance characteristics and their likelihood of acceptance as a long-term standard.
41. Blockchain appears as a continuously evolving technology. How will ABELE's products stay current with new releases of Blockchain?
The ABELE Group consists of the top finance and technology talent from across the most diverse business and research backgrounds. We look forward to our continued contribution to both new innovations and existing projects across the growing Blockchain space. And will continue our research and further monitor developments as it relates to the enhancement of the Blockchain and tested alternative data models. For example, most recently, two new designs have emerged as contenders to the Blockchain: Tangle and Hashgraph. These are new data models, which promise to yield remedies for Blockchain’s performance bottleneck, which is implied by Blockchain’s sequentially.
42. Is it possible to integrate Blockchain software to cloud based servers?
Absolutely, ABELE is already using Cloud solutions such as, Azure, to host both the evolving set of prototypes and the proof of concept Blockchain apps that we are showing to investors. Microsoft Azure is an open, flexible, scalable platform, supporting a rapidly growing number of distributed ledger technologies that specifically address business and technical requirements for security, performance and operational processes. ABELE also currently makes use of Amazon Web Services and soon, IBM cloud solutions.
Artificial Intelligence and Finance
43. What is AI and how can it be developed and deployed within services and products?
Computer scientists define Artificial Intelligence (AI) as the recreation of the human thought and intellectual abilities through a man-made machine. The real challenge of AI is to understand how human intelligence and the human thought process works. Today's AI machines can replicate some specific elements of intellectual ability. In particular, machines can solve complex problems according to algorithms defined by the scientist, who can learn from the experiences. Given present technology and knowledge, AI is the highest intelligence we can instill in robots. In practice, AI is provided by software that is then deployed to hardware (machine) and executed by programs (instructions) that implement machine learning and Natural Language Processing (NLP) algorithms. Interestingly, AI algorithms can solve problems that we – humans - create when we generate and process Big Data. This is because machine learning deployed on powerful computers can handle and organize information better than we can.
44. To which extent are AI tools easy to manage, deploy and integrate with existing software and hardware?
At ABELE, we do not consider AI a disruptive technology. Rather, we believe AI serves as toolkit that allows for the integration of new features with existing software and hardware. For example, because AI is “software agnostic,” it can be conveniently deployed in any existing and preferred programming language adopted by ABELE’s clients (e.g. C++, MATLAB, Python, Java, etc.).
45. Why do AI based hedge funds appear to be prone to more losses than other traditional funds? What is ABELE’s view on this?
Q1 2018 proved a challenging period for hedge funds using AI and machine learning in their trading process with many pointing to the AI funds playing a big role in February’s correction (~7.5% loss over previous month). At ABELE, we believe that adoption of sophisticated statistical methods should not be an excuse to lower risk management control. As such, adoption of more innovative trading strategies should require more rigorous risk control.
46. What is the difference between systematic trading and AI based trading?
Systematic trading is the use of software to execute trading plans or models previously generated by humans. AI-based trading involves defining basic rules and specific goals, while allowing the computer to find a set of trading strategies that best meet the stated goals.
47. AI tools appear to be the most innovative products of statistics and computer science. But, how reliable are these tools in comparison to more traditional and heavily tested approaches?
Interestingly enough, most AI algorithms originated before 1990 and have since been heavily studied. The first learning algorithm for supervised, multilayer perceptrons was published by Alexey Ivakhnenko and Lapa in 1965 and the term “Deep Learning” was introduced to the machine learning community by Rina Dechter in 1986. The recent success of AI and a larger diffusion in various industries is due to the extraordinary enhancement of computational capability of modern computers (processors and graphic cards). Thus testing, simulations and validation are now ways to make sure that algorithms are robust and conceptually sound to the problem.