>> From theCUBE Studios in Palo Alto and Boston, bringing you data-driven insights from theCube and ETR, this is Breaking Analysis with Dave Vellante. >> When a piece of digital art sells for $69.3 million, more than has ever been paid for works, by Gauguin or Salvador Dali, making it created the third most expensive living artists in the world. One can't help but take notice and ask, what is going on? The latest craze around NFTs may feel a bit bubblicious, but it's yet another sign, that the digital age is now fully upon us. Hello and welcome to this week's Wikibon's CUBE insights, powered by ETR. In this Breaking Analysis, we want to take a look at some of the trends, that may be difficult for observers and investors to understand, but we think offer significant insights to the future and possibly some opportunities for young investors many of whom are fans of this program. And how the trends may relate to enterprise tech. Okay, so this guy Beeple is now the hottest artist on the planet. That's his Twitter profile. That picture on the inset. His name is Mike Winkelmann. He is actually a normal looking dude, but that's the picture he chose for his Twitter. This collage reminds me of the Million Dollar Homepage. You may already know the story, but many of you may not. Back in 2005 a college kid from England named Alex Tew, T-E-W created The Million Dollar Homepage to fund his education. And his idea was to create a website with a million pixels, and sell ads at a dollar for each pixel. Guess how much money he raised. A million bucks, right? No, wrong. He raised $1,037,100. How so you ask? Well, he auctioned off the last 1000 pixels on eBay, which fetched an additional $38,000. Crazy, right? Well, maybe not. Pretty creative in a way, way early sign of things to come. Now, I'm not going to go deep into NFTs, and explain the justification behind them. There's a lot of material that's been published that can do justice to the topic better than I can. But here are the basics, NFTs stands for Non-Fungible Tokens. They are digital representations of assets that exist in a blockchain. Now, each token as a unique and immutable identifier, and it uses cryptography to ensure its authenticity. NFTs by the name, they're not fungible. So, unlike Bitcoin, Ethereum or other cryptocurrencies, which can be traded on a like-for-like basis, in other words, if you and I each own one bitcoin we know exactly how much each of our bitcoins is worth at any point of time. Non-Fungible Tokens each have their own unique values. So, they're not comparable on a like-to-like basis. But what's the point of this? Well, NFTs can be applied to any property, identities tweets, videos, we're seeing collectables, digital art, pretty much anything. And it's really. The use cases are unlimited. And NFTs can streamline transactions, and they can be bought and sold very efficiently without the need for a trusted third party involved. Now, the other benefit is the probability of fraud, is greatly reduced. So where do NFTs fit as an asset class? Well, they're definitely a new type of asset. And again, I'm not going to try to justify their existence, but I want to talk about the choices, that investors have in the market today. The other day, I was on a call with Jay Po. He is a VC and a Principal at a company called Stage 2 Capital. He's a former Bessemer VC and one of the sharper investors around. And he was talking about the choices that investors have and he gave a nice example that I want to share with you and try to apply here. Now, as an investor, you have alternatives, of course we're showing here a few with their year to date charts. Now, as an example, you can buy Amazon stock. Now, if you bought just about exactly a year ago you did really well, you probably saw around an 80% return or more. But if you want to jump in today, your mindset might be, hmm, well, okay. Amazon, they're going to be around for a long time, so it's kind of low risk and I like the stock, but you're probably going to get, well let's say, maybe a 10% annual return over the longterm, 15% or maybe less maybe single digits, but, maybe more than that but it's unlikely that any kind of reasonable timeframe within any reasonable timeframe you're going to get a 10X return. In order to get that type of return on invested capital, Amazon would have to become a $16 trillion valued company. So, you sit there, you asked yourself, what's the probability that Amazon goes out of business? Well, that's pretty low, right? And what are the chances it becomes a $16 trillion company over the next several years? Well, it's probably more likely that it continues to grow at that more stable rate that I talked about. Okay, now let's talk about Snowflake. Now, as you know, we've covered the company quite extensively. We watched this company grow from an early stage startup and then saw its valuation increase steadily as a private company, but you know, even early last year it was valued around $12 billion, I think in February, and as late as mid September right before the IPO news hit that Marc Benioff and Warren Buffett were going to put in $250 million each at the IPO or just after the IPO and it was projected that Snowflake's valuation could go over $20 billion at that point. And on day one after the IPO Snowflake, closed worth more than $50 billion, the stock opened at 120, but unless you knew a guy, you had to hold your nose and buy on day one. And you know, maybe got it at 240, maybe you got it at 250, you might have got it at higher and at the time you might recall, I said, You're likely going to get a better price than on day one, which is usually the case with most IPOs, stock today's around 230. But you look at Snowflake today and if you want to buy in, you look at it and say, Okay, well I like the company, it's probably still overvalued, but I can see the company's value growing substantially over the next several years, maybe doubling in the near to midterm [mumbles] hit more than a hundred billion dollar valuation back as recently as December, so that's certainly feasible. The company is not likely to flame out because it's highly valued, I have to probably be patient for a couple of years. But you know, let's say I liked the management, I liked the company, maybe the company gets into the $200 billion range over time and I can make a decent return, but to get a 10X return on Snowflake you have to get to a valuation of over a half a trillion. Now, to get there, if it gets there it's going to become one of the next great software companies of our time. And you know, frankly if it gets there I think it's going to go to a trillion. So, if that's what your bet is then you know, you would be happy with that of course. But what's the likelihood? As an investor you have to evaluate that, what's the probability? So, it's a lower risk investment in Snowflake but maybe more likely that Snowflake, you know, they run into competition or the market shifts, maybe they get into the $200 billion range, but it really has to transform the industry execute for you to get in to that 10 bagger territory. Okay, now let's look at a different asset that is cryptocurrency called Compound, way more risky. But Compound is a decentralized protocol that allows you to lend and borrow cryptocurrencies. Now, I'm not saying go out and buy compound but just as a thought exercise is it's got an asset here with a lower valuation, probably much higher upside, but much higher risk. But so for Compound to get to 10X return it's got to get to $20 billion valuation. Now, maybe compound isn't the right asset for your cup of tea, but there are many cryptos that have made it that far and if you do your research and your homework you could find a project that's much, much earlier stage that yes, is higher risk but has a much higher upside that you can participate in. So, this is how investors, all investors really look at their choices and make decisions. And the more sophisticated investors, they're going to use detailed metrics and analyze things like MOIC, Multiple on Invested Capital and IRR, which is Internal Rate of Return, do TAM analysis, Total Available Market. They're going to look at competition. They're going to look at detailed company models in ARR and Churn rates and so forth. But one of the things we really want to talk about today and we brought this up at the snowflake IPO is if you were Buffet or Benioff and you had to, you know, quarter of a dollars to put in you could get an almost guaranteed return with your late in the game, but pre IPO money or a look if you were Mike Speiser or one of the earlier VCs or even someone like Jeremy Burton who was part of the inside network you could get stock or options, much cheaper. You get a 5X, 10X, 50X or even North of a hundred X return like the early VCs who took a big risk. But chances are, you're not one of these in one of these categories. So how can you as a little guy participate in something big and you might remember at the time of the snowflake IPO we showed you this picture, who are these people, Olaf Carlson-Wee, Chris Dixon, this girl Sono. And of course Tim Berners-Lee, you know, that these are some of the folks that inspired me personally to pay attention to crypto. And I want to share the premise that caught my attention. It was this. Think about the early days of the internet. If you saw what Berners-Lee was working on or Linus Torvalds, in one to invest in the internet, you really couldn't. I mean, you couldn't invest in Linux or TCP/IP or HTTP. Suppose you could have invested in Cisco after its IPO that would have paid off pretty big time, for sure. You know, he could have waited for the Netscape IPO but the core infrastructure of the internet was fundamentally not directly a candidate for investment by you or really, you know, by anybody. And Satya Nadella said the other day we have reached maximum centralization. The main protocols of the internet were largely funded by the government and they've been co-opted by the giants. But with crypto, you actually can invest in core infrastructure technologies that are building out a decentralized internet, a new internet, you know call it web three Datto. It's a big part of the investment thesis behind what Carlson-wee is doing. And Andreessen Horowitz they have two crypto funds. They've raised more than $800 million to invest and you should read the firm's crypto investment thesis and maybe even take their crypto startup classes and some great content there. Now, one of the people that I haven't mentioned in this picture is Camila Russo. She's a journalist she's turned into hardcore crypto author is doing great job explaining the white hot defining space or decentralized finance. If you're just at read her work and educate yourself and learn more about the future and be happy perhaps you'll find some 10X or even hundred X opportunities. So look, there's so much innovation going around going on around blockchain and crypto. I mean, you could listen to Warren Buffet and Janet Yellen who implied this is all going to end badly. But while look, these individuals they're smart people. I don't think they would be my go-to source on understanding the potential of the technology and the future of what it could bring. Now, we've talked earlier at the, at the start here about NFTs. DeFi is one of the most interesting and disruptive trends to FinTech, names like Celsius, Nexo, BlockFi. BlockFi let's actually the average person participate in liquidity pools is actually quite interesting. Crypto is going mainstream Tesla, micro strategy putting Bitcoin on their balance sheets. We have a 2017 Jamie diamond. He called Bitcoin a tulip bulb like fraud, yet just the other day JPM announced a structured investment vehicle to give its clients a basket of stocks that have exposure to crypto, PayPal allowing customers to buy, sell, and Hodl crypto. You can trade crypto on Robin Hood. Central banks are talking about launching digital currencies. I talked about the Fedcoin for a number of years and why not? Coinbase is doing an IPO will give it a value of over a hundred billion. Wow, that sounds frothy, but still big names like Mark Cuban and Jamaat palliate Patiala have been active in crypto for a while. Gronk is getting into NFTs. So it goes to have a little bit of that bubble feel to it. But look often when tech bubbles burst they shake out the pretenders but if there's real tech involved, some contenders emerge. So, and they often do so as dominant players. And I really believe that the innovation around crypto is going to be sustained. Now, there is a new web being built out. So if you want to participate, you got to do some research figure out things like how PolkaWorks, make a call on whether you think avalanche is an Ethereum killer dig in and find out about new projects and form a thesis. And you may, as a small player be able to find some big winners, but look you do have to be careful. There was a lot of fraud during the ICO. Craze is your risk. So understand the Tokenomics and maybe as importantly the Pump-a-nomics, because they certainly loom as dangers. This is not for the faint of heart but because I believe it involves real tech. I like it way better than Reddit stocks like GameStop for example, now not to diss Reddit. There's some good information on Reddit. If you're patient, you can find it. And there's lots of good information flowing on Discord. There's people flocking to Telegram as a hedge against big tech. Maybe there's all sounds crazy. And you know what, if you've grown up in a privileged household and you have a US Education you know, maybe it is nuts and a bit too risky for you. But if you're one of the many people who haven't been able to participate in these elite circles there are things going on, especially outside of the US that are democratizing investment opportunities. And I think that's pretty cool. You just got to be careful. So, this is a bit off topic from our typical focus and ETR survey analysis. So let's bring this back to the enterprise because there's a lot going on there as well with blockchain. Now let me first share some quotes on blockchain from a few ETR Venn Roundtables. First comment is from a CIO to diversified holdings company who says correctly, blockchain will hit the finance industry first but there are use cases in healthcare given the privacy and security concerns and logistics to ensure provenance and reduce fraud. And to that individual's point about finance. This is from the CTO of a major financial platform. We're really taking a look at payments. Yeah. Do you think traditional banks are going to lose control of the payment systems? Well, not without a fight, I guess, but look there's some real disruption possibilities here. And just last comment from a government CIO says, we're going to wait until the big platform players they get into their software. And so that is happening Oracle, IBM, VMware, Microsoft, AWS Cisco, they all have blockchain initiatives going on, now by the way, none of these tech companies wants to talk about crypto. They try to distance themselves from that topic which is understandable, I guess, but I'll tell you there's far more innovation going on in crypto than there is in enterprise tech companies at this point. But I predict that the crypto innovations will absolutely be seeping into enterprise tech players over time. But for now the cloud players, they want to support developers who are building out this new internet. The database is certainly a logical place to support a mutable transactions which allow people to do business one-on-one and have total confidence that the source hasn't been hacked or changed and infrastructure to support smart contracts. We've seen that. The use cases in the enterprise are endless asset tracking data access, food, tracking, maintenance, KYC or know your customer, there's applications in different industries, telecoms, oil and gas on and on and on. So look, think of NFTs as a signal crypto craziness is a signal. It's a signal as to how IT in other parts of companies and their data might be organized, managed and tracked and protected, and very importantly, valued. Look today. There's a lot of memes. Crypto kitties, art, of course money as well. Money is the killer app for blockchain, but in the future the underlying technology of blockchain and the many percolating innovations around it could become I think will become a fundamental component of a new digital economy. So get on board, do some research and learn for yourself. Okay, that's it for today. Remember all of these episodes they're available as podcasts, wherever you listen. I publish weekly on wikibon.com and siliconangle.com. Please feel free to comment on my LinkedIn post or tweet me @dvellante or email me at david.vellante@siliconangle.com. Don't forget to check out etr.plus for all the survey action and data science. This is Dave Vellante for theCUBE Insights powered by ETR. Be well, be careful out there in crypto land. Thanks for watching. We'll see you next time. (soft music)

(upbeat techno music) >> From the Hard Rock Hotel in Las Vegas, It's theCUBE, covering HoshoCon 2018. Brought to you by Hosho. >> Hello everyone, welcome to this special Cube coverage. We are here, live in Las Vegas, for HoshoCon. I'm John Furrier, the host of theCUBE, and this is part of our continuing coverage and our initiating coverage of the blockchain crypto world, been doing it since January, covering it on our journal site siliconangle.com since 2011, covering Bitcoin and all blockchain stuff, but this is the first security conference dedicated around block chain and crypto put on by Hosho, and it's called HoshoCon. It's an industry conference, and we are here covering it. And this is an open, small kernel of smart people, really trying to have a top level conversation around security . And our next guest is Christopher Forte He's the CTO of 3BX, welcome to theCUBE. Thanks for joining us. >> Yeah, pleasure to be here. >> So, before we get into some questions about security, what do you guys do? What's the company do? You guys have a unique approach. Take a minute to explain what you guys do. >> 3BX is essentially a marketplace. It's a digital asset marketplace. We're trying to build a community around trading digital assets. We're really trying to focus on pulling away from the term 'cryptocurrency,' because we think it'll expand into much a much broader term. So we're structuring our platform on the support of any kind of digital asset, whether it be a cryptokitty or a an e-book, a concert ticket, you know, something that has a digital form that can be traded person to person. >> So, basically, you're expanding the definition, or actually, depositioning crypto, because it's kind of narrow, relative to how you guys see it. >> Yes, it's pretty narrow. >> Digital assets, I mean, look at gaming. >> Yep, absolutely. >> Gaming culture is not new. >> Yeah. >> I mean, they trade stuff all the time. >> Yeah, sure, even like in game tokens, they don't exist on a block chain yet. They're not cryptographically secured, so those are the types of things that I expect to see hitting a lot of these marketplaces soon. >> Well, that's smart, I mean, I think if you look at it, certainly we at (mumbles) blockchain, our entire media company's been moving to blockchain, and crypto, and token economics, but really the blockchain piece has been very limited. It's got very poor functionality, and all the top blockchain implementations are either private block chain, low latency, and fast, and developer friendly. >> Sure. so Ethereum's great for smart contracts, but just as a scale, relative to what most people need. >> Yeah. >> If you're running, you need a million IOPS, you've got a marketplace. >> Yeah. Some of these large scale, hyperscale networks, they're massive marketplaces. >> Yeah, they're huge. >> How do you guys fit in there? What problem are you trying to solve? Let me just start with that. >> You know, we're trying to pull away from the complexities of an exchange. We're trying to give the community a good tool to trade without a lot of knowledge of tokenomics. One of our unique assets, or unique features, is that you can trade with no market impact. You don't have to worry about price slippage, or the complexities behind order books, so we give a familiar interface to trading. Something you'd see on a traditional e-commerce platform. So we're trying to kind of introduce it to a wider range of people. We've talked to a lot of people who have a lot of difficulties, especially with the decentralized exchanges. >> Yeah. What are their problems? Just, like, reliability? >> Reliability. >> Black box- >> Liquidity, there's a lot of issues with liquidity around them, which causes problems when you try to trade any significant amount of coin. So, we're trying to give traders and the coin companies another outlet to trade without having to worry about liquidity. Or the risks of liquidity associated with it. >> So what's the status of the company? How many people do you guys got? What's the size? Do you have any deployments? Are you guys engaging certain communities? >> We are live. We released a kind of invite only beta about two months ago. So we've been out there having traders for about two months. We're a very small team, we're based out of Las Vegas. There's a development team of three people. We're just now broadening into more partnerships, more marketing- >> So you guys are hardening the platform, basically. >> Yep. >> By jamming and coding- >> Yeah, we went kind of product first, and then took a step back and are now approaching the market. So yeah, we're really excited. >> That's smart, you didn't hype it up first. >> Yeah, we didn't hype it up. >> But you could have definitely hyped it up, I mean, a lot of people who are winning right now are quality deals that had opportunities to do an ICO. >> Yeah. >> just, people are throwing money around. Just go back to February, the numbers are just off the charts. The, kind of, bubble burst in February, and certainly the SEC announced today, I'm covering the news, a major crackdown on all those ICOs, on violations right here in the United States, It just causes a distraction. I brought this up with Hartej last time I interviewed him in Toronto at The Futurist, which is exactly what you guys are doing, and this is the core trend and I want to get your thoughts on it. A lot of the alpha entrepreneurs, the ones that are building companies, don't want to get distracted from stuff that's not optimized on building a company. For instance, if I do an ICO, or you get involved in domicile issues outside the United States, you're optimizing all your energy, they're on an airplane, or market dynamics that aren't building a company. Yeah. >> This is kind of, almost a distinction at this point, you can almost look at opportunities, startups, entrepreneurs, inventures, and say, "Okay, we can almost see who's doing what." >> Yep. >> You do agree. >> Yeah, I think it's important to have something before you go and you spend a lot of energy raising money, building a pipe around the company. I think we're going to see a huge trend towards product first, having something, having a development team, a concept, a patent. Not just based on a theoretical white paper, so it'll be very interesting to see how it goes. We decided to go product first, so, no one had heard of us until we went live with our product. >> Good approach, I like it, I think it's solid. Good, we'll see how it turns out. I got to ask you, and I want to dig into the product a little later in this interview, but I want to ask you specifically, around some core trends I'm seeing, and patterns. >> Sure. >> It's pretty clear that when these emerging markets develop, total activity on the entrepreneurial side, a lot of people build and developing, attacking the market, but it's a trend, everyone's throwing out a common thing, I need to have community, and I need a two-sided marketplace. So the common thread's- and people don't have those- you can't just buy a community. >> Yeah. Communities aren't bought. >> Sure. You can't just say, "Hey, I need a community." Put a telegram channel, write some bots, >> Yeah. >> the next thing you know you got 25,000 people in telegram. >> Yep. >> That's not a community. >> That's not a community. >> That is AI bots looking like a community. >> Sure. >> And then a two-sided marketplace, you got to have a value proposition. So these are things that people are putting into their plans. >> Yep. >> That they don't have answers for. >> Sure. >> What's your thoughts on that, around community, 6and about marketplace? What are you seeing in the market, in market developing right now? >> I mean, building a strong community is very difficult. They have to align with your product, they have to align with your vision, they have to understand what you're doing, and at least have a use case for it. So, we're really trying to kind of have the community drive our development road map. So, we've done a lot of outreach, trying to get what people are interested in, what's lacking in the industry currently, what they want to see, what they're unhappy with. And we're trying to build a community around allowing people to have input and influence into the product that we're building. So, we're really early into the process, so it's difficult for me to really say that it's easy or difficult to build the community. >> So you're engaging the community to help. >> We are engaging the community. >> What are the number one things you guys are solving? Problems that you see are immediate, low hanging fruit that you're knocking out right away? What are the core things? >> I think some of the big things are simplicity, the usability of these interfaces. Kind of the knowledge around it, trying to do a knowledge transfer to our customer base. And trying to help people realize that there's a company behind these coins. I think that's a huge thing that we have to kind of push towards, is, it's not just a token. It's a token produced by a company with a cause. >> So how does your product work? >> It's like a basic marketplace that you would see in kind of a eBay or an Amazon, where someone posts an offer, posts a listing, and other people can buy from it. So, it's a buy and sell kind of- >> And you have your own native token? >> We have a native ERC-20 token that we use for fees. Because we're targeting the digital asset generally, we've externalized fees from traded goods. So, we want to make sure we can handle something that may not be divisible by, as Bitcoin is. So if you trade a book, for example, a lot of these exchanges would take a page out of it. If you use the current model of fees, they're kind of coin shaving off of your trades. So we're trying to eliminate that so we can expand into non-fungible, or non-breakable assets. We're also developing a wallet that basically encapsulates cryptocurrency into smaller assets to be traded off chain. So, we plan on kind of revolving around our internal token to handle fees of those assets. >> So it's a blend of on/off chain dynamics. >> Yep. >> So you can do a lot of stuff, and not have to do a lot of writing to the chain, if you're going to be doing a lot of re-re-writes. >> Yeah. >> All right, so the question I want to ask you that I think is important and in everyone's mind is, okay, Hosho Con is the first, inaugural- we love going to inaugural events because, you don't know, it could be the last one. >> Sure. >> Or, it's going to be big. I think this is a big trend, and one of the things we heard last night at dinner was, when we were having a conversation about it was, is no real conference, these conferences don't put security in the front. >> Yep. >> They really kind of have it as a side panel. It's always kind of an adjunct to something bigger, pitch competition, you know, big sponsor driven kind of programs. This is a security conference. What is the impact, in your opinion, of this Hosho Con, and security in the blockchain, that's going to shape the industry? What is your opinion? What is your commentary on that? >> I mean, obviously it's important to focus on security. I think a lot of people had a lot of, kind of assumptions that blockchain-specific, or blockchain-based technologies were unhackable. You know, the decentralization of something makes it secure, and I think that's a myth that they're going to have to debug, and we're seeing it with hacks. There's a lot of, I think, assumptions even around the hacks that are incorrect. So, bringing the idea to people that blockchain still needs to be managed, you still need to be careful. The smart contracts still have vulnerabilities and risks involved, it's not- >> Software is software. >> Software is software. It's unavoidable, when you start writing code, that there's going to be- >> You don't want a blue screen of death, certainly, you don't want to have to reboot, I mean, move fast and break stuff was great for webscale, but when you're talking about security and currency, you need rock solid, hundred percent reliability. >> Yeah. >> Otherwise, you lose your cash. Or your e-money. >> Yeah, it's something of value that you're going to lose. >> It's not a social media account, it's not something like that, you know, you're losing money. And it's very interesting, I think the more people know about the security around blockchain, cryptocurrency, the more they're going to realize that it's not an end all solution to everything. It takes time to evolve. Standards will probably have to be put in place. >> There's a lot of people, I remember when I was your age, and the web was coming around, everyone was afraid to put their credit card down on basic e-commerce transactions. >> Sure. >> And that was natural, because like, oh my god, it's online, it almost felt like a black box, and then they got over that pretty quickly, you saw PayPal and those kinds of companies came out. You mention eBay, these online sites are now secure. Crypto, there's almost like an unknown, a lack of education in the mainstream. And so we got to get to that point where, you know, wallets are wallets, and they actually do a good job, and you don't forget, and leave your wallet at the restaurant. There's some hygiene, and practices that are needed. Older generations, maybe, might not get it, but the younger generations, they're getting it, right? >> Yeah >> What's your opinion of this? Because, this is a generational shift. >> Yeah. >> This crypto, blockchain market, it's really generational. >> Sure. Anyone under the age of thirty pretty much loves it. >> Yeah. >> So, it's happening, right? >> Yep. >> So, what is the views around security, generally, in the mainstream? >> I mean, I don't think there are too many. Like I said, I think people kind of put a lot of assumptions in the inherent security of blockchain stuff. And I think they don't realize that we're trying to make it easier through mnemonic sequences, or passwords, so we're hosting wallets online now. It's not necessarily a pure wallet in the sense that it sits on a piece of paper. So we're going towards usability, which we're sacrificing security for. So the more usability we get with a lot of these mainstream products, the more we're going to have to realize we're getting back to a place of existing security vulnerabilities, with passwords, or stuff you would see with your bank account. So it'll be interesting to see the balance between the raw security inherent with Bitcoin, or a traditional cryptographic wallet, and then usability, whether it be cloud based stuff, or these exchanges. >> You know, Chris, one of things you're doing, that I think's interesting, and kind of points to the- if you connect the dots- the trend of, really, levels of granularity getting down to the micro level. >> Yeah. >> It's microeconomics. >> The beautiful thing about this market, is that, you could take a page out of a book, you can track it, and how you use that page like a pay for, all kind of digital rights stuff, digital assets. So you look at the world as a digital asset. This brings up the question of, okay, there's going to be software that's going to have to be written to manage this level of microtransaction, or microassets. So, how do you view, in your opinion, this whole notion of token economics? Because we've used tokens for years on all the stuff we program, on authentication. >> Yep. Tokens are used in computer science- not a new concept. >> Yep. But if you think about tokens as a currency, and as a mechanism for computer science, software, >> Sure. >> do you see a multi-token world? Why wouldn't everyone have their own token? >> Sure. And then there's going to have to be software- >> Sure. to manage the tokens. >> Yes. If you have a token and I have a token called a Cube Coin- >> Yeah. >> and you have your token, there's probably going to have to be some interaction between coins. Do you see that day happening sooner than later, or do you even see it happening? >> It's going to really depend on the use cases that they find. Whether a single platform is going to come out, and kind of take over the standardization of managing it, or, who knows, you see some of these transactional bridges, like between Dogecoin or Ethereum. So you can see that happening between tokens, or, everything being built on the same chain, or, having these bridges between chains, whether it be like an EOS to Ethereum token chain bridge. I don't know, I mean, we really have no idea. >> (mumbles) multichain, it's interesting, right? This is an interesting conversation. My vision is, I think multichain is a good trend. Why wouldn't you want to have multiple chains, if the use cases are not overlapping? I just don't feel comfortable about a monolithic approach of tokens. I'm just uncomfortable, generally, with that philosophy. >> I think it'll be important, and like you said, it'll be very important to have a good solution to manage them. People aren't going to want a hundred programs on their computer to manage their tokens. They're not going to want multiple apps on their phones. There's going to have to be some kind of standardization so that people can manage it easily. Otherwise, it's going to be impossible to keep up with. And kind of the interchangeability between tokens will be important. >> Chris, final question for you. What's this event like here? Describe for the folks who aren't here, what's the vibe, who are the people, what are some of the conversations in the hallways so far. What kind of person is here? What is this event about? What's the relevance of Hosho Con? >> Well, it seems like it's a lot of technically minded people, kind of hoping to push forward the security in the blockchain world. We've had conversations about everything from educating the masses, so kind of the average person, who doesn't understand the complexities of Bitcoin, and how do you inform them of what we're doing, all the way up to, what's the next step in security auditing. Hosho is really pushing forward, how do audit your code on the blockchain, or on a lot of these platforms, and I think it's really important to have these conversations, cause it's opening up new worlds of new thought habits for each of these companies. Everyone has their expertise, Hosho specializes in smart contract auditing, and we may not have that in depth knowledge of how to audit the contracts, so it's nice to kind of share the knowledge, and see that there's other solutions out there than everyone doing it on their own. >> What do you hope to be known for, for your company? If you could have that vision down the road, three years from now, when you look back, what do you want to be known for? >> I think it would be best if we were known as a platform to bring newcomers into the space. Informing, caring about the community, making sure that they understand what they're doing before they do it. As you know, Bitcoin is very unforgiving. A lot of these cryptos are very unforgiving. So I think it's very important for us to be known as someone who helps bridge that kind of intimidation. >> All right, Chris Forte, for 3BX, CTO, entrepreneur, building a company, doing it the right way, plans to use tokens, You guys, did you raise any money? >> No raised money. We're privately funded. >> Nice. >> So, we're going that route. >> Good. >> Bootstrapping, getting it done. Taking a different approach, which is the classic approach, of building a company the right way. TheCUBE, we are here in Las Vegas for Hosho Con. I'm John Furrier. Stay with us for more coverage after this short break. (upbeat techno music)

>> Live from Toronto, Canada, it's theCUBE. Covering Blockchain Futurist Conference 2018. Brought to you by theCUBE. >> Hello, everyone. Welcome back. This is theCUBE's live coverage here in Toronto, for the Untraceable event. Here in the industry, it's called Blockchain Futurist. It's where all the industry elite are getting together here in Canada, to talk about the future of blockchain, crypto, and everything. It's theCUBE's specific coverage. As we continue 2018, kicking off event coverage with our CUBE brand. But right now we've got two great guests from Start-up, and they're called Quantum EXchange and Bank, QuantEXchange. Manie Eagar, Executive Chairman. And, John Willock, who's the CEO. Guys, welcome to theCUBE. >> Thank you. >> Thank you. >> So you guys got some hard news to talk about. >> We do. >> But, you guys are doing an exchange model, bringing something really cool to the market. >> Yep. >> Which, we need to kind of get this figured out. Take a minute to explain what you guys are doing, the problem you're solving, and then we'll get to the news. Absolutely. So, I think the lot of people are doing exchanges. You see them coming all the time, and most of them don't really have any specific differentiation or value add. We are not like that at all. We have spent our careers as part of most of the team, in traditional financial services. And, we're coming from the securities exchange business to bring the learnings from NASDAQ, the learnings from the like of that sort to the Crypto Exchange space. And, to be able to facilitate not only a regulated exchange venue, but also one that is institutional grade in terms of tools and the client experience, as well as the trust factor with the platform itself. So, that's really what we're trying to get done with the Quantum Exchange that we're building right now. >> And how old's the company? How long you been around? When do you guys start? How funded are you? What's happening there? >> So, I'll refrain from discussing funding at this point. But, I will say we've started this year. I left the Toronto Stock Exchange specifically to pursue this in conjunction with Manny. And, we've been batting this idea around for the last couple of years. And, the market reached the stage in maturity and size, that we said now is the time to get going and do it. And, so far, fanfare has been fantastic. Reactions from people in the Crypto Ecosystem, people in the Securities Ecosystem, has been equally positive. >> Yeah. >> There's a strong desire to see something like this come to market. And, we're very excited to be able to launch. >> Before we get to the news, Manie, I want to ask you a question. One of the things that we've seen is two types of behavior. The other guy's got to lose for me to win, and then, or both parties can win. We're seeing trends where people are taking a posture against regulations. Oh, they're evil, they're causing all the problems. They kind of don't know what they're doing, kind of, they're evolving. Maturity levels are different based on countries. But, where the success is happening, like Gabriel with Bit. Okay, there's collaboration. Because the regulars actually want to do a good job most cases. They just can't get there fast enough. This is the new model. This is what people are looking at. This is the kind of solution ... >> Absolutely. >> A bridge between industry, and the slow but, yet want to change regulators. Your thoughts? >> Very, very good point. The good news is we're all talking to each other. I think there's dialogue at the moment, but it's not maybe as open as it should be. Because it's all day one. What I bring to the community, and have for the ... since I got engaged in launching the first Bitcoin ATM in the world, in Vancouver, part of that team. And, I think Anthony Bold from Bit is for an alliance. And, blockchain association in the block forum, which we'll announce tomorrow. 'Cause I worked for Blockhouse. I worked for Vodafone. I was involved in the Empasa project. And, I can see and understand what does it take for people to start using technologies. I think what everybody is hoping for is this golden moment. Like when the first iPhone arrived on the scene. >> Yeah. >> People queued around the block through the night to get ahold of that first device. We haven't had that moment yet. For Blockchain and Crypto. We've had the wild enthusiasm, which is all speculation as far as most of us are concerned. But, maturity is coming, these technology if Blockchain and Cryptocurrencies want to succeed, there needs to be another converging technology with what's already out there. The internet, your financial ecosystem, and so forth. >> Yep. >> In my view, there'll be a coming together. There'll be new models altogether. Incumbents will have to pick up the pace in terms of how they go about it. >> Yeah. >> But, we see the opportunity for ourselves, for Quantex. And the industry as a whole is where the convergence takes place, the dialogue becomes more mature, and open, and transparent. Regulators become aligned. At the moment, we hear of a lot of jurisdictions announcing this, announcing that. But, when you start investigating or assessing, it's different flavors, different cultures, different economies. >> Yeah. >> There's the Commonwealth Block. There's the North American Block. There's the Asian Block. Europe is a whole different ball of wax. >> Yeah, I agree with you and I just want to ... >> So, this is where it gets interesting . That's where we come into the boat. >> Absolutely. >> Well, I agree with you, I just want to make a point. During the dotcom bubble, during that internet wave, there was some over-speculation. But at the end of the day, the forcing function of reality was the growth of the online users was growing every day. >> Yeah, yeah. >> And, the demand and the commerce dollars were still real. Now, certainly there was an exuberance. Irrational, in some cases. But, it all ended up happening. I think here in this market, the forcing function is the reality that there's demand, and there's money, and there's impact. >> There is now, we now know that. >> This is coming. It's not like Doomsday. Well, it was fake. No, not really. >> No, we are still in the first inning of seeing what is actually coming out of all of this. I think last year's price speculation runoff obviously was set to decline at some point. But, there has been a long series of momentum coming out of that, where people have realized that this is something much more important and significant than what it looked like three years ago, perhaps. And, a lot of that talent is now coming to this space. Bringing, the capital, bringing the know-how, us included, to deliver something for the next generation of platform, tools, and ecosystem to really grow this massively. And, bring it much more to the mainstream. >> And, I think the idea of aligning with regulars, help them move faster. You mentioned adopt technology, but, still in the phase of deploying operational infrastructure. You mentioned some of the things, the projects you've worked on. Vodafone, that's cellular, that's towers, that's infrastructure. So, I think we're still in this hybrid model of, in parallel, capital formation, building companies, and then, just, we got to get the roads built. >> Well, and understand the posture that a lot of people are taking on. We need to decentralize, we need to open this thing up. But, at the end of the day, the consumer votes. You and I know if we don't have viewers, we don't have a channel. If we don't have users, people actually using the technology, not only investing, but actually using it. It aint going to happen. Decentralize, centralize to a hybrid. And, that's the part that we need to open ourselves. >> Let me ask you guys a question before we get to the news. This exciting news you get to share. How do you standardize something? Because, one common thread of all these major deflection points, at least, with the major cycles I've lived through, has been standards. >> Absolutely. But, it's not going to be your grandfather's standards.So, TCPIP was different. The OSI model is a different generation. The internet was different. Web social is different. What may happen may be different. So, but, standards play an important role. But, no one has clear visibility yet what will be standardized, what should be standardized. Do you guys have any thoughts on that? >> Well last year John comes in, and he's learned the world of standards at NASDAQ, and TMX, and elsewhere. >> That's true. >> Now, we need to bring it to this world. >> How do we scale operational lead to get a cohesive exchange that can scale and demure value? Where do the standards focus need to be? What should the emphasis ... where does the light get shined on, and where's the energy go to? >> I think, you know, you want to look at standards, think about something like this ETF debate that's been going on. Huge speculation about whether or not that's coming. I think a lot of people who are looking at that ETF debate, specifically, don't actually understand some of the economics and the mechanisms behind the scenes. So, for example, what is a fork? When you think about traditional securities, you got corporate actions like a stock split or dividend. A fork is an entirely different concept with entirely different results. Those are the sorts of things that need to be discussed, standardized, and brought to an industry cohesion to be able to successfully deal with some of these events as the market progresses. And, to bring some normalcy to some of this as well, especially if you want to bring institutions to the plate. And, I think that comes to one of the other initiatives that we're working on ... Which is the industry body, called block forum, which we're going to be discussing in a moment. That can really help be that joining voice >> Hold on, hold on a second. This is the news. >> behind everything. >> This is the news. You guys are announcing, let's get to the news. >> Okay. >> You're announcing a couple things. Start with what you were just talking about. You guys are announcing a forum. Can you explain? >> Correct, correct. So, we're launching, officially, to the remainder of the crowd here tomorrow, block forum. Which is an industry association that will be especially behind driving adult thinking behind all this, putting regulation into place, discussing commonalities around policy, around how to standardize, and how to really make all of this interoperable. And, I think that's the key word. If you have individual pillars of, islands of activity, that's not going to be the same as having a cohesive global solution. And, that's what we really want to drive. >> An exchange solution? >> Well, in our case in Quantex, absolutely. But, an exchange in the services we can offer is one part of the whole puzzle. There's a whole series of inter-connected affairs that have to work together. And, that's what block forum is going to drive, is this assembly of different connected parties who are all working for the greater benefit of the Prio ecosystem. >> Who is going to be involved in the forum? Who is the stakeholders? Who can join? Is it a membership? Is it a consortium? >> It is a membership. There will actually be a token that will have very interesting membership related tokenomics attached that we can disclose at a later date. And, that economic alignment between the parties who are staking effectively their interests in the certain topics that they want back or the certain efforts will be a completely unique model compared to what we've seen in the industry today, where generally speaking, it is a committee who drives something on behalf of members. This is really fundamental for all members, democratically from individuals all the way up to institutions, to be able to participate and voice their interests. >> So you will see governments as members. >> Yes, yes, absolutely. >> You will see industry leading stakeholders and practitioners. The whole idea of the body is not to create new policy or reinvent the wheel. We're getting policy, we're receiving regulation. So, how do we put this in practice? Where are the success stories? How can we show the industry as a whole? Governments across jurisdictions to align around their spacing. >> So a melting pot of people to get a conversation going. >> Right. >> To start shaping an agenda or just start talking? >> So, we're talking to governments at premier and cabinet level. We're talking to boardrooms of banks. We're talking to think of your top 40 leaders in blockchain and crypto. We're talking to all of them and engaging with them. >> And, what's the vision of the outcome that you can envision in your mind? What is that outcome for this group? What do you hope to accomplish? What is the end result, if you can kind of assume things go in a good way, what happens? >> I think this is a unifying voice for leadership in the industry to discuss what the outside, outside of crypto world that is, and really bridge that gap between those who are within and understand natively and those who need to be brought in to be able to interact with this and really grow all of this industry. >> And, promote the role models. >> And, exactly that. Exactly that. To bring the best to the front. And, really show that there is actually serious opportunity, serious business. This is not just a series of hackers or whatever nefarious activity these people casually may think the block chain industry is. This is something very serious and very real. And, we want to be a voice for that. >> Awesome. And, you guys had some other news on the fundraising front. >> Industry first. >> You guys are raising some money, you're doing a private sale, and new gear as much as you can, it's pretty invested, so, I think you can promote it. >> I will say with a caveat as you say, it's pertinent to investors only, and we have not completed our discussions with our legal counsel. Having said that, we are taking the model of a traditional securities exchange membership, seats on an exchange, which can be purchased, which have rights attached, which are a titled asset separately from equity of the exchange, for example, separately from a utility token as you would have seen with many other exchanges. This is something that we feel is a very unique model. We are very excited to be able to launch this, and come to market first with this concept. Which again, is blending the best of the old and new. We're taking tokenization, we're taking a concept that have existed in the previous markets and previous worlds, and blending them together for something that is somewhat unique and wholly new in this application. >> Well, I hope you guys raise a lot of money. We need more harmony between regulating and government entities to bring the whole world together. And, certainly from the money-making standpoint, what the liquidity and exchanges can provide as the world starts to understand where the groove swing is and where those swim lanes are, especially with security tokens. >> You bet, you bet. And, the success is going to be measured in ability to scale sustainably. And, we want to demonstrate that with this model. >> We need some leadership there. So, good luck. Best of luck. >> Thank you very much. >> Thank you, thank you. >> We are here live in Toronto, Canada for the Blockchain Futurists Conference. I'm John Furrier with theCUBE. Describing the single millers, talking to the most important people, the hottest stories. Here are the most colorful people, people traveling around the world sharing that insights with you. Stay with us for more day coverage here. The first day of two day coverage of Blockchain Futurists. We'll be right back after this short break.

>> Announcer: From New York, it's theCUBE, covering Blockchain Week. (light, upbeat music) Now, here's John Furrier. >> Hello everyone, I'm John Furrier. We're here on the ground in New York City for consensus 2018's Blockchain Week. I'm here with David Siegel who's the CEO of the Pillar Project, also the author of the Token Economics Handbooks, entrepreneur, mentor to companies. Thanks for coming on. >> Sure. Thank you John. Great to be here. >> So, I'm excited to talk with you, because I've been saying all week I love token economics. It's a core part of the business model, disruption. >> Right. >> It's part of the key formula where Blockchain shines. It's where the rubber meets the road as some say. So, let's jump in. >> Sure. >> In a, how much is being discussed here about that. I mean, obviously ICOs are well known and people are looking at that road, but token economics, the importance of it. >> First, I think it's important to understand we're at the very beginning of this. It's a steep learning curve. We have these old model T tokens called the ERC20 Token, which we will get rid of and build better things. We have models that are mostly based on old, you know whenever there's a new technology, we first imitate the old stuff until we see what the new. So one of the really exciting new things that's come out of this is effectively the Ethereum model, where you raise some money. You build a system, and it's open source. It's free. Anyone can take it and do anything with it, but it requires its own token to work. And the people who sell those tokens, you sell about 70% to your funders. And that creates the economy, but you hold about 30% back, and as the value goes up, as the network affect kicks in, and as these things rise in value, your 30% funds the project indefinitely after you run out of the first. So that's a pretty exciting model. That's what I call sort of basic Tokenomics. You have no business model. You have no income model. You're totally open source, but your token powers your platform, and you have some tokens in your back pocket. >> Yeah, and the general form that you see is 70 30, roughly. Is that just a pattern? >> That's about, that's normal. Now, that in a single sale, and what we see now in ICO land is pre-sale and then the big sale. I think we'll go to a more staged model, because I think too many companies are over-funded, too many projects are over-funded. 240 million dollars for status, maybe we don't need that much to start a project with a white paper. So, I think we're, I hope we'll go to a staged model. >> Explain stage model. >> You might sell 20% and raise what do you need to get to first base, three million to show a minimum viable product and get traction. >> Yeah, it makes sense. >> You know, what projects need more than three, maybe four? I mean, you don't need 20 million. And then you do that, but now you've got 80% of tokens in reserve. so now things are going well. Your token has gone for let's say five cents to 20 cents. You can sell another 20%. >> So the funding of the platform is that token economics kick in, per your other example, that 30% 70 goes raise and 30% funds the platform indefinitely. >> Yeah, that's typical. >> If you do the staged approach, what you're saying is there's more power in reserve to fund the platform. Cause if you can, if you get to first base, you might get to second. >> I think investors have been too gullible. And they're looking at these 50, 80, hundred million dollar raises and going oh me too. I have fear of missing out. I want to get in on that too. That's the big deal of the day. That is the one that's probably going to have lousy returns, right. These things are over-funded and not, there's no real give and take with the market. >> Yep. >> You know to get, like, nothing ever really works the way you plan. No business plan is ever worth anything. Think of, you know, Google, Apple, Microsoft. Their first business plans are for something else. (John laughs) So, find groups of people that you can give money to, not too much, get to first base, get some traction. Make something, listen to the market, continue to, you know, build what people want. And then your token will rise, and then you sell the next-- >> So I got to ask you. >> You know what. It's very much like venture capital, right. We do it in stages. >> It's pragmatic. It's the right way, I think an investor and the entrepreneur, by the way, your point is also valid, because like in venture capital, if you take on too much money, you could actually fail. You're not optimized, and we've seen that before. >> It's not good allocation of capital now. We've got a lot of innovation to do. Wouldn't it be great if we could do a thousand projects at like two or three, four million dollar level and see which ones come out of that? And then give them more. >> David, let's walk through a use case. So I'm a entrepreneur or I'm a growing business, and I maybe bootstrapped it or maybe took a little bit of the seed funding and did some cloud technology, open source, and whoa I've got a product. And I go, you know what, the growth strategy for me as a company is use token economics, because I got to decentralize use fit there. >> Sure. >> And I see a way to scale and grow with tokens. How should I set up my token economics? I got security tokens. I got utility tokens. Do I do a (crosstalking) purpose vehicle? It just sounds so complicated. >> I'm making funny faces John, because I see too many tokens, where you know, we always say, and I'm a token designer, well, what does a token do. Well the answer is it raises money. That is the number one answer. It raises money. Well, does it actually do anything for the token holders? Well, I'm not sure. >> Maybe down the road. >> It gives you access to the system. Is that a good answer? So, I think actually we should be turning most of these token sales into equity sales. And that's a different kettle of fish. So, I honestly think people misunderstand the ICO concept. And they should, we should think of ICOs as we know them today as project finance, not corporate finance, not company, not start up finance. Start up finance should be done with equity. >> That's a great point. >> Equity is something you hold very dear. There's only a hundred percent of it. You sell it only if you need to to get to the next level. And equity means your shareholders are along for the ride. They may have to vote you out of your job at some point. >> it's happened to me before. Happened to me before. That's venture capital. >> You may be acquired. You may, any number of things can happen to equity. And project finance is different. So, the Pillar Project is an open source project. It's a non-profit foundation in Switzerland. No one owns it. It can't be bought. Our goal is to do one project that we said in the white paper. We are on track to do that, but if for some reason we couldn't do that, I think the money should go back to the people who funded your white paper, not some random ride off in the hay. >> David, take a minute to talk about the Pillar Project. I was going to get to that. Let's go to that. What's the Pillar Project about? How did this come to life? >> Sure. >> What's the current status? >> So the Pillar Project is a good example of an open source non-profit project that uses Tokenomics and is not a company and has no equity. We have a token that will give you access to our wallet, which is coming this summer. And the wallet's meant to be, initially just a cryptocurrency wallet, like many others, but with so many differences John. So, for example there will be a name look up, an address book, and you'll find me by name, and you'll send me tokens, currencies by name, or you'll trade with me by name. You'll never see an ether address. You'll never see a Bitcoin address, no fishing, no hacking, no whacky cut and paste errors and mistakes. For example, the Blockchain Explorer will be built into our wallet, so as you send me something or trade something, you'll be getting status information all the time. You'll never go to a Blockchain Explorer. All these nice things are built in. We have lots of features for your mom to make it easy for her to understand and keep it very simple. >> So you've abstracted away some of the complexities. >> We've added complexity on the back end to do the services that make the front end very simple. >> Okay, got it, and what's current status of the project funding wise. >> We'll be shipping the first. Well, we raised money last July. We had a 20 million dollar funding last July. That has gone up, because ether has gone up. We got about 50 people full time. We're in London. >> So you're at first base or second base? >> We'll be on first base in July. We've got to get our product out the door. >> It's the wallet. >> It's a wallet to start with, but also it will help you manage your personal data. It will help you be GDPR compliant. We'll have an exchange, and we'll be doing equity ICOs. We'll be doing, in the wallet, we'll be doing, for example, with the utility ICO, you'll issue your token, you'll sell it to people. They'll buy it in the wallet, and then trading will be immediate. You'll be listed, everything right there. Don't move stuff around. We're trying to create a place that's safe for consumers. >> Got it. Alright, I love this concept about open source. And, it's kind of threaded. Some people are open source guys, like me and you who have seen that movie go from in a radical second tier citizen to primary tier power in the world. As Blockchain takes a community focus, we're seeing the same business model that made Red Hat very famous, that's powering the Linux Foundation. This notion of projects. >> Yeah. >> And in open source, it's a distinction between project and product, upstream projects, a community, downstream products. Downstream activity is where people productize the project. >> Yes. >> I see a pattern happening in this world where we're starting to see some of that. >> Interesting, okay. >> Your thoughts on this, because that's Ethos has proven, this world has got a lot of growth to it. Are we seeing this open source ethos and principles, architecting in some of the successful crypto projects? >> I would take this productization analogy pretty far, because it's true in the profit world too. It's true with startups often do this as well. It's a service. You get better at it. You productize it. That's pretty common. So I think that's part and parcel of just solving customer needs and then scaling, right. The non-profit thing or the open source thing is different, because you can't make money on your open source thing. You've got to find another way, right. And here in Blockchain world, we're using scaling effects and tokens. So let's go to Tokenomics, where you can start an ecosystem fresh with a token that has no value. And Ether had no value on day one, right, almost no value. And through network effect and use and the fact that it's a limited number. The limited number's important. The limited number makes it so that it's scarcity, right. It's got value to people who can see oh later it might be worth more. So you got both natural buyers and speculators coming into a system. And this is what's giving the SEC a hard time, because they can't see whether it's... >> They don't understand it. >> Is it a security or is it a gym membership? >> It's a serious problem, because they don't understand it. And they're causing a lot of, they're stunting a lot of growth in my opinion. But the thing about token economics is what you're getting at, and this is where I trying to squint through the noise. I understand in an infrastructure web one dot O. You got URLs. You got DNS. You have infrastructure. >> Yeah. >> Google has cost per click. All that apparatus doesn't work for network effects. So if you look at network effects as being the main value proposition in most of these opportunities, why were we using E-commerce stack, an old model, because how do you measure networks? Tokens are becoming and wallets are becoming a key infrastructure. I see this coming. >> Yes. >> And I see the network effect tokens becoming both an instrumentation vehicle and a transactional currency opportunity. So, this is a dynamic that Blockchain could really and tokens... >> So I think the huge opportunity John is that instead of fake news and fake everything and fragile DNS systems and things that are centralized, we can decentralize things now with a token at the center that puts skin in the game. And a great example is science. You know we do science pretty badly. It's whoever can get budget for whatever whacky project. And if we had a betting, a side bet system, where people could bet on the outcome of projects, even when you propose them, the people who make the decisions of whether to fund these things could look at the odds first of what the crowd thinks. And if the crowd is right about the outcome, the winners take the money from the losers. And this skin in the game concept is being used... >> Yeah, it's a marketplace. The market dynamics of what you just said I think is very important. This changes the evaluation structure based upon new information. >> So, the price of fake news is almost zero. And we saw that in the last election. We see that in Facebook everyday. We see that on the front page of the New York Times. The price of fake news is close to zero. If it costs you money that it, when it, turns out your stuff is fake, if you have to put up money alongside your news, and then we find out it's fake, and you lose it, that will change things. >> Yes. >> So the skin in the game tokens, and you can actually google skin in the game tokens and learn a bunch of interesting models is what's coming next. >> Well, we have to bring you on board theCube project that we're starting. We're tokenizing our platforms, and we think about this all the time. >> Yeah. >> It's very cutting edge. David, really great to have you on. Talk about the book. Where can we find it? Are you on Medium? >> One quick thing. You know, we're going to have token camp coming up in Lithuania. We've got a one week workshop and un-conference in Vilnius, Lithuania. I know that sounds like nowhere. >> What is that? What's the date? >> It's July 15th to 22nd. It's free. Pillar's paying for it. It's at a resort. We're taking over a resort with crazy crypto people, skin in the game tokens, token camp. We've got a business agility camp for entrepreneurs, for investors, for coders. We're going to do, in fact we're, I can just announce right now that we're doing a hackathon with Radix, an incredible new Blockchain and a bunch of interesting people. Lex Okland will be there, Venay Gupta. We're going to have learning, learning for seven days. >> That's at a resort. >> It's at a resort in Lithuania. >> So it's all one compound. >> Yeah, we're taking it over. And there will be a little golf. But it's good for families. We did it last year. >> I checked it out. It's got a lot of lake there too. You got a lake. You got golf courses. >> It's going to be really fun. And we did it last year, and people were learning until one o'clock in the morning. >> What's the capacity you're looking at for that event? >> 500 people. >> So intimate. It's a very intimate event. >> It should be perfect. We're going to be blasting out. You should come. We're going to be blasting out on 4K. We've got enough bandwidth to send to YouTube and to wherever else you want to distribute video. You could be part of the media center. >> Awesome, well David Siegel, great to have you on. Final question, your take away from Blockchain Week. Obviously, new entrants are going to, new actors are coming into the system, community's booming. It's still tight knit, but now you have finance. You have tech and you have developers all coming together. Your thoughts of the show this week, Blockchain Week. >> Yeah, one thing, the demos are pretty lame in general, I think. We still aren't paying much attention to user experience at all. >> Yep. >> I think the enterprise guys have a lot to learn, because they're kind of playing their normal enterprise game. And it doesn't look so good here. >> Yeah, Jace was talking about the Blockchain washing. (David laughs) Basically, putting a Blockchain-- >> We added Blockchain to this enterprise project and look. >> Yeah, is that a real dynamic in your opinion? >> I think they're figuring it out. I think some of the academic and some of the white paper stuff I've seen is okay and commercializing it. They're on the path to learning how to commercialize it. But they're not part of us. They're not, they'll never be crypto-anarchists, okay fine. But they don't really seem to get us and to be part of it. They're, it's amazing to see a conference where IBM, Microsoft, you know these other big names, are deloyed, are, like, in their own little pockets on the side, and no one's paying. >> John: It's a toe in the water for them. >> They're not paying much attention, because you go in there, and it's the normal marketing jargon and brochures. And it doesn't feel like they're really engaging. >> Yeah. >> I'd love to see more engagement with our community. >> And I think they got to really get engaged in. The good news is, for IBM at least, they're part of the Linux Foundation and Hyperledger Project. So, we're seeing some open sourcedness there, I mean. >> I'd like to see more thought leadership, more real, you know, publish some papers. Come to our conferences and give us some substance. >> Well, I mean, I talked to Michael Dell and Pat Gelsing for instance, and, you know, they are into Blockchain. Michael Dell's watched watched Oslo's videos. He'll probably watch this video. They're learning. And the statement is what they're doing is they're giving it to their R and D teams, so office of the CT. They're not really, so it's very academic, to your point. They haven't really operationalized the ethos and product. >> You know what? >> It's time for experiments. There's no way you're going to blockchain your whole company, your whole supply chain. It is time for experiments, and it is time for guys like Michael Dell to jump in and say we are-- >> What's your advice to Michael? What would you tell him to do? >> It's time for experiments. We're going to do some things. We're going to try some things. We're going to partner up. The Hyperledger stuff, you know, try more than that. Don't just be, go into meetings and summits and top down. Try some bottom up stuff of empower your employees, Michael. You're not Michael, but I'm telling you (John laughs) Michael empower people to try some things. They might even not be... They might be quasi-legal, but if it's an experiment, you're going to learn something. And then you can talk to the lawyers. Don't have the lawyers and the management say what the program is. >> Cause that'll put it in a box. >> They won't get it. >> They won't get it. They'll stop the action. >> They won't find that-- >> Ask for forgiveness, not permission. >> Ask for, go do it. Go build. Get, hire some crazy crypto people, and tell them to look for inefficiencies in your whole operation and cut them down by 90%. >> David, great conversation. We could go for another hour. You're going to be a regular, I can tell, on theCUBE. When we do our live format, we're going to certainly have you back. Keep in touch. >> Sure. >> I'm John Furrier here at Blockchain Week in Consensus as wrapping up the day three of coverage. I'm John Furrier. Thanks for watching. Be right back. (light, upbeat music)

(Latin music) >> Announcer: Live from San Juan, Puerto Rico. It's the Cube, covering Blockchain Unbound, brought to you by Blockchain Industries. >> Hello, everyone and welcome back to our special, exclusive coverage in Puerto Rico for Blockchain Unbound. I'm John Furrier, your host of the Cube. We're here getting all the action, extracting the signal from the noise. Our next guest is Sunil Verma, who's the partner of Team in Residence venture capital firm doing traditional VC as well as investing in token economics, blockchain, and decentralized applications. Sunil, welcome to the Cube. >> Thank you. >> So I got to get your perspective because you guys have done a lot of high profile deals on the venture side, Slack, Instacart and a slew of others, great portfolio. But you guys also got your eye on the prize on token economics. So explain the strategy of the investment thesis. Is it still venture, all in on token, mix, what's the makeup of the firm, what are you guys doing? >> Yeah, for sure. It's definitely a combination of both. We really feel there's opportunity in the decentralized world and we're really looking at sort of the white spaces there. So what is the LinkedIn of Blockchain look like? What does the Amazon of Blockchain look like? So those are the things we're trying to solve for. But at the same time we're really looking at companies that have the governance and the accountability, and transparency that Blockchain really locks in. That's really what we're investing in. So if there's a token or tokenomic that we really appreciate and we really understand, we'll be participating. >> That's good stuff, I want to ask you kind of the question and it's the classic Silicon Valley metaphor, but I want to put it in context of the venture architecture. How do you architect a venture in this new world? So the minimum viable product, or MVP, minimum viable, MVV, minimum viable venture architecture. What do you look for? Because you mentioned government, governance, we hear consensus, we hear transparency, we hear open source. We're seeing a new venture architecture emerging, it's not your grandfather's classic VC deal, which is team, team, team, patented technology, things are running much faster, running hotter, it's a moving train of technology, the plumbing level, but the business models as you mention are pretty clear, on some of them. What is the minimum viable architecture of a venture look like? >> Yeah, that's a really good question. I think when we were, what we're looking at is not your traditional venture companies, I think team, technology, the financials, product/market fit, all those things still apply in a big way here, and really what we're banking, what we're kind of looking at is how responsible is the team itself? I think over the last sort of 12 months, we've seen folks go out raise really big amounts of capital with no product road map, no business road map, no real way to get from zero to X, and now really what we're focusing on is is there a product that's already been built, do they really understand tokenomics, are they trying to shoehorn a regular business onto the blockchain and just assume that by adding Crypto at the end of toilet paper, they're going to get something? I think that's stuff that we have our red flags up on. >> I want to get your reaction to a comment I made earlier on the Cube, but also on this event. There's three types of profile types that we see, I want to get your reaction to this. One, the startup, we have an idea, it's going to be blockchain enabled, good vision, white paper, check. Maybe some VC might want them, but it's more token. And then the other end of the spectrum, I call the oh, shit, we're going out of business. I call that a pivot. They throw the hail Mary. Then the middle one is the growth company that's growing with token economics, all the elements are in place for a real go to market. What's your reaction to that? Do you see that's something similar and how do you identify each one and the role that you might play as an investor in that? >> No, for sure, I think that when we come at it, we're looking at it from a full stack experience so does the company need resources on blockchain developers, does the company need product and marketing support, do they need PD support? And once you've actually gone live, one of the things we're starting to realize now is you have to really approach this from both a PR standpoint as well as a hire standpoint. And you will have to sort of divorce what the company and what the employees are thinking about and what the investors really want. It's really about, and for a lot of the protocols out there, it's really about the next sort of 15 to 24 months and really getting the exposure that they need. From the early stages it is about the white paper, it is about the technology, it is about making sure you're thinking about it in the right way. >> So you just got to be cognizant what you're saying, if it's early stage, they got to have self-awareness to know that they got some work to do to build it out. >> Sunil: Yup, exactly. >> And then where's the growth elements? >> Sunil: Yeah, exactly. >> All right so I want to get your reaction to the ulity token versus the security token. Obviously a lot of people say, hey, I've got a utility token, and then basically raise money without a product, that's essentially, there's no utility yet, there's no product and people are trying to shortcut that, which is really not an optimized experience, because you've rushed the product to market, in some cases it takes a year to get there, so essentially that CC is kind of signaled against that. So, as an investor, how do you decide what's the best avenue, security token, or utility token, and why in each case would you go for either one? >> Yeah, that's a great question. I think it comes down to where they actually domiciled, where they being, and where are the customer base, right. In all honesty, the center of gravity for blockchain has shifted away from Silicon Valley. It's not Silicon Valley, itself. It definitely is around the Asian marketplace. When we look at the SEC and some of the stuff that they're kind of saying, that's great, no problem, I think we definitely need those checks and balances in place, we're investing in security tokens, that's not a problem for us, that's something that we do all day long. >> John: It's a process you know. >> Yeah, it's a process we understand, exactly. >> Credit investor, reg D, form D. >> We do KYC all day long. The thing is on the utility side, it's like, is there a utility that's broad enough that really is going to affect a billion plus people that we're actually interested in? And to your earlier point, they do have to have a product ready to go. So we're working with folks like Orchid, who have been working on their product for over a year plus. They've actually waited to do the token offering and what not, so those kinds of things, which is decentralized, those kinds of things are the ones that are really exciting to us. >> So what about the dynamic where a company might want to do a security token, raise some cash, and also have a utility token for either consensus or other things and can a company coexist with two ice deals at the same time. Have you seen that? >> You know that's a really good question. I would point you to a lot of the smaller public companies that are on the Nasdaq that are just adding Crypto to their product offering and you know seeing huge spikes. They have to manage both the public investors, and they also have to manage the token offerings, and token investors that they're doing now. I think it's, there are definitely ways to do it but at the end of the day is the team structured correctly to manage it and are we going to see a convergence of the pricing. You're not really going to get the same premium you will in the token markets as you will as on the public markets. >> Quick question on security token, what are you looking for for pledged against the security? Are you okay with future revenues, is it equity, what's your preferred, do you care, is there a preference? >> No, it definitely it's some equity in the company, I think, you know depending on the stage of the company, and the security token type that they're doing, it's equity, might be future revenue sometimes it's dividends or the opportunity to get dividends, so it's a combination of a lot of things. >> Do you have a preference, you care? >> At the end of the day, equity is always preferable. >> Okay, what are you looking at here, what deals have you seen here? Did you do any deals here? >> Yeah, we do, we have a couple, one is called, Creator.AI, they are a decentralized contact creation platform. One is iCash, which is one of the security tokens that's actually kind of out there. Another is Renovo Financial, they're actually doing a JCO, Jobs from the Jobs Act, a token offering based on that, they're actually going to be announcing some really big stuff that is coming up in the next week or so. >> I'm interest to talk about, let's talk about the Jobs Act and how instrumental that was, how that's changed the game on NGO's and mission-driven investing, which we've been covering a lot in DC. Sunil, we'd love to have you come down to our studio in Palo Alto, and talk more. Great to have you, thanks for spending the time. >> Thank you. >> Team in Residence, doing a lot of hot deals on the front end of investing. You get nervous at all, you worried about things these days, what's your mindset like, I mean, it's like white water rafting, you're in the middle of the action, what's it like? >> Oh, for sure, it's exciting, it's fast-paced. I think with the hair cut over the last few days, everyone's sort of rubbing their heads right now, but at the end of the day you have to have the stomach for it, and I think you have to be as educated as you can. >> And look for new liquidity ways. This is the key thing, new liquidities out there. >> I think we're seeing a lot of new liquidity. I think Telegram is a really good example of that. I think folks that didn't want to participate in round one are now getting sort of slugs of time tokens that are out there and they're buying it at a premium and it's all happening in the secondary market. >> That's awesome, with new infrastructure, new dynamics, new reimagining wealth, creation value caps, restore, harnessing that value is changing liquidity, changing the structure of entrepreneurship. Thanks so much, Sunil Verma, thanks for coming on the Cube, appreciate it. I'm John Furrier, more live action coming here in Puerto Rico, the Cube, be right back with more after this short break. (techno music)