The Pomp Podcast - #240 Christoph Strnadl - The Intersection of Distributed Ledger Technology and IoT

Episode Date: March 13, 2020

This is episode #5 in the Automation Series. You can learn more about the Automation Series here. You can learn more about IOTA on their website. Christoph F. Strnadl is the VP of Innovation & Architecture at Software AG. In this conversation, Anthony and Christoph dive into the intersection of distributed ledger technology and automation. Specifically, around digital currencies, digital wallets, machine to machine transactions, and how distributed ledger technology will empower the full potential of automation.  =============================== If you enjoyed this episode and want to stay updated on everything Bitcoin, blockchain, and crypto. Check out Off the Chain newsletter by visiting offthechain.substack.com and join 35,000+ other investors currently subscribed to my daily investor letter.

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to Off The Chain, simply the best podcast in crypto. Let's kick this thing off. The following episode is part of the Off The Chain automation series sponsored by IOTA. The goal of this special series is to explore the intersection of distributed ledger technology and automation, specifically around digital currencies, digital wallets, and machine-to-machine transactions. My core belief is that every stock, bond, currency, and commodity will eventually be digitized and distributed ledger technology will empower the full potential of automation to be realized. IOTA is the sponsor of the automation series. Their mission is to support the research

and development of new distributed ledger technologies, including IOTA Tangle. The IOTA Foundation encourages the education and adoption of distributed ledger technologies through the creation of ecosystems and the standardization of these new protocols. You can find out more about the automation series and IOTA in the show notes. Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression

of his opinion. This podcast is for informational purposes only. All right, guys, bang, bang. I've got Christoph here. I'm super excited to talk to him about a whole bunch of things. So thanks so much for coming on and doing this. Yeah, thanks for having me. I'm enchanted to do that. For sure. So Christoph, you've got a very different background, I think, than most people who come on to the podcast so let's maybe start there of what you did kind of before you got to software ag and then we can talk about the company and what you guys are doing and how you see blockchain yeah i absolutely love to you know i've been in the in the software industry for about 30 years i started as a self-employed developer at the time when you had the first pcs and i was

actually into standards implementing standards that might be interesting later on i implemented an edi converter in in c and i sold it commercially so we had about 50 installations of that thing and that was the time when you had to connect via modems to the central authorities and people were phoning up and complaining that the red lights on the modem would signal errors when instead it was the functioning of the device so i i know a little bit of development but then i I studied theoretical physics at the Technical University, which was about electrons in liquids. And that has kind of influenced my thinking that had a lot to do with computer experiments. So we invented some formulas and checked them.

We simulated them on computers. At that time, we also brought our institute to the Internet. remember that was before 1991 we didn't have the world web web invented so it was anonymous ftp it was uh it wasn't discord at that time it would have been called or read it it was called use net news so history is going to repeat itself and i knew a little bit of networking stuff i picked up a little bit of TCP IP stuff, which then 25 years later proved to be invaluable when we did a little bit of IoT messaging debugging. So it was the networking thing which drew my attention. And then I changed to Atos. At that time, it was a subsidiary of Philips, the Philips

communication and services data processing provider, where I immediately was responsible for new stuff we had a screen phone project i was the first one to deliver local area networking projects you know with the switches that you still had ethernet yellow cable for those who who knew that i still remember that and i was the first one to pick that up and we were very successful i became leader of a business unit and then which is already proving to be beneficial is we founded a strategic IT consulting department where I developed a few methods and concepts which come in handy. I wrote some papers, actually, which have been quoted over 100 times

about systematically aligning business and IT. And I think that is also what still makes my background interesting with IoT. It's always, and also with blockchain, And it's always you have business needs, you have technology which could fulfill that. How do you match that? There is an impotence. There is resistance. They don't fit always together so neatly.

So that's actually my profession. And then after Atos, I joined Software AG because I've never been into software. It was something new. I always have to change to something new after a couple of years. And there I was responsible as a chief IT architect for our integration offering. This is classical enterprise integration, and I picked it up very well. You know, it was the time of service-oriented architectures. It was a new thing again.

And with the background of a theoretical physicist, I'm not afraid to talk about meter models, about architectures, about, you know, the difficult stuff. If I don't understand it, I'm a little bit, you know, exaggerating and I have a big mouth. my wife would know how to counter that so yes if i don't understand it let's work together not just me but there are other people out there who know as much as i do and together you can move you can push forward organizations and in that respect i we then founded i think two one a year ago the cto office it adds off to reggie where i'm responsible as the vice president for innovation and architecture about for the for the thing how new stuff gets into our product of course we have research and development we have people who are developing the software

doing product roadmaps but usually those products roadmaps stop 15 18 months in the future but we know that there are technologies like blockchain like artificial intelligence maybe quantum computing which take longer than just 15 months for implementing you need to have a platform strategy how to increment implement that into our stack it's not just a single product we have a platform and we have that on-premise and and in the cloud so it's a little bit more difficult than just writing and a driver for that and this is where i'm responsible and also taking care of iot and distributed ledger technology stuff the title you know vp of innovation and architecture already signifies that we are not indiscriminately adding new stuff to our software so the innovation

is not restrained just by budgetarial issues that of course is always a topic but also by the long-term strategic architecture we have where do we want to have the the platform in five years are there any visions and actually i've been doing i've been coming up with visions it's of was internal. But we have a picture of that. And it is interesting, the innovative part of that picture is, especially with regard to completely new technologies, that one person or two person cannot predict the future. It's always path dependent. We know that people, the customers will influence the way how IOTA evolves, how other artificial intelligence things evolve. So it's a co-evolutionary field of play innovation and architecture then interplaying and i'm a very

structured person so if you have ever seen my my notes just have a look at my twitter profile these are live examples from workshops i do as an architect architecture helps me and our clients and our top management and the developers to organize our thinking so the combination of business and it and technology is has been highly interesting for the last 25 30 years and i think it's never gonna stop honestly yeah and so before we get into what you guys are doing at software ag maybe give us some insight into kind of the decision to go join the company right you'd spend a lot of time kind of building and starting companies and and in more of an entrepreneurial kind of smaller organization environment and then you go when you join software ag which

for those that don't know, is really, really large, right? It's got 10,000 customers over 70 countries. I was reading online that it's the seventh largest software vendor in Europe and the second largest in Germany behind SAP. It's just a massive company. What was that decision framework like and kind of why make the jump to Software AG? Yeah, actually, I was coming from a large organization myself. When I left Atos, it was about 70,000 employees. So I have a corporate background. It was only in the beginning that I had a very small self-funded company. But after that, I'm a pure corporate guy. So the question was, one way how to see it, why to move from consulting and services to software? And the honest reason was, I've never done software before.

It was just interesting, new, and it was integration. There was a lot of new things coming and happening. I didn't want to go to SAP because that's boring. You know, it's like the purchase order and you implement that with ABAP. I mean, it looked boring from the outside. Integration looked like no one really knew how to combine all the different applications. You ended up with hundreds of them. So that looked interesting to me.

And I've never done software before. And so maybe give us an overview. As you sit in kind of the innovation office, help us understand, like, what are the new technologies that you guys are spending the most time on outside of blockchain? So blockchain we'll get to in a second. But what are the other technologies that you guys are spending a lot of time on talking to customers with, et cetera? Yeah, definitely. it's IoT and the industrial internet of things which comes

in phases and many companies still are in the first phase asking us and talking to us can I connect that device or have a very large machine it's 20 years old how can I connect this beast of a machine there are no sensors built in and I'm not going to exchange

and throw it away for just something new it has been working flawlessly for the last two decades how do I bring those old robust machines to the internet of things and there are a lot of proven technologies what is interesting here is the need the requirement for edge computing is gaining more directions we can fulfill that you know the hyperscalers have have had difficulties in the past they are catching up however so you have something local you have an iot platform in the cloud combining that is where

We see a lot of discussions going on, but honestly, IoT has been invented 10 years ago. The new discussions are around how can we leverage artificial intelligence? Can a machine learning algorithm learn from the mistakes of the operators, from the errors, from the signals, the malfunctioning signals from the machines? You know, predictive maintenance sounds easy on paper. But if you go to the machines, you look at the limited number of sensors you have, it's really almost an engineering and philosophical thing how to find the formula, the rule for indicating that something is going to need maintenance before it breaks down or before it's trivially, I don't know, a bioreactor that gets too hot. That's trivial. And so a few of our tools, TrendMiner, for instance, already incorporate artificial intelligence to support the end users doing that. Because many organizations say, I don't want to go to the IT department. It takes six months before I get the specialist. So how can I self-service my analytics, my artificial intelligence things?

And we can't answer all of that today, but this is where a lot of discussion is happening, because the implementation of true predictive maintenance algorithms is hard work, and there is no substitute for hard work. You cannot buy that somewhere on the shelf. So that's artificial intelligence, also for using it in our own platform, like predicting the next step of the users. I mean, we have 10,000 users, 70% of the top 500 or Fortune 1000 use our integration scenario. I mean, our software knows how SAP systems integrate with cloud systems or how your local database integrates. We have tons of examples. And for us internally, how can we capture that, analyze that, you know, graph databases and all that thing, an engine? How can we use that wealth of neutral information?

We are not collecting personal data. It's just how are devices, how are machines connected to each other? If we can collect all these, and we are in the process of setting that up in the technology and the CTO office, but that's also on the strategic horizon, that would tremendously help the customers and ourselves. So that's besides distributed ledger, some of the topics we are discussing. For sure. And one of the things that I think has been a recurring theme on the podcast is a lot of people talk about these individual technologies as kind of silos. So they say, you know, your AI strategy, what's your blockchain strategy, whatever it is, especially for large companies. But all of these technologies are interrelated. Right. There's definitely kind of a collision. And a lot of the products that are being built today take various aspects of the technology in order to build that final solution.

I'm assuming that's what you guys are seeing and what ultimately led you to start looking at blockchain in relation to the other technologies. Absolutely. Software AG started in the 1990s as an integration company, you know, on-premise integration of the 100 or 200 or 500 of applications. That's going to explode the requirement for integration in the software as a service world. We have a tsunami of cloud applications. We're not talking about 500, we're talking about 5,000 in large corporates. I mean, 3M, one of our customers, has simply 150 plants. Imagine every plant having 10 cloud applications, I mean, which is obviously totally an underestimate.

So we have thousands of those applications. And this is where software is honestly, this is really world class offering in our integration. So integrating yet another technology, which is looking like a silo, like AI, like blockchain, was a natural thing for us to do and think, how would we be able to best integrate that into kind of a single cohesive integration platform? Because it needs to be bigger than just a single piece of software. For sure. And so how do you guys see blockchain itself in terms of where customers are, you know, kind of interested in using it? And then what is your guys kind of evaluation of blockchain in general in terms of how it can fit in some of the products you guys are building for folks? Yeah, we started thinking about blockchain in earnest, I think, three or four years ago with a little bit of technology prototypes that fit into our products, but also with a strategic assessment. What type, what beast of technology is distributed ledgers? And it was very clear that DLTs are in an early stage of the technology readiness, despite the fact that the Satoshi Nakamoto paper has been published 10 years ago or 11 years ago.

So it's an early stage technology with, and that's important, with nonlinear networking effects, winner takes it all, or strongly increasing returns. And network effects mean, from a strategy perspective, if you do a little bit of MBA strategy talk here, that you cannot think, you cannot come up with a point estimate of the future. You will not be able to succeed. There will be equilibrium. It will depend on the path customers are taking. There will be punctuations where standards have been set and everything will change. So the strategy under such a radical uncertainty cannot be to sit together and devise the best estimate of the future point, but to create awareness internally and externally to hedge some options like investing into IOTA on various levels and also doing experiments, thereby influencing, obviously, the evolution. So what we see is that customers are very interested in talking about blockchain, but they still are looking for a compelling use case. We have, if you talk about private permission blockchains, we have technical feasibility in many cases. But what is completely missing is the viability. You know, which customer is going to pay money for a technology when, and that's holding blockchain back, when, as a matter of fact, there are other proven, tried, cheaper solutions out there.

So the problem for blockchain POCs and other ideas of trying that out is that in many cases, you get other cheaper solutions using a cloud offering. Take Facebook Libra. That doesn't need blockchain at all. I've written a blog where I demythologize Facebook Libra. That's not a blockchain. Any database technology could do that. How many? A thousand transactions per second? That's ridiculous. Our own Adapass database can do one million. That's blockchain just for surfing the hype. But this is the problem for our clients. They cannot invest in hype just because it's funny to have or you get in the crypto community, you have a lot of traction if you do something with blockchain. We need to establish viability. We need to find someone who wants to pay, who is willing to pay money. and the only way how to find it is to to provide an opportunity to solve a business problem with blockchain which no other existing technology can solve at the same level of non-functional

requirements at the same level of costs and that's so tremendously hard to come up with and that also explains where there are no and i i challenge the world whoever's is is hearing that i I'm not aware of a single productive blockchain installation. And I don't mean that you have sent one Ether transactions or one smart contract. I mean that if the blockchain solution does not work, then some manager gets called and you lose money. You lose real money. I've never heard of a single highly productive like an SAP system or a messaging system, highly productive use case. So we are still looking for that.

And for us, for SoftwareGD, industrial IoT space with the pressure on operational efficiency, with the partnering, with the supply chain, the logistics problems, the many but not too many parties that would present the best kind of estimate of where blockchain would be able to become the only tool available for solving some of the business problems. For sure. And then one of the things that you mentioned earlier as a major focus for you guys is IoT and kind of as an extension of that automation, et cetera. Maybe let's talk about kind of how you see that area of software and kind of machine-to-machine transactions transpiring maybe over the next like five, ten years. What are you guys so excited about there? The first phase of the Internet of Things and also Industry 4.0 or the Industrial Internet is obviously connecting the machines, the devices to an IoT platform and sending data. But already at that point in time, sending data, you immediately have the problem or you need to solve that problem. How do I identify uniquely the device from which the data comes?

So device identity is something which immediately comes into play. And of course, if you have a closed network, it's easy to solve, you get some device IDs, it's difficult to manage. This is why IoT platforms come into play. But if you extend it a little bit to a more complex supply chain, who is managing the different IDs of the different companies? How do you do that? And for that blockchain technology or distributed identity systems, decentralized identities can provide and honestly are the only technical means able to provide that identity. That's number one. Number two, obviously, if you do some serious business processes with the data you get, then you need to make sure that the data has not been tampered with.

So data provenance, integrity is paramount. And SoftwareG has founded the Atomos Consortium, where we are gathering around 10 medium-sized champions in the manufacturing world. And they are thinking and they are operating, actually, via one IoT platform. But they have relationships with other suppliers. And sometimes one of the use cases touch the logistics, you know, repair jobs. It's essential that the data which comes from a device, which potentially triggers a repair ticket, which potentially triggers costs somewhere, that this data has been vetted, that it's known, that it really originates from that machine in that plant because there is money attached to it. And the shop floor is very cost sensitive. So, you know, operational efficiency as a measure prevails.

So the question of linking the data really to a single device solves a business problem, which right now can only be solved via replicating databases, complicated trusting many different parties, setting up a complex network. which can be implemented much more easily if you go to blockchain but if you look at the machine economy and you look you combine that with 5g for instance where you have local cells it's not always the case so it needn't be always the case that one device talks to an iot platform and the iot platform does something that gets a new parameter for the device sends a message to another device the machine-to-machine economy and communication especially with the advent of 5g and local cells would be able to happen locally so that one machine sends communication items i don't know the information about the kind of the stock kind of warehouse or whatever fuels

supplies that they need, that these communication types could run locally and only interact sporadically with an IoT platform. So that's something these kind of machine meshes, which will come in the next five to 10 years. And at that level, you need something to account for the transactions. This is where tokens, in the case of IOTA, obviously it's the IOTA token itself where native tokens would come into play to provide an accounting and native accounting

means how to reckon you have given me that i'll give you i'll owe you something else that would complement the messaging capabilities and and so as part of this like as you think through um kind of this rise in machine to machine transactions etc one of the things that i've been thinking a about is uh is the application of triple entry accounting right you basically need some um some kind of blockchain or uh shared ledger to um keep track of everything uh especially when it's automated right the transactions are microtransactions and they're happening so quickly etc sounds like you guys generally agree with that and then it gets into okay we need some piece of technology uh in order to to kind of serve that purpose what's the process you go

through to evaluate which one of those technologies uh you guys end up either going with or or you establish that you like yeah the the the number one threat um for blockchain solutions is a central cloud uh offering it's always cheap it's it's always cheaper and if the parties uh trust each other to the extent that they subscribe to the same cloud provider and that they find someone who is able to manage that then a central cloud solution is always cheaper than a blockchain solution that's a number one and the second defining element is that you need to You need to have a situation where the participants in that business process are not able to find an intermediary. They do not trust anyone, any third party, and it would be too cumbersome to have them in advance agree on such a party.

In Germany, we see that, for instance, there are a lot of independent insurance companies from the government. you have to be insured as a worker, but they are all peers to peers. So if you have a peer-to-peer situation and you do not have a natural leader, and then the peers are not two or three, but five, 10, 20, then it is very hard to have them agree on something on a single provider and have negotiations with them. 20 person, 20 partners negotiating with one cloud provider, that's gonna be we see that with other most that there are limits to how far that can go and for that blockchain and the standard contracts defined by the particular blockchain api potentially enhanced by smart contracts that would be easier to convince the departments to hook there so you

need to have a kind of a bunch of of peers who are so many that it's improbable or highly ineffective and costly that they will agree on a cloud partner if that's if that's the case then blockchain that would be better suited than other technologies there are if software he is is uh 51 years old now and we come from the database area so many of our internal um well-versed and I wanted to say older, you know, the more experienced database guys, they say, hey, Christoph, blockchain is just a replicated database structure like in new clothes.

And I said, yes, it is with a few tweaks, but if that's what solves the business problem, then however you call it, replicated, distributed, peer-to-peer consensus mechanisms, the customers of ours are not interested in how the technology is called, but whether it solves economically the business problem.

And the blockchain can do that in that type of setting. So we really make sure that there are no competing, cheaper alternatives available. And proof of concepts are one way how to do that. Typically, however,

we rather look into the business process first and do an evaluation and we actually would do two calculations how much would it cost to implement that in a non-blockchain technology and how much would it cost also in the long term like three or five years to implement that in blockchain so that's a really a business case a driven approach and then when that turns out to be positive then we go into a proof of concept but only together with customers we're not doing that uh alone and only in the form of co-innovation uh projects for sure and so maybe give us a uh an understanding as best you can i know some of this might be confidential or sensitive but help us understand how you're currently working with uh clients and integrating uh into their

existing systems we're building new products for them uh at the intersection of iot uh blockchain and automation like what does that actually look like in practice real world use cases yeah in the real world we start with our software we have an iot platform cumulosity it's uh together with an american uh the one that the best in the world so we would always look how to integrate the blockchain capabilities into that iot platform i've talked about edge computing we have an edge component for a particular use case we would look to a customer we have ideas where blockchain could sit but we validate those ideas together with a with a customer that it makes sense in a productive or production ready scenario so we have the platform and then we augment we extend the

available functionality of the platform by suitable blockchain code like running a node like writing an adapter like integrating the blockchain data model into our own persistence layer and we have two major product lines where we are going to do that one is the iot platform cumulosity and the other one is the the classical quote unquote integration stack with web methods also a world leading classical enterprise application integration slash service bus slash hybrid integration platform and there you face similar discussions you need to interface to some blockchains probably also to two or three blockchains at the same time where our software can provide a link kind of a bridge between the two blockchain realms and at the same time

connecting to your enterprises actually we have come up quite early with a vision where we see software he could position itself in the blockchain area and that is if you if you forgive me the here we want to bridge the on chain with the off chain world in in the case of iota the chain is obviously the tangle so we want to bridge the on tangle world with the off tangle business world of the other applications that is the vision we have which needs to be We tested every single step forward together with the customer in a co-innovation mode. So we augment our platform with blockchain-specific capacities. And that has varying degrees of difficulties.

If we just write in blockchain adapter, that's easy. We have done that in 2016 in a test environment. So it's uninteresting. The interesting part would be smart contracts, decentralized identifiers, which tie in and would need to be integrated at the core level of products. If we really use DIDs as the native means of identifying devices in cumulosity, that touches the core of our software. So we are looking for use cases together with customers, whether and when that makes sense. So this augmentation, this actually integration in the sense of then we run software, the node software or communication software inside our stack. That's how we would address and approach that.

Got it. And what do you see as the big challenges or the big needs to see further adoption of this by software AG customers? As you begin to incorporate blockchain technology, what are those big obstacles that you guys are really focused on overcoming? We need to find a use case, a business requirement where there is no other alternative than to use blockchain. That's the difficult task. uh that's easier said than than found because if you if you do an honest calculation then many if not all of the business cases even the you know the supply chain tracking food chain tracking honestly you can do that with a cloud application anytime there is no or i have not seen any true need for running that via a blockchain i mean it's it's hip

And obviously, you can do it with a blockchain, but where is the compelling reason, the reason why no other competing technology, which are all cheaper and proven and tried, where is that case? We are really, and our customers even more so, we are not desperately, but we are honestly looking for that. And it seems that this use case, this compelling case is very hard to find. Despite all the hype and all the many, I don't know, 1,000 startups in Silicon Valley looking into whether they can find that needle in the haystack. But we are confident that in IoT, we will see that. But we have not, and our customers equally not, we have not identified it yet. For sure. And then I know one of the things that you guys are really interested in is kind of this standardization of IoT automation and protocols. Maybe talk a little bit about where that importance of standardization came from and then kind of how you guys are evaluating the various companies that are doing that today.

Yeah, thanks. The standardization, especially in IoT, or I should say the lack of standardization is a pain in the ass, honestly. There are thousands of different adapters and protocols. So it's a nightmare to implement. On one hand, it's good for us because the demand, the requirements for our platform and the services and integration services of our platform go up. But it's honestly, it's a very technical step. Nobody's interested in how many adapters you use to connect your machine. That just has to work. It's a conditio sine qua non.

There's no business value in itself. So the more you can standardize things, the easier, the more energy and budget you have available to look at the business results, the business process improvements. And that's even harder because writing an adapter, that's just technical stuff. You put me and a few developers, you sequester me for a week and we have it. But changing your business process, I can't do that alone. I need your guys and the customer guys. That's change management. That's the difficult part.

And that's where 100 times the value of such a process improvement solution, supply chain, whatever, lays. So that's the difficult part. But now everyone spends so much time looking at how to connect things that the budget is then spent. I'm exaggerating a little bit. That the budget is spent and you don't go looking for tough integration, business process integration things. So the more standards we get, the easier it will be for everyone to implement the technology layer. And if we look at, especially in IOTA, the things, the talks they had, the agreements with the object management group, Richard Soley, that they are working on establishing IOTA as a standard for the IoT, that would be of tremendous help. And I think, to quote Richard Soley, his experience is from, I think, 25 years in standardization.

If you have an open standard, we do not want just a US standard. We do not want to have a European Union standard. It needs to be one standard worldwide. If you have an open standard and open source for implementation, so then anyone could do it. Of course, we would do it, but anyone else also would be able to hop on that standard, that these two elements will lead to mass adoption. And then we will have solved the first hurdle, and that is how to economically connect to that ecosystem. If we can solve that, and I think IOTA is one of the few, if not the only one, who is working in that direction, then a lot of momentum could have been or will be gained, actually. For sure.

And obviously, you guys have spent a lot of time looking at various things and I believe think that IOTA can serve as that standard. And I think my interest in this is I am very convinced that we will need a blockchain or automated triple entry accounting to facilitate machine to machine transactions and IoT and automation space. What was kind of the part about IOTA or when you did that diligence that really caught your attention and why them over any of the other solutions that you could have gone with? Yeah, thanks for bringing that up. We started a research in where to invest our time and look forward. And IOTA stood really apart by its domain focus. So they obviously understand the Internet of Things and the billions of devices as opposed to the 100 or 200 nodes. They also understand that mining is a bad idea for the devices.

You can't have that. that transaction fees if you have billion of devices then you pay billions of transaction fees you can't have that if you look at the manufacturer and i did the calculation myself they have about a large large factory of an automotive plant has 100 000 sensors i mean even if i charge a tenth or one hundredth of a cent per every transaction the costs are going explode. They're producing 16 terabytes of data in all the plants. No one can pay that. So it has to be permissionless. It has to be transactions without the fee. And only IOTA apparently was able to identify those requirements and develop from scratch or from various other sources,

the necessary kind of adapted distributed ledger technology from that. So that was very convincing. Honestly, the only thing I didn't and I don't really fully understand is why they have chosen ternary, the 5.7% energy efficiency. So I have not worked it out completely personally. But the clear domain focus on IoT, M2M, and also including later on smart contracts for smart functionality, that was outstanding.

If you look at other, like Ethereum, how they are struggling in gaining traction because they are horizontal. They are like any other general purpose platform. The focus is what differentiates IOTA. And that was number one. Number two was the technical maturity. So I like to study blockchains on the level of the yellow paper.

You know, Gavin Wood, Ethereum, a couple of years ago, I mean, I could have calculated everything. But that's promising as opposed to Bitcoin, where you had the code first and then the writing up the specification later on. Ethereum was already a definition first. And IOTA definitely has moved it to a higher degree with the IOTA Foundation. and the scientific underpinnings of the technology. You know, they do simulations, they have formulas. I'm a theoretical physicist. I should be able, honestly, to work it out myself,

all those probabilistic measures. For the lack of time, I have not done it. I rely on the IFs, mathematicians. But this is very substantial work, and it's proving that they know that the basis needs to be right. It's like if you buy a new plane, you calculate. There is mechanical engineering, aeronautical engineering. It's not someone just hacks around code.

It takes much too long. So this was something, not code first, but approach the fundamental information theoretic approach first. And then very rapidly afterwards, do the prototypes and test it and simulate it. So this cycle was different from the other blockchains. And the third one was also the governance mechanism, which is completely different and will be even more different in the future. I'm not able to say, but there is we actually and also the IOTA Foundation and others have been working on something in that regard. And unfortunately, the podcast is a little bit too early. I can't disclose that now.

But the governance of IOTA is in refreshing contrast to other things like Hyperledger, which is dominated by a single company. Bitcoin, you know, is dominated by miners and factions and the others, the other blockchain. Facebook Libra is, of course, a terrible example of a monopolist. But IOTA in that respect is, from day one, completely different. And this is inspiring trust, not only in us, because we bet on the technology, but also on our clients. I mean, we can change the software, but the clients would have to change every device probably and their identity. So, that's a huge decision. I mean, you can't just change two million devices because we have a hard fork.

I mean, that's impossible. So you have to be very careful. And all these elements, I auto-fulfilled them in a very exemplary and outstanding thing. So we then joined, not joined forces, but we contacted them personally. And the partnership evolved in that. And also the contact with the people. You know, I was in the Sum Sum, the summer summit last June or something like that. there was one day reserved for industry

actually that has never been broadcasted but nevertheless it was a vital and very important meeting with not only the developers but with Tom, Holger and you get to know a little bit the feeling of how those people tick but the governance is larger than individual people

which makes me confident because if someone leaves the company then the spirit of IOTA needs to live on and the IOTA foundation the OMGs standardization efforts and some other thing to come are very trust inspiring for us because it's a long-term bet a strategic bet will iota prevail or someone else but we are prepared to go with iota got it and and then um i guess how do you see the uh kind of standardized protocol of the

automation iot so uh iota or or whoever wins there um how does that interface with something like bitcoin which uh is being used as a currency store value medium of exchange etc like how do you guys think through uh various blockchains for uh different use cases yeah the number one problem the productive blockchains need to solve is obviously the blockchain trilemma how can i get scalability, while at the same time, ensuring sufficient decentralization and security. Bitcoin, obviously, is not able to solve that. I mean, with the four transactions per second, if you look at the Internet of Things, a single client will produce 16 terabyte of transactions per day.

So what shall I do with four transactions per second? This is completely ridiculous even to think about it. ethereum with lightning uh and and then also the mining you know i can't have devices mine something the proof of stake in ethereum is still waiting uh or we're still waiting on that so that's the the way how the structure of the tangle and the pow the simplest spam protection how the confirmation of two transactions as a means to ensure the integrity and to avoid double spending that was planned right from the beginning so the fundamental data structure is iot device oriented so this that proved to be a deciding factor when we moved to iota as opposed

to any other um the blockchain technology of course there are there are competing offers blockchains which claim to have implemented tens of thousands of transactions per second But if you look into the development area and the governance, then you find a bunch of people, highly intelligent people. But innovation is not just having a bright idea. Innovation is the new idea plus the commercialization, which includes the governance, the fearless structure, the focus of the IOTA foundation. And that's the only blockchain technology we see that is currently IOTA. Of course, Hyperledger has a lot of different versions of blockchains. You could do that or R3 in the banking industry.

But this is still very often dominated by a few, if not a single player. And so IOTA was the open, the most open standard. And, you know, we have a tagline at SoftwareG, freedom is a service. And we wanted to live up to that promise. So I cannot then go to a monopoly provider. I need to go to an open standard as opposed to a closed society if I really want to live up to my tagline. Got it. And then before I let you go, my last question is just like, when you look forward in the future, let's say 10, 15 years from now, kind of what are you most excited about in terms of the technology in general and the intersection with things like IoT automation?

Like what gets you up in the morning and just super excited about what you're working on? The future for the IoT will look completely different because once you have absorbed the connectivity, the messaging, the token, the value transfer, the standardization problems of hooking up the devices to the Internet of Things, once you have mastered that, and in 10 years that will be the case, then you'll see new business processes no one of us has dreamt about you remember you know obviously when twitter surfaced you had the iphone we implemented the iphone in 2007 no one would have imagined the tsunami of apps and what they do for usability and all that war so and the same will happen the ecosystem will explode with a tsunami on iot applications And that will provide a boost in value, which is 10 or 100 times the current value of IoT.

There is actually one of the few things which I've seen and come across was someone tried, I think it was, let me scratch my head, FSStat, I think, FinStrat. They provided a valuation of IOTA, and they came up with a value of the token around 100. Please look it up on the internet. But this would not even include the machine-to-machine economy. So even if you do it just a financial transaction, the wire transfer evaluation, then you end up with the tokens right now at 20 cent, 500 times 500. But if you imagine the business process, the processes which will run on IOTA in 10 or 15 years, the valuation needs to go up by 10 times, 50 times. You will see a new economy. Maybe it's not 10 years, it's 15 years.

But it'll change when the new, and that will happen over the next two decades, when the new devices, Engel, DMG Mori, all our other mass partners, Dürr, the new robots, the new paint robots are all native IoT enabled. If you find in 10 or 15 years, every Dürr robot being IOTA enabled, no one will talk. It's like an ATM. Everyone would use that. It's just a standard underneath, and you just wouldn't think, where can I get the money to go to a shop and buy something? You would think about which type of shops do I set up, and this is innovation at the next level, honestly, and I believe that. But we have to sort out the technical things first, and then we can really look at what's possible, and I can't even imagine that, and being part of that. You know, it's like when I hooked up the Institute to the Internet, I'm still proud that, you know, you configured all the bind daemon and the gateways.

And that was something you can not only tell your children, they are not interested, honestly, but personally, that's something where you said, yes, I did something. And it was I was participating in something which was bigger than just software or your own personality. And IOTA could be the same. And definitely it's so enticing that I want to be fully. Absolutely. Look, Christoph, I really appreciate this. This has been fascinating to kind of hear your perspective as you sit inside the innovation kind of hub there at Software AG, given just the size of the business and kind of the impact you guys can have throughout Europe and a number of other countries outside of kind of the European region. So thanks so much for coming on to do this.

And then we'll have to do it again in the future once we get farther down the road with a lot of this development. Absolutely. I would love to do that, to repeat it with the first live customer. Absolutely. Thanks for having me. Absolutely. It was delightful. Hey everyone, Pop here. If you like this episode of Off The Chain and want to help us take crypto to the top of the Apple, Spotify, and other podcast charts, please do us a favor and rate, review, and subscribe. To review, simply go to the Off The Chain homepage, scroll down until you see the five blank stars. Taking 15 seconds to fill those stars in and leave a quick review goes a long way in helping us take the entire crypto ecosystem to the top of the charts. I appreciate

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