The Pomp Podcast - Michael Oved: Building Airswap and Fluidity

Episode Date: October 26, 2018

Michael Oved is the founder of Airswap and Fluidity. In this conversation, Oved and Anthony Pompliano discuss decentralized exchanges, tokenized securities, and what he’s up to with Airswap and Fluidity.

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. Michael Ovid is the founder of AirSwap and Fluidity. In this conversation, we touch on all things decentralized exchanges, tokenized securities, and what he's up to with AirSwap and Fluidity. I really, really enjoyed this conversation, and I hope you do too. This podcast is presented by BlockWorks Group, the only blockchain event and media production company I trust. If you're an investor, lawyer, accountant, or entrepreneur and want to attend exclusive events and dinners, visit them at blockworksgroup.io. I promise you won't be

disappointed. 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. Before we get into this episode, I want to give a quick shout out to one of our sponsors. Saluna is a blockchain computing company powered by its own renewable energy. the team is planning to build a 900 megawatt facility on top of a 37,000 acre location

one of the best wind sites in the world in southern morocco you'll hear more from them later in this episode but i'd love if you could go check out their website you can find them at saluna.io all right guys i've got michael here from uh from air swap and fluidity i'm super excited about this we've got a bunch to uh to dig through so uh thank you very much for coming Thank you, Pomp. Thank you for having me. Absolutely. All right, so let's start with your background. I think everyone knows the crypto side, but you actually have been in finance and trading and all that stuff for quite a while. Yeah, so math, Carnegie Mellon undergrad, and then I joined this small trading company called Virtue Financial.

Grew like crazy, wrote it out through their Asia expansion, and I made partner when I was 25, which is probably the coolest thing that's ever happened to me. I went through a merger, you know, in my early 20s. I had the ability to like go to another country and build out a part of their business that, you know, so it's kind of like doing a startup but within a company, applying a business model to new markets. And in Asia, you know, one of the things I got to do is not only interact with the markets in technical and trading level but also in a regulatory level. So I became like very familiar with international law, Japanese law, Australian, Singapore, Hong Kong, China. And just having

like that kind of experience at a really young age I think set me up really well for what we're doing now. That company IPO in 2015, I took some time off. I learned about Ethereum in early 2016. In my previous career, it was like the humans losing on Wall Street to computers. Yup. computers coming in and just like dominating. And when I read about Ethereum, I was just like, this is pretty much going to happen but to all other sectors of the financial services stack. So I just wanted to be a part of it. And then, you know, started to look at exchanges, started to really study decentralized trading, blockchain, how everything kind of

fits together. And we released the swap protocol white paper with my co-founder, Don, who's incredibly talented at like, you know, synthesizing ideas and building product. And we released that white paper went viral and then we were on the map. That's awesome. What, um, what do you think the biggest things you learned at Virtu are? I would say the best thing I learned there is not anything specific, but more just culture and how to actually behave. Um, and what I mean by that is like, we didn't have the answers. We never, you know, when you're at the front lines of the financial markets and it's hyper competitive, it's a moving target. You're always trying to like come up with your alpha and figure out your trades.

You just have to figure it out. There's no one that's going to kind of hand hold you through something like that and so, just kind of owning, being able to actually jump into a problem and figure it out and, you know, not only from a mathematical perspective but also from an intuitive perspective. Just having that kind of ownership I think at a young age was really incredible and also that company's culture is very strong as far as not prioritizing like ego or anything like that or politics or no politics within that company is very flat. We had really good access to, you know, the leaders in the company. I eventually was a leader in the company and, you know, still was around all the young guys all

the time. So I think that kind of flat, um, non-hierarchical organization, which you'd probably find that like a bank, if I spent my twenties, uh, in a bank, I don't think I would be the same person at all yeah it's super fascinating to how nobody sat down and like hey here's rule number one two three four five of how to actor or whatever they just immersed you in a culture right and kind of an organizational structure and you just naturally pick that stuff up through experience rather than kind of intentional learning so I think that's that's how the strongest companies in the world operate I think that's and

that's gonna be the future it's like I mean even radar you kind of just transcribes his principles and gives you a framework in which you operate and that provides a framework in order to answer some difficult some easy questions because the thesis is that in life you're gonna be presented with the same questions over and over and so just having like a very positive framework around very intelligent and down-to-earth people I think really allowed that company to basically go from nothing to the biggest trading company in the world in what eight years mm-hmm which is crazy on Wall Street if

you think about it yeah it is pretty wild what uh what are one or two things that you guys tried that didn't work and you kind of took away a lesson from yeah so made a big I personally at that company made a big push for the company to look more at options trading so the company wasn't like powerhouse and options trading is one of the things that I kind of studied in college and I knew the basics about it and I had a thesis about how we should actually be trading them, implying our system. And my thesis had to do with, we already have the technology, we already have the ability to interact with financial markets in microsecond level. That's the hard

part. All we need to figure out is the pricing, right? We need to figure out how to actually price these options and figure out where, how to price the vol curve and when things move what we're supposed to do. And so, I came in with that thesis and I pushed it really hard and I think that we just didn't want to devote the resources to something like that and I got a little bit of pushback on that kind of plan and I think that was actually probably the beginning of the end of my career at Virtu is that little thing that I pushed for and I'm a very self-directed person. I kind of want to decide my own fate and I thought we can do it and it wasn't given the resources and i think i decided maybe at that point i was

going to leave absolutely and so you know you go you figure out about ethereum uh start looking at it's interesting to you um how do you go from oh this ethereum thing's interesting to i want to build air swap yeah that's i mean that that was like a year and a half or maybe a year apart um so that's that's a that's a good question i think that first learning about ethereum i learned about it by accident at a music festival by meeting Joe Lubin and a bunch of the Consensus people. It was in April of 2016. And at the time I was doing something else and I had to kind of wind it down, but I was living in Los Angeles and I actually made friends with Brock Pierce who lived in Venice at the time. Brock actually was one of the early people that kind of introduced

me to crypto. You know, his fall from, a little bit of a fall from grace, but I still am loyal to him. He introduced me to some of the things and then I just, I kind of wound down my previous project and started to look at the space a little more aggressively from L.A. but I couldn't do it from L.A. because there wasn't kind of the Ethereum community there so I reconnected with ConsenSys, started to hang out with them in New York and I think a lot of the problem with breaking into the space was that a lot of the people in blockchain that were kind of doing their own projects in 2016 had been around for like two or three years and they had a name, they had Twitter following, I didn't have any of that. So I was like, I

probably need to just, you know, align with the right people. And I saw ConsenSys as a good opportunity to do that. When we actually started to do the project, when we wrote the white paper, we were never a ConsenSys project. We weren't a ConsenSys project until after we released the white paper. And after, you know, maybe even, you know, two months before we did the token sale, we came in with our own capital. Don and I had our own, you know, previous successful careers we came in with our own capital uh we ended up doing it as a jv um not as you know their classic spoke structure or whatever you want to call it um and so we were able to just operate outside of consensus which i think um for us made it a lot better because we

didn't really have you know a hundred different people telling us what they thought about a project every day and so what was the original idea was it how we know air swap today was it something else and it's kind of evolved over time you know what what goes into um you know the idea as you guys write in that original white paper yeah so i think the i it evolved a ton to answer your question um in a short way but in a long way basically we're reading the message boards and trying to understand what do people want in this space as a kind of the first way i was looking at it in 2016 and everyone talked about decentralized exchange and this is kind of like a hot thing everyone was talking about and there were a few implementations at the time. And I was

looking at them and they were kind of mostly using order book models. And I had a lot of experience with order books, traded on pretty much every exchange in the world. And I just kind of decided, hey, we have this distributed system and distributed nodes that are processing the transactions. Order books are inherently centralized. They exist on one central server. If you try to distribute that, you're going to run into all sorts of problems. And so So we designed a model that became the swap protocol and that is the correct design for decentralized trading. I think we'll win in the long term.

And it basically gets rid of the order book entirely, decentralized. So the way I think of trade is you have five different components of trade. You have peer discovery, price discovery, execution, clearing, and custody. basically go through those five. Yup. Every time you want to do a trade, you go through that loop. We managed to decentralize four out of the five. So, we decentralized everything except for peer discovery. Peer discovery, you find everyone in one central place and then everything else is done decentralized

as pass peer-to-peer. This doesn't end up being subject to front running. It doesn't end up having race conditions. You don't have to charge market makers for placing orders and cancels which are all sorts of different things that other designs are running into and i think will make it difficult for them to scale when they start to get automated traders on their platform and when things start to really pick up it's going to be difficult for them to scale we won't have that problem we'll be able to always scale because we kind of like designed it correctly from the beginning got it um yeah and and so as you're thinking through that um why do you think or why did you guys choose to not decentralize the peer discovery is it

because you can't or is there some sort of regulatory reason or what was the thought process there because you got four out of the five but but what was that last one i think it is it is possible to decentralize the first one and i actually don't think it would be super difficult to do so and we might put on a roadmap at some point but i think we were just using the design where you want to put in ethereum you have you're subject to scalability issues where you basically can't just like throw everything on chain you want to only put the most important things on-chain. It's similar to Bitcoin. We have kind of off-chain mechanisms in order to communicate the state to the chain. So we basically designed something

where the part that was off-chain was the peer discovery and then in other designs you basically have an off-chain order book which is centralized. Because that's public it ends up being subject to all sorts of issues later on. So we're just kind of trying to think of what is the best way to do an off-chain, on-chain mechanism that doesn't have these limitations, and that's kind of what we came up with. Got it. And so today the AirSwap product is what? How are people using it?

Yeah, so we released the first version of the platform network protocol in April of 2017 that is basically designed for kind of more automated traders to communicate to manual makers. so it's kind of just like a quick check out. And the way we wanted to do that with the quick check out is to basically integrate it into dApps, basically have a widget that basically goes into dApps. We went into about 20 different dApps. What we discovered is that, you know, maybe the hard way that people aren't really using dApps. The tokens are mainly for speculative purposes at this point. And so we kind of have to go back to the drawing

board and we're like, okay, well, we want to, we need to think about how to design the system but we also need to compete with something like Binance or Coinbase, right, which is difficult because we can't do USD. We can't do Bitcoin. We have longer transaction times. The UX is just different. You have to have a wallet, knowledge of a wallet. You can't just come in with your bank account and just like buy tokens. So we were limited by all these things and we kind of decided to take a step back and said, how do we actually go after the problem again? And kind of the full version of the system is basically to allow a more communication-style interface,

and it's community-generated groups called Spaces. We're rolling that out. We just opened this up two days ago. We're rolling it out over the next few weeks, and then eventually we're going to have community-generated Spaces. This is kind of something that's at the intersection of something like Discord and the trading project. Okay, and so if I'm a user, I can come in,

I can get funds into the system, right, and then I'm able to trade on this decentralized exchange and then I can also chat or communicate with known or unknown individuals? Or how does that chat part work? Yeah, so you actually don't deposit funds into the system ever, so there's no custody or anything like that.

You basically just come in with your wallet and you're signing transactions and the executions are occurring peer-to-peer, so that's kind of one of the strengths of a decentralized exchange, decentralized trading network, whatever we're calling it these days. So, the thesis there in the chat interface is that there are all these other types of

trades that you might want to do. You might not just want to be communicating with a robot and receiving trades but you might actually want to get a better price, you might want to negotiate. This is kind of how a lot of different buckets of trading fall into this. Something like the OTC markets will fall under this and a lot of people don't know this in crypto because they're used to trading on order books, they're used to trading on Binance But most of what we trade in the world happens peer-to-peer OTC, both on Wall Street and off Wall Street. Every kind of transaction we do every day is peer-to-peer.

And so we're designing for that kind of experience, but putting an interface on top that we think is going to generate social features accounts. And we also have KYC features as well. So you could, as, you know, let's say, for example, as Morgan Creek, if you wanted to come onto the system, you're not going to trade against random people. You're going to want to know, you're going to want to KYC your clients, obviously, for regulatory reasons in that part. has been integrated into the platform. Got it. And so you guys also recently released or started talking about fluidity as well, right? And so you've got AirSwap, you've got AirSwap spaces, and then it looks like you guys are now also going into the security token space. So how are those related and kind of talk more about fluidity and what the focus is there?

Yeah, so we touched on this a little bit earlier, but fluidity is basically our parent company. company. We raised our own funds and came into the joint venture of ConsenSys, of AirSwap with ConsenSys. So Fluidity is actually our parent company and we revealed it only about a year after we had formed it. So we formed it in 2017. We revealed it at the Fluidity Summit earlier this year, which we were talking about earlier is where, you know, our friend Nouriel was debating with Joe Lubin. So we revealed that the name of the company and also the our commitment to bringing real world assets onto the blockchain um that is obviously a very hard problem and isn't something that you can just first of all you have to find an asset

then you have to our other thesis is that you need the right framework in order to do this you need the right standards that the industry is going to subscribe to or else you know if you just put list your house on like a bulletin board right no one's going to and they don't no one knows where it is or what or or that has any transparency on it you're not going to receive any liquidity so So we needed to figure out the right asset. We needed to figure out the right framework. And then we needed to kind of come out with it. And we actually did that last week.

And that was probably the most likes I've ever gotten on anything I've ever published in my life. Well, because what you guys announced was a $30 million piece of real estate in Manhattan, right, that is getting tokenized. Why start with real estate? You know, why that piece of property? Just walk us through that thought process. Yeah. So, we did like three or four months of Biz Dev. I think we talked to you guys about a few different things, you know, over the months and trying to figure out what we wanted to do. And really it was about, I think, finding the right partners. We met

this group, Propeller. Todd Lippiet has like 20 years of experience on Wall Street in structured products. And so, he can just, he just understands how to look at a deal and see every nook and cranny and he also knows how to design a deal that's actually good for investors. He has his own broker deal, he has his own fiat capability, he has his own platform and we knew how to do the blockchain side of it. We knew how to take the interest that they were gonna securitize and represent them as tokens and then create a secondary market for those tokens on AirSwap which we can touch on in a little bit. So we basically just found this really good partnership and we were looking through and trying to figure out they have all these

capability we have all this capability what should we focus on and the thesis is that something if you look at the the the broad scheme of what can be tokenized there can be something that's like a highly liquid public security or there's all these tail assets that have not had that if you hold one of them basically in order to get out of it you You have to repaper those transactions. You have to find a lawyer. You have to find a counterparty, and that's also very difficult. So it's just the ability to streamline the secondary market process of the illiquid assets.

Our thesis is that will provide a ton of value, whereas if you're looking at a publicly traded security like Apple or Facebook, they already have great financial markets for it, and they're already doing all their disclosures. There's all this regulatory infrastructure in place. We're not going to be able to compete with that. Well, it just works, right? The public markets today actually work for a good amount of people. There's some that, you know, are boxed out for different reasons. But what you guys are attacking is the markets where they aren't working well, right? Or they could work better.

And so if you start there, the bar to clear or compete with is not very high. Yeah, exactly. Got it. Okay, and so walk us through the actual structure of what you guys are tokenizing, right? So my understanding is that there's a piece of real estate and there's debt, there's equity, there's multiple components to this. How did you guys structure it? Yeah, so basically what we published was a framework called the two-token waterfall. And what the two-token waterfall is, it's a way to structure real estate or private security transactions such that the thesis is that if you structure it this way, you will be able to find liquidity.

and why is that is because token a replicates debt token b replicates equity if you take both both of these and add them together you basically have the entire value of the asset okay you're basically replicating the entire financial stack of a real estate asset and this can probably apply to 90 of the assets in the world once you get into the more complicated structures you know cdo clos that stuff starts to get a little more complicated but this you know a mortgage or or a building with 20 investors and a bank that has debt, you can basically replicate the entire financial stack of that transaction. So, what does that actually mean? It means that when you have a viewpoint on the price of the asset, you can immediately imply token

A price and you can immediately imply token B price. So, what we're doing is we're providing A plus B equals the entire value of the asset and once we do that, you're giving transparency on the entire value of the, of the, of the asset. And you're providing no, no arbitrage pricing, which will encourage traders to come, which will encourage liquidity. Got it. And so do you think that the two token waterfall works for real estate, but, you know, not equity or commodities or, or currencies, or do you think that this two token waterfall, can pretty much work for any asset that has both equity and debt in the capital stack. Yeah, I think it works for anything.

It's actually not specific to real estate. We reference real estate in the white paper. It's for alternative investments. So that can be something like private equity or real estate or anything else. So the idea is for the framework to be broad. It's actually part of a wider securitization framework that we are working on and that we haven't released yet. So there is kind of, our goal here is to basically release a framework, get a landmark deal,

put the deal, you know, and actually I can't, these are not tied together, the white paper is not tied to the deal although it's a framework, you know, for regulatory reasons. We can't have them tied together exactly but we're essentially have this deal, we're putting it through something that is similar to this framework and then we're basically proving the thesis that there's going to be an active secondary market. And then we can kind of expand out and cover the majority of assets in the world. So let's talk about that secondary market, right? Because I think that one of the knocks against security tokens today is, yeah, sure, technology exists, we can go ahead and we can tokenize things. But, you know, where's the

liquidity? Right? So kind of, you know, what's your rebuttal to that? And where do you think we are? And kind of where are we going when it comes to that secondary trading or liquidity? Yeah, I think particularly AirSwap or non-custodial trading platforms are going to be really well suited to go after this, to go after the secondary market. Why? Because in order to take custody of an asset, if you think about it, you have to basically have trust, right? You have to have someone else that's basically taking over the asset for you. And that's a highly regulated event on Wall Street. Custody is, if you were going to start taking custody of assets, you have to have every

single asset approved. As you start to go into the long tail, like we were talking about before, all the thousands of assets, you know, tens of thousands, hundreds of thousands, it starts to get really large regulatory burden on all of the, on every single asset you want to list on your secondary market. And so, a peer-to-peer non-custodial platform will allow this technology to scale. So going back to the idea of having OTC, more OTC style market, all these assets are kind of a liquid. And so you're going to want a way to actually communicate with someone.

You don't need to post it on an order book and expect it to trade like publicly traded high frequency traded security. Just not going to happen that way. Really what you want is you want an interface more similar to something like eBay or Craigslist where you're basically able to have price discovery found in a different way from an order book. And so I think that AirSwap is going to be very uniquely positioned to go after this market. Yeah, it's super interesting, too, when you think of a global investor base, right, where, you know, there's a lot of hurdles to jump over for, let's say, an international investor

who wants to invest in U.S.-based assets on a U.S.-based exchange, right? And so I think that there's an element of there's problems that we know and there's technology available today to solve those problems. But this space specifically around decentralized exchanges and the intersection with security tokens feels like an area where in the future we will create products, services or solve problems that we don't even understand today. Right. Totally agree. And I think that's one of the power of spaces that we're allowing people to provide is we're allowing them to define their own trading environments. So they can have their own KYC standards, they can have their own onboarding process

for, you know, let's say they only want Japanese traders to be transacting in the security or they're allowing it to go cross-border between X, Y, Z country. That kind of controlled trading environment we're allowing people to create on AirSwap. And the thesis is that in order for something like this to actually trade, an order book basically assumes that everyone is identical and everyone is exactly the same. But it's actually not true in real life and mostly for regulatory reasons. Yeah, no, it is. It's very analogous to, you know, no one could have imagined Uber, for example, until there was the advent of the smartphone with GPS and touchscreens, all this kind of stuff. When you look out 10, 20, 30 years, what do you think is possible in this like tokenized securities world or digital securities world? I can't look out 10, 20, 30 years.

That's a long time. I mean, I think that the way I look at this technology is, you know, the Internet had an incredible effect on humanity in terms of business, in terms of education, allowing people to just communicate anywhere in the world and decide how to communicate, right? You decide how you want to consume information. Everything that we do with money and value is top-down. It's from the government down. We don't have it in the banks down. We don't kind of have a choice. But this is allowing for peer-to-peer value transfer. I mean, obviously, obviously subject to compliance. I think that that kind of society is going to be, that

kind of technology is going to have a much broader effect on society because money is so core to our existence and the ability to kind of participate in capital markets and have freedom to participate in what you decide to participate in, I think that's going to have really profound impacts on society. But I don't think it's going to be like the internet where we have, it's going to be visual, right? It's going to be, it's just going to change us in an unreal way. Like, we're not going to be able to quantify it. I think blockchain is something that, you know, eventually the UX is going to be abstracted away from everyone. We're not going to be able to actually realize that everything that we're doing is kind of

integrated. It's actually one of the things I love about the Ethereum community is that of the projects kind of, you know, interoperate, they figure out how to get their smart contracts to match together. So you have someone working on derivatives, you have someone working on compliance, all these different smart contracts can basically interact with each other. Yeah. And I guess part of this is recreating elements of Wall Street securities markets, you know, et cetera, that we know. And then there's the imaginative part, right? Where can people figure out how to use this technology and apply it and also follow the rules? Um, what do you think today in the securities, uh, like digital securities market is the

main issues holding this back from going, you know, I don't know, tens of millions, maybe hundreds of millions of market cap to billions and hundreds of billions. I think we just need standards. We need a framework that, uh, basically, first of all, the institutions are going to buy into and also the general framework, the general investor is going to actually buy into. So I think we just need the right frameworks. We need to, we need like kind of the shelling point of tokenization to happen. And I think that'll probably happen over the next six months. To me, if I look at this technology, I think that the next five years are going

to be finance. I think the five years are going to get, finance is going to really get affected by this technology. The next five years after that is going to be accounting because basically once you have all every asset on a blockchain, there's essentially nothing to account for. And so you, the entire accounting industry kind of turns into a gooey, right? Where you're just running a scrape and everything is correct. You know, the next five years and, you know, this part probably happens in parallel but I think the legal industry, the compliance industry is going to change dramatically. I think automating compliance is going to have tremendous effects on society.

Because the way that laws are written currently, again, it's top down. The government says, this is the way you need to do things. And people need to follow that. And there is this kind of level of trust that happens where the government maybe trusts you or doesn't trust you, depending on who you are, to behave a certain way.

But if all of that is enforced into smart contracts and all of us are engaging in a society where we know that we're all following the rules, I think that allows us to do a lot more things, allows us to basically transact in all these different ways. And so I think automated compliance, I think automated compliance is something that people are not talking about enough yet, but I think they will very soon. Yeah, I mean, look, we've gone as far as to say wouldn't surprise us if the SEC mandated it, right, in terms of it actually makes their job easier. Are they going to be proactive rather than reactive? Part of it then becomes who is trusted to write that code, right? Is it a decentralized team? Is it the government themselves or a regulatory body? I think there's kind of a lot of questions in the execution and the nuances there,

but I generally believe this technology can solve a lot of the fundamental issues that we see in existing markets and would be quite powerful. Yeah, I totally agree. I mean, something like accredited investor checks, you know, can be enforced at the blockchain level, right? You can have a mechanism that basically looks at, you know, either if it's some, initially it'll be some central party that basically puts it onto the, puts your accredited investor check onto the blockchain. But eventually it can just like scrape your earnings or something like that, you know. And I think the accredited investor checks will change a lot over the next two years. that's another topic maybe worth going into but i totally agree i think i think eventually

this stuff will be mandated coding laws into smart contracts will be mandated i don't know who's going to do that absolutely what do you think it takes to get more retail focused investors to switch from investing in public markets and kind of traditional stocks to tokenized securities digital securities is it just user experience and interfaces um or do you think there's some sort of like inflection point that's event driven by you know something in the market well i i think it goes back to kind of what what you were saying before is that we really don't know what this technology is going to look like in three four or five years you know like peer to peer economy we don't really know we didn't really we couldn't really predict airbnb but now

Airbnb seems super obvious. So we don't really know what kind of investments people are going to be able to invest in or want to invest in. So it's kind of two sides. We don't know what the supply side is going to be and we don't know what the demand side is going to be. We have some ideas and some product ideas around that, but that's kind of maybe our edge right now, just thinking about that a lot. So I don't know if I'm able to say. Absolutely. Okay. And so what has been the response from kind of the global audience, right? Where do you see the most interest in, whether it's the real estate you guys are doing now or just kind of this move into the more kind of security-based assets? Can you tell a difference between U.S. versus other regions of

the world? How do you just think about geography? Yeah, I mean, everyone wants to invest in New York real estate right so we've had a tremendous amount of outreach from from different people people reaching out to us from around the world one of the things we're kind of exploring right now is a crowdfunding platform partnering with a crowdfunding platform in singapore and maybe doing a portion of of it there because in singapore they can onboard chinese they can onboard european so i think making these global products will allow them to proliferate further If you think about what's required for an international investor to invest in Manhattan property at this day and age, other than doing it through a REIT or something like that, it's actually pretty hard to actually buy a property. But fractionalizing and allowing anyone, well, anyone subject to compliance to be able to purchase, I think you'll draw a lot of international interest into this market.

Absolutely. And part of me thinks, you know, Wall Street is going to be asleep at the wheel and they're not going to see this stuff coming and there's going to be a whole disruption. And part of me sees that they've got blockchain teams and, you know, capital markets teams and all stuff and they appear to be paying attention. Where do you think the kind of disruption occurs, if any? Do you think that this is, you know, people sleep at the wheel no matter if they know to pay attention or not? or do you think that they're generally on top of it and there will be kind of coexistence between the legacy system and this new system? Yeah, so I've thought about this a lot

because the way I think about it is whether blockchain is going to be transformative from the top down or from the bottoms up. The top down meaning, you know, the banks, the governments decide, hey, we're going to put everything on a blockchain and everything's going to be great. Or if it's bottoms up,

where basically people are building this technology, they're layering on top, they're trying all these new things. And eventually it starts to pierce into the, there's some inflection point and eventually that just pierces into what the banks are doing. I don't know what the answer is. I think it's gonna be, I think it's possible that there is an event that really causes this technology to proliferate.

But I think, like, ultimately the banks are getting wagged by the compliance departments And so they, you know, you've seen so many different ways that they've been trying to get into crypto, trying to get into blockchain technology. We have conversations with, you know, a few different banks. It's been kind of sometimes kind of frustrating where they they're just always just thinking about the, you know, they just can't take any risk. Right. And this is the same reason why, you know, Virtu is so successful is because they were able to move quickly and they're able to take risks and able to build these platforms that banks weren't able to compete with. So I think that I think the bottoms up approach is more promising. But but I also think that in order for this technology to really take off, especially on the tokenized securities part, it's going to need institutional adoption. Absolutely. Well, it just brings a level of legitimacy, right?

And kind of sophistication. This makes sense. All right. So let's do some rapid fire questions here. I'm going to change it up just a little bit, given kind of what you're focused on. on the on the tokenized security side what do you think the assets that need to get tokenized that you haven't heard of yet which ones would be the most intriguing to you such a good question that you're speechless you know one of one of the

interesting things that we were talking about yesterday is different levels of the entertainment stack which um i personally am very averse to the entertainment industry because i'm from la um but i think that there there are different uh elements that have tons of middlemen just involved in taking a piece of the pie right where the artist eventually isn't seeing anything so um being able to tokenize and and represent that and value and you know maybe royalties or something like that i think there's there's a lot of promising things there you know again And there are so many middlemen in that industry that you would need that to come from the top down, I think. You would need the labels to, you know, invest in your project in order to get that off the ground.

Absolutely. Maybe enlist Kanye for that one. He seems to be all over the tech and music scene right now. He's your boy. We'll see. We'll see. He's going crazy on the Internet lately. Let's know.

All right. So other than AirSwap and Fluidity, what do you think is the most important company in crypto today? I think that the most important problem in crypto is scalability. And you're seeing all of these new platforms that are coming out with all these unique ways to solve scalability problem like DFINITY. and you're going to see Cosmos and Tendermint coming out later. I think like the hard spoon later this year, having Etherment, having a second version of Ethereum that has a different consensus mechanism,

I think these are all going to be super interesting. I think Ethereum needs to figure out how to scale because a lot of competition is coming. Absolutely. Competition might be good, right? Definitely. I think even the price going down and there being all this competition coming to market i think has caused the community to kind

of rally around hey you know we actually have to have to get this stuff done absolutely um okay what uh what's your one most controversial thought in crypto if you uh the one thought you have that a high majority of other people would uh would disagree with just don't want to offend too many people with my answers whatever one you just thought of that you don't want to say say it nobody listens to this anyways You know, I think the one thing that I've never kind of understood is, is how much infighting there is in this community. Like, you know, with what happened with Bitcoin in 2017 or 16, I can't remember now.

17. 17. You know, people's careers basically are defined by what chain they support. And, you You know, so it's kind of like these technological upgrades and this self-organizing community. I think people just need to be a little more patient and supportive. But, you know, I guess that's not as fun on Twitter. Yeah, it's definitely not as much fun. And there's so much anonymity or pseudonymity that goes on, right, that real identity is kind of lost. It's actually one of the things, I don't think I've ever really talked about this,

facebook figured out early on right was real identity actually increased the quality of the content and so you know in crypto i don't think that everyone should have to use their real identity i actually think there's a lot of protections that can be provided by anonymity pseudonymity etc um but it is interesting to see you know the my spaces of the world had uh all sorts of pseudonymity anonymity um facebook said no you have to use your real identity higher quality content and ultimately ended up being the winner i do wonder what that impact would be on crypto if everyone had to use a real identity we have a lot of ideas around that um definitely for kind of the user-generated communities i think identity is a huge part

of blockchain that hasn't been explored totally agree i think that people have identity solutions but they don't know how to use them and so something like requiring legitimacy on on a platform that people actually use i think would provide a lot of value yeah it'd be super interesting to explore um all right you got a magic wand you can wave it one time and change one regulation or improve one regulation what would it be i think the simplest one is the accredited investor rules i think they're kind of stupid and outdated um if you think about it when i was 22 years old i took my series 7 i became licensed by FINRA

to sell securities to the public but I wasn't an accredited investor so I couldn't buy them it's pretty crazy it's got to change yeah

what do you think the right framework would be I think it's a combination of either capital or some sort of education

you know if you know what you're doing you should be able to participate in you know a startup company

that you believe in yeah i'm a big fan that i think the education one would be uh be harder to implement obviously but but i do think that uh it would be uh quite powerful and actually you might get a more efficient more safe market if you just have more people educated totally agree right um all right so the one non crypto question uh we have to admit that aliens exist um do you think that there are animal aliens Are there, do they have pets or do you think that they're just, uh, human, uh, like aliens? I mean, definitely, definitely.

Why? Species on those planets. Um, I don't know why. Probably. Hmm. So you're, you're an alien believer though. Oh yeah, for sure. Yeah.

Same. Yeah. I don't have any, any doubt. I mean, the, have you watched, um, Cosmos? I have not. You gotta watch Cosmos. It's great. But basically, at the end, they zoom out from Earth, and they zoom out from the solar system,

and then zoom out from the galaxy, and they say, you're just a speck of dust. Yep. Right? And it puts everything into perspective. The amount of time that this planet has been around is not very long compared to the galaxy. Just probabilistically, I mean, there's definitely oceanic planets. Probabilistically, if those planets have been around long enough, you know whether life came from

some meteor that hit the earth we don't really know how it originates but probabilistically that has likely happened on another planet as well do you think they know about us and just can't get to us or they don't even know about us

I think multiple species know about us yeah multiple non-earth species yeah and why do you think they haven't come here or do you think they have i don't know yeah i don't know if i'm convinced that they know about us like if we knew about them you think we'd go we would try to but it would require uh going you know bending the space

time continuum so we'd we would have to go faster than the speed of light they discovered an oceanic planet um you know four light years away so if we could go at the speed of light we can get there in four years um if we knew that there was life there yeah we'd probably send we'd probably figure out how to get there you know maybe not in our lifetime or maybe actually in our in our lifetime age won't be uh an issue which i'm optimistic about um at the rate at which technology is going but i think that yeah if we knew if we knew there was a a planet with life four light years away we would figure out how to get there for sure it's uh it's like curiosity killed the cat like we couldn't resist right we got to go uh would you go yeah you'd be one of the first

i wouldn't be one of the first um you know and they're also talking about people going to mars and they pick the first uh group of people that are going to mars and the expectation is that when you go to mars you're just going to die on mars right um so you just have to be comfortable with that and i was thinking about it and i was like what would it feel like to die on mars right like you're on an alien planet you haven't eaten like regular food in five years let's say um you don't have any of your friends you don't have any you know podcasts eating nothing you're just you're just miserable until you die right and you die like completely alone i don't want i don't want that i don't want to be the first maybe when we figure out how to change

the atmosphere i'll check that out yeah i uh i don't think any humans listen to this but the aliens definitely listen to this podcast it's the only people listening um all right so uh i end each podcast i let uh the guests ask me one question uh what one question would you like to ask You're thinking so hard about this It's scaring me I just have a few different ones I'm just trying to think We'll break the rules

You can ask too You know We're yeah i guess where where do you see this going in two years two years so uh i think a lot about the bill gates quote of you know we overestimate two years underestimate in 10 um and on the digital security side i completely agree we're going to get to a, you know, global marketplace with, you know, kind of compliance and law written into code, all the assets will be digitized, etc. I'm actually pretty bearish on how far we're to get

in two years. As we've just looked at it more and more, I think part of the problem is the user experience of the key, like or the core components isn't there yet. So one of the you know, one of the easy examples there is just, when I want to send you Bitcoin, it's actually pretty hard, right? And the running joke is like, you know, everyone's scared when they send it that it may disappear, right? Because like, I've got to make sure I get your address perfectly right. And just that user experience sucks, right? And so we're all the wackos that are using this stuff early, and it's fun, and it's cool. And we think we're really smart. But there's no way that mass adoption is happening when I've got to send, you know, Bitcoin to this random string of letters

and numbers. Right. And so like, that's a really clear example of we got to fix that problem before mass adoption happens. And so if we got to do simple stuff like that, the odds that we're going to get to like buying and selling digital securities in 24 months on a global basis with code written into law and like, you know, full harmony of jurisdictions and all that kind of stuff. Just, I think there will be, you know, examples or kind of early assets that accomplish that we're not going to have like a highly liquid marketplace, in my opinion, right? So I think that, you know, that that's one thing now, I don't think that it takes 10 years, right? So it's like actually somewhere in between there. And so if you looked at it and said, take, you know, I don't

know, $70 trillion of assets, right, that are kind of tradable, I think, in the US. And maybe I have that number wrong i'm not sure but if that's true like 50 of the assets are tokenized or digitized right in the next 10 years i could see that right and just kind of coexistence and and there's kind of the slow disruption of the existing system like that wouldn't surprise me yeah i actually totally agree with that i think i think security is going through any sort of kind of inflection point i think it's probably at least two years away uh one of the things i i like to think about and that I'm hopeful of is that someone like Apple comes out with, you know, a hardware wallet solution

that's basically integrated into your device so everyone in the world basically can sign and send transactions. There's like three companies that it would be powerful for. It'd be like an Apple, a Facebook, and like maybe like an Amazon, like a massive retailer, right? Like one of those three companies, a hardware provider, some sort of like social network identity provider, right,

and a retailer, if one of them did it, I actually think it would force the hand of everybody else, right? Because they don't want, I don't know if Facebook would want all of their users using Amazon's wallet, right? So now all of a sudden you push the pace of innovation across the spectrum and everyone has to create one. And then somebody will come around and they'll bundle them all together and say, you know, hey, here's one wallet that interfaces or is it, you know, interoperable with all these other wallets and and we'll kind of enter this whole cycle um but but i think that that first one's really important yeah and i think facebook's interesting because they have a blockchain team from what i heard it's they're they're struggling to find

talent because you know a lot of the young blockchain developers um maybe the ethos is a little bit at odds with with facebook and also uh you know i think a lot of the young talented people won't necessarily join facebook at this point so i think facebook probably will go into acquisitions free at some point to get into blockchain in a serious way. Yeah. I mean, I don't know for sure about the engineer talent, right? Like that wouldn't surprise me. I mean, that's a narrative that generally makes sense. The one thing that's interesting to me about Facebook is they've got, you know, some of their top talent leading the team, right? So they went and, you know, David Marcus, Kevin Wheel, et cetera, you know, Morgan

Beller. They really have been thoughtful about, you know, if we're gonna put resources here, Let's make sure we put some of our best people. And so I'm interested to see, you know, what they come out with. But whatever they launch, they'll immediately be the largest crypto company. They got two billion users. And so if all of a sudden they give everyone a digital wallet, right, or something like that, they just have more users. And so I think that, you know, that's a pretty interesting world of possibilities. And so I'm cheering for them to do something that, you know, kind of positively impacts the world and drastically increases the adoption of crypto.

Me too. Absolutely. All right, man, it's been super fun. Thank you so much for coming. We'll have to do this again. Thank you. I thought that. Hey, guys, thanks for listening. We're back with the CEO of Saluna, John Belzier. John, what are you most excited about right now? What excites me the most is that we're really in the midst of a revolution. Satoshi Nakamoto's paper that came out eight years ago really launched a revolution globally. And the blockchain is definitely here to stay.

Today's blockchains are predominantly seen as the core technology for cryptocurrencies, among other things. But in the future, blockchains will do more. They'll be the foundation for entire new ecosystems. They will revolutionize a host of different industries around the world. And taken as a whole, these new distributed applications will form a new kind of internet. One where protocols replace companies and algorithms choose the best computing backend and solutions that they can find. This new ecosystem, this new internet, if you will, will need dedicated infrastructure to power it. And what excites me is that Soluna aims to be the key part of this infrastructure.

We have the opportunity to build the next great infrastructure company to power this revolution. Thank you for taking the time. If you'd like to learn more about Soluna, please visit soluna.io. 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 you listening and see you next time on Off the Chain.