The Wolf Of All Streets - Trust By Transparency with Chen Zur, US Blockchain Leader at Ernst and Young

Episode Date: November 26, 2020

Chen Zur has a diverse background in a multitude of sectors and over 20 years of experience at Ernst and Young. Upon E&Y’s discovery of blockchain 6 years ago, Chen became the US blockchain leader for the company, helping clients implement blockchain at scale. His ability to explain complicated and abstract technologies and concepts in a way that everyone can understand makes this episode unique. Scott Melker and Chen Zur further discuss working at Ernst and Young for over 20 years, working on the blockchain for 6 years, the internet of value, the 5 reasons for utilizing blockchain, China’s CBDC and the imminent digital dollar, big brother, NFTs, the gold standard, removing the middle man, the normalization of blockchain, the future of precious metals, private vs. public blockchains and more. --- VOYAGER This episode is brought to you by Voyager, your new favorite crypto broker. Trade crypto fast and commission-free the easy way. Earn up to 9.5% interest on top coins with no lockups and no limits. Download the Voyager app and use code “SCOTT25” to get $25 in free Bitcoin when you create your account. --- ELECTRONEUM Electroneum, has gained widespread adoption providing a mobile-first payment solution to the world's unbanked, attracting more than 4M users worldwide in less than three years. They have since launched a new freelance marketplace, AnyTask.com, which is providing thousands of freelancers the opportunity to sell their services to buyers globally, without the need of a bank account. Learn more at Electroneum.com. --- MYBOOKIE Bitcoin is the easiest way to Bet, Win and Get paid at MyBookie. Make your first deposit with Bitcoin and MyBookie and will instantly double it up to $1,000 to add excitement to all the Thanksgiving NFL action. Celebrate the holidays with MyBookie. The exclusive home of the Crypto Rewards Program and Turkey Day Free Play. Use promocode SCOTT at mybookie.com and double your first Bitcoin, Lite Coin or Bitcoin Cash Deposit 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

This episode is sponsored by Voyager, Electroneum, and MyBookie. Stay tuned to hear more about them later in the episode. What's up, everybody? I am Scott Melker, and this is the Wolf of Wall Street's podcast. Today's guest is a CPA, MBA, and most importantly, the US blockchain leader for Ernst & Young. When it comes to large-scale real-world blockchain adoption, there's nobody better for us to talk to than Chen. I can't wait to find out the progress and pace of blockchain adoption here in the U.S. and how Ernst & Young is planning to incorporate and proliferate blockchain technology.

Chen Zer, it's a pleasure to have you on. Thank you so much for taking the time. My pleasure being here. Thank you so much, Scott. So before we jump into the questions, once again, I'm Scott Melker, and this is the Wolf of All Streets podcast, where twice a week I talk to your favorite personalities from the worlds of Bitcoin finance, trading, art, music, sports, and politics. The show is powered by Blockworks Group, a media company with over 20 podcasts in their network. You can check them out at blockworksgroup.io. And if you like the podcast and follow me on Twitter, you need to check out my website. Join my newsletter. You can do both of those things at thewealthofallstreets.io. So now let's dive in. I went to the University of Pennsylvania in the 90s, and Ernst & Young was one of the companies where many of my classmates landed

primarily as management consultants. So it seems surprising to me that the company would be so focused on blockchain just with my sort of bias as to what the company does in my mind from that period. So can you talk about what Ernst & Young does exactly? Right. Generally, and then in blockchain, and I'll be brief on that generally, but I hope it will help explain. So Ernst & Young is basically doing three or four things, depending how you slice and dice it. But the main thing that we do is, of course, audit the financial books and results of companies. The next adjacent thing would be work on the tax returns and tax for our clients.

And the last, but not least, definitely in recent years, one of the largest parts is consulting. And inside consulting, there's, as you said, management consulting and strategic consulting. There's business consulting, but there's an ever-growing piece of technology consulting. And as the world evolves, you know, no surprise, technology takes a larger and larger part of everything we do. And the last COVID crisis isn't different. It's just emphasizing this and making it even stronger. And as such, Ernst & Young has been investing in technology consulting for many, many years, at least as far as I joined EY 20 years ago. And a long time,

yes. And this trend is only getting stronger and stronger. We do all kinds of technology consulting. Some of it is directly related to innovative technologies like robotic process automation would be another example, blockchain or artificial intelligence. And when we dive into blockchain and when we discuss the profound change that this technology would bring to all the rest of what Ernst & Young does, for example, the way we audit financial results and reports on them, the way tax is being calculated and paid, everything is going to be influenced by blockchain and therefore the

large commitment, all the big four, specifically EY has to this technology. It's going to dramatically change the way we work in our entire business, if you ask me, at least over the course of the next 10 years. So how long has EY been looking at blockchain technology specifically? I know you mentioned you have a technology consulting group, but at what point in the history of this with the rise of Bitcoin, just to give us some context, when did you realize or did the company make that commitment and say, this is the future, this is how we need to proceed? So I would say this initial interest in blockchain technology is around at least five, six years

old. And so fairly early on, at the time, it was just another technology among others, but as time progressed, and I would assume 2016, 2017, when blockchain really erupted, then EY started dedicating more and more resources and partners to deal with this technology directly. At least when I started, it started as a hobby, not as something EY directed me to focus on. And I think I'm not different from the others who are dealing with this technology. And as this evolved, then we made it our day job as well. Makes sense.

So it's interesting because 2016 and 2017, obviously was when we saw sort of this massive run in cryptocurrencies. You know, we saw altcoins, ICOs, this huge boom in Bitcoin, of course, and then a bubble pop. But that's not really what you're talking about here, right? Right, right. So thank you for this question. Very relevant question. Cryptocurrencies are a part of what blockchain technology information digitally, then blockchain would be in the future the internet of value or the best way to exchange value between organizations. That's much, much louder than just cryptocurrencies, of course. That's interesting. I've never heard the term the internet of value, but that's extremely interesting.

I love that. Can you please dive into what that means? Because I think everybody will hear that and have a little light bulb. So, yes. So let's think about it in the following way. If you think about the way humanity manages value all throughout history, then let's go to a small village with a running stream of water in the middle. You have chicken, I have goats, probably the water that we both drink and use don't have value because they're abundant.

All we need to do is go to the middle of the village and just take water from there. Water will have very low value. The chicken, the goat, they have one thing in common. They are both scarce. And in these early days, we would probably barter between us, and that's how the value and economy worked. We exchanged things of scarcity. When bartering became too complex as we evolved, we moved from exchanging and bartering to putting our value in precious metals.

And this is what we exchanged. Same thing is kept. Why precious metals? Because they are scarce. When carrying precious metals around became too complex, too dangerous, what we did is put precious metals in the banks and issue notes against them. And then we carried notes around exactly the same thing. Notes are scarce, therefore they have value. They represent precious metals in the bank. And that's true up to the 1970s, right? So, we just, through the entire history, we had this situation where precious metals are kept in the bank and we have by now dollar notes or what's called fiat currency backed up by governments, backed up by gold, and they are all scarce. At the 1970s, this connection between

fiat currency, the notes themselves, the paper itself that is up to now worthless, it represents gold, is broken. And now that the fiat currency, the notes are just representing the commitment of the government to honor them as a source of value. If I give you a $100 bill, there's one thing that is constant, one thing that didn't change all throughout history. If I give you a $100 bill, you know I didn't get to keep a copy. $100 bills are scarce. Enter the digital era and the internet with it.

It is an amazing tool to exchange information. It is an amazing tool to, for example, to have this conversation between us. But when I send you an email, send you a picture, I by definition send you a copy of what I have. So while amazing at sharing information, not good at managing scarcity. Digital things, I can copy paste, easy. So I cannot manage value with them. So does that mean we still use paper notes? Does that mean that we don't use the internet and digital in order to exchange value? Of course not.

The way we do it is through middlemen that make sure that value is kept scarce. And what I mean is for me to today move $100 to you digitally, I can either use a credit card, Ven know, Venmo, PayPal, a bank, wire, ACH. One thing is always in common. There's a middle party that would make sure that I'm credited and you are debited or the other way around, doesn't matter. But always we would have this entity keeping value scarce. Enter blockchain. Finally, this was a very long-winded introduction.

I love it. Blockchain has the ability to manage digital scarcity, trusting the code rather than middlemen to do it. So if you think about Bitcoin, there's one thing that, Bitcoin is an example of all cryptocurrencies for that sense, have a piece of code that control once and we get digital scarcity and we can manage value digitally. So no double spend problem. No double spend. Exactly. So, when you talk about the internet of value, you're talking about the provability of scarcity in all of these transactions, which can then be leveraged for the different aspects of your business.

So, what are the different aspects of your business where you see blockchain becoming a key factor? Also, I guess after that, we can go into where does it just not work? And what applications that we see everybody talking about for blockchain or nonsense? So, but let's start with the ones that are actually useful. Where does it work? Anything that of value would be relevant if it is the ownership over assets, if it is the ownership and exchange over inventory, the ownership over intangibles as well.

It doesn't matter. So let's take a few fun, quick examples. If instead of exchanging, I'll build on the example I gave. Usually when I pass $100 to you, it's not a gift. It's an exchange of something of value that you have. So let's build on this example. Let's say that you have a car and I want to buy it for $100. Terrible car. Terrible car. A toy car. No, a car. Perfect. No, no would need the car in a minute. So the way we would do it today is go to the DMV. I would either wire you the money or give you cash. And we would use the DMV to record, to keep the record of who owns the car. Because what we never want happening is that there's two owners for the same car, right?

Again, always the car has value, and therefore the owner, it's scarce. The owner needs to be one, or at least the ownership needs to be split. The same thing we would do, or maybe a sentence before, the DMV acts here as a middleman in order to make sure that there's only one owner per car. What we would do with blockchain in that specific example is generate a token. The DMV would generate a token that represents the ownership of the car. This token is, you don't need to understand, sounds like a scary word. The only thing you need to understand about a token is that it is unique. It exists only once across the entire network,

and this specific token represents the ownership over your car. And when we want to exchange value, I would deposit, let's say, the 100 digitized dollars, and I'm now moving from cryptocurrencies to digital fiat, right? And we can speak about that in a minute. I would deposit my 100 tokens representing $100 to a smart contract. You would deposit the ownership over the car. A smart contract would wait, for example, for a third party,

like a garage making the checks that the car is in good condition. Once the third party gives the thumbs up, something we would do manually today, the smart contract would exchange the value. No need for a middleman. So the escrow agent, the smart contract becomes the escrow. Yes, yes, exactly. But it is a digital escrow agent. It does not take commission, definitely not anything in the scale

that a physical escrow agent would take, especially if we have large deals. It could be inventory as well. It could be basically anything. And the smart contract would manage the exchange of good ownership tokens and fiat currency tokens. And we would exchange in that way. That touches everything, basically. Now, if you want to build on this example, maybe you made profit by selling the car.

Maybe you need to pay taxes on that. So the smart contract, which is only a piece of code, could at a minimum report this automatically to the tax authorities. At a more advanced stage, it would take the $100 that I just paid, take $5 and move it directly to the tax authorities. No reporting, no something at the end of the year, definitely for indirect tax, the future is automatic indirect tax payment. That would imply that the IRS doesn't want us to just have to go through the exercise of guessing what we owe them when they already know, which is, to me, the most absurd thing that I do every single year. But I guess that's tangential. That's interesting, by the way, before I ask you a question, if I may, to me, once governments understand the potential of, and there is a government who already understands

that, it's called the government of China. But once governments understand the potential of moving away from manual currency to digital currency and what it means to the basis of tax collection, to the level of effort it would take in order to have much more accurate and larger tax collection, they would become the largest advocates to this technology rather than the largest resistance to it. Isn't that a little scary, though? Central bank digital currency. I mean, I guess we can go there and circle back on what we were talking about before, but I love talking about central bank digital currencies.

Obviously, they're more efficient. They're better for governments. They're a dream talking about central bank digital currencies. Obviously they're more efficient. They're better for governments. They're a dream for a central bank to know exactly where the money supply is and everything happens faster and you can incorporate smart contracts as you say, but as a citizen, as a citizen, yeah,

big brother, no more, you know, no more private transactions, no more cash and no more choice about your taxes. Like you said, it just is removed from your account, right? What if you had an expense? Yeah, so go into that.

Yeah, so let's talk about what they are, and then I will explain at least how I see these things. So central bank digital currencies are the blockchain version of printing money the way we know it today. So CARES Act is a perfect example. The US government is printing trillions of dollars and distributing them out of thin air. It's just printing dollars on magic, right? Not even on paper, right?

On blockchain, what you would do is mint, the word would be mint the dollars as tokens to exist on a public network. And then the citizens could use the tokens. Think about a stimulus check that arrives at your wallet at the press of a button without the lawyers, bankers, accountants, and so many other middlemen in the process that all do very important work. I'm not taking that away today, but they all take very nice chunks out of this money just because they need to give a service, et cetera, et cetera.

They are closer to the plate. I don't want to go there deeper, but you understand the level of efficiency and disruption when all these layers of middlemen simply go away. So back to central bank digital currencies, the U.S. Treasury, instead of printing dollars on paper, prints dollars or means tokens, puts them in circulation, and they represent dollars one-to-one. That's central bank digital currency. Now to the big brother tax collection question.

I pay my taxes. Same. On time. Same as you, same as most of the people. There are those who don't, right, or who are more flexible with that. There's a fine balance. First of all, that's illegal to do. It's just easier today than in the future. And Big Brother, in that regard, will only enforce the law. As for the privacy aspect of things,

I want to introduce a notion real quick of zero knowledge proof. The government does not need to know the, you know what, when I think of it, I could counter your argument and flip it. Using code to pay taxes would also mean that the government needs to know less about the nature of the transaction. That's true, because they just care that they're getting their money. They don't care exactly what the transaction was. They don't care that it was a car. They just care that that $5 was removed.

Exactly. was a car they just cared that that five dollars was removed exactly and in that sense as long as they trust the code they don't need to know and my freedom and privacy is kept at a hot done right right there's a big chance that you know all these things are there's two sides to this coin but done right this actually could increase privacy rather than decrease it. Also, I mean, it's sort of waxing poetic to even discuss it as like some theoretical eventuality. It's coming. Central bank digital currencies are the future of money. I think it's just important and you made it. The differentiation is that it's still fiat currency just in a digital form.

And, you know, it just makes it easier for them to print money. It doesn't naturally become a cryptocurrency or deflationary or any of the things that many of us, you know, love about Bitcoin. And China is already, like you said, they're way ahead. It's happening. We're going to be behind, wouldn't you say? Oh, I just had the chance to visit Shanghai a few years ago and already without relation to blockchain, the private citizens there already are not allowed or disencouraged,

I don't know exactly how it works, to use cash money. And the way they move money around and make transactions is using their all-powerful WeChat that does everything. It also moves the money in transparency to the government. Of course, privacy in China is very different. But bottom line is, if you do that, black market economy, drug deals, weapons, anything you could think of that is bad, becomes so much harder to execute because now money is digital and at least some of this

transparency exists to the government. Again, it does not mean that private citizens lose their privacy because of that. It's really interesting. So I want to go back. We were talking about all the things that blockchain is great for. But I think that then at least the sort of crypto community in the world that's very passionate about it jumps probably way ahead to things that maybe it's not ideal for. Actually, I've heard arguments, you know, a lot of people say we should be voting on the blockchain, it would be provable, but then there's a lot of

arguments why that wouldn't work. So are there examples of things where you've heard sort of the idea of using blockchain floated that are just somewhat not ideal? I can talk about five tests that when I think about what makes a good blockchain use case versus a not so good blockchain use case. And I can talk about the why as well for each test. So first and foremost, does the use case include multiple parties? If a lot of use case I get, I'll give an example, managed treasury for a single large entity is a use case I heard a while back.

If it's one entity, honestly, you don't need a blockchain. Just use a central database. It would be cheaper, faster. If you think about blockchain, what we're doing is taking the information and multiplying it many, many times in order to generate trust. So no one party could influence the data. If there's only one party involved, you don't need a blockchain. The second thing is trust between the parties. That's the second question.

If there's no trust issues, then you don't need a blockchain. Blockchain is replacing the trust you today have with each other with trusting a piece of code. So having a trust issue in your use case, critical. The next thing that makes a very good blockchain use case is the exchange of value. As we said, blockchains manage tokens, manage scarcity. If your use case in voting is, you know, a borderline example,

there's a few others, there's no value exchanging hands. I'm not saying an absolute no, but a weaker use case, you would need to have a very strong resonating yeses to the other things. Because voting, for example, there's no value unless you start, you know, saying that every existential value, right? The importance of a single vote, right? Of course, which we know is not important.

So the next question in that regard is complex business logic. The notion of our ability using a blockchain to agree, and I'll give an example in a second, but our ability to agree on business logic, put it in a code that exists equally for both or multiple parties, and all parties get to check the code once, they know it hasn't changed, and therefore they trust that as long as the right parameters

are entered to the code, the result will be something that they agree to. That is a key component of a good blockchain use case. I will give an example. It will also help explain the last test. So an example would be something we are currently doing with Microsoft and its Xbox community. And the use case that I find extremely interesting and simple to explain

is when, let's say, when my son goes and buys a FIFA 2019, it caught on Xbox, it costs a $60 and he will pay this $60 to Microsoft, but then Microsoft need to distribute the money. For example, for example, to EA for distributing the game. So out of the 60, 10 go to EA.

The way this is done today is, or done before blockchain, is using Microsoft is taking the information from its sales systems. Microsoft is doing the calculation. They are distributing the calculation. Everybody checks the calculation. They are distributing the calculation. Everybody checked the calculation. They give the thumbs up. 45 to 70 days later, EA would get their $10. What we've done is take the pre-agreed agreement that says out of every dollar EA is entitled

to X, we put it on a smart contract. We connected the smart contract directly to the Microsoft sales system. Systems, I should say. There are quite a few of them. And if I'm now EA, I sit on an equal copy of the calculation that I checked. I sit on an equal copy of the data. So as long as I believe Microsoft is not manipulating their own source sales data, I automatically believe the result.

Dropping the 45 to 70 days to a couple of minutes, literally. Right. And eliminating all of the middlemen, eliminating all of those salaries, eliminating all of that friction. I would say making them focus on added value. So, for example, I'm serious here. I'm a consultant a little bit. But I'll give you an example. So in today's world, these people were on the EA side, mainly focused on reconciling the information. Now they can drive insight, try to drive insight from the data

they have the time rather than reconcile. Let me, there's one thing I want to talk about in a minute, and that's how ERP connects to all of this. I think it's extremely interesting. But let me finish the thought on the tests. So test number four was that we have complex business logic between the parties. Test number five that is really important in terms of blockchain use cases

is the size of the ecosystem. If it's just Microsoft and EA, they are much better off preparing an API between them or an interface between them and being done with it, it would cost a fraction. But if you think about the fact that there's an extended network here, meaning the $10 that reached EA, don't stop with EA. They need to pay FIFA,

the soccer organization for royalties, which on their turn would pay Ronaldo, his face is all over the cover of FIFA 2019, he gets royalties as well. So Ronaldo is rich. He doesn't mind waiting, you know, 70 days and 70 days and 70 days. So waiting for about six months or more just to receive his due royalties. But if I'm the artist who contributed the voice to the game, I'm not as rich as Ronaldo. I also get the royalties at the end of this chain. What if I could get these

royalties and trust them in minutes instead of six months? So the last test is this extended network applicability. If it's a small network, I could solve these issues in other ways. If we are talking about an extended network that needs to exchange value between it, now we have a good blockchain use case. That makes perfect sense. I know there was something you wanted to dive into there that you took note on. So please feel free. Yeah. So the question that I'm asked is, how do we see this technology? Or you're asking as well, how do we see this technology impact the world of business? And in order to understand that, you need to, let's go, we won't go to the dawn of history

this time, only 40 years back in time to the days before ERP. An organization, ERP, enterprise planning, enterprises was planning systems like SAP, Oracle. I had the pleasure of working with both. I also worked for not the entire 20 years where EY, I worked for SAP some of the time. So if you go to the days before ERP, an organization would run an inventory system,

a manufacturing system, financial system, HR system, et cetera, et cetera. A management meeting would be a bunch of managers coming together, each with, HR system, et cetera, et cetera, a management meeting would be a bunch of managers coming together, each with their own report, and now they need to reconcile the information between them. That would be the most of the time spent. ERP came into the world and put the entire business, meaning master data, business processes, reports on a single platform.

And now a management meeting these days is no argument over the data and much more time can be spent on what do we do about it and analyze it. That's what ERP did. But ERP's limitation is the fact that it is siloed. It exists within my organization. My customer would run their own ERP. My supplier would run their own ERP. At best, we have some kind of interfaces between them that are one-offs, definitely not scalable.

Blockchain and the potential of blockchain is to do what ERP did to the single organization only on an ecosystem level. I can put now business processes, master data, and reports on an ecosystem level rather than a single company level. And now I will have the option to think about an annual demand planning as a manufacturing organization that sees end customer demand and raw material supply. These are things that think about the level of efficiency in inventory levels.

When we have that level of transparency and one maybe big caveat, it does not mean that everybody sees everything, right? It means that anyone that is entitled to see something can see it and trust it. That makes perfect sense. That is the big change, the big next step in enterprise systems evolution that blockchain would bring. Sick of paying ridiculous fees to trade crypto? It's time you try Voyager.

It's hands down my favorite place to buy and trade crypto, and it's 100% commission free. Voyager gives you easy access to more than 40 top crypto assets, and you can instantly transfer cash from your bank accounts. You never miss a trading opportunity. Even better, you can now automatically earn interest on your crypto holdings. Currently, they are offering 6.5% interest on Bitcoin and 9.5% on USDC. Yes, you heard that correctly, 9.5% interest.

And there are no limits or lockups, so your funds always stay liquid. Find out why so many people are making the switch to Voyager. Visit investvoyager.com or search for Voyager in the iTunes or Google Play store and get $25 in free Bitcoin when you use the promo code SCOTT25. That's S-C-O-T-T-2-5. Sick of paying ridiculous fees to trade crypto? It's time you try Voyager. It's hands down my favorite place to buy and trade crypto and it's 100% commission free. Voyager gives you easy access to more than 40 top crypto assets, and you can instantly

transfer cash from your bank account so you never miss a trading opportunity. Even better, you can now automatically earn interest on your crypto holdings. Currently, they are offering 6.5% interest on Bitcoin and 9.5% on USDC. Yes, you heard that correctly, 9.5% interest. And there are no limits or lockups, so your funds always stay liquid. Find out why so many people are making the switch to Voyager. Visit investvoyager.com or search for Voyager in the iTunes or Google Play store and get $25 in free Bitcoin when you use the promo code SCOTT25. That's S-C-O-T-T-2-5. Using Bitcoin is the easiest way to bet, win, and get paid at MyBookie. Make your first

deposit with Bitcoin and MyBookie will instantly double it up to $1,000 to add excitement to all the Thanksgiving NFL action. Use your bonus to wager on props, parlays, and teasers all weekend long. New Bitcoin depositors will also be automatically entered in the crypto rewards program where you will receive cash back, huge bonuses and exclusive promotions until the end of the season. Don't forget Turkey Day Free Play is coming this Thanksgiving Thursday. This is your opportunity to bet up to $250 risk-free on the early Thursday game. Pick the right team and you win. If your team's upset, your bet's refunded before the afternoon game. You can't lose. Celebrate the holidays with MyBookie, the exclusive home of the crypto rewards program and Turkey Day Free Play. Use promo code Scott, that's S-C-O-T-T,

and double your first Bitcoin, Litecoin, or Bitcoin cash deposit today. Really sounds like it fixes everything for big businesses. It's really incredible. But I want to touch on something you said before. You gave the example of us exchanging a $100 transaction for our very cheap car. And you touched on the fact that I send in my $100, you send in proof of ownership of the car, but we still need a third party to validate the mechanic, you know, that the car is in working shape, that it's a fair deal. So obviously we want to eliminate that third person, which is where anyone in this space understands chain link and band protocol and all these sort of oracles, right?

So how do we verify the data and make sure that it's a fair transaction between the two when you start talking about these massive enterprise systems? Yes. So I want to say something about eliminating the third party. The way I see third parties, there's two kinds, at least for this discussion's sake. There is the third party that, let's take an example, a bank. A bank makes its money from two separate things. One, the fact that they bring value to the process. And the other is because they are the trusted middlemen. That's two different things. Let's go back to the escrow example. Many times times escrow also includes a line of credit. When a bank gives a line of credit, this is bringing value to the transaction. And therefore, I don't see that part going away. So that's the mechanic. That's the mechanic. It's more than the mechanic. This

is philosophically important to understand. When the third party, that's the mechanic. This is philosophically important to understand. When the third party, that's the mechanic. Yes, now I see what you mean. In the garage, yes. He's not facilitating the physical transaction. He's adding the value of his expertise to verify that there's trust. Exactly, that's the mechanic, yes.

And the DMV in this story, we go and stand in line for these days, five, six hours in line just so we have a middleman that will make sure that we exchange ownership. This can go away. It's two very different distinctions. Middlemen that bring value to the process, they're not going anywhere. On the contrary, when we have more resources to spend on good quality middlemen that bring value, we would be able to pay them more. And the money,

you know, they ask me a lot, all these big ideas, who will fund them? Why would organizations pay for them? I believe that the amount of money that is going to be saved by removing the middleman from the equation will be 10x the number that would need to implement this system. Isn't it like moving your data to the cloud from the old way of having like a server farm and your basement and all these guys down there? That's literally the example we use to explain this the way 10 years ago,

a little bit more, 15 years ago, if you would come to a CIO and tell him you need to run your ERP systems on the cloud, he would tell you, you are insane. No way in hell. 2017 was the first year where more ERP implementations were delivered on the cloud than on-premise. And since then, it's a landslide. No one does on-premise anymore unless you're a government military agency or something. So I guess Amazon doesn't just make money selling books. No, a few other things i guess their web services are a significant part of their business so what's interesting to talk about when

we talk about transferring ownership of something like a very a car right so that that's a a single item that we're using a smart contract for basically an nft correct like then we're using a smart contract for, basically an NFT, correct? Like then we're talking about non-fungible tokens. We're not talking about like something that's been printed in mass. It's just one token for this very specific item. So obviously in the crypto space, we see the proliferation of NFTs for art. But we know that there's so many more applications for NFTs that people aren't thinking about, right? Is that what we're talking about here?

Yes, exactly. And let me give you a cool example. So one of our clients is a large Italian winery, and they sell a lot of their wine in the Far East. The problem they have is that in a research they did, they found that about 20%, meaning one out of five bottles they sell are forged. Yeah, pour out some and pour the other in the bottle, put the cork in it, and who knows?

That's a problem, right? So what we're doing about it is putting a QR code on every wine bottle. This QR code is one-to-one linked to a non-fungible token. And as these wine bottles get scanned, of course, we know how to create a larger token that contains all these bottles in a box and then a shipment, etc., etc. What we get is not just an end-to-end supply chain, but we get the customer's ability using the cell phone

to just scan the label just before he buys the wine and see the entire history all the way from my winery to his hands and know that this is an original bottle. It is extremely hard to, I always get the question of, can't we just fake the qr code no you can't or just switch the wine same bottle different wine yeah yeah okay same bottle different wine yes but not on mass scale right you would need to purchase all these bottles, empty them, refill them with cheaper wine, seal them, and hope that even the most basic trend analyzing AIs that now the winery has visibility to, don't pick up on the fact that you are recycling bottles.

Crappy scam. It would be a crappy scam. Crappy scam. Let me give you another way where this is a great tool to fight illegal stuff. Let's say that as the winery, I sell the wine $50 a bottle to the Chinese importer and $100 a bottle to the Japanese importer

because they have more buying power. So a smart Japanese importer and $100 a bottle to the Japanese importer because they have more buying power. So a smart Japanese importer would just take the wines, parallel import into, import into Japan and sell it in 75. But when I as the importer or as the winery start getting scans of wine bottles, I know they went to China. Appearing in mass scale in Japan, I know that I'm fighting parallel import. Now, the parallel import already exists, but this is an easy way to identify it.

It's interesting because in the art world, obviously, people, I think, don't understand. They think the art is the NFT. But in this example, as you're giving, it's important to understand that it's the proof that's the NFT. It's the document that says it's real. The art itself is not the NFT, correct? It's really the provenance, the document that says this is the person that owns this and it's one of a kind. The art itself is not tokenized. I would say that it's a little bit more than that.

It's the chain of custody all the way from the original artist or the point where the art was validated and tokenized all the way to my hands. If something fishy is going on with this artwork, you would not be able to prove a coherent chain of custody. So as you said, it's the provenance, and we see it mostly right now in food and pharma, where it is important to know that you are using the right medicine or you are consuming food that you know where it came from. By the way, it's less strong in the US.

It's much, much stronger in Europe. I would say something about the eating habits of the Americans versus the Europeans, right? They care much more what goes into their mouths. And therefore, this is where we see QR codes on chicken, on mozzarella cheese, on wine, as I said, on many, many products where the Europeans care enough to scan and see this chain of ownership and how this chicken, when it was processed and that it was kept in what we call cold chain, so kept refrigerated, and arrived fresh into my hands. I believe that also in the U.S. this is a muscle we need to exercise a little bit, but also here we would see more and more demand towards this,

I want to see where my food came from. That makes sense. That makes a ton of sense and so interesting. And Americans just have horrible taste in food. Fair to say that we're not the healthiest of human beings on the planet, but I guess we don't need to go down that road. So you guys are committed, obviously, to blockchain. You've laid out countless use cases, obviously, for this that are going to change, you know, business in the future. Do we get to a point where blockchain becomes as essential, important as the internet and, you know, the technology behind yourself, VOIP, and the technologies behind your cell phone?

And do we just, does it become so universal that it's what's running almost everything and nobody even realizes it's there? Like your phone or your email or the internet. Nobody thinks about how they work. They just use them. I'm biased, but, but if you ask me, it's an, it's not a question of if it's a question of when, right? If this is, this makes so much sense. And there are a lot of limitations. We can talk about that in a second.

But as of every technology, you know, and Moore's law that exists for so many years, we are evolving in a very, very fast pace. And it is really a question of when, where we, our experience, and this is already something that is today, in our use cases, let's take the wine, for example, you interact with your phone. You don't need to know there's a blockchain running in the background. And do we see this become the majority of business deals in the future?

We're talking about seven, 10 years into the future, but I would bet yes. I agree. I mean, I agree. It's just interesting to hear you say that. I don't think it's a bias. I think it's just, how can you not? Educated guess, let's call it. Yeah. For somebody with probably better knowledge and more information than most. So I'll put my bet on your educated guess. Thank you. So let's talk about limitations for a second. Because, you know, there's a lot of buts.

And one example is privacy, right? Let's maybe one step back. There's two kinds of blockchains, private blockchains, private permission, where you control who joins the network, and public blockchains where everybody who wants can join. If you ask where we see this future where everything and everybody interacts using a cell phone, it is probably in the public blockchain world. The problem with public blockchains, two main things is one, performance let's, inside performance, there's a lovely argument about the energy consumption it would take to run all these transactions on a blockchain.

We all know Bitcoin today such a large energy consumer is the method in which we validate transactions, which is like many things initial. It is called proof of work and you need to use a lot of compute power, electricity in order to approve transactions. But as we evolve, we find better ways to approve transactions that are dramatically 99% more efficient already than proof of work. For one example that is very relevant is proof of stake. In order to approve transactions, you need, very similar to the banking system. You need to put a large deposit. You would lose if you are a bad actor. And according to the size of your deposit is

the amount of random transactions you would get to approve. Once we move into proof of stake and we're talking about weeks, not even months, hopefully, in Ethereum at least. Yeah, it's coming. It's coming. We are talking about a 99% more efficient in terms of energy. And we won't go into the technical details, but there are multiple efficiency improvements. Again, think about Moore's

Law. We are every 18 months, you know, I don't know if anyone did this calculation on blockchain, if it's not too early. We are definitely gaining these gains in efficiency. Parabolic. Or parabolic. Yeah. Yeah. So that's one thing.

And the other large issue is privacy. And this is interesting, especially to me, because while EY leaves the scaling issues to others, in privacy, we take the driver's seat. We're not waiting for things to happen. We employ a large group of mathematicians working on these zero-knowledge-proof protocols that would enable us and already are enabling us to exchange. So let's go to the car example. We don't want everybody to know that the car is

shit and I paid $100 for it. And we don't even want to know that we have anyone to know that we have made these transactions. I remind you the tax authority is taking care of it. We already have the ability to exchange the car token and the dollar tokens in complete privacy over the public networks. This is called Nightfall as an example. We have the ability to execute business logic in privacy over the public network. What the network would know, back to the beginning of what we said, is that we did not double spend value. We can prove that. You don't need to know what we exchanged. As long as one token left your wallet and came to my wallet, and 100 dollar tokens left my wallet and came to your wallet,

the network needs to know that the sum of these transactions is zero. They don't need to know that the sum of these transactions is zero. They don't need to know what moved. And this is not science fiction. This is already working. Of course, it needs to be improved and enhanced and blah, blah, blah. But we are not talking science fiction here. Yeah, it's incredible.

So it is going to be the future. I think it's pretty clear. So I'm curious then going back to sort of the third party oracles. Will these be employing these existing oracles or is it sort of a situation where case by case they're going to have to create or invent their own third party to verify that the information can be trusted? I think that there will be many, many types of orcas. If you look at Chainlink, as an example, anything that cannot be disputed, like what is the temperature in New Jersey currently outside, right? There's a formal body that measures and publishes this information. They can be an automatic oracle. We have, let's take a real example.

I'm in Jersey, and it usually snows here, although less and less in recent years I understand, but it snows and I need to enter a contract with the contractor who clears my driveway out of snow. The way this works, this contract works, we don't argue about when he came and when he didn't come. He makes sure the driveway is clear and he bills me according to the amount of days it snowed above an inch, let's say, during the winter season. This is a classic use case for a smart contract using an oracle. The days it's not about an inch in 24 hours is public knowledge that someone like Chainlink or the meteorological service itself

can publish over a blockchain. And we just use a smart contract to refer to this data. Now, if today when I get the bill, I need to check the information and reconcile it myself. If it's a smart contract taking the data directly from the meteorological service, I can go auto pay on this bill. Of course. That's the future here. Yeah, and that's what I'm talking about because I know that it snowed and I know that my driveway was cleared,

but somebody has to verify how many days it snowed and how much money I owe you, right? So there is still, as you said, a value add from a third party, but that third party itself, it's an important distinction, isn't necessarily a person. It's another smart contract.

It's another smart contract. The mechanic is exactly the opposite example where we would need to go to a physical mechanic with a physical car and he would need to upload his test result and that cannot be completely automated. That would be input. The smart contract is waiting from an approved third party org. So interesting. So interesting. So, I mean,

I know that we're starting to run up against time, unfortunately, because I feel like we could do this for another three hours, but, and maybe we will. By the way, we're missing one thing. Go ahead, please. We have time. It's totally up to you. I just want to, yeah. One thing that I learned is that blockchain, maybe we should have done it. It's just the early hour. Blockchain is best discussed over beer.

We shouldn't have a large pint of beer in our hands and the discussion would even flow better. Well, it's funny if you try to discuss Bitcoin over beer, you try to explain it to someone who doesn't understand it and you've already consumed a keg before they start to even get the idea. That's one of, I think, the shortcomings is that you do an excellent job of it, actually, because you have practical real world examples that you continue to give that explain each of these applications. But I do find that to be a major barrier for entry, is that most people either don't get it quickly or they just don't care yet.

First of all, I find that with the right explanation, people do get it quickly. Do they not care yet? You need to look at the, you only need to look at the price of crypto over since COVID started. I agree. To see that this is not the 2017 hype. We're talking about, in my eyes, are completely different. And just to be clear, not an investment advice in any kind, clear, right?

But needs to say, we're talking about my personal opinions, not the EY opinions, et cetera, et cetera, all these disclaimers. I believe that blockchain technology has evolved since 2017 to these days. Evolved dramatically. I believe that COVID only accelerates what happened. Let me give you another very nice example about Bitcoin that would maybe resonate. I get sometimes this notion of, yes, but miners that are approving the transactions are diluting me as a Bitcoin holder because they get newly minted Bitcoin. If you look at the dollars you're holding in the bank, the trillions of dollars that are diluting the dollar value over the last year, this is not 10x, it's not even 100x. It's such a dumb argument. It's a deflationary asset. I mean, we know the exact supply and we know exactly when it will hit the market and we know exactly where all of it is unless it's been

lost. So yeah, it's such a dumb argument. And you just touched on it. I put a video on Twitter of myself just sort of like vomiting ideas. I do this sometimes. But I said, you know, the most Sir John Templeton, the famous quote, this time it's the most dangerous four words in investing or this time it's different. And then I said, I dare say this time is different. In 2017, we had a speculative bubble, right? Your average person was buying something they didn't understand because somebody told them that they'd get rich and be able to sell it for more. This time we have that, like, it's not, we don't have that speculative FOMO. We have people who are FOMOing in, if you want to call it that, you know, fear of missing out, but to hold it, right? They're reducing supply. They're buying it because they see billionaires and the Michael Saylors, MicroStrategy, PayPal, Cash App. They see them all saying, listen, this is a store of value. This is where we're putting our money to stop our cash from bleeding value. We're going to fight inflation. So they're buying it with no intention

of selling it. It's completely different. It's completely different. I very much agree to that line of thought. I think that as a very conservative person myself, looking at the way governments deal with the COVID crisis all around the world by just printing more and more money, I think it highly relates to the original Bitcoin use case and logic of taking this store value away from government's control. What I'm not saying, and that's important, I don't see a world where cryptocurrency is

a wild, wild west ruled by drug dealers, weapon traffickers. If you look at what you need in order to invest in crypto today, if you are the average person, it is extremely similar to opening a bank account. KYC, K-Y-C-A-M-L, they know everything about you. Right. So, and again, back to the taxes issue. When you will sell this cryptocurrency, the reports will be there to make sure that you pay the accurate tax. Yeah, and we're paying way more taxes than everyone else. If you're a cryptocurrency trader, my God, every time you're drinking, you're having a coffee right now.

If you bought that coffee with Bitcoin, you just sold your Bitcoin and have a taxable transaction. So, yes, the notion that it's for criminals and all that is so absurd. The government just wants to get their taxes right. And again, when I do believe that as time passes, governments will see more and more value in doing these things. Let me give you one other example that I think is a really interesting use of this technology that relates to how we see governments adopt the technology. So, real example, I will change the names of the countries, but real example

that happened a few years ago, the European Union, I'm changing the entire name, but the use case is still real. The European Union gives $50 million to the United Nations to build schools in Nigeria.

It wasn't the United Nations. It wasn't Nigeria. Got it. Okay. Anyway, the UN gives the $50 million to the Nigerian finance ministry, who starts distributing the money to the education ministry, to transportation ministry. From there, it goes to various contractors. And long story short, two years later, the EU sends an audit committee to visit the schools the $50 million bought,

or euros, it doesn't matter. that part is true. They find luxury cars. They find two houses in La Godegarda. They don't find too many schools. The money is long gone by the time they audit it. I'm sure all these organizations are doing a great job in auditing the money trades. But what we have done with blockchain is create, first of all,

if you look at the five tests, the problem is that this is value exchanging hands between multiple parties that don't trust each other. There is a business logic because you need to build schools with the money. And for example, so what we've done is create an end-to-end track of where the money goes, provenance of the money. And we are able to connect it to KPIs, so a third-party oracle that would come to the site and upload 10% progress, 20% progress, etc. We are connecting it to business logics that, for example, would say you cannot spend more than 10% of the money on salary. You cannot spend more than 5% on IT.

And we have literally created this single view of the provenance of the $50 million, and we did it in retroactive, but still on seven different projects like this, funding projects, where we are able to show the funding organization what was done with the money in an immutable way. It's literally the opposite of what people think. They think that you would use cryptocurrency to be a scammer or a thief, but the cryptocurrency actually prevents the scammers and the thief from being able to perpetrate their dastardly

acts. I mean, it's a total separate conversation, but like there's so much evidence of this Afghanistan, Iraq, the United States government takes your tax dollars. They give it to a private company. That private company goes and buys 10,000 cars that have no use. They build a shopping mall in Iraq only for the, only for the soldiers. And mall in Iraq only for the soldiers and they put into McDonald's and they put into all these, you know, and they give all this money to the private businesses and none of this stuff gets used. I mean, we saw it over and over and over again. And I never even thought about it. This would prevent all of that.

Three words, trust by transparency. That's what blockchain will bring to the world. And this is where there's so much resistance as well because there's so many today that benefit from the lack of transparency. And again, when I say transparency, I don't mean everybody get to see everything. That's not what I mean. But those who are allowed to see information get a single view of entire ecosystems rather than the siloed information they get today. Absolutely. So interesting.

That is such an interesting, I love that trust by transparency. I almost want to title the episode trust by transparency. Let's do that. Either that or Internet of Value. It's going to be a tough one. I'll have to send them off. So I think we've touched on basically everything here. And I really do feel like we could talk forever.

So parting thoughts. You know, well, I also want to ask you, and you can't answer this, but when does Ernst & Young put their treasury in Bitcoin? I can give you a partial answer. We are seriously working on enabling these channels. It is, as you can imagine, far from simple endeavor. And we, we, Ernst & Young has a lot of safeguards in place in order to make sure we do it right. But we are going through this gauntlet in order to, to make sure we are doing it right. And this is not something that is theoretical on paper. We will not do it until all our safeguards are answered and when they are sure that this is safe and the right thing. But the first steps in that direction, we are already taking.

I didn't think I would get that much of an answer from it, honestly. And it just reaffirms my thought process that once Saylor and MicroStrategy opened the floodgates, that everybody's got to be considering it. They have to be. Every company, maybe it's far-fetched and maybe, honestly, maybe the market cap of Bitcoin is just not nearly big enough for them to even commit a significant amount of money to it. Maybe it has to be bigger first. But at this point... I wasn't talking about... I know you're not saying you're not giving me a commitment from Erson Young. No, no, more than that. I wasn't even talking about Bitcoin.

I'm talking about using blockchain technology as a safe means to conduct business. As an example, simple example, not related to cryptocurrency at all, is can we agree with a customer and enter a contract with a customer to give services in order to receive funds using a smart contract. Can we do that instead of using wet ink paper? That is the kind of things that we are... Right, that's happening. Right, and inevitable as we've touched on.

So parting thoughts, what, you know, if there's any more like a vision of the future, grand ideas that we somehow haven't discussed in this whirlwind. Grand. So, so I think we, we touched, we touched on a lot of thoughts.

What I would encourage people is, is, you know, I describe a wonderful future. There's, there's a road to get there. It would change the way we interact with government. It would change the way we interact with each other. It would make us trust code rather than

trust people, which is a good thing. It could be translated. It would increase our trust in people due to the ability to the code will, due to the trust the code will create. I encourage you to learn. That would be my parting thought. From everything I said, if you are now a believer, the next action is not to run and buy Bitcoin. It's to run to as simple as YouTube, start typing a few keywords and learning. That would be my parting thought. Absolutely agree. So how can everybody keep up with you after this conversation?

So the easiest would be LinkedIn. Just ping me, I'll accept you as a friend, and our activity over blockchain is significantly shared there. That would be the easiest. Well, thank you so much. You're an exceptional guest. You really do put things in a manner, I think, that makes it easy to understand. And you have a discernible passion for this. And it's inspiring. So, I mean, I really enjoyed this conversation.

I'm glad that we had the opportunity to talk. And I can't wait to see what you guys are doing in, you know, a year, five years, 10 years. Hopefully you'll still be there in that position. We can schedule a date for six to 12 months from now to recap and talk about the progress that this technology made over this time. I would love to. We'll definitely do that. Thank you once again for taking the time. I really do appreciate it.

My pleasure. Thank you so much.