Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Giyom Lebleu: The Gyft of the Blockchain and Improving Prepaid Cards

Episode Date: November 9, 2015

Businesses with the alleged potential to become the next Google are plentiful in Bitcoin-land, but finding actual commercial success is a lot harder. The best example of a commercial success is gift card company Gyft that became known as the first place to give access to a wide range of merchants for bitcoin holders and later achieved the largest exit so far in the crypto space in an acquisition by payments company First Data. Gyft CTO joined us to talk about how he got involved in FinTech, what makes gift cards so interesting and how recently Gyft has been trying to reinvent gift cards by using the power of the blockchain. Topics covered in this episode: Giyom’s early involvement in FinTech in the early 2000s His previous projects Bernal Bucks and Credibles that explored gift cards and alternative currencies Why gift cards are a great place for financial innovation The mechanics of gift cards today and why their security is broken How Gyft Block can improve the security of gift cards using the blockchain Why Gyft moved their gift cards off the Bitcoin blockchain onto private blockchains Giyom’s view on the utility of Bitcoin and private blockchains Episode links: Giyom's blog Gyft’s Giyom Lebleu: Following Linux ‘The Most Likely Path for Bitcoin’ [CoinJournal] Future of Money Interview. Part I. On Credibles and owning digital currencies issued by brands you love Gyft Payments giant First Data acquires Gyft in an effort to bring digital gift cards to the masses [Pando] Gift Block Bernal Bucks Credibles This episode is hosted by Brian Fabian Crain and Sébastien Couture. Show notes and listening options: epicenter.tv/104

This is Epicenter Bitcoin episode 104 with guest Guillaume LeBlue. This episode of Epicenter Bitcoin is brought you by ShapeShift. With no account or signup required, it's the easiest way to buy and sell gems, counterparty, dogecoin, dash, and other leading cryptocurrencies. Go to shapeshift.io to instantly convert your alt coins and to discover the future of cryptocurrency exchanges. And by Hyde.combe, protect yourself against hackers and safeguard your identity online with a first-class VPN.

Go to hide.me slash epicenter and sign up for a free count today. Hi, welcome to Epicenter Bitcoin, the show which talks about the technologies, projects, and startups driving decentralization and the global cryptocurrency revolution. My name is Sebastian Kutjou. And my name is Brian Fabian Crane. We're here today joined by Guillaume Leblieu. He's originally from France, but he's been living out in Silicon Valley for a long time. And it's been really interesting sort of preparing for the episode because he's actually been interested in the sort of

topic that Bitcoin brought up for a long time before Bitcoin was also a very early Bitcoiner. And most recently, and he was a CTO of GIFT, and he still works for GIFT, which was acquired now. So, Guillaume, thanks so much for joining us. Thank you. Yeah, so I thought it was really fascinating reading your blog, so you've been quite a prolific blogger, written tons of posts. And when I was looking at your blog, you know, you seem to write about a lot of the topics that people started to think about a lot when Bitcoin came up, right? Like, what are currencies, how do they work, what's value, but before Bitcoin. So that was very interesting to see that.

So can you get a bit of a background about yourself and how your interests evolved, I guess? Yeah, so I studied to work in the financial technology sector in about 2004. I studied a company called Briggs Logic that was working with large financial institutions, banks and insurance companies to help them implement web services around industry standards that were popular at the time, and moving the infrastructure of banks and payments processors from legacy protocols to more modern APIs. The idea was that we could build a kind of a banking layer that people would be able to build easily new apps on top of. So, and this company was acquired by a large company called D-Bold that provides banking solutions to financial institutions.

And after working there for a few years, the financial crisis happened, and I just felt like this was was a moment where they would give some legitimacy for innovation in financial services. Around the same time, I think a lot of people in the industry had similar thoughts. Square studied around the same time. Bitcoin emerged at the time. So I started to look at the part of, that was interested to me, which was how do we actually empower businesses, anyone with some productive capacity to participate in as a financial asset issuer and so prepaid and any sort of business issued credits to me was a very interesting place to to to change how

you know the banking system and money works so that's been really what I've been focusing on since 2010 through a variety of projects that one of them being Benel Bucks which was the first neighborhood currency linked to a a debit card and as well as Credibles which was a crowdfunding product using prepaid business issue prepaid for companies to small businesses especially in the food segment to raise money why did you see debt a prepaid as as such an interesting way to start because I mean if you think of the like financial crisis and the way the banking system works it's not obvious to me why that will

be a good place to start changing how money works. Right. It's a fair point. I think what I saw is that essentially the banking system, you know, it works through credit, right? So when credit expands, things go well, when credits goes down, things go bad. So, and the only way to actually create credit into our system is through bank loans. So when banks decide not to lend money, we basically go into a a negative spiral loop. So giving the ability for businesses to issue their own prepaid assets would give them an ability to to go against that, right? So it's something that, you know, has been talked about for many years,

you know, 25, 30 years ago, people were talking about the IBM dollar. And, you know, large brands like Starbucks, for instance, I've been doing this for a while. now. They are doing about one-fourth of their global sales through prepaid. So the idea that you trust a brand that is actually delivering products and services more than a bank, which is more like a collection, like a leverage between debts and assets, is to me made sense. It seems today that people do trust Starbucks with their money much more than they trust a lot of smaller institutions. So that thought to me it was interesting. So there's another reason which makes this very interesting is that it's actually prepaid is actually a very simple

asset and the fact that it's closed loop, the regulations that are around it are fairly simple, right? So since you're issuing an asset that can technically be only redeemed at the business we shoot it, it doesn't really is considered as money by regulators throughout the world. So it's really easy to innovate around this. If you want to do prepaid on the blockchain, it's much easier than if you want to do securities on the blockchain or bank deposits. So it's a very interesting place to experiment, innovate, deliver production-ready systems, then look at other opportunities in other spaces. So, I mean, the idea that the business issued assets space is sort of a closed loop

and not considered money, we can get into this topic a little deeper in the show, but do you think that that can change with the advent of cryptocurrency and the ability to exchange currencies on exchange platforms? Will that evolve in the future? Yeah, of course. But today, you know, the way that regulations think about money is that it's either money or it's not money. So I think things, these regulations are going to have to evolve to recognize that it's really bad liquidity. So if you have an inadequate asset and Bitcoin to

degrees somewhat of an illiquid asset still, you cannot really sell a million dollars worth of Bitcoin without affecting the price. So the more liquid an asset is, the more likely it's going to be used for, you know, driving maybe illegal transactions as well. So if you're trying to move under money, you may not use gift card because you're going to lose a lot on friction, on swapping. But if you're going to, if you have an asset that you can transact a lot in it without losing too much in transaction costs and exchange cost, then it becomes basically because money. So I see money as really as liquidity. Any asset can function as money. It's really how liquid this asset is. So I think regulators will need to evolve.

to a point where they look at how liquid a particular asset is and regulate things based on that, not based on whether it can be transferred peer-to-peer. Let's get into the gift card market. Before we get into what you guys have built a gift, can you talk to us about what the current gift card industry looks like, and specifically the infrastructure that most of us don't realize, that when we use a gift card, when we go into a store and buy a gift card and pay with it, that there's this very complex infrastructure underneath that, multiple actors. Can you sort of give us an overview of what that looks like?

Yeah, so the gift card market as an industry is about $100 billion, I think, $30 billion a year. And within that, you have what's called open loop and closed loop. So I would say it's about half and half. One half is open loop like your visa card that you buy it's a Safeway to, you know, put money on if you're unbanked or enclosed loop, which is merchant-specific gift cards. And the variety of use cases go way beyond like the typical gift card. I mean, gift card has stayed as the main term for, you know, basically merchant. issued prepaid, maybe because it's not any other good term for it.

But really, the use case are, you know, for instance, buying for yourself, making a company doing buying a gift card for there as an incentive to their employees, rewriting people for performing certain actions online or offline. So for instance, you feed up a survey at a grocery store, you get a gift card. So there's a lot more use case to gift cards than just, you know, someone sending a gift to someone else. And the way the market is structured is that you have a limited number of processors, which are your companies that authorize transactions on these gift cards. And then you have a number of players between these processors

and the receiver of the gift card, the user of the gift card. And some of these processors are doing distribution or reselling or buying these gift cards from each other. So there is a lot of movement, and there's a lot of intermediaries, if you want, between the processor and the receiver of the receiver of the. gift card and nowadays you see even more more players appearing for instance you have gift card exchange marketplace so you could have you know from the time the gift card number is issued and provisioned to the time it is consumed you

could have you know five six players so the security of the gift card is very similar to where you know credit cards were 20 20 30 years ago I mean today credit cards debit cards have been security models have been increasingly tightened, you know, with tokenization, what Apple Pay is using. It's a pretty tight security model. But for gift card, we're still using static gift card numbers. So as these gift card numbers gets transferred, and as the gift card market gets digitized, so

you're transferring not only transferring a gift card with a max drive and coded card number, you're just sending a card number around. it's prone to being stolen and compromised. So, and I'm not even talking about processors or companies that basically issue gift cards as, you know, sequential numbers, which we've seen. The, you know, there is a lot of points in that chain where these caldemberg can get compromised. So, you know, the story a lot of people I've heard about is people going to a retail store, scanning the gift card. number there and then look you know just writing scripts to check if the if the the card had been activated and funds have been loaded on it so I think the

industry is spending a lot of time trying to work against these kind of a basic attacks and so at gift we felt like you know this needs kind of a new model right and instead of using shared secrets that we are going to send to each other, the blockchain model of using publicly encryption, publicly signed transaction is a very, just that is a very useful model for securing transactions. So that's kind of where we started with our interest in Bitcoin as a platform and blockchain is how do we solve that security problem. So you mentioned the security issues, and specifically we're talking about card numbers getting stolen along the chain from where the card is produced to where it is consumed.

What are some of the other paint points that we may encounter on the merchant side or on the consumer side with the way that the current Bitcoin market works, or the current gift card market? Yeah, so it's not easy for us to check a balance on the card. So you have, you know, even for us, you know, gift, we have a lot of experience in the area. We are part of first data. We have access to a lot of, you know, processors and a lot of players in the space. It's still very difficult for us to provide, you know,

up-to-date balance information for these gift cards. Every system is different. It's due to the nature of closed loop that since it was closed loop, everybody could kind of do whatever they wanted. So we have today, you know, potentially for every, if they are, let's say there's about 15, 20 different places where you can check the balance. So APIs to check balances of gift card

and maybe not all the merchants supported. So for each given merchant, you may have different, you may be able to check the balance but not transfer to another card, for instance. So there are different features that are not available for different merchants and different processors. It makes things very complicated from an application developer standpoint. If you're just interested to start issuing these gift cards

and allowing them to be redeemed at the merchant, where they are issued, it's just very complicated. And you need to essentially pay all these players along the chain for their services. I think it's very similar to the banking, the way the banking system works. Do you have any idea of how much it costs a merchant? For every dollar gift card that is sold,

how much overhead they're paying for this whole system and the security and the loss and all this? No, I don't have specific numbers about that. But definitely, I mean, the fraud in a gift card is much higher than the fraud in credit card or debit cards. And, you know, it's not untypical for a merchant to give discounts to the distribution channels of about, you know, 5, 10%, which is how they kind of pay for these, you know, for these costs, if you want. is by basically setting their gift card at a discount to the face value. So it could go between anywhere between 20% to, let's say, 3% right, as a discount. Our show today is brought to you by our friends at Shapeshift.com.

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And we think that's very honorable and very cool. And plus, by sponsoring shows like ours, they really help entertain people like you and help promote growth in the industry. So good job, Shapeshift for doing us right. And we like to thank Shapesh for their support of Epicenter Bitcoin. So when you guys or when you joined Gift or Gift a company, so the thing Gift became well known for in the Bitcoin community was that they said, okay, we accept Bitcoin as a payment.

You can buy gift cards with Bitcoin, right? And at the time, there was very little you could do with Bitcoin. So, of course, a lot of people started using GIFT. Now, we've talked a lot about the sort of infrastructure-level problems. Was GIFT at that time already trying to change some things there as well? Or was sort of, I guess, the main difference between other GIFT card providers accepting Bitcoin? No, we really started thinking about this around, yeah, the beginning of the year. So this year.

Yeah. So gift is really committed to making it very easy, secure instant to buy any gift card from any merchant. So, I mean, we haven't truly looked into adding other cryptocurrencies. But, you know, if there was a huge demand for that, that's something that maybe we would look into. So we really started this thought process. I mean, the conversation around security, I think it started a long time before we started that, but specifically working around and developing something that would address that, studied around the beginning of the year.

So we're going to talk in just a minute about the work you have been doing to your addresses using the blockchain. But I thought it would be interesting to take a step back and take a sort of a bigger picture view on gift cards again. So you mentioned Starbucks before, right, and that they do a quarter of their revenues with gift cards. Yeah. Of course, the interesting thing there, I guess, is that they're essentially like pre-financing. They're getting like free financing or how do you think about that? And how do you think about that also when you maybe go.

go beyond Starbucks and think about merchants in general. What's the potential there? Well, I think the case for the Starbucks case is, you know, some people would say is a unicorn. I think it's very difficult to replicate the combination of, you know, you have a huge brand and you have a daily purchase activity around this brand at very low, in very low amounts. and also you said a drug, which is coffee. So all these things make it very unique, I think, to replicate. I think it's, if you compare to other companies, I mean, if Starbucks does about one-fourth of their global revenue using prepaid,

about 10% using their app only, it's quite reasonable, I think, to expect that other businesses may be able to, depending on the kinds of products they sell, services they sell to do a lot more with prepaid than they've done before, maybe in the range of 5% of their revenue, for instance. So the Starbucks case is unique, but I think the reason why people haven't been really using prepaid is just because of the fragility of the system. If you get something and you don't know how much money there is on it, if you don't know that

you can trust it, if you don't know that you can trust it, if you don't know, note that how much business has issued of it, if you cannot easily transfer it to someone else or resell it, it doesn't make it very attractive. But if it had all these capabilities, I think a lot of people would be looking at it differently. And merchants would be using it a lot more. There is a lot of benefits for merchants. So merchants, by using prepaid, they generally they get some cash up front, which may or may not be interesting to them. I suspect it's not for Starbucks, but it may be for a small business, or I know it is. I mean, crowd funding and Kickstarter are a form of prepayment, right, in many cases. The other aspect is that you can reduce

fraud and transaction costs. So you can ask people to pay, you know, $25, $50, $100 and then have a lot of small transactions, which is going to reduce your transaction fees. And also you are building a relationship. Your prepayment, this asset that the customer holds becomes a point where you can, you know, exchange or engage your customer around. So Starbucks, again, has been doing it with loyalty points, but just having a channel that you provide updates, people go to you to ask for their balance, or this becomes places where you can engage with the customers and promote offerings and stuff like that. So it's a very, to me, it's a very, very interesting asset. It's just underutilized because of, I think, security and just user experience

issues. And so the thing, the work you did with the other project, Credibles, we haven't talked about yet, but I think that is very interesting too, you know, because it sort of tried or tries to roll out something similar to Starworks, right, but make that accessible to small local merchants. Yeah, so the use case is very much, and as I said, the use case is very much valid. So I think the challenge that you'll see from anyone doing anything related to local, including the Yelp and the Foursquare and all square or all these companies, anything that relates to local and small business is it's all about having a very good distribution model. Because it's all about you're essentially, you need to reach a population of small businesses that's very

difficult to reach. Small business owners are not always at their store. They have employees there. You cannot just stop by and try to have a conversation about Bitcoin. So I think anyone who's been trying to sell Bitcoin to small businesses on the street knows that. And then actually, you know, getting them to sign up, to change their workflows, to train their employees. All of that takes a lot of time. And then actually making sure that they stay in business because there's a lot of turnover in the small business community. So, you know, all of that make your distribution cost huge. And there is an endless line, endless number of companies that have attempted to solve this problem. So if you're in the transaction business, it's even harder because they need to change their point of cell system.

They need to grade it. They need to do all kinds of things to it. So that is the main challenge, I think, for how to change and how to make these kinds of new blockchain-based assets or cryptocurrencies available at these merchants is who is going to fund the distribution cost and how do you recoup that later on. So I think what was very attractive to me in what GIFT was doing as part of First Data is that they built an app for small businesses. It's called Gift for Business.

And this app is available on a device called Clover, which is basically a POS device running Android that is able to accept any kind of payment methods. But in addition, any developer can create a new app on it. And so they've built an app marketplace, so it becomes super easy for a developer to create a new app, deploy it to an app marketplace, kind of like the iTunes store, and suddenly for a small business owner who wants to try something new,

they can just press a button and add it to their point-of-sell system, and it automatically becomes a new tender. So to me, that's the future model of distribution of new software to small businesses. For small businesses, the point-of-sell system, The point of cell system is their central nervous system. This is their computer where they do everything. So now that we have smart devices that are able to become a place where people, small business owners, can try different apps,

then it becomes much easier to start accepting other kinds of things, right? So that was kind of what I thought was interesting with GIFT and First data compared to what I was doing before. I was doing this as a standalone app. And a lot of companies do that. They build a new standalone app that they provide to small business owners. So now it changes the workflow. It makes it very expensive for the for the business to participate. Whereas if it can be easily added to the point of sale system as a one-click install, that solves the problem of how you scale to millions of businesses. Yeah, that's very interesting.

And just a little bit of background very briefly. So the Credibles, I guess the idea was right, that you could basically do the prepaid with a local merchant, which then is sort of a little bit like crowdfunding, right? So you say, like, okay, I really like this butcher. I'm purchasing basically money there, sort of like buying in bulk, but I can actually use it over time. Yeah, so Credibles has been very successful with a few hundred businesses.

and many of these businesses have seen incredible results. So the model has really had really good response. The problem was always like, how do we go from a few hundred to a few hundred thousand? And that requires a lot of capital to build distribution. you know, companies like Groupon as have hired, I mean, I don't know, I've heard thousands of salespeople to be able to do that. So it's not something that companies are, or investors, I think are very, you know, very warm about to do. But I think the concept is valid. I think small businesses can look into, you know,

leveraging the trust, the knowledge that their customers have in them to, you know, get a little bit a bit more cash upfront. You know, for small businesses to get $10,000, $20,000, $50,000 upfront from their customers, that is sometimes the difference between making it or not. So the ability, the fact that they have now this tool that they can do it is very useful. I think cryptocurrencies, blockchain-based assets are going to make that much and much, much easier for any kind of business of any size to do that. Today's magic word is gift, GIFT.

Head over to let's talk bitcoin.com to sign in, enter the magic word, and claim you're a part of the listener award. So we've went over the gift card industry and how it looks now, what the problems are. Can you talk to us about gift block and how you address all these issues and make all that so much better with the blockchain? Yeah. So, I mean, there's a couple of things that I think are important. One is the use of public infrastructure at the core of every transaction and use of a share ledger with industry participants to drive interoperability. So right now we're not really focused on making Give Block an industry initiative.

we are open to, you know, and have conversations with other companies, but we're primarily thinking of how do we improve the current infrastructure that we have at GIFT with this technology. So these, the two main interest was to have kind of a standard ledger system that we could share, easily share internally within, other companies of first data as well as externally with partners and third-party developers that want to integrate with us. So initially, you know, when we started this thinking, we thought, okay, well, let's build this on Bitcoin. There was already some people looking at, you know,

private chains. But we thought Bitcoin was going to be, you know, probably the best place to secure some of these assets. And I think over time we realized that some of the scaling issues were going to take a longer time to be resolved. And so we decided over the course of the summer to switch to a private chain approach. And we still think that, you know, GIF Block as a private chain will work. work with Bitcoin, but as it is today, I think most of the assets that will be issuing on GIFLog will be issued on this private chain.

So from a technical perspective, how exactly does that work? Because is it just a fork of Bitcoin or do you use some other? Yeah, so we're using chain.com as our blockchain provider. So I think they would be, you should have them on the show to answer all these, all these technical questions. But it's not really, it's not a fork of Bitcoin. So, but it's, it's as close to Bitcoin as it can be without being a fork of it. That's where I'll, I'll, I'll, that's what I'll just say. I don't think, I think you should, you should just have them on the show to, to answer the question.

What we are very committed to is making interoperability with Bitcoin very easy. So what I think is very important is how do we take, for instance, an asset, how do we issue this asset on Bitcoin? Where and then from there, how do we move this asset to a price? private chain to do small, quick, fast transactions that comply with current regulations. And how does this private chain then maybe checks into Bitcoin on a every 10 minutes to provide a non-repeedable sort of a timeline of transactions? I'm so curious though.

So with private chains, right, I mean, you don't have like mining pools and stuff. So I presume you're going to have different, you know, different nodes that do the transaction processing. So are these all, would these all be internal to first data? Or do you try to set up a sort of a bigger network to get, I don't know, some of the companies issuing gift cards perhaps or third parties to also participate in, this sort of process of securing the chain? If I can just chime in here, Gim, aren't you using open essence protocol as the layer on top of Bitcoin for issuing these gift cards?

So that's where we started, but as I mentioned, we decided to move away from that over the course of the summer. So I think there's still going to be use cases for using open assets on Bitcoin. I think, for instance, for issuing an initial amount of initial amount of asset is something that I could see some businesses do on Bitcoin

as a one-of-one-time transaction, and then move some of these Bitcoin to a private chain, effectively making the private chain a side chain with a much more, much faster settlement mechanism. And without having to implement, you know, censorship around anti-censorship, right? As some people would say. So on a private chain, there's there's a number of rules that we need to you know that we need to comply with in prepaid in terms of velocity of transactions as well as brands are very keen to understand where their assets are being used. So for instance if you're Disney you don't want your gift card to be sold on the porn site

right so how you can maintain some of these things and monitor these activities is important on a for the gift card industry right to answer your question what we want to do is we have this vision for having either a single chain or a network of chains of connected chains that the gift card industry players would be using. And so we want to have these conversations. But initially, it's much more about just us putting a product out there that's going to deliver a much better experience and security for end users. So one thing that we were very much focused initially on solving the security problem.

But as we started to implement things, what we realized is that the model of the Bitcoin model of the redemption model, if you want, is very interesting and can be used to provide a much better experience. So one thing that we demoed a few months ago and also recently at Money 2020 is how we can do basically push payments, how push payments, which is how I describe Bitcoin payments, how these push payments can be used to do things that we are not possible before and that other wallets cannot do. So a good example is, for instance, doing multi-asset payments. So on a private chain that has support for an infinity number of assets, it's very easy for to kind of have a slightly different version of BIP 70, where the merchant requests you an amount. And in addition to this amount, they provide you with a list of assets that they're willing to accept. It's very easy for the wallet to retrieve that in a machine-readable format and then look at it and then build a

transaction that's going to be satisfying these requirements and push that transactions to the blockchain. So effectively what you can do is you can do a multi-asset transactions. In one payment, one push, one click, you can redeem a gift card, a pay. payment with your bank deposits, your credit card account, your loyalty points, etc. Whereas you should look at the current experience even for what it's like, you know, Apple Pay, you may have to go through each card individually. So that I think is, you know, very valuable. I think people don't want to have to go through this hassle of selecting all these different

cards. The other thing that's very interesting with push payments and blockchain-based payments is that the user is in control. I mean, the efforts of Bitcoin is that I own my assets, I do what I want with it, and I don't have a bank. They're secure by my, I can choose where I want to, you know, secure them or deposit them, if you will. And when I pay, I decide what I send to the merchant. So in this model of push payments and gift card assets, I may want to be able to review on my wallet, which asset do I want to use where.

And so I think that is very important because I don't see that, I think there is going to be a lot more assets that people are going to be using on a daily basis. I think right now maybe we have five or ten assets in our wallet. Maybe we'll have 50 or 100 or more. So it's going to become very difficult for providing an easy-to-use experience on the point-of-cell system. So the point-of-cell system is going to have to become something much leaner that delegates much more of the decision to the wallet. And the wallet is going to make a lot of intelligent decisions about which asset I want to use or do I want to swap an asset on the fly with something else, maybe sell one

by one to make a particular transaction. So in terms of user experience and the security model that we can expect in this sort of new system as opposed to the gift card one point. system. If, for example, if I have a gift card on my phone and my phone gets stolen, is there any way for the merchant to be able to redeem that or perhaps invalidate my gift card? Like, what's the level of control that the merchant has on these assets once they've been issued? Is it like Bitcoin or is it something more like what we've talked about recently with the open chain protocol where essentially there's a validating no that has control? over what can, you know, what assets or sorry, what addresses can send assets or not? Yeah, so I think it depends on the brand requirements. I think some brands will want to have

very tight control over what can be done. And so you may, you, you probably want to enforce some of these things at the private chain level with a signing node. And, you know, some others will be much more free about how they want their assets to flow. So I don't think there is, I think some rules are going to be enforced at the network level on the compliance side. I think some rules are going to be enforced at the wallet level. So the idea of a private chain is also going to be able to maybe leave it. limit which which wallets are authorized to connect to it and make sure that only certain

wallets that have passed some compliance tests are accepted on it. So with that mechanism you could enforce some rules to some, for instance, I don't want my gift card to be sold on this type of marketplace. The way you're going to enforce this rule is, I think, much more likely to be done at the wallet level than at the network level. And regarding the ability to exchange different gift card assets, so we talked about this at the beginning of the show, can you go into more details to what it would look like if we'd have an exchange marketplace where you, with your Starbucks asset or your Starbucks money could change, could exchange it for like Walmart

gift cards. Is that something that would be desirable or even possible in this model? Can you talk about that? Yeah. So I think from an end user standpoint, it's very desirable to be able to take any gift card asset and sell it, right? And it's very desirable for someone else who wants to buy this gift card as a discount to be able to buy it from them. So there's value there. I think the other side of that is that if you're, again, if you're, we're talking about brand money. So if you put yourself in the shoes of the brand, you may not want to have your assets

being freely traded at major discounts by people. So I think the way it works today is that the brands provide access to their assets on certain conditions, right? That resettlers or exchanges or distributors are going to comply with some of the rules and are going to make sure that their resettlers are going to comply with these rules as well. So I think I can see a, you know, what a, what a centric model. that some of these things will be preserved. So I'm not expecting to have a free-for-all kind of space where people will trade any asset for any asset. I think it's much more likely to look like what exists today,

but with a much higher level of security and understanding by the brands of where, what's going on, with their gift cards, right? So right now, for instance, on some exchange sites, like, I'm not gonna give any names, but I don't think the brands like that activity a lot because they basically have their gift cards discounted. And people may buy gift cards from other people

that may be criminals. And so when they are made by gift cards from other people, and so when they're, go redeem it, it doesn't work. So I don't think that's something that brands want to promote, but if the transactions were secure, maybe some of them will change their mind. It's unclear right now, to me, what exactly is going to happen in the exchange aspect of gift cards. What I do think is that people, when we think about putting assets like that on a blockchain, the first thing that people think about is exchange and trading.

But there are much simpler use cases that I think are very interesting. If you think of a merchant issuing, not a merchant, but a manufacturer of a service or a product issuing prepaid credits, Typically, this model has been limited to merchants that have their own retail location. So you buy a gift card or prepaid account from a provider, and then you redeem that for goods and services of that provider. But I think without talking about trading and exchange, what this blockchain-based model is going to allow you to do is to redeem these assets at other locations, right that are not that are selling the products of the manufacturer but are not part of the same

company right so example is Starbucks credits being accepted at other locations or doing Coca-Cola cook dollars and having them accepted at McDonald's right so Coca-cotta has millions of places in the world where their products are sold but how do they engage their customers, you know, around a prepayment account if none of these locations are going to trust the assets when they are presented to them? So I think having assets issued on a blockchain means that each merchant can now trust that authenticate that they are, are receiving valid assets from this merchant and then they can easily trade them back to the merchant for something else. So I don't think the trade the trading may not be something necessarily that's going to be look like a trading desk but the I think there's going to be

some a lot of these new scenarios enabled by blockchain-based assets where there is some trading involved. Yeah, I think that's an exciting use case or the use case which is like, let's say you have a bunch of organizations that say, okay, well, we're too small to do prepaid cards on our own, but you know, if you get together and say we do like consortium and accept each other's things, then maybe that's something that can work too. Yeah, exactly. So I mean, that's where when I when I studied working on Burundbox, this was kind of our ideas, is, if is as a merchant I can issue some prepaid credits but you know maybe they're not going to be trusted so how can I pull them with other merchants into a create a new

asset out of a smart contract based on other merchants prepaid credits and then we have some rules in the smart contract if any if any one of us fails and that that asset it's kind of like a derivative, right, of a variety of assets as value to, may have more value to consumers because now they know they can use it at different places. They know that if one of us fails, they still can use it, right? So I don't know. I don't know what's going to happen there, right? I think right now the most likely, the most promising scenario I see is just being able for

business to issue assets and having these assets to be used at a ton of different locations. I think to me that's that's the most exciting scenario. Let's take a short break and talk about hi.me. Have you ever tried watching streaming TV from abroad? If you have, you've probably been greeted with an annoying error message written by some idiot lawyer telling you that you have no rights and you can't watch this program from outside the country. This used to happen to Sebastian all the time when he was in lonely France trying to watch his favorite moose hockey game in Canada and you wouldn't believe how angry he got that's where most of his gray hair comes from.

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and you can sign up for that at height of me slash epicenter. Now, if you use URL and if you decide to go premium down the line, it's going to get you 35% off. And the premium plan gives you a lot. It gives you unlimited data. You can use as much as you want. You can connect up to five devices, so your whole household fits on the plan, and you can use any of their exit nodes all over the world,

and they've got like 30 of them. And of course, you can pay with Bitcoin. So give it a try. We would like to thank Haight. comi for their support of WebSend of Bitcoin. So as we mentioned in the beginning, you've been working in FinTech for a long time. And so I'm curious at the time, what was the sort of the view inside the fintech? I assume that the sort of nascent fintech industry.

Did you guys have the expectation back then that, you know, this was going to like, change the world in a short time. As today, right, we have that. In the Bitcoin blockchain space, there's this expectation. Like, this will change. And everything is going to come very fast. People will be thinking like, oh, what the hell happened here? How did I not see this coming?

Did you have a similar experience back then? Or was perspective different then? Yeah. So I studied in FinTech in 2004. and mostly working with, you know, around web services implementation. And I think there was a similar excitement at the time that, you know, web services were going to, you know, change banking and change money. That finally, banks were not, we're going to lose their power.

People were going to be using apps and to connect to them. would be basically a provider of a commodity service, right? And, you know, in terms of interoperability, interoperability, everybody thought, yeah, we're going to be able to more easily move money around, trade different assets with each other. And from my standpoint, there was, I mean, very little of that, or none of that has happened.

So I think the one thing that I mention sometimes is that's different this time with blockchain is that at the time there was opportunities for people to do things on their own and not really look at the true interoperability. So some of these financial instruments can be complex, and unless you actually agree on the semantics, you really don't interoperate, right? So I think with blockchain, we're forced to really rethink the lower part of the stack and at a very simple level of basically issuing an asset and transferring assets. And I think at that level, because it's very, very simple, we're going to see a lot of interoperability. I think at the smart contract level maybe that's where we're going to see a lot of challenges

in interoperating between different assets. Back 10 years ago, we could agree to disagree. I think right now with blockchain, it's really about agreeing and considering. consensus and automating reconciliation between different chains. I see a lot more. I think we have a, there is a real chance today. Now, I know, you know, I was at Money 2020 and there is, recently, there's a lot of excitement about this, but I think it's putting into question so much when you think about

about it. It's a I think there is a one thing that I tell some startups is that it's it's it's right now we've seen some excitement we've seen start doing very excited about Bitcoin and then as the price faded a lot of companies said oh we're we're doing blockchain now and and just focusing on really working with financial institutions So there's a ton of companies that have emerged in the past year doing that. The problem is that financial institutions are extremely slow. So I still see a lot of value in working very closely with startups trying to change the financial industry from the ground up. because it's very difficult for an existing player to put into question some of the things

have been doing for many years. So I think the right approach when you work with all these financial institutions is to try to work on new projects, right, to try to work as if you are creating a startup from the inside. So instead of saying, yeah, let's move things to the blockchain. to really look at, okay, what are the new things that these blockchain technology enables? So I'm not familiar with, very familiar with NASDAQ, but what NASDAQ announced was a private equity market, right? Which, I don't know if this was something they were very much known for before.

Maybe it's a brand new market for them. So they are not really saying, yeah, we're going to use blockchain for moving all the existing. market activities that we have, which was built on systems over the past 30, 40 years, they are building something brand new. So I think that's something that will probably see happen elsewhere. It's much more likely for a new startup that's part of an existing financial institution. So I think it's more likely for a large bank to say, okay, let's set up a new digital bank that's going to be completely built on blockchain,

then to say, yeah, let's integrate blockchain into our existing systems. That would take a longer, much longer time to do. So talking about the blockchain topic or the Bitcoin topic, but let's say, well, actually with both of them, so when you think of, first of all, of Bitcoin, where do you see this going? Where do you think it's going to have the biggest effect five years down the line? And similarly, where you see the movement of blockchains and smart contracts, you know,

try the attempt to integrate that sort of in the base layer of our economic infrastructure. Where do you see those two movements ending up? You're saying the Bitcoin movement and the blockchain movement? Right. So, I mean, I think there's, I don't, maybe you see those as the same. I don't know. They're certainly related, of course, technologically, and there's certainly a lot of interoperability that's possible, but I think they are trying to solve kind of different

problems, at least the way I see it. I think fundamentally when you do a financial, like a ledger, it doesn't mean a lot without actually, if your ledger is about being accurate and resilient, et cetera, do that outside of any other ledger to me doesn't make a lot of sense. So, you know, the way that companies and banks do reconciliation today is very manual. So I actually see, I think there's a lot of the value of blockchain is how they're going to help us automate reconciliation between different, different ledgers. And it's not just for financial assets, right?

applications for supply chain management, for instance, are very interesting. So I really bind to this idea of an internet of chain with potentially every company having a chain. And I think that Bitcoin is going to play a key piece of that. I don't know if it's going to be a central piece, but I think it's going to be a major player in that Internet of Change, if Internet of Chain, if only because, you know, every chain may want to commit to it on a regular basis, or because it will become sort of the default asset that you use to do, you know, interchain trading, right?

that's so to me they are they are related the other aspect is that I think a lot of innovation came from Bitcoin a lot of technological innovation came from Bitcoin especially in the wallet space and what's very exciting about Bitcoin to me is that it's it's the first time that we have an open source financial stack And a lot of the innovation we see now outside in this real ledgers is been benefiting from that. So I think that we're going to continue seeing a lot of innovation on Bitcoin because of its permissionless aspect that will be borrowed by private chain. I don't completely put aside the possibility that after several years of experimenting with blockchain and doing some very valuable work with blockchain that we may see a revival as Bitcoin starts

to scale, or Ethereum starts to scale, that people will go back to. permissionless chain. I think there's a cultural change that needs to happen there, but yeah, in all cases, I really see Bitcoin playing a central or public chain playing a central role in this internet of chains. I mean, if you look at repo, for instance, repo was thought originally as this idea that you could, you know, you could have a lot of different people issue different assets.

and then you would have some kind of protocol to do routing, and you'd be able to route any transaction from any node to any node. And when the new repo, so this was the original repo, before repo.com, the new repo emerged, and they created a currency as part of it to facilitate trade across nodes. So maybe Bitcoin will play this role, meaning that if there is no liquidity available between two nodes, on multiple different chains,

maybe Bitcoin will be the default asset to execute the transaction. Cool. Yeah, that makes sense. And I think that's definitely a possible scenario. That would certainly be a great outcome for Bitcoin. So, Kiyom, thanks so much for coming on. It was very interesting talking to you with one of the projects that's best known in the Bitcoin space, no gift. Many people love it a lot because, you know,

sort of there when people wanted spam Bitcoin, there wasn't much options, but actually also doing very interesting stuff, sort of thinking about how, you know, gift cards and prepaid and all can work better with Bitcoin. So thanks so much for sharing your perspective. Thank you very much, guys. And thanks to our listener for joining us.

So we are part of the LTB Network. you can find all lots of great shows about Bitcoin and cryptocurrencies on let's talk bitcoin.com and we put out new episodes of Episandandand Bitcoin every Monday and you can subscribe to those on iTunes, SoundCloud of course in your favorite podcast app or watch videos on YouTube.com slash episode of BTC and if you're a loyal listener so we're still doing this bribery contest basically you just write a review let us know so send me to a show at episode and Bitcoin.com and we'll send you a t-shirt. So thanks so much and we look forward to being back next week.