The Pomp Podcast - Ami Ben-David, Managing Partner at SPiCE VC: Why Ami Believes Long the Bankers

Episode Date: May 16, 2019

Ami Ben-David is Co-Founder & Managing Partner at SPiCE VC, and Founder at Ownera. In this conversation, we discuss tokenized securities, the role of bankers in the financial system moving forward, how freedom and privacy are related, and where Ami believes the biggest opportunities in digital securities exist today. ----- If you enjoyed this conversation, share it with your colleagues & friends, rate, review, and subscribe. This podcast is presented by BlockWorks Group. For exclusive content and events that provide insights into the crypto and blockchain space, visit them at: https://www.blockworksgroup.io

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. Ami Ben-David is co-founder and managing partner at SpiceVC and a founder at Onera. In this conversation, we discuss tokenized securities, the role of bankers in the financial system moving forward, how freedom and privacy are related, and where AMI believes the biggest opportunities in digital securities exist today. I really enjoyed this conversation and I hope you do as well. 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, coming live from CIS. I feel like a radio disc jockey saying that, so I'm going to keep saying it. With Ami, thank you so much for doing this. Thank you. We got a lot to talk about. Some we agree on, some we don't. This is going to get good really fast so uh let's go background first and then we can get into uh some stuff you're doing now but what did you do pre-cryptid um i was an interpreter i started uh six companies

six companies yeah okay that's a lot yeah some did very well some did terribly some did okay and uh i think the last important thing i did before uh crypto was uh ai machine learning okay and and uh distributed search engines things like that basically most of my companies were companies that i invented the product and and led the product that's usually what i did got it and so what was the big company ah we're getting handed water perfect thank you so i'd say the biggest company before i started the fun was a company that did a distributed search engine based on HTML5. And it was selected by Firefox and Telefonica

to be the search engine for the Firefox OS. Okay. A doomed operating system that tried to compete with Android and with iOS. But it was very cool. It's a search engine where you would ask a question and instead of getting links as a result, you get apps pop up which you can swipe between the apps and each app would answer your question from a different provider so completely decentralized search engine they're going

to give you a different microphone okay can you guys hear them now all right okay yeah i'm here yeah all right all right so you do the search engine and how do you eventually discover crypto like what's the first time you ever hear about crypto and you're like wow let's go change the world buy some bitcoin so when we were doing the search engine a few of my uh developers were constantly talking about this new thing called bitcoin and fighting about it and so on and i said oh whatever i'll buy a few so i bought a few at 500 and then no actually i bought it at a thousand and then it dropped immediately to 500 and stayed there for two years or so so i forgot all about it and then suddenly it started going up again and it went up and up and up and then

from my previous day that when i did the search engine we did it together with a guy called brendan eich brendan was from mozilla from firefox he's the guy invented javascript and he was talking about crypto and about blockchain and i understood what he said but he didn't really sink in yep until he actually did the brave launch and you know raised 35 million dollars in 30 seconds so i immediately called him up and said hey what's going on yeah so for those that don't know brandon is uh he's the founder of a whole bunch of stuff but um today uh brave browser yes and the uh the bat token or the basic attention token yes so i i okay so you see him just ball out and raise 35 million dollars in 30 seconds you're like that

sounds pretty interesting yes and he was like yeah well it was so amazing and and we started talking about it and i said well we're building a fund uh can we make the fund tokenized and then we realized we can't really make the fund tokenized because tokens are utilities and a fund is a security by definition people give you money you're supposed to give them more in return so that's a security so you can't do a found with a utility token so we said let's do a security token we started looking around nobody was doing it there was no platforms no legal structure nothing. And since I've been doing startups all my life, we just sat down and said, okay, let's go ahead and just do that. What year is this? That's 2017. Okay. So 2017. And when you

do this, explain what a tokenized fund is and what the difference is between that and a traditional fund. So a regular VC fund, the LPs give money to, and then they're waiting for the exits. And when there's an exit, the exit spreads between the LPs. So if you have 10% of the fund, you get 10% of the exit, roughly. A tokenized fund, we did exactly the same. If you want to be part of the fund, you buy tokens. And if you hold 10% of the tokens, when there's an exit, you get 10% of the money. So for all intents and purposes, it's just a regular VC fund, but you have tokens and tokens are tradable and it becomes liquid from day one. So we basically took an asset class that is illiquid for seven years on average and made it immediately liquid.

So we were very excited about that. Okay. And when you do this, how much did you guys raise? What was the reception? The reception was initially very good from the crypto side and very, very hesitant from the institutional side. Why? Because they didn't know what tokens were. Tokens were connected to crypto and to utilities and basically lack of knowledge. And to be honest, nobody knew what security tokens were because we were the first. So security tokens were not in vogue yet at the time.

We ended up raising about 10. We are now, the NAV that we're managing is about 15. So the fund grew up nicely. And the reason we didn't raise so much was that crypto crashed when we were raising. So the crypto people disappeared. The fiat people hasn't arrived yet. So timing is very important sometimes. And how many of the people are buying a fund like that because they want to be in a tokenized fund versus they want to bet on you and your ability to pick companies and kind of the traditional things that a venture capitalist would be evaluated on?

I think that's the main thing that we learned. So initially, we kind of led with the fact that we were a tokenized fund and explained what we were doing. Today, when we're talking about raising, we're talking only about the asset. The fact that it's tokenized by now is not news anymore. People are used to security tokens. it's already becoming more and more acceptable so if i were talking about a fund today i would talk only about the fund and the fund itself funnily enough also invest in the infrastructure for security token because we saw this thing as that we did for ourselves and we realized that

this is just the tip of the iceberg which is doing a fund but this is the story is funny we built a platform for ourselves and carlos my partner put out a blog post to say this is our platform you can come and invest in our fund. And we got a lot of people calling us and saying, hey, can we use the platform to launch our own asset? So two things happen out of that. One is that we span out, securitize a separate company, which is now a market leader. And we're, you know, one of our portfolio company. And the second thing is we double down and focus the entire company, entire fund on investing in the security token infrastructure and the ecosystem which has grown dramatically over the last year and a half all right let's talk about

the uh the ecosystem where is the infrastructure today for security tokens give it a grade before we get started a b c b plus c minus a plus a plus what all right go ahead explain why a is good or a is bad a is good in america a is good oh so i'm from england that's oh wait is a wait hold on explain this let's do it the other way around in england a is bad man i don't i is our c is good because i'd have been a genius in england a star is the best a star a star is the best yeah no if i have kids i'm gonna send them to england they're gonna be the smartest kids in the room so yes i would say that um we're still starting the it's it's not it's not so c minus c i would say is where we're being nice go ahead depending who i mean there's uh as i said our portfolio

companies securitize the market leaders so they do what they do very very well but it's just the beginning of the market the rest of the market other companies uh are way behind all right so i did this with somebody recently uh it hasn't been aired yet so you get to rebut them if you disagree with them but let's go through the ecosystem uh there's issuance platforms there's protocols there's exchanges and their service providers the way i think about it right yeah uh you gave them a c combined let's go to the issuance platforms which securitize does so this helps assets actually tokenize an issue they're doing well they're good okay so they're good they get a a they get an england a or an american a american american okay uh what about the entire

issuance platform ecosystem like when you look across the board right so not just securitize but everybody is that the most developed part of the ecosystem um i would say it's now the development okay developed part of the ecosystem but there's a lot of players out there that haven't actually deployed anything okay so they make a lot of noise but they haven't really deployed anything and and and for me marketing is just boring deploy all right uh protocols um protocols i would say most of the market today is working on top of ethereum okay ethereum was not designed for security tokens so it's really hard it's an anonymous network um and it's it's just built by you know by anarchists so it's not ideal for securities so you have to build on top

of it uh the first protocol that was launched was ds protocol by securitize there's another uh a few other protocols that haven't been used very widely widely um we're just starting on the protocol side all right we'll get into what you're doing there in a second uh exchanges exchanges we really in the beginning there's t0 out with very very little trade uh there's open finance which we are trading on uh the trade volumes are not high we're trading above nav so i'm happy but it's not you know it's not uh uh you know there's not enough volume in there and uh within spice we invested in three exchanges because okay what three exchanges uh we invested in inx that's going to go in new york we invested in archux that's going to go is that one archux archux

okay what is that uh they're in a security token exchange that's going to go in london okay city people and we invested in invest the crowd that's going to be in an exchange in singapore because i believe that while the assets are international trade is going to be local so we want to have a big player in each main market are you worried about the circles uh the or poloniacs uh gemini Coinbase, maybe even a Binance, coming top down and getting into the security token game? Or do you think that these kind of native security token type exchanges can win? I think I'm the opposite of worried. I'd love them to come. However, I don't see them, you know, most of them are not really inclined to go and do the regulation that is required. And they already

have a history and a past and an existing business that is not exactly compatible with being regulated so it will be hard for them to do that but the more the merrier got it and then service providers is the last part what grade are we given service providers it's very very initial in terms of service provider if you want to know you got to give me a letter see see yeah all right why because the market is not mature yet it's it's now maturing they're only there's just a very few small number of players actually done things and a lot of people that are theorizing and marketing and telling stories on but but it's just being built now this is a new

ecosystem it's growing in massive scale but it's still very very new i mean we launched our token in april of last year and we were the fourth token ever so we're just talking less than a year now do you know what the first three were the first story the first three uh blockchain capital was the before science was science before i don't remember the third one got it um all right and And let's talk about the assets that are getting tokenized today. I think everyone got excited about funds and equity. I've now seen bonds. I've seen a bunch of asset-backed tokens by commodities.

Where do you see the most activity and where do you think the sustainable assets will come from first? All of the ones that you said, and you didn't mention real estate and infrastructure projects and things like that. I think the answer is initially every asset that is illiquid by nature is illegal, illiquid, illiquid, non-liquid, non-liquid assets. That was a bad translation on my part. Illegal versus illiquid is a big difference. Illiquid. So non-liquid assets that are large. These are the prime ones to be to be tokenized now. And what I found from my experience is that in this market, the supply of assets that want to tokenize is infinite. Infinite. We raised our hands when we launched Securitize and said we want to tokenize.

Immediately, we were flooded by people that wanted to tokenize. The problem of the market is to get it normalized and to build the infrastructure so that investors come as well. But the problem is not going to be from the supply side. Suppliers do want to tokenize their assets because they're sitting on non-liquid assets that are worth hundreds and tens of millions of dollars, which they can't touch. So if the supply side is not the problem, then demand side, obviously, there's issues. Why are investors not interested in doing this, or at least why are they not doing it? What's holding them up? I would put it this way. The infrastructure that the big investors, the institutional investors required to invest is not there yet to the level that they will be comfortable with it.

And they're very, very risk averse. And they're managing other people's money and their fiduciary rights. And for them to jump into holding a digital asset, even if it's connected to a real asset in the real world, it has to be solid. And from what I'm seeing today, it's not yet solid enough. So first of all, it's running on a blockchain, you know, Ethereum, which is, you know, has some bad reputation and a lot of crypto association and built by people that have different ideology. Let's put it this way. But is their ideology incorrect or is it just not in line with what institutions believe? It's just incompatible. I mean, a lot of the ideas that you would hear in a crypto conference where, you know, I put a tweet out that I where I said that I think anonymity is not important.

Privacy is important. I was nearly stoned, basically. So Twitter is a dangerous place, as you would trust me. All right. So as these institutions are looking at coming into the space. So so let's let's let's put on the table one of the things we disagree on. Then we'll talk about an era and then we can talk about other things we disagree on. All right. I got I'm like captive now. He can't get away. He's got to he's got to talk to you about this stuff. So first is I'll go easy first.

Long Bitcoin short the bankers. You very cleverly wrote an article called Long the Bankers, which when CoinDesk sent it to me, I literally responded. and i said haha that was very smart uh explain what you mean by along the bankers and kind of what the logic there is okay you constantly say that everything is going to be tokenized all the currency but also all the assets oh now the assets are the key the big capital behind the assets is in the institutional market these are the big big big big capital these are the trillions of dollars And these guys require somebody to mediate for them. They can't go direct to every small issuer or every big issuer.

They need trusted entities that they trust to underwrite for them and to distribute for them. And those entities are the investment bankers. So if we think that everything needs to be tokenized, if we think tokenization can be a trillion, multi-trillion dollar market, the road goes through investment banks. and then when they do their their job it will flow to the rest of the market it will go to smaller players and it will go to to the market will go to to retail but initially you need to get the big money there because as i told you before supply of assets is unlimited if you can get a banker if you can get jp morgan if you can get any of the big bank i'm just saying jp morgan as an example, or Citi, or ING Capital, or any of these players to take an asset and

then turn around, underwrite it, and say, we trust this asset, and then turn around and sell it, and provide all the tools to their investors because they know what the fiduciary rights are, and do it in a regulated manner, that's where this market is coming. And it's not going there without the bankers. So I disagree. Okay. Automation is going to take out white-collar employees before it take out blue-collar employees. And the bankers are at the top of the fucking list. And here's why. I've invested in multiple companies at this point that use data to underwrite loans, equity, et cetera, in an

automated fashion that render the bankers completely irrelevant. And I'll give you an example. So there's a company that we invested in called Bravo Capital. What they do is they work with mobile app developers that monetize through subscription, right? So think of Spotify, for example. They go to Spotify and they say, give us all your data, give us your bank account, your advertising account, your analytics, all this stuff. They suck it in. They use algorithms to underwrite CAC and LTV. They then say, I'll give you a loan for you to use for customer acquisition. You use that money to acquire your customers. But when that customer pays, they pay the app store, right? $10 a month. Apple takes their cutout. Then they send the money to

Bravo. Bravo takes their cutout and they give the rest of the money to Spotify, right? In that case, normally you would have an investment banker underwrite the loan, right? Do the work, all this stuff. They completely remove them with algorithms, right? Figure is another one with the mortgages. We basically go from having seven, eight different middlemen and seven, 8% fees to now there's one middleman and it's an algorithmic product that completely removes all of the middlemen in the mortgage process and you can compress the fees, right? Again, the bankers are gone. Like it's not a, is it going to happen? It's, I have proof points that it's going to happen. My theory is that what the bankers are going to do is they're going to gravitate towards

the assets. They feel like they can keep hold of the longest. And so it's going to be the super esoteric stuff it's going to be the really big real estate deals like all that type of stuff so it'll be the big dollar stuff but the volume on an aggregate basis is going to go algorithmic within the next like five years i think that you're right when you're talking about he admitted he was right yeah look at that i think you're right when you're talking about uh assets that are i would say commoditized okay okay so when when i when an asset is commoditized the the job of underwriting it can be automated because it's commoditized yep but the vast amounts of money out there the big capital the trillions of dollars are not necessarily in things that can be automated

like if you have a 600 600 million dollar mall in romania that wants to be tokenized okay you can't send an ai to underwrite it you need to have somebody and the issuer if you you can't trust the issuer as well the issuer will say yeah this is a a billion dollar mall no you need to have somebody look at it and say i put my reputation i stake my reputation that this is a 600 million dollar mall in romania and then turn around and sell it to a buyer in in the u.s okay that functionality is not going away soon now if i have to wait until an ai can get on a drone fly to romania uh inspect the mall and come up with with with something reasonable we'll have to wait a long time i i think that um there are two innovations here that are happening in parallel

one innovation is blockchain and the other innovation is ai and i think that they will be connected in some places where where it's where it makes sense and i'm already seeing it exactly the places that you mentioned are where these things are are being connected but there's a if we want to reach the trillions of dollars of security tokens then the bread and butter of the of the big capital, is still managed by asset managers, still distributed by these guys. And we can offer them something amazing. We can offer them private securities, which until now they did not distribute. They did not touch.

And even if they distributed them, there was no transactions post-sale. And we can bring them literally trillions of dollars of new money. It's not some sort of a blockchain efficiency improvement. Let's put a blockchain and improve your IT 10%. and nobody cares about that. This is new business for these guys. So I think that in the majority of things, what you're saying is like 10 years away. So that's why I'm saying I live in the future. Okay. All right. So talk about what you're building now. So one of the projects that I actually talked about as a concept here in this conference, six months ago, I kind of saw it

coming because i i i'm seeing the market very early and what i saw was that um we need a new blockchain for security tokens i say ethereum is not going to cut it it's just not built for this you hate ethereum uh for security tokens i do okay it's just it's just not relevant do you own any ethereum sorry do you own any ethereum uh no no okay you're talking your book okay go ahead sorry i don't i don't own any theory but but that's not a good that's not a good proxy because I hold some EOS and I don't believe in that either. You can't say that in LA. Yeah, I know.

All right, go ahead. Yeah, rub some salt on this. So, yeah, what we're doing with Onera is we're building a new blockchain, a base layer network dedicated to security token from the ground up. So basically, this is like an Ethereum type protocol. but rather than it be ethereum it's your own and it's specifically built for security tokens it's for institutional investors okay and explain what the main difference is between an ethereum and what you're building what what's it called it's called onera onera okay it's a blockchain for ownership okay and what is the main difference between that and like an ethereum so two main

things the first thing is that it's it's institutional grade so it's built on something call on code of the Hyperledger Fabric. In Hyperledger Fabric, when you go to a bank, they're accepting it immediately. They can deploy it on IBM, on Amazon, on Microsoft, on Google. It's acceptable. So immediately, the tech problem goes out of the question. Yep. So it's built on that.

The other thing that's interesting about Onera is that I'll describe a problem that I found with the current security token ecosystem, which makes it a problem for institutionals. Today, in the world of security tokens, the token is considered as just a thing that can be traded and moved from one hand to the other, but it doesn't include any value. The value of the token is off-chain.

So you'd say you can have a token that says you own a building. The document that says that you own the building is off-chain, is kept on somebody's server. And just the token is moving around and it's a proxy. and and i see that this is a big problem why i i called it the brooklyn bridge problem okay so imagine i actually did this i went on on raven coin which is uh and and i i created a token called brooklyn bridge and i can sell you the brooklyn bridge token and you will own the brooklyn

bridge token all the miners in raven coin are going to be extremely happy because you're now the owner of brooklyn brooklyn bridge and i'm not it doesn't make you the owner of brooklyn bridge because it wasn't mine to sell in the first place and nobody's incentivized to look outside the block yeah but but in that situation i could create a llc right now called empire state llc and i could technically sell you ownership in empire state building llc you don't own the empire state building but we don't not use llcs because of that you could you could cheat in the real world too but in the real world you buy the you buy the securities initially and then you can do your due diligence it doesn't then start traveling across exchanges across peer-to-peer

across the internet the problem with the not the problem the advantage of security tokens is that they can move around so it's not enough that the primary buyer can do their due diligence because next day it's moving to another person another person and another person and suddenly the original value that i bought i don't know where it is i actually challenge you today to pick any random security token out of the internet and tell me what's the underlying value is and i'm telling you you'll have to be a detective you have to dig really hard to find what the value is and it's not immutable the board of this company can come in and say uh we'll make a decision that from now on you're not getting 50 of the revenues you're getting 20 of the revenues and nobody would

know there's no way to tell the digital security and how do you guys solve that problem so the way we solve it is onerra the token actually carries the values inside it with it everywhere it goes that's smart people stuff so explain that okay so what we're doing is we invented something called kya kya yeah know your asset okay it's the equivalent of kyc kyc is know your customer it's about the identity of a person kya is know your asset is about the identity of an asset okay and what this includes is everything you need to know about the asset that the token represents so if it's a building it's all the documents of the building and then you also specify what rights you have as a token owner and it is signed by the uh by the issuer okay and that's put on the

blockchain together with the token encapsulated together immutable so that no matter who gets the token they can open it look inside and their rights are there nobody can deny their rights nobody can say that it's different now and they don't have to look for it anywhere it's on the blockchain so information becomes available for everybody so when you sell me the brooklyn bridge token now i look inside i realize you tricked me basically i know that i don't own the brooklyn bridge immediately so that was the first layer okay it didn't solve the brooklyn bridge problem yet it only solved the information problem but then you have to to do to solve the second problem which is verification and that's the second thing that onerra does onerra is run by nodes that we

call underwriting nodes. Uh-oh. What's an underwriting node? An underwriting node in a regular blockchain, a node is anybody with a computer. On Onera, an underwriting node is a financial institute, like a bank, like a broker dealer, like any company that is reputable to do these kinds of things. And if you want to upload a token to Onera, you have to take your KYA to an underwriting node convince them that it's true and they upload your uh your token to the onera platform so all the kya's and all the tokens in onera are verified by underwriters and you're if i'm the purchaser of the token i'm counting on the fact that this reputable organization was willing to put it on here so they must have done their diligence yes and we also added the

business model behind it so this if if i'm an underwriter and i take an uh an uh an asset and bring it into an era i do the work listen i'm going to use blockchain terms now okay i do the work to verify that it that the that the kya is true not only on the blockchain but also in the real world so i did the work then i stake my reputation to it and i put it on the network And as a price for that, as a fee, from now on, every transaction for the life of the asset, I'm going to get a transaction fee for it. So I get the lifetime revenues. I basically become the blockchain, the block producer for this asset. Got it.

Where are you guys in terms of building the product today? So, we already have a basic test proving that it can be done on Hyperledger Fabric because people thought it couldn't. So, we're showing how Hyperledger Fabric can be turned into a public network, how you can store tokens on it, how the tokens can store the KYA, how underwriting nodes can underwrite the KYA. All of this, the basic proof of that has been done. And now we're starting to scale up towards a proper real implementation. So you're like the ninth person in security token slash financial services around blockchain that have told me they're using Hyperledger. Why is everybody using this? I think because what I said before, Hyperledger is perceived as institutional ready, institutional grade ready. IBM is behind it. Microsoft is behind it. Amazon is behind it and so on. But there's an interesting point to understand. All the people you talk to are building private networks because that's what Hyperledger was built for. What we've done is we did something a little bit clever where the hyperledger, if you remember, I said that every issuer have an underwriter.

So from the point of view of the underwriter, they have a private network. They only deal with their own issuers. They don't deal with any other issuer. But the users connect to all those private networks together. So from the user perspective, it's a public network. So we created a public network out of a combination of private networks. So for the user, I can have one wallet and I can have assets managed by Citi and asset managed by JP Morgan when they become nodes and asset managed by any other node in the platform. So you basically have a public network.

You can have liquidity. You can have, you know, all the exchanges can use the same network and so on. So what we're doing with Hyperledger is quite unique. What if I don't trust the banks? If you don't trust? Don't trust the banks. Then choose another underwriter. Got it.

It's an open platform. let them compete if you can build a new underwriting node with an ai in there and your ai is doing the underwriting and you know people will trust yours better you can also price it any way you want it's it's a it's a completely open platform what we've done here is we've taken the real world uh situation where people take assets public they go through an underwriter and we just made it open completely open and we let the market dictate what kya means we let the market market dictate the prices we let the market dictate who they trust as their underwriter doesn't have to be a banker all right before we uh wrap up and we may have time for like one or

two questions rapid fire okay most important company in crypto other than your own uh coinbase right now coinbase why because it's bringing it to it's helping bring bring crypto concepts to the to the masses all right that's fair uh if you can change or improve any one regulation what would it be? Reg D, I'll make it a lot simpler. Which part would you simplify? I would say that it's just wrong. What it does, it allows people to invest. It allows only the people that already have money to make more money. So it says, if you're rich, go ahead, be more rich. If you're not rich, don't be more rich. The way that I would do it is I would make it as a percentage of somebody's income because you don't want people to go bankrupt and so on. So you can

invest up to 10%. If you have a thousand dollars, invest up to a hundred. If you have a hundred million, invest up to a million, but in a scalable way. Got it. What's the most controversial thought you have in crypto other than long the bankers? Because that's outrageous. But what is your second most outrageous thought? I think that the, and that's a lot of people in crypto value anonymity i think anonymity is the most dangerous thing any platform can have i hate anonymity why i'll give you an example anonymity is what allows people to hide and then do the worst thing possible which is uh on telegram people basically cloned my my uh my uh my profile and tried to hack people out of money and and succeeded in hacking people out of money it's terrible only because of

anonymity in in in election when you're talking about election in in countries here in the u.s there's election now in israel bots can come in and become anonymous and they can they can ruin everything and i think there's a very there's a very good game theory about this that says that when when you need trust there are only two states of equilibrium either everybody trusts everybody or nobody trusts anybody now in a market where there's no anonymity you're much more likely to be in a position where people say what they think and they have consequences and so on so trust is achieved in a market where some people can cheat very quickly all trust collapses all you don't know who to believe everybody's a liar and it's just if five percent of the anonymous people cheat

it ruins trust in the entire platform but so we don't have that much time we can talk about this for hours i actually think that's a good thing in the fact that i don't want to trust anybody i don't think you should trust anybody i don't think they should trust anybody right i i think that crimes fraud all this stuff happens i don't blame somebody for cloning your profile and like trying to fraudulently induce money from somebody i blame the fact that those people trust you that's the that that's the problem if they didn't trust you they would never give them money right they didn't trust me they would never give money to those frauds instead if everyone was in the position of i trust no one i verify everything then you remove

all of those risks and so anonymity doesn't even matter at that point now it's up to you whether you want to be anonymous or not because whether you're anonymous or not nobody they don't trust you either way i think what you're saying is is the theory of what you're saying is cool but you know so a lot of so are a lot of theories in theories are cool i mean communism in theory it could be cool but then in reality it's a shit show because what happens is when people start cheating as you said uh real people get hurt real fast and i mean talk hurt i mean financially physically abuse people who are not anonymous hurt way more people jamie diamond has hurt more people than all anonymous accounts on the internet combined times 20 but you know we know who he is

and we can decide whether we uh he's one of the richest people in the world i know but but at least we know who he is and we can decide whether we like it or we don't like it but if somebody showed up on on on on twitter looking exactly like you with the exact same names and same everything and then said something that hurt somebody but that's not anonymity right that's anonymity anonymity allows that to happen no no anonymity like all that is is they've basically that they've um they've copied my information that they're um they're pretending to be me right so they're pretending to be something that's not anonymous but the anonymity would be if they are on twitter and they just have an egg photo right because even like if you look at uh i don't

know crypto bully or bully esq that was his name or panda whale or whale panda or any of these guys like they're actually not anonymous they're pseudonymous right because they have their they have a name that you associate with their account and over time you can choose whether or not to believe them not believe them whatever but the anonymity like i i would actually argue that there's almost no anonymity on facebook twitter etc like it's all pseudonymity which we can argue whether it's good or not but anonymity doesn't exist on those platforms right i don't see a lot of difference between anonymity and so then anonymity as long as you don't have to as long as you can speak uh without your true identity and you can do things without your true identity

and you can buy things without your true identity and so on and so forth this is a slippery slope that ends where i get attacked physically okay and it happened it's not a theoretical thing now you can be a theorist as much as you want but once your family is in danger once your livelihood is in danger once your well-being is in danger suddenly it's not so cute anymore and i think anonymity uh is exactly that kind of thing and you know people people kind you know all the crypto uh zealots you know they're they want everything to be anonymous and so on for me if if a terrorist organization can get more funds because they're using anonymous platform i don't want that platform what if it violates my personal freedoms and my rights i think there's a balance here and

i think that uh i i do not support regimes that would use the the identity to to uh you know to to attack you, but I don't support it in the same amount of fervor. I mean, I don't agree to that. It doesn't mean that I have to agree to the other. I think anonymity is dangerous. And I think anonymity reduces the quality of the public discourse. And there's a hashtag that says everything is stupid. And in the end, if everybody's anonymous, everything is stupid. I got you to say that we're going to automate the bankers. I can't get you on the anonymous side. all right uh most important book you've ever read um i don't read books actually all right uh none i have an eye problem so i don't like reading i can i can answer on a tv show if you want tv show

i'm i'm following two tv shows now i'm following billions uh-huh which is cool i don't know if you see you're seeing it yeah and i'm following star trek the new star trek finally star trek is doing something interesting perfect let's talk about aliens so star treks what they're doing now is They're taking your favorite subject, AI, and pitching them as the villain that will end all life. Don't believe anything you see on TV. All right. Aliens, real or not? Real for sure, but we'll never meet them.

Why not? They're too far away. All right. That's fair. Listen, I don't know. Have you ever seen Zoom? We might just start video conferencing with them. Could be.

All right. What one question do you have for me that will take two questions from the audience? Two questions? No, just one question for me. and then two, let the smart people ask two questions. Okay, so I would ask you, in terms of your view of security tokens, do you think it's bigger than crypto,

smaller than crypto, just about the same? My view has evolved on this. I don't believe in security tokens. What I mean by that is I believe that every stock, bond, currency, and commodity will be digital, right? And that's literally the core thesis since the day I got into this stuff.

It's just another name for a security token. It's digital securities. It's the digitization of the assets. The idea of a security token to me, it just doesn't make sense in the sense of it puts too much emphasis on this is different than it's actually the same thing. It's just the underlying technology gets swapped out.

So I don't use that vernacular anymore because of that. So what do you call it? Digital securities? Yeah, I usually just call it a digitally native asset. So it could be a stock, a bond, a currency, a commodity. It could be whatever. But with all that said, one of the most painful times I've ever been on the Internet was when I came out and I said that digital securities were going to be much bigger and more important than Bitcoin and the recreation of money. So we agree on that. Well, so here and why I said it was on a pure market cap basis, the money supply globally is let's call it, you know, 80 to 90 trillion dollars.

Real estate globally is 215. Right. Just on market cap. Now there's an argument to be made and I actually am sympathetic and believe most of it where yes, but money is integral, even though it's smaller on a market cap basis. It's so core as the unit of value that importance isn't just about market cap, which I think is a fair argument. So it's just not black and white, but I do think that people are underestimating how big it will be yeah all right two questions whoa all right three uh four all right fine four just those four i'm not taking any others so i um am victim of identity theft sim swapping remote um

my phone was stolen when i wasn't even it was stolen remotely and i have a schwab account i have bank accounts and within 72 hours all of my cryptocurrency was wiped out if i still haven't been able to get back on all the platforms so the anonymity issue that i mean brought up is really important to me this has really destroyed me not financially it's the loss of time money effort stress and anxiety i spent two or three hours a day trying to my my identity is recovered it's all my assets are basically been corrupted and i don't it's very hard to even know where to go to begin to try to recover all that this so this is really important so one nobody wants that to happen right to uh both of my partners have been sim swapped one of those and swims up like

five times right and uh we've been able to develop ways to stop it etc uh that's not because of anonymity though that's because of the mobile carriers have bad security measures right they're able to be socially engineered like like there's serious problems there right so i don't want to kind of uh de-minimize what's going on but that culprit is not anonymity right it's those players now there's a whole bunch of things to be said around uh if they were socially engineering your information from you through anonymous accounts or pseudonymous accounts etc I think that it's a huge problem. It's just not the anonymity that's the problem.

The mobile phone services are done. You have to agree that the anonymity of the thief helped him get away. But it's not anonymity, right? It's like saying a bank robber walks in the bank, doesn't tell anybody their name. And because they robbed the bank, they were anonymous. What I'm saying is that when this person logged into or registered an address on Bitcoin, for example, they didn't have to provide any details. Now, if they did it through an exchange now, they would have to provide details.

And I'm happy with that. If they didn't provide any details, then they could run away with the money and potentially disappear with it. So this is... But this is a key piece, right? In a bank, it's hard to do that. Now, I will take... I agree that banks have theft as well and probably more. Yeah.

But let's not ignore the problems. Just because that happened to him doesn't mean that I should have to give my information to access money. like i i i come at it from my fundamental right is to be private right i don't have to be public private and private and anonymous is not the same thing no but but true privacy is i'm have complete anonymity you can be you can be more private and non-anonymous i don't want to be more i want to be private not because i'm doing anything wrong it's like encryption right everyone thought why why would you encrypt communication if you're not doing anything wrong so i'll i'll go back to quickly to to to uh to what we talked about we're so over time they can't stop us go

ahead okay so i'll talk about what we talked before they're staring at me i just go ahead so on on on bitcoin you get anonymity but you don't get privacy because everything you do is on on chain on a platform like uh like on era you will not get anonymity but you will get privacy because everything is hashed so what do you prefer anonymous but not private or private but not anonymous but who knows who knows what i'm doing do you know there are enough companies out there that can match patterns and know that as long as they know that it's one of the wallets that's connected is yours they can make the make the connection to you so even even people that uh you know most people would agree that even though uh bitcoin is anonymous it's not private because

it's transparent while a platform like like an institutional grade uh uh platform is not going to be anonymous but it's going to be completely private now it's not going to be private from the bank because they know it and i know it and that's fine but for everybody else it's going to be private so what i'm saying is anonymity does not generate privacy by default and privacy doesn't mean that you're not anonymous to most of the world i thought we were past this and then you got it kick-started no but also my deposit the deposits have a unique identifier so whoever the thief was had to send it to a unique identifier as a deposit and that is traceable but not it's anonymous but is it traceable by cyber security oh for sure and all that for sure i i uh in a week

or two we're going to come out with a recording uh i interviewed a active dea agent who this is his job is to find money launderers using crypto. Fascinating. All right. Got right behind you. I'd like to go back to the bank robbery example, because I think that's a really good one to talk about privacy versus anonymity. Man, you really kicked the hornet's nest. All right. You asked me for a controversial opinion. I gave you one, didn't I? Because I like the example of a bank robber because it's a really good practical example of why we should not have perfect privacy because of examples like that. You could be an anonymous bank robber, have a mask over your face, no one knows who you are when you go in. But we're able to hold that bank robber accountable because the car they're driving might have a license plate that's registered to their name.

They might go home to an address that is registered to their name, and we have a trusted, centralized authority in the police or the FBI or some sort of law enforcement who can go and hold that person accountable. So I know this was more of a statement than a question, but to make it a question, wouldn't you rather have a society where accountability can exist without perfect privacy so that we can effectively reach more of that equilibrium that you spoke about where you don't have – you're not perfectly anonymous. You're not perfectly private. You're somewhere in the middle. So an individual who wants to exist in general privacy and anonymous behavior can, but we can still hold those accountable who try to take advantage of being anonymous. The only thing that I'll say is the violation of any of our rights is a violation of all of our rights. Right. I spent a year in Iraq and guess how Iraq gets how it is or Venezuela or China. It starts with the violation of one person's rights. Right. And you're looking at it through the lens of law enforcement. But it is not. I shouldn't have to give up my rights to privacy, to anonymity, to freedom and my personal freedoms so they can catch you doing bad things. what's that got to do with me? Not my fault, right? Because their job is harder, which by the way, by having anonymity and privacy, it does make it harder, right? We shouldn't give up our rights to make their job easier, right? And when you talk to guys like this de-agent, his take is take Monero. It's incredibly difficult, but they are going to figure out ways to

solve this right to to track things etc but that is for them to develop the it by giving up our rights in that manner it's this slippery slope right now look what china does right they literally track your face all around the place i and i agree and first of all you know i thank you for serving to to protect those freedoms but i think that's a single dimensional way of looking at freedom we're not just free from one from one thing we have freedoms that protect us to be free from many different things freedom from our government but also freedom from crime and freedom from other bad things you have no no but you have no innate freedom from crime that's not a thing you may not want crime but you have no guaranteed right free from crime i actually should have the

freedom to come beat you up right now there's punishments but but but constitutionally constitutionally we're guaranteed justice and the security of posterity from our government so when we talk about what the freedom is that we're guaranteed and this gets more constitutional that it does theoretical when we put it in the context of the united states we do legally by being a citizen of this country, entrust in a centralized government, the responsibility and the duty to ensure posterity and justice and general freedom to its citizens. So wouldn't it be the job of the government to make sure that that happens? If you had a, if you had a right with an equilibrium. Yeah. If you had a right to safety, then they should track all of us with

facial recognition. They should track all of our license plates. They should make us. But I'm not saying we become a maximalist in any – Where's the line? And that's – honestly, and I think that's where you leave it up to our courts and you leave it up to the law. We've been modifying that line since 1783. So when you said where is the line, you basically acknowledged that there's a line. My argument is if you buy into that – if you buy that argument, where is the line that you're willing to stop at? I don't think there should be a line.

I'll comment on that, though. But there is one thing I want to say about this is that you will find that, I mean, I don't know enough about you, but the approach that there is no line is easier to take when you come from a sheltered environment. But if you're part of a minority or you're being abused, the line is in a completely different place for you. So it's really dependent on who you are. So if you're in danger of being, you know, this line that doesn't exist threatens you or your family or your livelihood or your property, you would want that line to be somewhere along where, you know, the gentleman says it should be, where it makes sense, where not too much of your rights were being violated because rights are being violated by laws all the time. You have to pay taxes. That violates your right. So the line is somewhere where, you know, people are safe, first of all, from from abuse and torture and everything else. So to say that there's no line for me is a little bit on the extreme. I just don't believe in relying on somebody else for your safety.

And but I understand that. And I'll just give an example. I'd like to hear your comment on this specific line. I think it was 2014 Supreme Court case decided on the degree to which law enforcement is allowed to take and possess someone's cell phone. And this particular officer arrested someone, went through their cell phone contents, and then arrested them for a different crime. And the Supreme Court ruled that that was unconstitutional and set a line that an officer is allowed to take possession of the phone and check its contents so much to ensure that the cell phone itself does not pose a threat to the officer. So really just the physical nature of the phone. What are your thoughts on that particular line and that kind of middle ground being thought out by pretty smart people who aren't necessarily seeking for power themselves in different contexts that revolve around privacy versus safety? has a cell phone ever beat you up come on wait to check a cell phone for danger to an officer right again i don't have all the details but that's a pretty uh far reach i mean just in in practical terms it effectively means you can look at it but you can't go in the contents yeah

to look at it right it is different than going into the contents of it right and so again it would be if you can search somebody's phone i would think right and again this kind of somebody's not a lawyer who doesn't understand constitutional law etc that you would be able to not go into somebody's phone unless you had a search warrant you're searching right but but the officer is able to arrest the individual go into their pockets pull out a cell phone and look and you know verify so it doesn't i mean doesn't that kind of find a middle ground between true privacy because true privacy would mean that no arresting officer is ever able to search my, you know, to search my person. So doesn't that kind of find a middle ground to ensure safety

and some degree of privacy? No, again, right. And part of this comes down to, yes, officer safety is important, right? Some of my best friends are police officers. And I think what they would tell you is they do that for their safety, but they're doing it after you're already in custody, right? That you're already charged with a crime in a sense of that they have now taken possession of your body, right? And put you into custody. That's very different than if they walk down the street, they cannot go in your pocket just because they want to, right? It changes when you go, I think from what you were saying earlier, bad people do bad things. And when you do bad things, the rules change, right? We put people in cages, right? For decades for crimes

all the time. I think that that changes when you violate the rules of society. But if you are a law-abiding citizen, they can't do that stuff. So I think it's different law-abiding citizen versus criminal. All right, let's move on before... Go ahead. Who else? All right, he's got a question about why we're here. Man, we're 20 minutes over time. These guys are... All right, just let her hurry up. So earlier in the talk, you'd mentioned about Onera being decentralized, correct? So what is the process for selecting underwriters? How are they chosen, verified, and secondary to that, why can't this be done via AI? Because the data available for your example, say the Romanian shopping mall,

from daily foot traffic to car traffic to plot size to rent numbers to weather patterns, to all this AI information is available. You know, why, I guess, so yeah, how are the underwriters chosen and why can't this be done via AI? So, to the first question, the Onera is going to be a non-profit foundation, open source, and the rules for who can become a node will be published. So for example, one of the rules will say that if you are a registered entity with the SEC or FINRA or any of these agencies, you can immediately become a node. So basically, the rules are going to be published and anybody that meets the criteria can get in.

So doesn't that take away the decentralization of the project then where you have rules and limitations and certain people who are only qualified to participate? So you're going to open a very new kind of worms here about what is actually distributed and what isn't distributed. But I think that if we can have thousands of entities on the platform, all of them approved by their being regulated. okay it's distributed enough i understand that definitely where you're talking about having one or two people in control versus having thousands and then the markets helps find the equilibrium right but it still feels like a centralized solution when you're when you're i'm not religiously uh decentralized you know some people uh talk about decentralized platforms as if this is a an end in itself and and it's not it's just it it shouldn't be

decentralized that's that's enough the other question about ai uh you know i've been building ai systems for many years uh we're still some time away from what you're describing if a company for example want to launch into the market and they say that we think uh our company is worth a hundred million dollars because we're doing this that and the other okay if if they can say whatever they want and based on that the market will price them then we'll we'll have the ico phenomena again Anybody can say whatever they want. They can bring AI to do that. We're talking about data analytics

and data being processed through an AI program. So as we talked about it before, and I said anything that's commoditized, the data is commoditized and can be replaced by AI. I would welcome an automated node on Onera. 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 you listening and see you next time on Off The Chain.