hello everyone I'm Jean Faria we are reporting on the ground near Puerto Rico for blockchain unbound exclusive conversations at coinage end of covering all the action restart week of ten of events cryptocurrency blockchain all the people are here with the local ecosystem the cube is here it's great to have you on thanks for joining blockchain innovation is today global this is a revolution way bigger than the Internet itself programmable money programmable contracts that wipes out finance it wipes out legal it wipes out governance in many ways there's no central authority you have access to open source software it's fully connected so now is the time to make it translate we've all heard about the steam digital transformation its businesses that if they don't evolve and adopt blockchain AI all these other things they have a threat of being put out of business it is extremely competitive a new set of stakeholders investors global players governments are it's happening now you have a chance to be a part of an economy without a permission of a centralized organization have to pay 200 people in 40 countries and it's an unholy mess with withholding taxes and concerns around money transfer costs a hassle it's a nightmare like all currency control so you're only allowed to move a certain amount of capital out the country legally so what happens in all your backups our currency and you can effectively invest in assets around the world this is making it much easier to contribute to help people to get healthy and you don't have to go to school there's a very big influx of young and talented minds at that right and this is really changing the revolution landscape you've got the radical Burning Man hippie guy all the way to a three-piece suit yeah and that diversity is very very rich a lot of people are scared I like whoa hold on slow down we're not gonna prove it the other half saying no this is the future so you have two competing forces colliding for some reason crypto really pokes at people's biases you know why does it have any value and I go well why does the United States dollar have any value I mean you've got Full Faith and Credit of the government that's in debt by 20 trillion dollars you know is that a good idea most people that come here sorry with the what the how and people are scared but the young people are like yo this is happening this is not a moment this is a movement is definitely oh say 1996-97 of the internet bubble it's just starting people know there's something really magical they don't quite know what you know America really grew because you're abused to have all the controls and so the capital by sea left Europe and away in America and now it's happening 300 years later as America has all the controls and the capital starting to go away so a new Liberation's happening incredible resources are now being poured in problems that were ignored for many many and what is beautiful is that block Candy's doing it open-source is accelerating the tech these ideas are being freely shared whereas before there's bottlenecks in the collaboration aspect if we're able to write a contract in a thousand people be able to verify that contract and we're able to transfer money from one person to another without the two parties being involved we've got a perfect scenario security and speed and fairness all at the same time you can create these chains of trust and that can happen anywhere in the world you're on a level playing field if you have 4G connectivity now you can compete globally and be a part of the global economy so if you're someone who's in the emerging developing world and you want to begin to build wealth and you'd like to own a piece of first world real estate and today the minimum is about a thousand dollars but by implementing the Plott chain further they won't eventually get down to one dollar you can buy a piece of real estate and enjoy the returns on that I want to solve the wealth gap and I truly believe we can do it when we can allow anyone anywhere to invest in good quality assets a conduit with the current system there's too many friction costs the killer app right is money it's paying people that is the killer app of the block type right now let's say that money is software and it is software so if you buy something with a credit card what do you think's happening it's all software and what has happened is open-source software has always eventually won with respect to close source software so proprietary money is probably back on its heels because open-source money's coming in something like that will give liquidity to a lot of small business owners America is a country of small business owners across the globe it supports small business owners it's an interesting model yeah you don't have to give up any equity you don't have to give up any poor seats yeah right it's much leaner my super if you're an investor you gotta get a pound of flesh somewhere is it's just getting it on the discounted tokens is there a little liquidity going on when you think about you know private sale presale is 99% a token deal right although equities coming in because a lot of more venture capital is coming in and they're demanding a piece of the action from a company and equity perspective its equity might be future revenue sometimes as dividends or the opportunity get dividends so it's a combination of you have a preference you care you know at the other day equity is I was always preferable there is a provision in the 1934 Securities Act called section 12 G it allows us Spacely to go public by telling the SEC we're doing it without having to delay it to wait for their permission after 60 days it's a derivative so we'll continue to clear comments but but the thing is with tokens who knows how long that'll take I mean is the SEC gonna Shepherd something through with crypto 1 or do they gonna make it take 5 years I don't know [Music] all over the island this is the new Oliver field the world is moving too fast today for a big country to keep up it's all gonna happen now in this next century at the city level and so we work a lot with four smaller countries or small countries because I know estonia armenia baja rains got you know dubai envy so i mean every country wants to be the crypto country multiple small countries are going to come into the space which they know now they can get the capital flowing into that company and they're gonna allow their rules to be lacs they're gonna let capital flow through and then us will have to change or maybe UK will have to change orders against us will have to change in the first world a lot of what we're talking about is a nice-to-have it's it's sort of a bit of a game and if i can participate but where I come from an emerging war that's a necessity they are no other solutions so if you live in South Africa or China or India and you want to get your money into a first world country like England Australia America it's very very difficult and virtually no one can do it but it's a major problem because you want wealth preservation you want but Plan B you want your children to be able to go to a first world university etc etc etc Puerto Rico being a free associated States of the United States of America is like the best place to actually test this possibly some push for that for infrastructure for you know internet for all sorts of different things in terms of building the best infrastructure the new newest best-in-class for your business it's four percent corporate taxes and individual it's zero percent now that's what you got to move here you gotta move here okay but you don't have to give you deliver your US citizenship no taxes are great at the same time they fall in love with the islands so it's amazing because to me Puerto Rico is a combination of LA's whether San Francisco's open-mindedness and Barcelona's you know 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 most people in America mainland sort of think they're going to a foreign country because it's treated that way by our government how do I come to Puerto Rico do it right not offend the culture in abil them together what's your experience with the play ball stay good friends lost their relocation services for their business and themselves so they write a big check to you guys for the service but it's you guide them through the entire process and there's real energy here because there's a social movement underneath the entire cryptocurrency movement and that's to basically help your fellow man or women all these activity is really going to give a a shot in the arm to the Puerto Rican economy and we're bringing our funds and we're bringing our advisory the radar Thank You exponent there the hurricane was a horrible atrocity that happened and now we have this blank canvas to create a vision for Puerto Rico so what we're doing is we're connecting every single University on the island to work on open source projects to like make solutions for the private sector they know that if they can buy power on a cellphone like they're already doing for other goods and services now we've got a game-changer this is restart week and one of the other things that we've done is help all of the conference's come together collaborate rather than compete so go into the same week and put all of these satellite groups around it and then we blanket it a week around it so that we had one place for people to go and look for all of the events and then also for some for them to understand a movement about the education piece it's very difficult for people that kind of get caught up to speed because there's some technical things that need to understand to really apply this technology into the business world the other day we had an event where we talked 50 people how to create a smart contract from scratch those are 50 people who are not the same anymore ecosystems developing yet entrepreneurs you got projects you got funding coming in but as it's gonna be a fight for the ecosystem because you can't have zillion ecosystems there are definitely some you know the galaxies and you know regulatory aspects that you know put some concerns and a lot of you know people's mind since its inception you've seen people and media and mainstream media in particular target Bitcoin and they're just adopting the government narrative saying oh everyone in this industry is corrupt Oh everyone in this industry is an ICS camera Oh everyone in this industry is a a drug runner and they have all selling drugs on the dark web and and it's like you know what like you can do some research and don't get better than that traditional media they want to take down everybody that they don't consider you know like a birds of the same feather there actually are a lot of scammers and a lot of like dark forces inside of the cryptocurrency movement so that's why I think we welcome kind of more regulatory influence because you know none of us want to see bad actors in the space we've seen folks go out raise you know really big about to capital with no product roadmap no business talking roadmap no real way to get from zero to X what are they trying to shoehorn a regular business onto the blockchain and just assume that by adding crypto at the end of you know toilet paper they're gonna get something I had another founder tell me that you know Mike tokens are worth 100 million humming yep you don't have a user you just have a product you're tokens I've hiked if you ask me it's it's what little I can tell my house is 100 million dollars it's only worth as much as the top buyer how much we really need hardcore reputation systems in our industry and in the for the world I think 2018 is going to be the year of clarity on regulation and I think that's where Puerto Rico comes in and plays a major role 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 when I go to the supermarket and where I go it's full of American and people from outside and when you ask them where you're from and they will tell you from Puerto Rico this is gonna become the epicenter of this multi-billion dollar market we need to have people prepared for this you have to create the transparency 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 all communities need to evolve in my opinion between technology communities open networks of governance where we have peer-to-peer distribution of finance and of resources in a way that allows people to aggregate around the marketplaces that are actually benefitting the way that they believe the world should work we're going to be tools that far surpassed what's currently available in terms of the messages the websites all these things 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 it makes sense everybody is going to get to play together across every device the developers are going to get rewarded for creating content people are going to be rewarded for creating things inside the games and the players are going to get rewarded for getting to the top levels of all the games and we're going to reward them through our cryptocurrency if we begin to own ourself sovereign identity then when we're owning our data that's the foundation for universal basic income communications completely frictionless payment completely frictionless and governance completely frictionless and we have to put this all together who wins here the average citizen entrepreneur that is leveraged citizen player that wants to start something whether it's a banking a service provider of some sort an entrepreneur or a new financial instrument or firm you all have greenfield opportunity here the first thing I would tell found us is to reach out ok this community is very very supportive like you can reach out to me you can reach out to other guys LinkedIn Facebook or come to these events and say your idea and you need help because you will need help you cannot run this alone ok you are running a company you're running your team have a good team that's the first thing you got to be vigilant and you keeping your money in a hard wallet not keeping your private keys on your computer if you're using a centralized system those centralized systems are really easily exploitable strategic partnerships Advisors founding team and then show the idea to the people explain yourself frankly and honestly and I think the community will reward you to go and find it ring whether you're a fortune 500 company or a startup it's all about building the community and I believe that whether it's utility Target or security or combination of the two it provides an incredible vehicle to ultimately be the catalyst to your community and if you the to community adding value then you're going to build a company event it's always gonna be led by the business model because you need something to act as the power pull to pull the thing along right 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 but a very small percentage of the capacity of what it could do then the advice would be to entrepreneurs don't fret about the infrastructure just nail your business models right and because the switching cost might not be as high as you think that's right we're in the old days when we grew up yeah you made a bad technology decision you're out of business yeah but the first advice that I give my clients is to stomp this is this business that's too much formal in it yeah right if you're missing out so no just because everybody's out there Nico you should be doing an SEO right yeah 46% of I SEOs have already failed already failed start with the business gather this in the counties down right so free cash flow unique value proposition Prada market fit what sits under business think about the token model right the token model has to go in handy now with your business model and revenue model and once you figure out that business and took the models now it's time to think about compliance I'm gonna raise money in the US and abroad I've decided to go to security choking hypothetical instance absolute what do I do is there for you an incentive mechanism or is a fundraising mechanism or both who's gonna be my user who's gonna use this token right there aren't gonna be moms dads hospitals they was my target and then how they're gonna use it and are they gonna hold it I'm gonna sell it are they gonna trade it so all these different things define that oh c'mon once you get your token actually authenticated realized everything's transparent and it gets on that secondary market it's better to use that to invest in anything you need investment get everybody incentivized around your token all your employees all your vendors everybody incentivize around that token it's a thousand percent more powerful than a dollar so the dollar doesn't go up in value in your token your token can go up and down and as soon as you find just one spark it blows up everybody boats rise equal it's pasta Sara Lee the time to crack open the champagne you still have to demonstrate product market fit you have to help build a market in our particular case so there's a lot of hard work launch it's a start line it's just like it's only a step along the whole process you know what made people get it you showed them the money yeah you showed them the money sometimes people don't you can explain these concepts that are world-changing super high level or whatever people were not actually gonna get it until it's useful to them average business people and senior business people who have typically been shut off to the idea of blockchain are now seeing this as very real and here to stay momentum is just beginning it's gonna be amazing what these guys come up with that's one of the things I love about doing this thing right I'm an old guy and I get to hang around these smart young people makes me feel young again yeah but the other thing that we have and I think you should share it as well as we have to offer to these young guys experience thing we just invented a new category in the ico category an advisor token and a you have to have the stomach for it and I think you just have to be as educated and as you can what government entity can resist for the long term something that's actually trying to provide a better and better and better financial infrastructure you should be able to participate in many different nations who have many different economies that are all really cooperating interdependently to create the best possible life for all human good one dollar will not change your life but if you change your habits you'll change your financial destiny and so my philosophy is get it to a dollar so that every single person can participate and once you start to learn good habits around money and wealth the rest it's a formula like it's a flywheel instead the world will become a better place we'll have better companies positive impact is not counter to profit they go hand in hand the Puerto Rico movement it's a movement while Czech entrepreneurs capital investors the pioneers in the blockchain decentralized Internet are all here this is like the Silicon Valley of the crypto right I think they're calling it crypto island yes TV show we should be honest like it's not lost its crypto island exclusive coverage for Puerto Rico's - Cuba I'm John Ferrari getting the signal here out of all the noise in the market this is what we do this is the cube mission great strip we start week Point agenda open content community thanks for watching [Music]

>> Announcer: Live, from San Juan, Puerto Rico, it's theCUBE. Covering BlockChain Unbound, brought to you by Blockchain Industries. (Puerto Rican music playing) >> Hey, welcome back everyone. This is theCUBE's exclusive coverage here in Puerto Rico for Blockchain Unbound. I'm John Furrier, the co-host of SiliconANGLE Medias. theCUBE is our flagship product. We go out to the events and extract the signal from the noise. My next guest is Christian Ferri who's with Block Star, doing investments, ICO advisor, he's been in the space, great to see you, nice to meet. >> Absolutely, thanks for having me John. >> Thanks for joining. So, okay, some people are saying that we're the top of the bubble, some people are saying that it's the beginning of a revolution. Some people are, like, staying away, "Oh my God, what's going on?" Some of those investing both in equity and token deals. What's your take on this? I mean, how do you explain this? Because it is a global phenomenon, I mean, what's your take? >> Yeah, I think we're at a very early beginning right now. It's definitely, I would say 1996-97 of the internet bubble if you will. We're seeing some amazing growth, right? So, things are picking up real fast I think. You know, the moment that Bitcoin hits $10,000 a lot of people got interested in all this phenomenon. ICOs are becoming the standard for fundraising for startups. It's an interesting model, you don't have to give up any equity, you don't have to give up any board seats, it's much easier, much simpler. But there are definitely some legalities and regulatory aspects that put some concerns in a lot of people's minds. >> What are the, I mean obviously if you're an investor, you got to get a pound of flesh somewhere, the old days was equity and that was a long game, it had a different gestation period. How are you making money now on the investments? Is it just getting on the discounted tokens? Is there a little liquidity going on? So, if there's no dilution, you got to make money somewhere, so, where is the secret? >> Yeah absolutely, great question. So I think if we're looking at security tokens, to finance investment vehicles, the way you make money is by the value increases of the token, right? So, as you buy a $1 and the token goes to $1.50, you have your 50% increase, right, return. There are new companies in the ICO space, they're thinking about leveraging the equity side of things, but it's fairly new. Right now it's merely a token deal, so when you think about private sale, pre-sale, it's 99% a token deal, right? Although equity's coming in because a lot more venture capital is coming in and they're demanding a piece of the action from a company in equity perspective. >> Yeah, and some of the ICO's, because we've outlined this on theCUBE many times, Blockchain, I call it the Crypto-stack, Blockchain, Cryptocurrency, and the application on the financial is ICO, >> Christian: Right. >> But that ICO also translates into the application dynamics of token economics, tends to value creation. >> Christian: Right. >> Hence what you were talking about token value going up, kind of like how equity investment would go up if it got sold on valuation, etc. >> Christian: Right. >> Okay, ICOs are hot. Now the market is pretty aware of the scams, the scams out there. Young kid puts a fake white paper out there, raises 20 million, >> Christian: Right. >> Next thing you know it's like, "where's the money?". >> Christian: I've heard that before. >> And then you've got legit ICOs going off the blocks which a really legit, going great, how do you make sense of it as an investor? Is it classic word of mouth? >> Yeah. >> What kind of due diligence are you doing? What's your filter? >> I think what you said, word of mouth definitely plays a big role in it, I had to trust that toward your network. Having a research team kind of helps understand the technology behind it, if it's actually feasible. I go through 250 white paper a month. >> So you're a white paper reader. >> I am not, my research team oversees actually. >> Okay. >> But as an investment and advisory firm, we have a lot of inflow of companies that want to get advised on or invested in. And a lot of these white papers are total moon shots, it's like build a YouTube and it's 1982, you have a dial up, you can't do that, you need a broadband, right? >> John: Yeah. >> So, you have to have a very diligent process and team that does that. And then think about 99% of the white paper you'll see are going to be crap or junk. Only one or two percent are going to be good. And so that selection process is very key. On top of that, there are a few things in the tokenization process that can raise red flags. For example, if they're too aggressive on the discounts on the private sale, like 70% discount, 80% discount, it's not a good indication, it's a red flag. >> Really, why not? >> It shows that the product is not that great, right? If you have to give somebody an 80%, if you're buying a Ferrari that is discounted at 80%, would you buy it or would you say, "well I'm not sure"? >> Well you could be, it's like giving warrant coverage on a equity deal, >> Christian: You could. >> You could go up to someone and say hey I'm going to give you 80% discount because I want you in my deal, and I want you to make more money than the other guys. >> And what we see. >> I mean that's the counter argument. >> Yeah and what we see. >> I guess what you're saying is there's two vehicles. >> Yeah. >> Desperation. >> Christian: Yep. >> I got to discount the shit out of it to get attraction. And what I'm saying is it's kind of like a hot deal you want the right people in, I've seen both. >> Christian: Yeah it's a good point, usually what we've seen in the past four and a half years is that the good deals don't get discount more than 35%. That's usually the max they get discounted, especially just because you said you need strategic partners to back you up, to help you out since the beginning. These people should be invested in the project, they should not be incentivized by the discount that you're giving them on a private sale. But they should be incentivized because they believe in you and believe in the product. >> So it's a judgment call. >> Yeah. >> You shouldn't have to drop your drawers, so to speak. >> That's right. >> Good feedback, that's great, now token sale economics, I'm the entrepreneur, how should I be thinking about going to you, and I have a good deal, I have a great product, I've got token economics, I'm a growing company, this is an opportunity for me to scale my business at an unprecedented level. I can get more capital than I can on the private market because it's flowing faster here. What do I got to do to get your attention? >> Well, first of all, from an advisor perspective, we only take usually established companies, they have a minimum of 10 million in ARR, so annual recurring revenue. We make a few exceptions, if there's a very strong team, a very strong advisory board, or they have a few characteristics and qualities that we look for. We kind of trying to wave that 10 million ARR, but we're looking for like stellar team, rockstar teams, with a good advisor board, with technologies actually feasible to be built in the next two or three years. And that can actually be deployed on the market. >> So they want to see product, you got to see product. >> Absolutely, absolutely. >> So you don't investing in the moon shot, as you said. >> No. >> Not really because that's essentially a seed deal. >> Yeah, exactly, there are circumstances when you have a very amazing team, that've done some crazy amazing things in the past, and they're talking about moon shots, right? They're, I'm not going to say a name but there's a big ICO right now raising billions of dollars. >> Telegram. >> Right, well I'm going to say a name. >> Telegram, are you in Telegram? >> Sorry? >> Are you in Telegram? >> Yeah I'm a user, right? >> Not a buyer of the ICO. >> I have not invested. >> Okay. >> I have lot of people that want to invest in an ICO, but I personally have different opinions on it. But there's a lot of moon shooting over there, right? >> John: Yeah. >> So you want to make sure there's a fine balance between what you're promising and what you can actually do. >> Great, so what's your advise to entrepreneurs when they're at the stage of, "I really want to do a token sale, I think we're ready". What's your advisory role? How do you come in and help? They might not be ready for capital but they might want some advisory, maybe throw in a little bit of token cash, not token cash in there, but legit cash via tokens. >> Christian: Absolutely. >> How do you engage? What's your, you mentioned some of the 10 million, but what do you bring to the table? >> So the way it works usually is that they come in with a white paper and an idea on an established business that they want to tokenize, and then we basically have a conversation, we start having a conversation to figure out what they want to do. But the first advice that I give my clients is to stop. This business has too much FOMO in it. >> John: Yeah. >> The fear of missing out. So not just because everybody's out there doing ICO you should be doing an ICO, right? >> John: Yep. >> So this is the first thing to take a step back, figure out what really makes sense for you, and your situation in your company. And number two, I always provide the example where, thinking of going ICO in a three step process. You start with the business, right? >> John: Yep. >> So back in the 90s and I think you were around back then. >> John: Yeah, I was. >> When you were asking somebody, when you were saying, "what are you doing?", it was like "oh I doing a startup, "I'm building a company, I'm building a startup", right? >> John: Yep. >> Everybody was talking about startups. You go just about anywhere in the world talking about Blockchain, and somebody stops you and says, "what are you doing?", an ICO, right? >> Everyone's doing it. >> Everybody's doing it, but an ICO is an investment vehicle and not a company, right? >> John: Yeah. >> So, start with the business, got the business mechanics down right, so free cash flow, unique value proposition, product-market fit. Once you've done the business, think about the token model. >> John: Yeah. >> The token model has to go in hand in hand with your business model and revenue model. And don't settle for the first one to come to mind. There are over 50 business, I'm actually writing a book about it, The First ICO Playbook coming out later this year. >> John: Okay, great. >> It's going to have some new token models in it, and once you figure out the business and token models, now it's time to think about compliance. And compliance can actually enable the rest, and, when under the right jurisdictions, they're a match for the token and the business model. >> John: Alright so the token playbook, great job, I'm glad you're writing that book, I think we need to get a good playbook down. Alright so here's a playbook question for you we're going to go to the playbook on this one. Security token, or utility token, okay, we've got that figured out. We got to have utility. I'm going to raise money in the US and abroad, I've decided to go with the security token, hypothetical instance, what do I do? Security to equity? Security for future cash flows? What is the playbook for the security token? >> Well it's more simple than it sounds, in a sense. So the first this is if you're not sure whether it's a utility or a security, just file it as a security. And from a security standpoint, I think you're covered whether or not you're selling to the US or are a US resident citizen, you still have to comply with the SEC regulations just because you're in the US. And so a security can actually have different terms just like you said, a security to equity, a security to token and so forth. That depends on what your revenue model is and what your structure of your company is, and so a lot of people are doing security equity. Other are doing security token, just because they don't want to give up the equity of the company or the board seats. >> John: So what's the biggest thing that you're scared of in this market, as an investor? Are you worried about regulatory? You worried about too much money chasing not enough good deals? What's your fear? >> One of the initiatives I started last year is called the BlockChain Compliance Alliance. It's a no-profit independent initiative to develop a standard for ICOs. >> John: You started that? >> Yeah, I founded it last year with a few other folks, and then five or six people, >> Trying to build some stability around the process? >> You got it, yeah, it's almost like a self regulating standard, or an SRO, right? >> Yeah. >> And we had the opportunity to engage in some regulators, some folks at the SEC and some other government agencies, not just in the US but also in Europe, and they're very open to have a self-regulating standard. >> We need self-regulating standards, the community's got to take care of business, there's a lot of scams out there. >> Yeah, absolutely, so they're open to say to have an industry of self regulating from the top down, the kind of choke innovations. >> John: Yeah. So I'm not really concerned about too much regulations coming in the regulators. >> John: Well the SEC's just been signaling, they've taken a few obvious scammers down, but they really haven't overreached, in my opinion, I think signaling has been good, but they're signaling. >> They are signaling. >> They're not looking the other way. >> Absolutely, and I think it's they're job, they have to be signaling. >> But then they don't know what they're talking about either so the communities got to step up to your point. >> Correct, right, so we're trying to kind of be that, basically that intermediary, if you will, right? >> How many people are involved in that? Just take a quick minute to explain, URLs or like a website. >> Yeah we do, it's blockchaincompliancealliance.org. >> John: Who's involved in that? >> It's five or six people we're getting on, volunteers, it's a nonprofit, so volunteers. We're looking for additional volunteers, donations, and a board of advisory. We have a few high level advisors. >> Whales, whales. >> Yeah, well. >> They're called whales, are they whales? >> Well, whales don't want to be known, it's hard to find a whale, but I said that we have a few high level advisors that would like to come onboard, we're going to make that announcement soon. >> Us minnows out there. >> But it's going to be exciting. >> That's awesome, okay now back to the token economics, I'm fascinated by the token economics. Again, you can't just whitewash a business in saying, "hey I'm tokenizing now", there really has to be a dynamic. What do you look for, what do you observe, and what's your thoughts on how to actually think about the token economics alignment with the business model? Where does that have to line up for you? >> Yeah, good question, I think there are different aspects of it, first of all, you need to define what a token is. Is that for you an incentive mechanism? In which case, you can use an airdrop model, you don't necessarily have to ask people for money. Or is it a fundraising mechanism, or both? So let's just start with these basic questions. You can think of it, you can move on to say, "who's going to be my user?", right? Who's going to use this token? Think about are they going to be moms, dads, hospitals? Like what's my target? And then how they're going to use it, are they going to hold it? Are they going to sell it, are they going to trade it? So all these different things define the token model, right? And the token model, as we said, needs to go hand in hand with the business model, the revenue model as well. So for example a lot of companies are using the token as a fundraising mechanism, but an incentive mechanism as well to incentivize this behavior. >> So talk about the dynamics of an airdrop and a token swap. We're starting to see airdrops are well known, just take advantage of explaining to folks who don't know. And then, I'll get to the token swapping, we're seeing some synergistic keiretsus for me, so airdrops and then token swaps. >> Yeah, airdrops are becoming, basically the new standard, I would say, they're a way-- >> John: Outside the US? >> Even the US, actually. >> John: Are they doing it in the US? Okay, explain what it is. >> There's a company, I think it's called Earn.com, where you can actually launch your airdrop campaign for free or you have to pay something but >> John: What's the URL? >> Earn, Earn.com >> John: Earn.com, okay yeah I see that. >> E-A-R-N, yeah. >> Explain what an airdrop is, just define it. >> So, it's a very simple term, you basically airdrop tokens, you basically give tokens to users, to people, right? So basically people sign up on your site, and you white list an address, and then you basically send those tokens to that address. So it's a way to circumvent a public sale. >> So get free tokens out? >> Christian: Yeah. >> To generate community activity, marketing buzz. >> Christian: Correct. >> So you're just going to airdrop it, kind of metaphorically. >> Right, there are some ways that people do private sales with airdropping. >> Where's the gotchas on the airdrops? Where are people getting in trouble? >> Well, if the token is a security, depends on if they're giving it to you for free, but the value increases, the token increases in value, that delta becomes dubious. From an IRS perspective, from an SEC perspective, from a CFDC perspective, that we still haven't figured out, but ideally if we give out free tokens to incentivize the community, >> Yeah that's normal marketing usage, in the SEC you view that as a utility, a legit utility. >> Yeah we see that with the new bill that passed in the past couple of days, that's how they define utility. >> Alright now let's talk about swaps, token swaps, because starting to see some activity around, self-forming, which is natural in communities, adjacent businesses saying, "hey I'll swap "two million dollars worth of tokens "for two million dollars of mine". Kind of a Barney deal, you love me, I love you back, kind of thing, but it's trying to cross pollinate communities and share value, basically a Bus Dev Bill. >> Christian: Yeah, absolutely. >> What do you think about that? >> It's great, I've seen that a lot of that in forming new partnerships between ICOs. So, let's say there are two ICOs that definitely want to have some IOJV or some partnership together, they have some qualities that they'd like to have of each other, and that's how they do it, they do a token swap. It's almost like an equity swap from a regular traditional company standpoint. It's almost like you want to have an action in the company, and I think it's a great model, it's a great incentive mechanism. >> A great legal bill too in all this, someone's got to pay for it, lawyers are having some fun with it. >> Yeah. >> Kind of new progressive laws being figured out, lawyers generating new dockets for the first time, final question for you, I know you got to run, appreciate your time spending it with us. Puerto Rico, you're observation here, you're from the bay area like we are, what are you doing here? Why are you here? What's your observation, what's the hallway conversation? Share some color commentary about BlockChain Unbound. >> So, I'll start with why I'm here. So, it's beautiful place, the weather is amazing, the water is amazing, it's a great place to take some time off. I'm speaking at a bunch of conferences, and meeting a few people. And I'm part of the movement of the Puerto Rico Crypto Movement. I think it's great, I had the opportunity to meet with some of the government officials that came here at BlockChain Unbound today, and talk a little bit about what's happening, how can we actually make sure that, create some sort of a system that is made for ICOs and BlockChain, and what I like about it is that it's very open to accept new ideas, very open to try out new things, which not always happens in the government space, so I'm very excited about >> And they're really active to open arms. >> Absolutely, absolutely. So, I have very high expectations and very good sense that things are going to pan out here. >> You do any deals here? Write any checks? Sign any commitments? Verbal MOUs, handshakes, what's happening? >> There's been some of that. I'm a big believer that you need to do enough due diligence on the process, so have a cool off period, a honeymoon period kind of cool off but I think there are some very interesting people here, I met some very interesting brains, very interesting products. And the energy, you can feel the energy. People want to try their risk and invest. >> I see a lot of people doing deals, I saw one VC, I'm sorry, VC, investor, token investor, he's done six deals already here. >> Christian: Yeah. >> He's buying tokens, handshake, verbal commitments, and MOUs. >> Yeah there's a lot of that going on. >> And a lot of money coming it, a lot of international too. >> Absolutely. >> So great to see not just here in Puerto Rico, not just US, this is a global phenomenon. >> It is, this is one of the things that BlockChain is about. It's ubiquitous, it's everywhere, and that's the beauty of it. >> Well, Christian, thanks so much for coming on theCUBE, we really appreciate it, thanks for sharing the data and advice. The BlockChain Playbook is coming out at the end of the year check it out, Christian Ferri with BlockStar. I'm John Furrier with theCUBE, SiliconANGLE Media. Live coverage here, wall to wall, two days, back with more after this short break.