(techy music) >> Live from Toronto, Canada, it's theCUBE covering Blockchain Futurist Conference 2018, brought to you by theCUBE. (techy music) >> Hello, everyone, and welcome back. This is the live CUBE coverage here in Toronto, Ontario here in Canada for the Untraceable Blockchain Futurist Conference. This is day two of wall-to-wall CUBE coverage. We've got great presentations going on, live content here on theCUBE as well as in the sessions, great networking, but more important all the thought leaders in the industry around the world are coming together to try to set the standards and set up a great future for cryptocurrency and blockchain in general. Our next two guests are very special guests for theCUBE and we're excited to have them on, the Honorable Wayne Caines, Minister of National Security for the government of Bermuda, and Kevin Richards, concierge on the Fintech business development manager, part of the Bermuda Business Development Agency. Thank you guys for coming on, really appreciate the time. >> Thanks very much. >> Thank you for having us. >> Why this is so important is that we heard your presentation onstage, for the folks, they can catch it online when they film it and record it, but the Bermuda opportunity has really emerged as a shining light around the world, specifically in the United States. In California, where I live, Silicon Valley, you guys are now having great progress in hosting companies and being crypto-friendly. Take a minute to explain what's happening, what's the current situation, why Bermuda, why now, what's developing? >> This has all happened over the last eight months. We were looking in November of 2017 to go in the space. In January we went to the World Economic Forum in Davos in Switzerland. When we went to Davos in Switzerland something very interesting happened. People kept coming up to us, I was like the Hound of the Baskerville, or the Pied Piper if you please, and so, so many people were coming up to us finding out more information about Bermuda. We realized that our plan that we thought we could phase in over 18 months, that it had to be accelerated. So, whilst we were at the World Economic Forum in Davos we said to people, "Listen, if you want to change the world, "if you want to help Bermuda to grow, if you're serious," this is a Thursday, "Meet us in Bermuda on the Monday morning." On the Monday morning there are 14 different people in the room. We sat in the room, we talked about what we wanted the world to be, how could Bermuda be in place, what are the needs in this industry, and by the Wednesday we had a complete and total framework, and so we split up into industries. Number one was ICOs, we wanted to look at how to regulate the ICO market. Number two, we wanted to look at digital asset exchanges or cryptocurrencies or how do we regulate security tokens and utility tokens and what do exchanges look like, how do we do exchanges in Bermuda, and then we wanted to talk about education and setting up incubators. And so, come fast forward to July, August, we have an ICO bill in place that allows us to look at setting up ICOs in Bermuda. We wanted to focus on the legal and the regulatory framework, so this is a nascent space. A number of people are concerned about the dark actors, and so we wanted to set up a jurisdiction that traded on our international reputation. Now, remember for the last 60 years reinsurance, finance, captives, hedge funds, people in the financial services market have been coming to Bermuda because that's what we do well. We were trading on the reputation of our country, and so we couldn't do anything to jeopardize that. And so, when we put in place the ICO legislation we had consultants from all over the world, people that were bastions and beasts in industry, in the ICO industry and in the crypto world came to Bermuda and helped us to develop the legislation around setting up an ICO. So, we passed the ICO legislation. The next phase was regulating cryptocurrencies, regulating digital assets, and we set up a piece of legislation called the Digital Asset Business Act, and that just regulates the digital asset space exchanges, and the last piece we wanted to do was a banking piece, and this is the last and we believe the most significant piece. We were talking to people and they were not able to open up bank accounts and they were not able to do, so we said, "Listen, "the Bermuda banking environment is very strong." Our banking partners were like, "Listen, "we love what you guys are doing, "but based on our corresponding banking relationships "we don't want to do anything to jeopardize that space," but how could we tell people to come to Bermuda, set up your company, and they can't open bank accounts? And so, we looked at, we just recently passed creating a new banking license that allows people to set up their business in Bermuda and set up banking relationships and set up bank accounts. That simply has to receive the governor's Royal Assent. As you know, Bermuda's still a British pan-territory, and financial matters have to get the okay of the Queen, and so that is in the final stages, but we're excited, we're seeing an influx, excuse me, a deluge of people coming to Bermuda to set up their companies in Bermuda. >> So, the first two pieces are in place, you have the legislation... >> Mm-hm. >> Mm-hm. >> You have the crypto piece, and now the banking's not yet, almost approved, right? >> It's there, it simply has to get the final sign-off, and we believe that it should take place within the next two weeks. So, by the time this goes to air and people see it we believe that piece will be in place. >> So, this is great news, so the historical perspective is you guys had a good reputation, you have things going on, now you added on a new piece not to compromise your existing relationships and build it on. What have you guys learned in the process, what did you discover, was it easy, was it hard, what are some of the learnings? >> What we've learnt is that KYC, know your customers, and the AML, anti-money laundering, and terrorist financing pieces, those are the critical pieces. People are looking in this space now for regulatory certainty, so when you're talking about people that are in the space that are doing ICOs of $500 million or exchanges that are becoming unicorns, a billion dollar entity in three months, they want a jurisdiction that has regulatory certainty. Not only do they want a jurisdiction with regulatory certainty, they want to open up the kimono. What has this country done in the past, what do they have to trade on? We're saying you can go to a number of countries in the world, but look at our reputation, what we're trading on, and so we wanted to create a space with regulatory certainty, and so we have a regulatory body in Bermuda called the Bermuda Monetary Authority, and they are an independent regulator that they penned the Digital Asset Business Act, and so the opportunity simply for people around the world saying, "Listen, we want to do an ICO, "we want to set up an exchange. "Where's a country that we can go to that has a solid reputation? Hold on, how many countries have law surrounding"-- >> Yeah. >> "The Digital Asset Business Act, how many ICO countries have laws. Guess what, Bermuda becomes a standout jurisdiction in that regard. >> Having a regulation signaling is really important, stability or comfort is one, but the one concern that we hear from entrepreneurs, including, you know, ourselves when we look at the market is service providers. You want to have enough service providers around the table so when I come in and domicile, say, in Bermuda you want to have the banking relationships, you want to have the fiduciary-- >> Yes. >> You want to have service providers, law firms and other people. >> Yes. >> How are you guys talking about that, is that already in place? How does that fit into the overall roadmap for your vision? >> I don't want to beat a horse (laughs) or beat a drum too much, that is what we do as a country. So, we have set up, whether it's a group of law firms and the Bermuda, excuse me, the Bermuda Monetary Authority, the Bermuda that's the register of companies that sets up the companies. We have Kevin, and Kevin will tell you about it, he leads our concierge team. So, it's one throat to choke, one person that needs, so when you come to really understand that the ease of business, a county that's business-friendly with a small country and with a small government it's about ease of reference. Kevin, tell us a little about the concierge team. >> It's like the Delaware of the glove, right? >> Absolutely. >> Come in, domicile, go and tell us how it works. >> I'll give you a little bit of background on what we do on the concierge side. So, one thing that we identified is that we want to make sure that we've got a structure and a very clearly defined roadmap for companies to follow so that process from when they first connect with the BDA in Bermuda to when they're incorporated and set up and moved to Bermuda to start running their business is a seamless process that has very clearly identifiable road marks of different criteria to get through. So, what I do as a concierge manager is I will identify who that company needs to connect with when they're on the ground in Bermuda, get those meetings set up for when they come down so that they have a very clearly mapped out day for their trip to Bermuda. So, they meet with the regulator, they meet with the government leaders, they meet with the folks who've put together legislation that, obviously you mentioned the service providers, so identifying who's the right law firm, corporate service provider, advisory firm on the ground in Bermuda, compliance company, and then making sure that depending on what that company wants to achieve out of their operation in Bermuda they've got an opportunity to connect with those partners on their first trip so that they can put that road map together for-- >> So, making it easy... >> Making it very easy to set up in Bermuda. >> So, walk me through, I want to come down, I want to do business-- >> Yeah. >> Like what I hear, what do I do? >> So, you send me an email and you say, "Listen, Wayne, we're looking at "doing an ICO launch in Bermuda. "I would like to meet with the regulator. "Can you put a couple law firms in place," in an email. I zip that over to Kevin or you go on our Fintech.bm website-- >> Yeah, I was going to say... >> Fintech.bm website, and Kevin literally organizes a meeting. So, when you come to Bermuda for your meeting you have a boardroom and all the key players will be in the boardroom. >> Got it. >> If you need somebody to pick you up at the airport, if you need a hotel, whatever you need from soup to nuts our team actually makes that available to you, so you're not running around trying to find different people to meet, everyone's there in the room. >> And the beauty of Bermuda is that, you know, the city of Hamilton's two square kilometers, so your ability to get a lot done in one day is, I think, second to nowhere else on the planet, and working with the BDA concierge team you're, you know, we connect with the client before they come down and make sure we identify what their needs are. >> The number one question I have to ask, and this is probably the most important for everyone, is do they have to wear Bermuda shorts? (laughs) >> When you come you tell us your size, you tell us what size and what color you want and we'll make sure, so the... I tell this story about the Bermuda shorts. The Bermuda shorts, Bermuda's always had to adapt and overcome. Bermuda, we have something called the Bermuda sloop and it's a sailing rig, and so we... The closest port to Bermuda is Cape Hatteras in North Carolina and we wanted to cut down the time of their voyage, so we created a sailing rig called the Bermuda rig or the Bermuda sloop. Over the years that has become the number one adopted rig on sailing boats. We've always had to adapt and become innovative. The Bermuda shorts were a way to adapt and to get through our very hot climate, and so if you look at just keep that in mind, the innovation of the Bermuda sloop and the Bermuda shorts. Now, this Fintech evolution is another step in that innovation and a way that we take what's going on in the world and adapt it to make it palatable for everyone. >> What's the brand promise for you guys when you look at when entrepreneurs out there and other major institutions, especially in the United States, again, Silicon Valley's one of the hottest issues around-- >> Yes. >> Startups for expansion, right now people are stalled, they don't know what to do, they hear Malta, they hear other things going on. What's the promise that you guys are making to the law firms and the people, entrepreneurs out there trying to establish and grow? >> The business proposition is this, you want a jurisdiction that is trading on years of solid regulation, a country and a government that understands business, how to be efficacious in business. When you come to Bermuda you are trading on a country that this is what we've done for a living. So, you don't have to worry about ethical government, is your money going to be safe. We have strong banking relationships, strong law firms, top tier law firms in Bermuda, but more importantly, we have legislation that is in place that allow you to have a secure environment with a clear regulatory framework. >> What should people look for as potentially might be gimmicks for other countries to promote that, you know, being the Delaware for the globe and domiciling, and what are some of the requirements? I mean, some have you've got to live there, you know, what are some of the things that are false promises that you hear from other potential areas that you guys see and don't have to require and put the pressure on someone? >> When you hear the people say, "We can turn your company around in the next day." That we don't require significant KYC and AML. Red flags immediately go up with the global regulatory bodies. We want when a person comes to Bermuda to know that we have set what we believe is called the Bermuda Standard. When you come to Bermuda you're going to have to jump through some legal and regulatory hoops. You can see regulation, the ICO regulation and the Digital Asset Business Act on BermudaLaws.bm. BermudaLaws.bm, and you can go through the legislation clause by clause to see if this meets your needs, how it will affect your business. It sets up clearly what the requirements are to be in Bermuda. >> What's the feedback from business, because you know, when you hear about certain things, that's why Delaware's so easy, easy to set up, source price all know how to do in a corporation, let's say in the United States-- >> We don't have the SEC handicaps that they have in America, going from jurisdiction to jurisdiction. You're dealing with a colony that allows you to be in a domicile that all of the key players finances... We have a number of the key elements that are Bermuda. We're creating a biosphere that allows a person to be in a key space, and this is, you have first move as advantage in Bermuda. We have a number of things that we're working on, like the Estonia model of e-residency, which we will call EID, that creates a space that you are in Bermuda in a space that is, it's protected, it's governed. We believe that when companies set up in Bermuda they are getting the most secure, the strongest business reputation that a country could have. >> The other thing I would add, I'll just say, you know, quality, certainty, and community is what that brand represents. So, you know, you've got that historical quality of what Bermuda brings as a business jurisdiction, you have the certainty of the regulation and that pathway to setting your company up and incorporating in Bermuda, and then the community piece is something that we've been working on to make sure that any of the players that are coming to Bermuda and connecting with Bermuda and setting up there, they feel like they're really integrated into that whole community in Bermuda, whether it be from the government side, the private sector side. You can see it with the companies that have set up that are here today, you know, they really have embraced that Bermuda culture, the Bermuda shorts, and what we're really trying to do as a jurisdiction in the tech space. >> What can I expect if I domicile in Bermuda from a company perspective, what do I have to forecast? What's the budget, what do I got to do, what's my expectation? Allocate resources, what's going to be reporting, can you just give us some color commentary? >> So, with reference, it depends what you're trying to do, and so there will be different requirements for the ICO legislation. For the ICO legislation a key piece of the document actually is the whitepaper. Within the whitepaper you will settle what your scope of business is, what do you want to do, what you know, everything, everything that you require will be settled in your whitepaper. After the whitepaper is approved and if it is indeed successful, you go to the Bermuda Monetary Authority and they will outline what they require of you, and very shortly thereafter you will able to set up and do business in Bermuda. With reference to the digital asset exchanges, the Digital Asset Business Act, such a clear guideline, so you're going to need to have a key man in Bermuda, a key woman in Bermuda. >> Yeah. >> You're going to need to have a place of presence in Bermuda, so there are normal requirements-- >> There's levels of requirements based upon the scope. >> Absolutely. >> So, if you run an exchange it has to be like ghosting there. >> Yeah, yeah, you need boots on the ground. >> And that's why the AML and the KYC piece is so important. >> Yeah. Well, I'm super excited, I think this is a great progress and this has been a big uncertainty, you know, what does this signal. People have, you know, cognitive dissonance around some-- >> Yes. >> Of the decisions they're making, and I've seen entrepreneurs flip flop between Liechtenstein, Malta, Caymans. >> Right. >> You know, so this is a real concern and you guys want to be that place. >> Not only, we will say this, Bermuda is open for business, but remember, when you see the requirements that we have some companies won't meet the standard. We're not going to alter the standard to accommodate a business that might not be what we believe is best for Bermuda, and we believe that once people see the standard, the Bermuda Standard, it'll cascade down and we believe that high tides raises all boats. >> Yeah. >> We have a global standard, and if a company meets it we will be happy for them to set up and do business in Bermuda. >> Well, I got to say, it's looking certainly that leaders like Grant Fondo in Silicon Valley and others have heard good things. >> Yeah. >> How's been the reaction for some of the folks on the East Coast, in New York and around the United States and around the world? What has been some of the commentary, what's been the anecdotal feedback that you've heard? >> We're meeting three and four companies every day of the week. Our runway is full of Fintech companies coming to Bermuda, from... We have insurtech companies that are coming in Bermuda, people are coming to Bermuda for think tanks, to set up incubators and to do exploratory meetings, and so we're seeing a huge interest in Bermuda the likes have not been seen in the last 20 years in Bermuda. >> Well, it's been a pleasure chatting with you and thanks for sharing the update and congratulations. We'll keep in touch, we're following your progress from California, we'll follow up again. The Honorable Wayne Caines, the Minister of National Security of the government of Bermuda, and Kevin Richards, concierge taking care of business, making it easy for people. >> Oh, yeah, oh, yeah. >> We'll see, I'm going to come down, give me the demo. >> We're open for business and we're looking forward to seeing everybody. (laughs) >> Thank you for the opportunity. >> Thank you very much. >> Thank you. >> Major developments happening in the blockchain, crypto space. We're starting to see formation clarity around, standards around traditional structures but not so traditional. It's not your grandfather's traditional model. This is what's great about blockchain and crypto. CUBE coverage here, I'm John Furrier, thanks for watching, stay with us. More day two coverage after this short break. (techy music)

from the silicon angle media office in Boston Massachusetts it's the queue now here's your host David on tape so cube conversations simplifying blockchain for developers remi karpadito is here is the CEO of espresso remy thanks for coming in yeah thanks for having yeah so you guys are in the Seaport we want to hear all the action that's going on there but let's start with espresso CEO founder or co-founder um not a co-founder founder okay good just to clarify with respect to your co-founders voice why did you guys start espresso yeah no it starts back on in a little bit little while ago we originally wanted to and a replace our first company was a company called campus towel and we want to replace student identity with NFC chips and smart phones and it was a really cool concept back in 2010 but at the time there's only one phone that had the technology capable of pulling the south and we built a prototype with that smart phone as a Samsung phone at the time and we brought that around to a dozen plus colleges showing hey you could replace the student ID with the phone you can just tap your phone to it for attendance for events etc and they loved it but everyone had the same question you know when is the iPhone can have the technology and we were three years early the iPhone didn't come up with NFC chips until 2013 and we ended up hitting into a mentoring platform and scaled that company October 70 colleges across the country but ironically enough we came back to the same issue a lot of CIOs and CTOs wants to interface with their single sign-on servers which required us to support this legacy technology you know so AJ and I spun back internally AJ's our co-founder and CTO to identify how can we replace identity again but instead of using hardware and smartphones let's use the blockchain and AJ was an early a Bitcoin adopter back in 2010 mining Bitcoin really I'm passionate about the technology and I started learning a little bit more about it and trying to find a way to incorporate blockchain technology into our student identity solution as a secondary offering for Campus Tau but we quickly realized was that our front-end engineering team who is a little bit underwater in terms of the technical skills that needed to help and participate in the development for the boccie an identity solution so we ended up building up to middleware components to help them with the development and that's where we saw kind of that's where the lightbulb went off and the bigger opportunity came about where a lot of the infrastructure and tooling needed in order to build a production level blockchain application isn't quite there yet ice we ended up hitting and building a new company called espresso to make botching development more accessible so let's talk about that that the challenge that your developers face so you were at the time writing in for aetherium and in solidity right which is explain to our audience why that's so challenging what is solidity yeah and and why is it so complex yes illinit e is a JavaScript based framework for writing smart contracts on in the etherion platform it's not a fully baked or fully developed tools that yet in terms of the language there's some nuances but on top of that you also need to understand how to support things like the infrastructure so the cryptography the network protocols so if you want to sustain your own blockchain there's a lower-level skill set needed so the average JavaScript engineering could be a little bit kind of overwhelmed by what's needed to actually participate in a full-blown botching development yes and they're probably close to 10 million JavaScript engineers worldwide so it sounds like your strategy is to open up blockchain development to that massive you know resource yeah and in JavaScript being a definite core focus out of the gates and will be developing a plethora of SDKs including JavaScript and Python and Ruby etc in the thought process is you know activating these engineers that have coming new code academies or Enterprise engineers that really get a C++ or another language and allowing them to code in the languages they already know and allow them to participate the blockchain development itself okay and so how many developers are on your team so we've it's a small ad product teams three people on a parodic team now but we're actually the process is killing that up yeah so those guys actually had to go on the job training so they kind of taught themselves and then that's where you guys got the idea said okay yeah exactly and we realized that you know if we could build out this infrastructure this tooling layer that just allows you compile the language as you know into the software or the blockchain side it can make it a much more accessible and then also the other thing too that's interesting it's not just kind of writing the languages they already accustomed to but it's also the way you architect these blockchain solutions and one thing we've realized is that a lot of people think that you know every piece of data needs to live on the blockchain where that's really not something I've been teachers for you to do so because it's really expensive to put all the data on the blockchain and it's relatively slow right now with ethereum of 30 transactions per second there's companies like V chain that are looking to remedy some of those solutions with faster write data write times but the thought process is you can also create this data store and with our middleware it's not just an SDK but it's a side chain or a really performant in-memory based data store they'll allow you to store off chain data it's still in a secure fashion through consensus etc that can allow you to write data rich or today's level applications on the blockchain which is really kind of the next step I see coming in the Box chain space so I'm gonna follow up on when coaching there I mean historically distributed database which is what blockchain is it's been you know hard to scale it's like I say low transaction volumes they had to pick the right use cases smart contracts is an obvious one yeah do you feel as though blockchain eventually you mentioned V chain it sounds like they're trying to solve that problem will eventually get there to where it can can compete with the more centralized model head on and some of you know the more mainstream apps yeah and that's and that's kind of where we are because our thought process if we were to move campus topic the kind of private LinkedIn for colleges per se on to the blockchain back when we started it wouldn't be possible so how do you store this non pertinent data this transactional or not even transactional this attribute data within a boxing application and that's really where that second layer solution comes into play and you see things like lightning Network for Bitcoin etc and plasma for aetherium but creating this environment where a developer comes on they create an account they name their application they pick their software language and then they pick their blockchain there's pre-built smart contract we offer them but on top of that they already have this data store that they can leverage these are things that people already accustomed to in the web 2.0 world these are the caching layers that everyone uses things like Redis etcetera that we're bringing into the blockchain space that well I that we believe will allow this kind of large-scale consumer type application well when you think about blockchain you think okay well he thinks it's secure right but at the same time if you're writing in solidity and you're not familiar with it the code could be exposed to inherent security flaws is that so do you see that as one of the problems that you're solving sort of by default yeah I think one thing here is that I kind of as you write a smart contract you need to audit you test it so on and so forth and so we're helping kind of get that core scaffolding put up for the developer so they don't need to start from scratch they don't need to pull a vanilla smart contract off of a open source library they can leverage ones that are kind of battle tested through our through our internal infrastructure so the last part of our kind of offering is this marketplace of pre developed components that developers can leverage to rapidly prototype or build their applications whether it be consumer engineer or enterprise that one and you were developer what's your back my background yeah so I studied entrepreneurship and Information Systems so I do have I was a database analyst at fidelity it was my last job in the corporate world so I do have some experience developing nowhere near that of my co-founder AJ or some of our other but but yeah I understand the core concepts pretty well well speaking blockchain who if she was talking about obviously you you see a lot of mainstream companies obviously the banks are all looking at it you're seeing companies we just you know heard VMware making some noise the other day you're at certainly IBM makes a lot of noise about smart contracts so you're seeing some of these mainstream enterprise tech companies you know commit to it what do you see there in terms of adoption in the mainstream yeah no I think the enterprise space is gonna want to fully embrace this technology first I think the consumer level we're still a little bit ways away there just because this infrastructure and this tooling is needed before developers kind of get there but from the enterprise space what we see I mean obvious things like supply chain being a phenomenal use case the blockchain technology Walmart IBM are already implementing really cool solutions one of them my advisors Rob Dulci is the president of Asia and they've successfully implemented several blockchain projects from car parts manufacturers to track and trace through wine seeds and this from grape seeds and so there's a lot of different use cases in the supply chain side identity is really exciting Estonia is already doing some really cool work with digital identities that's gonna have a big impact voting systems etc but also thinking through some newer concepts like video streaming and decentralization of Network Maps and so there's many different use cases and for us we're not trying to necessary solve like a dis apply chain problem or anything we're trying to give a set of tools that anyone can use for their verticals so we're excited to see kind of what a spreads used for and over the next several months to here I remember you mentioned V chain before so explain what V chain is and now your what you're doing with those guys yes if V chain is another kind of next generation blockchain they're they're v chain Thor is the new platform and actually their main net launch is tomorrow and they're really excited they're introducing heightened security faster block times more transactions per second they have a really interesting governance model that I think is a good balance between pure decentralization in the centralized world which i think is that that intermediate step that a lot of these enterprises are going to need to get to end of the block chain space and we're working with them or lon on their platform so our token sale will be run through V chain which is great in addition we'll be working with them with through strategic partnerships and the goal is have espresso be the entry point for developers coming into V chain so we'll help kind of navigate the waters and kind of have them leverage the pre-built smart contracts and get more developers into the ecosystem okay let's talk about your token sale so you're doing the utility token yep and so that means you've actually got utility in the token so how is that utility token being utilized within your community yeah so the data actually the token is used to meter and mitigate abuse in the platform as well so at every single transaction it'll validate the transaction in addition it will be an abstraction layer since we do speak to multiple block chains that ezpz token will have to abstract up to aetherium to Thor which is the V chain token the future dragon chain etc so that's a really interesting use case and one of the interesting things we're trying to solve right now if you're a developer trying to come in and use it it cryptocurrency for development you need to go to something like a coin base you have to exchange fiat to aetherium you have to push that out to a third party exchange you have to do a trade and then you have to send that digital wallet address where you get easy peasy Oh to our account after that's a ton of friction and that's more friction if you're not a crypto person you're gonna be what is it you're gonna be asking to do it yeah so we're talking to some pretty big potential partners that allow kind of they would be the intermediate intermediary or money service to allow a seamless transition for engineer just to come straight onto espresso put down a credit card bank account verified go through the standard kyc AML process and then be able to get easy peasy in real time and that's something that at a macro level I think is one of the biggest barriers to entry in the botching space today so what do you call you your token easy-peasy okay so you're making that simple transparent done so you're doing a utility token you do in a raise where are you at would that raise give us the details there yeah yes so we just close our friends and family around we're not private sale right now are working closely with the VA in the VA chain foundation helping kick that off right now as well and we're yeah this is gonna be much more strategic capital in this round and then after that we'll be moving into since we are partnered with each a in their community gets a little bit of exclusivity in the next piece of the round so their master note holders will get a bigger discount in the next round and then the last round will be the public round for the general community and that's where we anticipate a lot of developers we already have development shops coming on participating in the first round which is great because the thought process is we want to get as many developers in this platform as possible throughout the summer and I think that's one of the most unique things about the token sales it's not just raising capital it's actually getting people that want to use your product to buy him now and that's that's amazing so okay so you're doing the private sale first right and you open that up to those types of folks that you just mentioned and they get some kind of discount on the on the token because they're there in early and they're backing you guys early and then you guys got a telegram channel I know it was on the recently anything is exploding it looks like a pretty hot you know offering and then then what happens next then you open it up to just a wider audience we start getting the core community members from V chain and then after that the public sale will be really targeted for the unused these are the people that you know need to put in a large substantial amount of capital again and at that point you could put in a couple hundred dollars and actually participate in in the token sale and you'd be getting in the kind of ground Florida sand and the SEC just made a ruling you know recently a week ago or so that Bitcoin and in aetherium were not security so that's a good thing nonetheless you as a CEO and entrepreneur you must have been concerned about you know a utility token and making sure everything's clean that there actually is utility you can't just use the utility token to do a raise and then go build the products you have you had it you have a working product right yeah so there's a lot of functionality already set up and we're going to continue to iterate before we even get close to the actual tokens or the public sale right so we anticipate having full functionality of what we want to get out there to the development world by the end of the sale so it's the thing that we I think one of the biggest things in this space right now in terms of the law and compliance side is a lot of self regulation since in the u.s. in particular it's such a great area you need to one stay up-to-date with every single hearing announcement but also really make sure you're you're taking best practices with kyc AML making sure the people you know good people that are investing into the comm or I've kind of participating in the allocation and and that's something we you know we've spent a lot of time with our legal team I've got pretty intimate with our lawyers and really understanding kind of the nuances of this space over time what about domicile what can you advise people you know based on your experience in terms of domicile yeah I'm not a lawyer but based on our experience I mean there's some great places over in in Europe you know Switzerland Malta Gibraltar we're down on the came in and also Singapore there's a you know these different legislature or jurisdictions are writing new law to support the effort and I think that's gonna continue to happen and I hope it happens in the u.s. too so we remove some of this nuance and gray areas that people can feel more comfortable operating and I think that's gonna happen hopefully soon in the next six months or so we'll see but as long as more guidance continues to come out I think we can operate or people can operate in the US I know a lot of people are moving offshore like we did so just something that's gonna it's a tough area right now well it gives you greater flexibility um and it like you said it's less opaque so you can have more confidence that what you're gonna do is on the up-and-up because as an entrepreneur you don't want you know I'm not gonna worry about compliance you just want to do your job and write great code and execute and build a company and so I mean I feel I don't know if you agree that the u.s. is a little bit behind you know this is kind of really slow to support entrepreneurs like yourselves like like us we'd like more transparency and clarity and you just can't seem to get a decision you're sort of in limbo and you got to move your business ahead so you make a decision you go to the Caymans you go to Switzerland you go to Malta and you move on right so and I think it's interesting too and you know a lot of what the SEC did in the beginning there's a ton of bad actors out there just as well and there's a bunch of good actors too so again if you yourself regulate you play you really understand what you need to do to be compliant you should be fine but again I think the flexibility you get right now is the more kind of defined law and some these other jurisdictions makes a lot of it yeah and I don't mean to be unfair to SEC they are doing a job and they need to protect the little guy and protect the innocent no question I would just like to see them be more proactive and provide more clarity sooner than later so okay last question the Seaport scene in Boston you know we always compare Boston and silicon silicon valley you can't compare the two Silicon Valley's a vortex in and of itself but the Boston scenes coming back there's blockchain there's IOT the Seaport is cranking you guys are in the Seaport you live down there what are you seeing would give us a what's the vibe like ya know watching me just passed about a month ago it may be less and as the great turnouts I spoke at a few events a few hundred people kind of it each one which is great and it's interesting you get a good mix of Enterprise people looking to learn and educate themselves in the space you see the venture capital side moving into the space and participating in a lot of these larger scale events and it's definitely growing rapidly in terms of the blockchain scene in Boston and I spent some time in New York and that's another great spot to and an even think places like Atlanta and I was down in Denver I did a big presentation down in Denver which was awesome and and now the coolest thing about blockchain is it really is global I spent a lot of time in Asia and in Europe and speaking over there the the pure at like the tangible energy in the room is amazing and it's one of the most exciting things about the industry many people that in the space know we're on the cutting edge here we're on the this is a new frontier that we're building along the way being part of that and helping define that is pretty exciting stuff that's cool you know I said last question I lied I forgot to ask you a little bit more about your your team maybe you could you talk a team your team your advisors maybe you could just give us a brief yeah okay there my co-founder and CTO we've been working together since I believe my sophomore year at college so it's been a while and he's their original crypto a blockchain guy and and pushed us in the spaces leading to the product development on that from in the top of that we have Craig Gainsborough our CFO I actually spent a lot of time at PwC he was the North America tax and advisory CFO over there Jalen Lou is the director of product marketing Kevin coos the head of product he worked he was nominated for a Webby and then we have our ops team Kyle who's a former campus - a complete business deaf guy over there that's working on us from some of the other side on the advisory team we have a really good team sunny luke from the CEO and founder of e chain just came on eileen quentin the president of Dragon chain foundation that was the blockchain company spun out of Disney and then David for gamma is the co-founder and had a product at autonomy that's an IOT protocol really really cool stuff happening over there new new new program coming about Rob Dulci as the president of Asia in North America which is the supply chain company and they've already successfully deployed a handful of use cases and mihaela dr. mahele Uluru who is really interesting and in this sense that she was working on decentralized systems before they were called blockchain she worked with the professor in Berkeley that defined decentralized in technology and she speaks in the World Economic Forum frequently and is really just a global presenter so we have we feel like we have a really strong team right now and we're actually getting to the point of scaling so it's gonna be exciting to start bringing in some new people and picking up the momentum it's super exciting well listen congratulations on getting to where you are and best of luck going forward best of luck with the raise and and solving the problem that you're solving it's it's an important one and thanks for coming in the cube of course thank you so much you're welcome all right thanks for watching everybody we'll see you next time this is david onte

>> Narrator: Live from San Juan, Puerto Rico, it's theCube, covering CoinAgenda, brought to you by SiliconANGLE. (salsa music) >> Hello everyone, welcome to our special CUBE exclusive coverage in Puerto Rico. I've been here on the island all week, talking to the most important people, entrepreneurs, citizens of Puerto Rico, the entrepreneur, the students, connecting with Blockchain, investors, thought leaders, and the pioneers. I'm John Furrier, the cohost of theCUBE, co-founder of SiliconANGLE Media, and we're here with Crystal Rose, who is the CEO and co-founder of Sensay, doing something really cutting edge, really relevant, and kind of ahead of its time, but I think it's time to get it out there and get that token program. Crystal Rose, thanks for joining me and spending time with me. >> Thank you for having me. >> So one of the things I think that you're doing, and I want you to explain this because it's nuanced, and a lot of the super geeks get it and alpha geeks will get it, but the mainstream people are used to dealing in their silos. I use Facebook, I use LinkedIn, I use Twitter, I use chat, I use Telegram, I use these apps. The world's kind of horizontally being disrupted because of the network affect that Blockchain and Crypto is now the underpinnings of, and there's ICOs out there and other things happening, but it's a disruption at the technology stack with software. You guys are doing something with Sensay in the SENSE token that is changing the equation of how people come together, how people grow and learn, whether it's a nonlinear path of some proficiency or connecting with folks or just learning, whatever it is, it's a discovery mechanism. Take a minute to explain what you guys are doing and why it's so important. >> Well we built Sensay to connect everyone together without any borders or intermediaries, and so really it's as simple as every phone has the capability to have a messenger. We have five billion phones that have SMS on them, and so we wanted to take the most basic messaging system, which is the most important thing that people do, and connect it to any other messenger, so Facebook Messenger, Telegram, Slack, anywhere where people are chatting, we wanted to create a system that is interoperable and can decentralize your contact list, essentially. >> Yeah, so this is important, so like most people when they go to social networks you got to find a friend, you get connected. In some cases I don't want to have to friend someone just to have a chat, I mean I may not want to friend them, or I might want to or it's a hassle, I don't know who to friend. Is that kind of where you guys come in? >> Yeah, that's one really great use case, because things like Facebook max you at five thousand friends, so if you friended everybody that you had a conversation with, if you needed to know something. Let's say that every Google search that you did was actually a conversation, you would cap the number of potential contacts. We have a circle of people around us that extends out with different tiers. But I think some of the most important people in our lives are actually strangers. So instead of building the social graph we wanted to build the stranger graph. Sensay cares more about what you know than who you know. Because if we can connect people together around similar interests and like-mindedness, we're connecting tribes, and that's really the innate human connection that we're all looking for. And it's also when you extend yourself outside of your social graph, you're most likely to educate yourself or to uplift yourself more. So the way to level up is to get somebody who's an eight or a 10 if you're a five or a two, and find someone outside of your current circle. >> And that also eliminates all this group think we've seen on some of these hate threads that have been on, whether it's Facebook or some IRC backchannel or Slack channel, you see the hate just comes in because everyone's just talking to themselves. This is the new way, right? Connecting out? Through the metadata of the chat. >> Exactly, we want people to seek out good connections, helpful connections, and so if you can both contribute what you know you get rewarded. And if you can ask people on the network you also get rewarded. So by asking something, you're receiving a reward. It's a two-way system. So it's not just the person who is helping, so we don't really encourage an economy of experts. We think that everyone is a sensei. A sensei literally means a person who's been there before. So we think of that as somebody who has had that life experience. And I think if we look at the internet, the internet democratized expertise. It gave us the ability for every single person to write what they were thinking, or contribute some kind of content in some way. But for 20 years the internet has been free. It's a really beautiful thing for consumption, and open source is the absolute right methodology for software. When it comes to your own content a reward makes sense, and so we wanted to create SENSE on top of the platform as a value exchange. It was a point system, so kind of like Reddit Karma. And we wanted to let people exchange it out for some value that they could transact in the world. >> So basically you're going to reward folks with a system that says, okay, first ante up some content, that's your SENSE token, and then based upon how you want to work with people in the network, there's a token transaction that could come out of it. Did I get that right? >> Exactly. So the person who contributes on the network gets rewarded for that data, and it can be anything that you've done in the past, too. So if you have a lot historical data on Facebook or on GitHub for instance. Let's say you're a developer and you have a bunch of repos out there that could be analyzed to see what kind of developer you are, or if you've contributed a lot to Reddit, all of that data is out there, and it's been something that defines you and your personality and your skills and who you are, so you can leverage that, and you can get a reward for it just by letting Sensay understand more about you, so the AI runs through it. You get more rewards, though, if you have real conversations. So it's almost like a bounty program on conversation. >> So we have the same mission. We love what you're doing. I'm really so glad you're doing it. I want to get to an example in Puerto Rico where you've reached out with strangers, I know you have. And get that, I want to get to that in a minute, but I want to continue on the Sensay for a second and the SENSE token. As you guys do this, what is the token going to be looking like to the user? Because you have a user who's contributing content and data, and then you have people who are going to transact with the token, it could be a bounty, it could be someone trying to connect. How is the token economics, just so I can get that out there, how does that work? >> Well right now in Sensay the transaction is peer to peer, so both users who are chatting have the ability to tip each other, essentially. They can give each other some coins within the chat. We have the concept that when you're having a conversation it's always a buyer and a seller. It's always a merchant and a consumer, and sometimes those roles flip, too. I'll be selling you something and eventually you're selling me something. But it's a natural way that we chat to transact. So that was the first way that the token could be used. We then realized that the powerful part of the platform is actually everything underlying the application. So the layer underneath really was the most powerful thing. And so SENSE network evolved as a way for developers who are creating apps or bots to be able to build on top of the network and leverage the access to the humans or to their data, and so now the token can be used to access the network. You get paid if you contribute data or users and vice versa, you can pay to access them. What that's doing is it's taking away the advertising model from being the only entity that's earning a profit on the data. So you, the user, when you're giving your data to Facebook, Facebook earns a lot of money on it, selling it over and over repeatedly to advertisers, and while it's technically yours in the terms you own it, you don't actually have any upside of that profit, and so what we're doing is saying, well why don't we just let a potential business talk to you directly on your consent and give you the money directly for that? So that two or five dollars for one connection would go straight to you. >> This is the new business model. I mean, this is something that, I mean first of all, don't get me started on my ad and tech rant because advertising creates a bad behavior. Okay? You're chasing a business model that's failing, attention and page views, so the content is not optimized the proper way. And you mentioned the Facebook example. Facebook's not optimizing their data for a user experience, they're optimizing for their monetization, which is counter to what users want to do. So I think you kind of are taking it in another direction, which we love 'cause that's what we do, we are open source content, but the role of the data is critical so I got to ask you the hard question. I'm a user, it's my data, how do the developers get access to it? Do they pay me coins or... You want developers because that's going to be a nice piece of the growth so what's the relationship between the developer, who's trying to add value, but also respecting the user's data? >> Exactly, so the developer pays the network and as a user you're a token holder, you own the network, essentially. So there is really no real middle layer since the token will take a small amount out for continuing to power the network, but a nominal amount. Right now the most expensive thing that happens is the gas that's on top of Ethereum because we're an ERC20 token. So we're looking to be polychain. We want to move onto other types of blockchains that have better, faster transactions with no fees and be able to pass that through as well. So we really want to just do a peer-to-peer connection. There's no interest in owning that connection or owning the repository of data. That's why the blockchain's important. We want the data to be distributed, we want it to be owned by the user, and we want it to be accessible by anyone that they want to give access to. So if it's a developer, they're building a bot maybe, or if it's a brand, they're using a developer on their behalf they have to pay the user for that data. So the developer's incentives are completely aligned with the peer-to-peer architecture that you have, users interests, and the technical underpinnings of the plumbing. Is that right? >> Exactly. >> Okay, good, so check. Now I got that. All right, now let's talk about my favorite topic, since we're on this kind of data topic. Who's influential? I mean, what does an influencer mean to you? Is it the most followers (mumbles) it's kind of a canned question, you can hear it coming. I'll just say it. I don't like the influencer model right now because it's all about followers. It's the wrong signal. 'Cause you can have a zillion followers and not be influential. And we know people are buying followers. So there's kind of been that gamification. What should influence really be like in this network? Because sometimes you can be really influential and then discover and go outside your comfort zone into a new area for some reason, whether it's a discovery or progression to some proficiency or connection, you're not an influencer, you're a newbie. So, context is very important. How do you guys look at, how do you look at influencers and how influence is measured? >> I think at the bare bones an influencer is someone who drives action. So it's a person who can elicit an action in another person. And if you can do that at scale, so one to many, then you have more power as an influencer. So that's sort of the traditional thinking. But I think we're missing something there, which is good action. So an influencer to me, a good influencer, is somebody who can encourage positive action. And so if it's one to one and you get one person to do one positive thing, versus one to a thousand and you get a thousand people to do something not so great, like buy a product that's crap because it was advertised to them for the purpose of that influencer making profit, that metric doesn't add up. So I think we live in a world of vanity metrics, where we have tons of numbers all over the place, we have hearts and likes and stars and followers and all of these things that keep adding up, but they have no real value. And so I think it's a really, like you said before, the behavior is being trained in the wrong way. We're encouraged to just get numbers rather than quality, and so what I think a really good influencer is is somebody who has a small group of people who will always take action. It can be any number of people. But let's say a group of followers who will take action based on that person's movements and will follow them in a positive direction. >> And guess what, its a network graph so you can actually measure it. That's interesting... >> Exactly, exactly. >> I can see where you're going with this. Okay, so I got to talk about your role here in Puerto Rico. You mentioned earlier about reaching out to strangers, the stranger graph, which is a way, people's outside of their comfort zones sometimes, reaching out to strangers. You came here in the analog sense, you're in person, but on the digital side as well, kind of blends together. Give an example where you reached out to strangers and how that's impacted your life and their life, because this is the heart of your system, if I can get that right. You're connecting people and creating value, I mean sometimes there might not be value, but you're creating connections, which have the potential for more value. What have you done here in Puerto Rico that's been a stranger outreach that turned into a wow moment. >> Our outreach has been so far an invitation. So we bought a space here that's turned into a community center. Even at the very beginning we had no power as most of the places around that have been sitting for a year or two or since the hurricane, and so we put a call out and said we'd like to get to know the community. We're doing something called Let There Be Light, which is turn the power on, and you know, we put it out to a public group and saw who would show up. So basically it's a community, central building, it's a historical building, so a lot of people know it. There's a lot of curiosity, so it was just a call, it was a call for help. It was really, I think the biggest thing people love is when you're asking them for help, and then you give gratitude in return for that help and you create a connection around it. So that's why we built Sensay the way that we did, and I think there's a lot of possibilities for how it could be used, but having that encouragement of the community to come and share, we've done that now this whole week, so this is restart week, and one of the other things that we've done is help all of the conferences come together, collaborate rather than compete, so go into the same week, and put all of these satellite groups around it. And then we blanketed a week around it so that we had one place for people to go and look for all of the events, and also for them to understand a movement. So we since then have done a dinner every single night, and it's been an open invitation. It's basically whoever comes in first, and we've had drinks every night as well, open. So it's really been an invitation. It's been an open invitation. >> Well congratulations. I really love what you're doing. You guys are doing great work down here. The event this week has been great. We've got great content. We have some amazing people and it's working, so congratulations on that. As you guys look forward, one of the things I've observed in my many years of history, is that there are a lot of waves, I've seen all the waves, this wave's the biggest. But what jumps out at me is the mission-driven aspect of it. So I mean I can geek out on what's the decentralize and the stacks and all the tech stuff happening, but what's most impressive is the mission oriented, the impact kind of thinking. This is now, society is now software driven. This is a new major thinking. Used to be philanthropy was a waterfall model. Yeah, donate, it either goes or doesn't go. Go to the next one, go to the next one. Now you have this integrated model where it's not just philanthropy, it's action, there's money behind it, there's coding, there's community. This is now a new era of societal entrepreneurship, societal missions. Let's talk about your vision on this mission and impact culture that's part of this ethos. >> I think impact is the important word there. So we think about, we think about bringing capital, like you said with normal philanthropy, you can bring capital and you can continuously pump capital into something, but if the model is wrong it's just going to drain, and it's going to go to inefficient systems, and in the end maybe do some help, but a very small percentage of the capacity of what it could do. So what we have the concept of is bringing funds here. We have a fund that was just launched called Restart Ventures, and the idea is instead of compounding interests, we want to make compounding impact, and so it's a social good focused fund, but at the same time all of the proceeds generated from the fund recycle back into other things that are making more impact. So we're measuring based on how much impact can be created with different projects. It could be a charity or it could be an entrepreneur. And if we're getting a multiple, most of that money is going back. So a very small percentage goes to the actual fund and to the fund managers, and the lion's share of the fund is going back into Puerto Rico. So I think if we look at how we can help in a way that is constantly regenerative, sustainable is good, regenerative is better. We want to at least elevate ourselves and get to the point of sustainability, but we're not improving at that point. We're still just fixing problems. We want regenerative. So if we can keep planting things that regrow themselves, if we can make it so that we're setting up the ecosystem to constantly mend itself, it's like a self-healing system of software, this is the right way to do it. So I think that's the new model. >> You built in some nurturing into the algorithm, I like that. 'Cause you're not going to do the classic venture capital carry, you're going to rotate in, but still pay some operators to run it, so they got to get paid. So I noticed in the announcement there was some money for managing directors to do it. So they get paid, and the rest goes into the compounding impact. >> Right. >> Okay, so I got to ask you what your view is these days on something that's really been important in open source software, which again, when I started it was a tier 2 citizen, at best, now it's running the world, tier 1. Open source ethoses are sprinkled throughout these new, awesome opportunities, but community made it happen. What is your current view on the role of the community, communities in general, to make this new compounding impact, whether it's software development, innovation, impact giving, regenerative growth. What's your view on community? >> If community operates with a mentality of giving or contribution over consumption we do a lot better. So when you have an open source network, if a community comes and they contribute to it more, that's something that regenerates. It keeps adding value. But if a community comes and they just keep consuming, then you have to continue to have more and more people giving. I think a really good example of this is Wikipedia. Wikipedia has hundreds of thousands of people who constantly contribute, and the only reward that they've ever gotten for that is a banner ad that says please donate because we don't do ads. So it's a broken model, because you want it to be free and you want it to continue to have the same ethos and you want it to have no advertising, yet the people who contribute most of the time also contribute most of the funding to keep it alive because they love it and care about it so much. So how could we change that model so that the community could give contributions while also receiving a way to make sure that they're able to keep doing that. And a reward system works, and maybe that's not the only solution, but we have to think about how we can keep creating more and more. >> Well I think transparency is one thing I've always loved. The thing that I always hear, especially with women in tech and these new important areas like underserved minorities, and also the bad behavior that goes on in other groups, is to shine the light on things. Having the data being open, changes everything. That is a huge thing. So community and open data. Your thoughts? I'm sure you agree? Open data and the importance of having the data exposed. >> One hundred percent. So our platform also has a layer of anonymity on the user by default, and part of the idea of being able to understand whether or not data is good. Because think of human data, we have to figure out quality. In the past there would be a validation system that is actually other humans telling you whether or not you're good and giving you some accreditation, some verification. This is our concept of experts on things. Now we would rather take consensus. So let's just crowdsource this validation and use a consensus mechanism that would see whether or not other humans think the data is good. If we're using a system like that, we have to have open data, it has to be transparent and it has to be able to be viewed in order to be voted on. So on our platform on just the first application on Sensay, we expose this consensus mechanism in a feature called Peek. So Peek basically lets you peek inside of conversations happening on the network. You can watch all the conversations that happen, the AI pulls out the good ones, and then you vote on them. >> It's kind of like when you walk into a nightclub, do I want to kind of hang out here? >> Yeah, you're kind of a voyeur but you get rewarded for doing it. It's a way for us to help classify, it's a way for us to help train the AI, and also it's a way for people to have passive ability to interact without having to have a conversation with an actual human. >> Well you're exposing the conversation to folks, but also you get signaling data. Who jumps in, who kind of walks away. I mean it's a gesture data, but it's a data point. >> Right, and it's completely private. So the beauty of the transparency is there's actually privacy baked in. And that's what I love about blockchain is it has all of the good things. >> Crystal, I got to ask you a final question. I know you're very busy, and thank you for taking the time to share your thoughts with me today here on theCUBE here in Puerto Rico. This week you've been super busy, you look great. I'm sure you've been up, burning the midnight oil, as they say. What is the, I won't say craziest thing because I've seen a lot of cool, crazy things going on here, it's been fun, what is some highlights for you? Conversations, meeting new people, can you just share a couple anecdotal highlights from restart week that have moved you or surprised you or just in general might be worth noting. >> I've been overall extremely surprised but the sheer number of people who showed up. I feel like a few months ago there was a small group of us sitting around wondering what it would be like if we could encourage our friends to come here and share the space. So just to see the thousands of people who have come here to support these several conferences has been amazing. My most surprising thing, though, is the amount of people that have told me that they bought a one-way ticket and have no intention of going home. So to make Puerto Rico your home I think is a really amazing first step, and I just did a panel earlier today with the person in government who had instituted Act 20 and 22, and that was the initial incentive-- >> Just take a minute to explain what that is for the folks that don't know what it is. >> Sure. So Act 20 and 22 are for the company and the individual respectively. They are a way for you to get a tax incentive for moving here as a resident or domiciling your company here. So you get 0% taxes. I think companies range up to 4% or something like that, and that incentive was created to bring more brilliant minds and entrepreneurs and different types of people with different vocations to the island. So basically, give them a tax incentive and encourage the stimulation of economy. So that has brought this wave of people in who have an idea that no taxes are great. At the same time they fall in love with the island. It's amazing because to me Puerto Rico is a combination of LA's weather, San Francisco's open-mindedness, and Barcelona's deep European history. It's just a really beautiful place. >> And it's US territory, so it's a short hop and a jump to the States if you need to, or Europe. >> Yeah exactly. And no customs and you have your driver's license to get here. Also it's a US dollar. And I say that because most people in America mainland don't realize that Puerto Rico is an American territory, and so they sort of think they're going to a foreign country because it's treated that way by our government. But what I've been really shocked about, though, is the sheer amount of innovation already here. The forward thinking ways of people and the embracing of things like open source and blockchain technology, because their minds are already in a mode of community, a mode of sharing, a mode of giving. >> We interviewed Michael Angelo from Edublock.ido, Edublock, they're connecting all the universities with blockchain. We also interviewed Damaris Rivera, with Puerto Rico Advantage. They'll move you down here. You can press a button, it's instant move. So folks in Silicon Valley who are watching who know us and around the world know theCUBE, there's a group of like-minded people here that have tech chops, there's capital flowing. There's capital people I know have moved here, setting up shop, as well as the Caymans and everywhere else, but it's nice. So it's kind of like LA. >> There is a lot of capital. I have just witnessed a couple hundred million dollars of funds that were established in the last couple of months. And this is around all different types of technology sectors. You don't have to be a blockchain company. You can be innovating in any way possible. One of my favorite projects is a machine that turns plastic bottles into diesel fuel. So one of the problems here is that the generators on the island, when we were here last time we met a guy that was working at a bar in a restaurant, and he was like, "Hey I saw you guys in New York Times "and I think you're like the Crypto people." And he had a conversation, and he said, "I was wondering if you could help my grandmother "who is stuck with no power, and it's been months, "and she's in her 90s, and she needs a generator to run "a machine that keeps her life supported." and so a couple of people went out to bring more fuel, bring a generator to donate. They started understanding that there are so many areas that still need this level of help, that there's a lot that we can do. So when I see projects like that, that's something I want to back. >> Yeah, it's entrepreneurial action taking impact. Crystal, thanks so much for coming out. Crystal Rose, CEO, co-founder of Sensay, real innovative company, pioneer here in the Puerto Rico movement. It's a movement, a lot of tech, entrepreneurs, capital, investors, and the pioneers in the blockchain, decentralized internet are all here. This is like the Silicon Valley of Crypto, right? >> I think they're calling it Crypto Island. >> Crypto Island, yes. It sounds like a TV show. We should be on it. It's not lost, it's Crypto Island. >> Exactly. >> Thanks so much for spending the time on theCUBE. >> Thanks John. >> John: I appreciate it. >> I appreciate it so much. Thanks for making sense of me. >> I'm John Furrier here on theCUBE here in Puerto Rico. Our coverage continues after this short break.

>> Announcer: From Palo Alto, California, it's CUBEConversations with John Furrier. >> Welcome back to our special CUBEConversation here in Palo Alto. I'm John Furrier, co-founder of SiliconANGLE Media, and the co-host of theCUBE. We're with Grant Fondo who is an attorney, with Goodwin. Specializes in block chain, Initial Coin Offerings, also known as ICOs. Part two segment we just went over the high-level landscape, but I really want to walk through the playbook of ICO process. Call this the Initial Coin Offering, or ICO-101. Take me through the process, okay? Hypothetically, let's just say we want to do something, we want to have an ICO called "Crowd Coins". Something that we're looking at doing. But let's just walk through that. What's the advice, what's the playbook? Take me through the process. >> Sure. So the first question is, where are you located, and who are you targeting? So what I mean by that is, where is the founding team? Are they in the US? The threshold issue is whether they are in the US or abroad. If they're in the US, and they want to stay in the US, and most don't want to move, so they want to stay in the US, then we talk about, "Okay, you're going to be subject to US regu-- potentially subject to US regulation." And so, the next step on that is, who is your target audience for the token sales? Are you looking to do accredited investors? Are you looking for US people, are you looking for foreign, and who are those target people? So the threshold issue is, as I mentioned before, are you looking for accredited or unaccredited? Most people would rather, they believe in the democratization. >> Accredited over a million dollars of net worth? So it's like a... >> It's essentially a sophisticated-- yes, it's essentially a sophisticated investor. >> And what's the trade-off between the two of those? >> So the trade-off is, if you really want to get a large market, you do the unaccredited route. And that means anybody can participate. Accredited, if it's credited, it's a much more limited, typically from 50 to 100 people, high net worth individuals, there's a paperwork process, it's exemption under their security's rules. Most of the token sales we're seeing are unaccredited, although we're seeing a trend now, too, that people are doing a hybrid of accredited US investors, and unaccredited foreign investors. It's an interesting hybrid that we're seeing. But, so that's the initial threshold. We have many companies that say, "Well, what if we move our operations offshore? What if we open up a company in Switzerland or something like that?" And I think what they don't realize is that if they are trying to seek US money, or they are located in the US, or the money that they raise comes back to the US in some way, that they're going to be subject to US regulations. So simply sticking something offshore doesn't cut it from a regulatory perspective. So that's the first question we ask, is to trying to figure out, "Okay, where are we setting up this entity?" And typically you set up different entities to raise the token sale. >> So what if a company, say, us as an example, already exists, we're a Delaware corporation? Do I have to stand a new company up, or subsidiary? What's the playbook? So there's a clean sheet of paper is a new company, so that's where you start, I get that. But what about a pre-existing companies? >> So if you're a Delaware corporate pre-existing company, sometimes we'll set up a new, like a subsidiary. Sometimes just for typical corporate reasons it's good to set up separate entities. The other issue, threshold issue, is tax issues. We typically advise people to get sophisticated tax advice from CPAs, things like that, Deloitte's one of the players in the space, for example. And that decision then becomes, do you set that entity up in a more tax-friendly venue than the United States? The British Virgin Islands and the Cayman Islands are two of the examples of where these people set these entities up for tax purposes. >> The tax thing seems like it would take time. Does that slow things down, or is it...? It's super important, obviously. >> So, it does. It has a couple components. It slows it down because there's another player involved, you also have the potential transfer of assets and you have to figure out what are the assets that you're going to trade, move from the Delaware corporation, for example, to the Cayman Island corporation? You also have obligations of, you have to go live in the Cayman Islands for a while, which is not a bad thing. >> My wife wants me out of the house, time to go to the Cayman. >> So it's funny, I had a client who said, "Alright, let's set up in the hotel right next to the airport," and I'm like, "If you're in the Cayman Islands, go to the beach. Don't stay at the airport." >> Start scuba-diving. A lot of people would do that. Okay, so, great, so, jurisdiction and corporate structure is the first consideration. >> Yes. >> What's next? >> The next step is related to that, is what type of sale are you doing? Are you doing a token sale or a security sale? And what we mean, and that's a big threshold issue. What we mean by that is, and most of the sales are token sales. But is the token that you're using going to give someone equity in the company? Are they going to get a percentage of the profits from the company? Are they going to be able to control some of the decisions of the company? If so, that looks more like a stock. And so, therefore, it's deemed a security token. That is subject to SEC regulation, and there's a different route. Many people don't go that route, but some do. So, for example, people in real estate transactions where they want to give, use tokens, but they really want to give investors who get a percentage of the real estate profits. They'll go the accredited US investor route. For the other pivot is towards the utility token. Which is the utility token, like an arcade token, it's basically a token that works in the platform, and people use it so that they can transact on your platform, they can play games, they can get content, they can encourage people to find bugs in your software. >> John: So, transactional-type value. >> Transactional, exactly. >> So, smart network, smart contracts assume some sort of marketplace with coins and the currency, right? >> Grant: Exactly. >> Okay, so the next step. The tokens and security and utility, I get that. Okay, make that decision, now what? >> So the next step is, you need to do a white paper. And you need to hire a law firm to help you with the white paper and all the legal, all these different steps. So then we'll take a look at the white paper, and we'll advise them on what their token looks like, if they're trying to do the utility route we'll walk through the different language and things of that nature. We also try to clear it up, make it just a little bit more readable. And then, once they do the white paper, we then, also, help them with the pre-sale documents. Oftentimes they'll do two sales. So it's called a "pre-sale", which is where you give an opportunity for significant purchase, people that you believe will be significant purchases of tokens, and they'll come in and they'll buy a large amount of tokens, let's say $100,000 dollars in tokens, but at a significant discount from the price that will be for a regular token sale. So maybe a 20% discount. >> So once I have my token, security or utility, okay, now I got to go figure out how I'm going to sell this. >> Grant: Yes. >> And that's what we're getting at here. >> Yes. And so, typically you make a decision and do a pre-sale, and you raise a certain amount of money, and then you do the sale, the token sale, about a month later, typically. >> What about allocation of tokens? That comes up a lot. So I'm also thinking, "Okay, is there a structure for X percentage for the development, X percentage to sell, to offer to the community or network, how many stay in the company." we see people keep an allocation for the company, or, between 15 or some higher. So how do you put the pie chart together, or distribution of token? >> One of the things you have to figure out, is this a token that you're going to sell all your tokens right off the gate, except for some of the ones you keep, or do you envision later releasing tokens over time? So some of our token sales, every year, excuse me, token companies, will release tokens over the time to continue to provide tokens to the users. So you have to make that threshold decision. What you typically see, is you see a percentage kept by the company, you see, and it's usually, usually you see 15 to 20%, although I've seen companies up to 90%, and then you'll see a bunch of the tokens issued to the market, and they will tell people through their white paper what they intend to use that money for. Most of the times it's for R&D and development of the platform, and continued maintenance of the platform, but also legal and administrative expenses for that company. One of the big issues that companies face, is where are they in the development of that platform? Ideally, by the time they do the token sale, the platform exists and the tokens can be used immediately. That helps, we talked earlier about, being a security versus a token. That helps in that analysis. If you're building a platform, and you've already got it up and running, that looks more like utility token. If it's going to be a year or two before that platform's available for use, the SEC may say that looks more like a security. >> And a lot of people get flagged in ICOs where it's like, "We're going to see something in late 2018." And so they hope to raise money through the tokens to do development. And it can be like a Kickstarter kind of model there. But it's not legit. I mean, from a product standpoint. I shouldn't say, "not legit". It can be scrutinized. >> I think now, the SEC gave some guidance a couple weeks ago, and I think that in Coin Center, which is a very think tank in this area, they issued a spreadsheet, essentially, that talks about when are you more a token versus security. And I think that's an issue. I think, especially going forward, companies, if they can, are better off having a platform up and running by the time they issue the tokens. >> Okay, so next question is, okay, great, now I'm rockin' and rollin', now I got to do some blocking and tackling. I need a white paper, I got to have a website, what are the minimum viable elements that need to be in market for an ICO? Obviously a website. What are the elements there? >> One is the white paper, which we talked about. You also, as part of that white paper, you want to make sure you are conscious that this is a white paper that has to live and breathe potentially years, and so you want to be honest and forthcoming, and also give yourself some flexibility. But the other thing is, not every company is a super-sophisticated smart contract company. And so they'll often hire vendors to do that. >> John: Do the white paper. >> No, not to do the white paper, sorry, to do the actual smart contracts to set up the token sales. Those companies will also assist with the white paper, just like we do, but their primary platform, or purpose, is to help launch the smart contracts. You'll also have marketing companies that will assist with marketing the token sales, so that more of the community knows about your business, and that there's a platform out there and that hopefully that's a platform that you want to use tokens on, and so that's another component. And then, also, the tax advice that I mentioned before. >> Alright, so in that white paper, is also the consideration for who the service providers will be in the process. >> Sometimes. Not always, though. Sometimes it will identify who's going to get, if the service provider, for example, is going to get tokens, but oftentimes you don't see that in there. >> Alright, so white paper, probably an FAQ of some sort, but, again, thinking about this being an evergreen, living document that'll be on the web. It could bite you in the butt, or help you, so be careful, right? So that's what you're saying. Good advice. Okay. Tax considerations. Okay, now I have my tax hat on. Bring in Deloitte, bring in tax guys. What are they talking about? How does that impact the process? >> So, you mentioned the delay before. I think any time that you bring more players in it obviously delays things. But they're important players. All these are important players. And part of what you want to do, is you want to bring them in early, versus waiting, because the tax implications are significant. It takes time to set up foreign entities, it takes time to go live in the Cayman Islands, not the worst time, but it takes time. >> John: What duration in the Cayman Islands would someone have to live? >> I'm not an expert on that, but you're going to spend a couple weeks there, for sure, if not longer, and you're going to have to stay there through the token sale. >> Does the boat get paid as part of the token sale? >> I'll leave it up to you on how you decide to spend that money. >> Okay, so back on the jurisdictional thing, this is important. People, can they do it in the US? >> Yes. >> Yeah, they can. Okay. But how does that impact the process? Is it a tax issue, or is it just, comfort? What's the consideration between a Cayman Islands, foreign makes sense if you have people there, but Caymans would be the alternative to the US companies, right? >> So if you do it in the US, you can still have your operations here, and essentially you can have some people here, but the primary wallet, essentially, entity receiving the money would be in the Cayman Islands. If you decide, and that's really mostly for tax issues. If you decide to forego that, so some companies decide the tax issues are not significant enough that I want to deal with it, setting up a Cayman operation, there's a delay, there's expense, and we'll deal with the US tax issues. And so that's just a business decision. >> And because the tokens are viewed as income? >> Revenue. >> Revenue. >> Grant: It would be viewed as a revenue for the company. >> Okay, so does that mean, if a corporation wants to buy tokens, that's an expense? >> So, it's funny, we haven't had that question asked, and I'm not a tax expert, but yes, I think it would be an expense. >> We'll have to get a referral, get a tax guy in here to answer these questions. The post-ICO issues. Did we get to the ICO? So the next step is, okay, I got my tax considerations, it's time for the ICO. What happens next? Do I ring a bell? Is it a digital bell? What happens? >> It's kind of fun. Most companies, what they do is they put a countdown to when the ICO is about to start, and they usually give a window. And it's typically a two-component thing. One is, if we raise X, so let's just pick a number, $30 million dollars. It's a $30 million dollar X amount of tokens we sold, the token sale will stop at that point. And/or a time limit, so two weeks. We'll have a two week token sale. And so, you'll have the timeline, and they'll actually register for you on their website how much they've raised, how many tokens have been sold, as well as where they are in that timeline. And then the timeline ends either through one of those two mechanisms, and then the token sale is closed. >> And then I'm sure there's a protection issue around protecting the tokens. Can you add some color there? Because there's been rumors that someone raised $34 million dollars and lost it all. They've basically been robbed, digitally, by hackers. Who do you call, then? Better Coin Bureau? >> So we've dealt with that issue, and we can give advice when that happens, but it's a tough issue. Tracking, the FBI, obviously you notify the FBI... >> John: It's a fatal flaw. >> It's a real problem. Typically there are people abroad. So you have to assume it's gone. So one of the immediate things we talk about is security. And some of it is very basic security. And that is, if you are receiving all these Ethereum or Bitcoin or however you're raising it, set up a bunch of different wallets. If you're going to lose money, it's better to lose one out of 10 wallets, or one out of 20 wallets, versus one wallet with all your money there. So some of that is just prudent, in a sense, but I also think you really need to make sure. That's part of why you bring some experts in, if you don't have that inside expertise it's going to make it extraordinarily insecure. >> How do vet the service providers if I'm going to work with the company if I'm an entrepreneur or an entity to deal with the front-end of the first collection? The wallets make sense. You sprinkle it around, it's like digging a hole, or putting mattresses all over your house, so I get that. Who do I deal with on the inbound? Is there a central authority that takes the cash in before it goes to wallets, or it goes right into different wallets? >> That's where we talked about a smart contract vendor will assist you in setting things up so that it goes directly into a wallet. Part of it is just word of mouth. People get referrals, they look for who's done other ICOs. Part of it's reputational. Some of it, too, is when you talk to people, you can figure out, do they really know what they're talking about? Hopefully you have some IT security people on your team, or that at least you can rely on who can really vet, vet these providers and to say, okay, this is a really strong product, and we feel comfortable with that. And you're betting a lot on it, so it's a really important decision. >> John: So you invest in a security resource. >> I think you have to. >> Okay, now ICO is completed, everyone's high-fiving, the clock is ticking, and there's a post, maybe a trickle, or a one-shot opportunity, assuming that trickles is part of the process. What's the post ICO consideration? >> One of the issues is the money, right? So what do you do with it? So this is a pre and post token sale issue. And that is, do you provide employees, or founders, with tokens? And I think the consensus now is that the more you provide tokens for employees and founders it more looks like securities. So there's a tendency for people like advisors who come onto the company, to provide them tokens. I think there's a risk that if you do that, it looks more like securities. So you have to treat that money and that token, especially the tokens, because the company keeps some tokens, too, right? You have to continue to remember that that's a utility token, not a security token. As far as the money goes and what you want to use it for, you have to keep consistent with your mission. So it's just like crowdfunding. If you ask people to donate money to an idea, you can't change that idea. And if you do change that idea, you need to let them know about it. So you have to be very transparent. So there's no such thing as "free money", and I believe that one of the risks with the post-token sales is, some of these companies are not going to make it. And so you want to be very cognizant of that you're doing the right thing, you're making the right decisions. Pretend, in a sense, that it's truly your money, and every dollar that you spend is your own dollar. You want to use it wisely, and you never want to be embarrassed or ashamed or concerned about how you spent that money. >> As long as it's not buying a boat or having a, like on Silicon Valley, renting out Treasure Island and having a big party. Use it wisely, and to the mission of the firm. Okay, so the question I have for you, this comes up a lot is, okay, I get the utility token. That creates value for the currency, you're not selling the appreciation as an investment, it's a transactional component of a smart network with smart contracts, and values the creation and distribution of that value. I get that. If a company wants to do that, they can still have an equity plan, I assume, because you have to assume that that utility is contributing to the value of the overall enterprise itself, the company. That's where the employees would get the stock options in a normal stock option plan. >> Yeah, it's just like any other company. When you raise money, you still have equity. So I think they are generally Delaware corporations that stick with the standard structure. You can give options in the company. There's no concerns with that. >> So you have a coin vehicle going on, and a standard equity program. >> Grant: Yes. Absolutely. >> Okay, so, post-ICO, what else? Cross your fingers and hope you can use the development cash? >> I think, too, and this goes throughout the process from the beginning through the post, which is, be careful how you talk about the token sales. Don't talk about, "We're going to try to increase the value of the tokens." Remember, the token is a utility token. It's an arcade token. It's not a security. >> It's like playing a video game. Pinball Wizard. You pump it in to thing, play your game, and people get value out of that. >> So that's fine. But what you don't want to say, is you don't want to encourage people to continue to trade and buy the token for the purpose of they hope it's going to go up in value and not use the platform. >> Even though everyone's doing that. >> There's some truth to that. There's a little bit of, that's the elephant in the room, a little bit. But there's different ways to do that. As you build your community, as you talk about it and you're excited about your company, and people are. It's a great, it's a fantastic tool, and what's really been fun about it is you're seeing these companies that hadn't thought about the block chain and utility tokens and say, "Wow, this is such a great mechanism to build this huge community, and have all these people participate through these tokens. Setting aside the fund-raising aspect of it, but just this, it's a great mechanism to do this. The democratization of my platform. And I can reach internationally. So focus on that. Don't focus on the value of the token. There's another issue, which is putting them up on exchanges, particularly pre-token sale, I think you need to think twice about trying to connect with an exchange and sticking your tokens up on an exchange. >> John: Why? >> Because it sounds like security again. It sounds like you're trying to develop this market for more people to buy this token to go up in value. Now, it's okay to provide a platform, just like the arcade owner, it's okay if that arcade owner thinks that other people can sell his token for him, or her token for him, that's fine, but you got to be really careful about how you do it. >> So Brave browser, which is obviously utility, has BAT tokens. They're listed, I believe. >> So you can list, yeah and I think, you can list, I think it's just a risk. And I think what you don't want to do, is you don't want to say, "We're listing our tokens and trying to encourage people to buy the tokens." >> So it's optics. It's how you position it. >> It's important. The optics are important. >> So talking about expectations. Can we talk about this in our first segment, but I just wanted to just end this, ICO-101. Went through the process, overall expectations? Any thoughts on that? What people should expect? Duration? Fees? Costs? Is it order or manual, what solar system are they in? Million dollars is it going to cost, is it going to be $20K, how do you engage on fees, and then process timeframe? >> The process depends in part of the company. How far along are they on the white paper, how far along are they on the platform? But setting aside that issue, and more from the legal technical advisor, generally takes two to three months. We're seeing some that are longer. It takes time to put the white paper together, and we proof it and give advice, and then I'll also have some of the other advisers give advice on it. It does take time to set up the tax structure, so if you're doing the Cayman Islands, that's probably a two to three month process for sure. Depends on how much IP you transfer as well, so that can slow things down. >> John: Licensing and agreements. It's like standard legal stuff. There's no fast-track. There's no shortcuts. >> There's no shortcuts. You're bringing in an initial consultant so it takes time to negotiate. So I think safe, you're going to assume at least three months, if not, definitely more. >> Well, the number one question I think here, today, for you, is, who's going to pay for this hour? Who are we going to bill for this? >> Grant: You'll get my bill. >> I appreciate the candid conversation. Thanks for sharing your knowledge, again. This is an expensive hour here on the CUBE. The community is a freebie. Grant, thanks for sharing. You do some great work. I think I'm going to look back on this time in history and say, "Man, glory days, or hell-of-a time." It's going to crash and burn or go big, in my opinion. Great stuff. Grant Fondo. Attorney at Goodwin. Great firm, check him out. Doing great work. 25+ ICOs in the pipeline. Done a bunch of work. New area. Exploring the future of block chain, a lot of disruption, anything that has to do with supply chain, anything that has to do with technology, decentralize concepts in a distributed manner is really the rage. We see this as a game changer. It's SiliconANGLE. I'm John Furrier, thanks for watching.