EB86 – William Mougayar: The Business Of Decentralization

Transcript

this episode of epicenter bitcoin is brought to you by vulturo the goal to Bitcoin exchange traigo to Bitcoin instantly and securely starting at just one milligram go to bolt or com to deposit some Bitcoin and start trading today and by shape shift with no account or sign up required it's the easiest way to buy and sell gems dash new bits manero and other leading crypto currencies go to shape-shift iota instantly convert your old coins and to discover the future of crypto currency exchanges alright welcome to episode of Bitcoin the show which talks about the technologies projects and startups driving decentralization and the global cryptocurrency revolution my name is sibbeston future and my name is Brian

Fabian crane and we're here today with William muga yar he is based in Toronto and he's a very experienced technology executive he's worked at HP hewlett-packard for a long time he's started with CEO of hue tech startups and recently he spent an investor in some Bitcoin companies like change tape and what we're going to talk about quite a bit today open bizarre or ob1 the company behind open bizarre and he's also an advisor to eat here him so he's quite involved in this face especially with photos from the perspective of a you know experienced guy and also an investor so I'm super excited to have them on thanks for joining a state william thank you it's great to be here

so a question we often ask or guess how did you get involved in big home or the cryptocurrencies days yeah well I was lucky that since I'm living in Toronto I became involved actively when I heard of italic having started etherion but even prior to that I had been hanging around Fred Wilson's blog for a while and he started to talk about bit going back in 2013 and I was very intrigued about the topic and started to get involved with it towards the end of two thousand

middle to end of 2013 as almost close to two years so far but I really became very excited because I saw a lot of similarities with what had happened with the internet back in 94-95 and I had been there i have been part of the internet evolution and how it unraveled in front of us from day one i was involved at the time with an organization called commerce net which was the equivalent of the Bitcoin foundation today so we were working on standards and advocacy and security and payments in canada and the US Commerce that was based out of Silicon Valley

Palo Alto so I've seen this movie before more or less and I am very very excited about what bitcoin with will do for for the next ten years in terms of the impact it's going to have on the Internet yeah I mean we often forget I mean Brian and I were both in her early 30s and we were there when you first started but weren't really old enough to really out what was happening and I'm not all day I have to have to check him not 38 ok learning solution but but yeah it's always interesting to to have sort of the perspective of someone who was there when they were

about our age and and how things were happening then and so I'm curious about this Commerce net organization what were they doing specifically but it was pretty much the equivalent of the Bitcoin foundation when it started basically the intent was to work on standards on education so it's a bit maybe a bit the cone Center and big confrontation so it was a lot of Education payments internet payments were very very big at the time because just for memories sake now we take internet payments for granted but I can tell you for the first three years of the internet the banks did not want to

touch internet payments if you wanted to do internet payments up until 97 or so you had to jump through a lot of Hoops it was done with what was called internet gateways so you have to go through these outside servers that had the setups for doing internet payments and now we take it for granted obviously we can do we can pay for anything on the internet but that wasn't the case before so that's what commerce now was working on and also working on use cases working with small companies and large companies and trying to explain what how companies were adopting the internet from an e-commerce perspective so the genesis of

of commerce net namely the name is was to promote commerce on the internet from the early days because it was perceived to be one of the key applications of the internet you see any similarities with some of the backlash that bitcoin has gotten specifically in the press is less I mean not so much now but in the last few years with some of the same criticism that the internet was getting in the beginning definitely I mean the internet payments the banks did not want to touch internet payments it was this kind of thing that was not secure they were saying they were not guaranteeing anything and and there was

a lot of backlash even with there were talks about to having internet tax like adding internet adding a special tax on top of the internet and in some countries and some governments in the same way that some governments are thinking about adding attacks on Bitcoin and these are some of the things that then went away they became non issues so definitely there are similarities but we have to keep pushing ahead I mean this thing is not going to get built in two years or three years as much as there is excitement in the space and there was excitement in the internet space in 94

95 96 97 it took a long time it took about three years at least for everybody to start to understand the internet back in in those days and and the internet was not as complex as bitcoin is today so I predict it for sure we have another two years of education of educating people about what bitcoin is what it can do what the block chains our I mean what what's common it is that they have a multiple personality meaning that there are different things to different people and if you ask anybody about what they are doing with the internet today

they'll each give you a different answer depending if they use it for web content or whether they are selling something on the internet or whether they are using it for communication and many different uses same thing with Bitcoin yeah right now those that are involved in the Bitcoin space are very few but each one will have a different use case for them so what's common is that the narrative is very rich the story is very interesting and each one of us will find its own story about how we use Bitcoin and the blockchain in the same way that we are we have found our own story in how we use the internet

and that's what's really exciting but this thing is going to take time I really really would like people to realize that this thing is not agate is not going to get built in in one or two years and hopefully we'll talk about this later on in terms of whether there is a bubble or a crash and what really brought the crash back in that the year 2000 is people wanted to accelerate the internet in terms of what it could do if you wanted to get that thing happening much faster and then it showed up and that's what crashed it so I hope that we keep our our level our heads on a level

level basis so that we don't hype things much I wonder you will make this comparison with the internet now a bunch of times and I actually wanted to ask you know there have been all these different technological sort of revolutions and evolutions during the past decades you know there was the mobile rise of mobile smart phones cloud computing the social web of course the Internet itself and so do you think bitcoin is most similar to the rise of the Internet well bitcoin uses the internet right so it's it's a very important overlay it's

an overlay on the internet and the properties it has are multifaceted the the genesis obviously is money so this is a new component that we did not have before there is a technology component with Bitcoin and the blockchain specifically so--but going is the currency components so it's going to affect money but the blog chain is a technology component so there it's going to affect transformations so the analogy is that back in the 90s as well there was a big movement to do ray engineering

if you remember in 92 or so michael champion michael hammer and james champi were championing the causes of doing reengineering and in big companies and the idea was you had to start by removing the old processes and rethinking everything that companies were doing because I t was this new enabler so I hope that the blockchain is seen as a as an enable of re-engineering and reimagining things for for big companies and for small companies so so

it takes a while to to rethink differ with new solutions and mine now the way it starts usually is you start to do you bring in a new technology and you start to do the same thing you were doing before with the new technology without a lot of innovation this is usually step one but then later as you get more experience you start to say well met let's rethink completely how we're doing something and and then let's start from from scratch and that's I think where the opportunities are going to be is in seeing new totally new ways and like new companies new behaviors and I talked

about that in one of my blog post we're looking I try to be a little bit forward thinking in terms of where VidCon was taking us and I put these activities into four pockets the first bucket is is in having new companies and new behaviors that we have not seen before the second bucket is inside existing companies so bringing the blockchain into existing companies and figuring out how it's going to change things inside the outcome will be that industries will be changed some indices will be transformed that's the third component and the fourth component is just seeing as technology so it is changing the technology stack that we are used to

using so there are many pieces in the in the blockchain the cryptocurrency that space that are our new pieces of the stack if you're a developer you're going to be familiarized now with things like distributed hash tables what is that or I PFS I'm not going to go into the details but and distributed applications where the browser does different things than just have running JavaScript we can go into that and later on if you want but there's a new architecture that is a new paradigm basically if you are a developer so you have to use new tools

and the same way that at the web even though it started as a content publishing platform then with the advent of java and and other languages then it became a development environment so the blockchain is a great development environment the only difference is that it's still a bit early it's a bit immature and not all the pieces are there so if you're developing for the blockchain you still have to put all the pieces together more or less on your own and and that's some of the challenges that we have today if you're a developer although it is getting

better so you've talked about this analogy that Bitcoin you would read a blog post that bitcoin is like a new cloud and you you said that block chain infrastructure doesn't replace cloud computing but it sort of unbundled it democratizes it can you explain it can you explain that and can you also explain what some of the consequences of such an unbundling and democratization would be yes for sure well when you look at the blockchain the number one thing that comes to mind people think of it as a distributed ledger as a programmable ledger which is fine it is that but what

it is also is a big infrastructure as we know the infrastructure meaning the computers the machinery neither the actual hardware for mining the Bitcoin network basically there's a lot of computing power out there there's more than 6,000 nodes right now around the world and that surpass the the performance of supercomputers that exist today so this infrastructure is like a cloud infrastructure and it's it's yes it is validating the transactions but it is also really running transactions it

is validating transaction so in a way it is it is like a cloud you are running applications you are running software on this network of computers that is global and the implications are that it's a new architecture basically so the developers now have this this new infrastructure and what's really interesting is that they don't have to set up servers if you were to go to amazon today as easy as it is you still have to set up a server you have to open up an instance and configure it and and although it's easy beginning easier but you still have to

do that and with block chain networks whether it's a Bitcoin blockchain or another block chain and the ones that are global specifically you just worry about the application that you are writing and you write it in a way that it's aware of the of the blockchain it's aware of the network and you execute basically these little programs on the blockchain in the form of smart contracts which are really business logic and so I'm saying this is a thin cloud because I don't want to give the illusion that this is going to replace

the current flower mean you cannot write enterprise-wide enterprise-level types of applications but these are little programs but it's a start it's okay to start with little programs with little smart programs that does smart contracts that just do a little bit of logic but at least they run it they write efficiently and it comes back and it's very cheap it's we're talking in the sense a kind of levels not way why do you think it is cheap cuz I mean bitcoins expensive right I mean as far as I know if hearing is going to be very expensive right to run things on it here

iam why do you say will be cheap and not necessarily maybe at the beginning it might be a little bit more expensive than it will be at the end because the cost is shared it's like a crowdfunded it's like a crowdsource sharing of the infrastructure overall the number is big to run the network but when you divide that up by the number of users that are on it that we're talking into the sense into the sub dollar level for running little things the vision is that it should be it should be about the same as what you're paying for internet access if you have a

really good internet access you probably have to pay fifty dollars per month more or less to a hundred dollars depending where you are in the world but if you bring that down on a daily basis you paying two dollars a day more or less so we're talking those kinds of levels at two dollars a day energy dollars for what like for running for running programs that that you you would be responsible for that are providing value to you in the form of a business logic in the form of something that is of value to which the value is going to be more than what you're paying of course so this is the way that I I see this I mean correct me if I'm wrong but what

you're what you're talking about when you talk about little programs it's basically decoupling what we now see is cloud solutions so I would I would see this like this so for example Dropbox so many components to what Dropbox offers Dropbox offers different levels of of cloud storage size like capacity and then there's permissions and they're sharing and there's all these things if you decouple that then you would have liked storage sharing permissions perhaps the ability to view files in your browser and these are all different components of that application and perhaps in the future where we can when we can envision is that rather than

having one service which is Dropbox which had all these features we would have all these decoupled features and then perhaps you have another feature which is another spark contract that you could plug into just the the hosting component and if you want to add sharing you can also add that in there is that sort of what what you're describing in terms of decoupling the cloud infrastructure we have now yeah that's that's one way of to describe it and the other way to describe it is that it's it's like a form of sass it's a software-as-a-service kind of utility so imagine now if you can if you're a business user and side a company and you can run these smart contracts yourself without going

to IT so that's the other big implication of running little programs on the blockchain it is eventually when we start to put these programs in the hands of business users and make it as easy as opening a browser and launching something then I think that's the big impact that is going to happen down the line and that's that's a big implication for companies so i think the what I'm describing here is going to take a little bit from cloud computing types of budgets let's say and a little bit from the sass from running software as a service component so it's it's a

new--it's a new form of running programs of running a business logic between people between companies but it's really a micro transaction it's going to start at least the way we see it right now as at the micro transaction level so by bits and pieces and and then what's what I'm really excited what's really exciting is when we start to put this in the hands of business users because business users can take it in any way they want they know their business and they know their use cases and and that will empower them to to really propagate this is this technology more globally our show today is brought to you by bolt

or calm the goal to Bitcoin exchange now when you live in brillion or in france or in a lot of comfortable places like the US etc we often forget that when you put money in the bank you don't actually control it anymore and it's not really yours so when things go wrong you still have access to it maybe maybe not and i think the grease thing has that really Illustrated that and this we Illustrated that some forms of money are protected from that and bitcoins one of them and go is one of them that's right if you want to start buying some gold you can do that very easily with Volturi calm you can start trading as little as one milligram of gold and you don't even

need to do any kyc if you're buying less than five thousand dollars worth of bitcoins per day so that just eliminates all barriers to entry so and the gold that you buy on voltar belongs to you it doesn't belong to voltar oh it doesn't belong to some third party you own the gold legally so go to Walter calm and start training some gold today and we would like to thank Voltaire 0 for their support of episode in Bitcoin so moving on to business models this is something that we've discussed quite a bit and we still can't really wrap our heads around how these things will be monetized the very fact that say for example open bazaar is decentralized and we'll get to open bazaar in a second but the very faculties decentralize it's hard to to

see how you can you know as a company building this have a business model around it you talk about what business models will look like in these decentralized app worlds and how the differ from existing business models in the tech space okay well one of the parameters that's changing here in the the era of decentralization is that the center's are becoming again using that word thinner the center's are going to control less but they are going to empower more and they are going to get flattened so which means that I mean look at the Bitcoin network which is the

the great example of distributed of a distillate infrastructure there is no Center to Bitcoin and the only thing closest to a center is the five or so core developers that really at the center of it but everybody else that is contributing to bitcoin is at the periphery is at the edge of the network so innovation is really happening at the edge of the network at the edge of those old centers so the business model is I mean it's very difficult I mean at this point

it is it is difficult oak in generic terms in terms of what the business models might be but they are going to be very peculiar to every particular situation that will apply what their business is all about and and and they will develop these business models themselves based on their business specifically so first of all there's one one thing that is for sure is that the blockchain is technology so there will be a the equivalent of software services that will proliferate around the blockchain technology itself so a lot of

there are few companies today that are taking the approach that hey it's just software so being just software we can help you to develop solutions for it we can help you to integrate the technology into what you're doing and and that's kind of the service as a model so there there's lots of that going on but part of the part of the technology is knowing where to place that technology is the same as IT I mean I T on its own it doesn't do too much unless you know exactly what kind of business it's going to enable I think one way of looking at

it I don't know if you will give that but if you just sort of focus on Bitcoin for a moment right maybe one or one way that people have often thought about bitcoin is like like a bitcoin is a little bit like owning a share of this big decentralised distributed enterprise project so if that's the case and if that's true then I guess one of the implications of that could be if all these companies like coinbase change shape and so on our building things that then enhance the value of you know of this project of this sort of decentralize enterprise

well of course the all the value they create the question is you know does that go to the company's at the edge or does it go to the center and sort of that centers enterprise and if the second is the case does that mean they'll be left out and the sort of all the benefit goes through the Bitcoin holders and the companies don't manage to build profitable businesses around it I think one area where we've seen this a little bit happening maybe it's a payment processing because obviously what a service like bitpay is super valuable for Bitcoin and it helps a lot with adoption and people can pay places and stuff but do they have a business model I mean the problem is right if you

have different companies competing there you know you'll have a computer on price and it may be very hard for them to make money in the long time yeah I mean I think here's how i would i would look at it there are three pieces to the to the the marketplace one is the infrastructure level the second piece is the middleware services and the third piece is the applications it's the same thing as the internet so at the infrastructure level you have the miners they're making money that's fine and then the middleware payments exchanges I mean they are kind of a middleware because they're in the middle yeah there they make money as well because they have to take a cut on the transaction

perhaps but it's a small much smaller it's a much smaller cut where there's the most excitement is in the at the application level at the I so what are the applications there the field is wide open and that's where the innovation is going to happen but it kind of comes in goes into stages we have to have a solid infrastructure and we have to have a rich a choice of middleware services of software of building blocks basically and then it will make the life of the application of the applicants that are building the applications much easier so in back again to the vision small it it's yeah I think the value is going to be in the bigger the bigger

segment is going to be at the application level when these middleware enabling technologies become a little bit more mature and then somebody can look at the music space or can look at the content space or can look at the ecommerce space and then you take every industry one at the time and the financial services as well of course it's a big one that's has a lot of potential in using the blockchain so there is going to be innovation in in every particular segment in every particular industry in applying the blockchain technology the one common

element is is the issue of this of the trust of validation so what the one of the innovations of the blockchain is that it lets you perform a validation or a trust without a particular intermediary so it simplifies a settlement it simplifies a very verifying that a transaction is going to the right person without having somebody in the middle verifying that so generally speaking a lot of intermediaries might be threatened by the blockchain if their job today

involves something like a clearinghouse type of service or if it involves settled so one book that has gone a lot of attention I think in this sort of space was a book by Peter Thiel who among other things found it was one of the founders of PayPal I called zero the one and energy argued that the only way to build it in a really profitable business technology business you know is to build a monopoly which then you know allows you to use your market power to charge high prices make a lot of money and of course if you look at the big technology successes like Facebook amazon ebay etc they all have been monopolies in the main area they make

money at least so how is that going to work out in in the decentralized space because I think there's a first of all that people don't like monopolies at all in this area and there's also the question whether they are compatible with the technology itself because if you'da centralized where's the monopoly does that mean no money will be made or it will be much more distributed and small and not not no huge enterprises will be built well I think the monopoly is going to be in the form of a protocol but it's not really a monopoly because it's going to be open so there will be some open protocols and the whole basis

is openness now so in bitcoin is an open protocol anybody can fork it right athyrium is an open protocol open bazaar is an open protocol open assets is also an open API so a lot of the technologies start are starting to be as an open starting with that openness and mine and then they what they do is they start to achieve some network effects and the analogy here is that we want these protocols to be adopted we want them to be globally adopted so that there are lots of users that are all these protocols and in the same way that you then start to realize what the business

model is once you have a lot of users the same thing is going to happen with the network effects but I think the implications of what you saying would be that it won't be these kind of massive companies like Google or something right because if the network effects are with the protocol and if nobody owns the protocol or if it's owned by a whole huge distributed group well where is the company right they it's still I mean it's still a little bit not clear how this whole thing is going to unravel we can just speculate but in an informed manner I think there will be a lot of opportunities to build and to

provide services on top of these protocols that our value-added services and maybe there are new forms of intermediaries for example that lets you get created on the protocol that offer services that are needed that can benefit others and maybe those services may not be as expensive as what the central kind of parts were doing before that so definitely there's going to be a more wider distribution of opportunities at the edges of the network at the peripheries of the network and it is

still not clear whether that will create a lot of small companies that are multiplied basically or whether it will create a bigger Giants big giants like the Google and the Facebook's that we know but definitely it is starting right now with the openness of mind and with with trying to reach as many people as possible globally and then we'll see what happens so you've been an advisor as well too athyrium tell us what excites you about that project okay so it's it's been a long time in the making obviously as you as you know what's

really exciting about it areum is is they it's different than Bitcoin as a blockchain so that's kind of where people get hung up initially and they try to compare it to a Bitcoin I mean bit going itself just to put that aside bitcoin is a very tough act to follow people look at it and they say oh it's a network at an open source I get users I have a cryptocurrency fine I can do the same thing and then it becomes like Bitcoin but it's not very easy to be to copy the Bitcoin model it's it's got a long lead ahead of any other block chains out there but the etherium

approach has been different in that first of all the code the consensus model they are arriving at is going to be a proof of stake into instead of proof of work so the implication is the technical application is that the mining will not be as expensive and than anybody on the network could be a note to to power the running of the of the blockchain they get would they would like to do proof of say right it will be proof of work and they would work you know maybe in legislation switch that its way it's moving it's moving fairly decisively towards the proof of stake as a deployment option so I'm talking long-term yeah the other big difference

is that the currency itself and they don't call it a currency it is a cryptocurrency if you kind of technically call it that way but it's like fuel it is fuel that runs the smart contracts which are those little business logic applications that run on the ball chain so a theorem is one hundred percent optimized from day one to have programs run on the block chain so that that is a very important difference as well from a bit going and the Bitcoin blockchain where yes you can run smart contracts on the Bitcoin blockchain but it takes a little bit more to make that happen so if Syria Miz

is really enabling a new architecture a new development architecture which we're calling web three architecture we're at the first level that the browser is is a special-purpose browser and that contains the beginnings of what we call the tabs the distributed applications and then the second element is the blockchain and the third element is a virtual machine which is really the network of the whole network of computers that are validating the transactions so when you put this together you have a new three-tier architecture and that allows developers

to develop the distributed applications which are taking a lot of different segments and and and then innovating and specifically so we will see different types of applications like crowdfunding or a stamping of origin for products or prediction markets and financial derivatives and so on so pretty much any any application that you think you can think of probably will have a smart contract DAP equivalent that could be built on the etherion platform so if helium is really a development environment it's a development platform

and that brings a new paradigm to to how applications are written and then it runs on its own blockchain the etherion blockchain but it will also be interoperable with other block chains and in terms of passing values back and forth so it's it's not going to be on its own as an island and that's how I see things in the future as well blog chains will talk to each other I was going to ask you about that so what this one thing I've been thinking about a lot lately is what was so great about the web is that you had one protocol HTTP and where you have browsers that are all compatible and you can build all these

applications with HTTP I mean over HTTP but what seems to be happening with all these watching technologies as well have multiple protocols a bitcoin of etherium you may have open bazaars like some other block chains may also come up so I'm not sure how that's going to play out in the future like it seems like perhaps will be coming more to an app based model where each applebees speaking specifically to one protocol or maybe who knows maybe like you mentioned if all these protocols and talk to each other we can have like one type of browser or one type specific type of software whether it be a mobile app or a

desktop app that can talk to all these blockchains at the same time yeah i def i mean that's what it's going to have to go that way if you think about the side chains project it is a form of interoperability with a bitcoin blockchain so they're going to freeze the value the bitcoins and then they do some work on the side chain and then they they they bring it back so that is a form of interoperability and we can see more of that that's going to happen it could be at the cryptocurrency level so it could be just an exchange so I perform something in the theorem with ether and then I there's a value that I

go and exchange it into bitcoins or it could be at the file level there is a maybe some data that is there then kind of trans acted upon into one block chain but then it gets passed to another block chain or it could be a file so there will be different levels of interoperability between the different platforms as let the block chains are powering today's show is brought to you by your friends at shape-shift shape-shift is the fast and easy way to trade all coins and they now support over 30 of the most popular altcoins including dash swarm peercoin verte coin dogecoin gems and so many others the

list just goes on when you want to trace them all points forget about using exchange what do you still use a Walkman no that's so 20 like nothing I mean 20 that's like 90 95 man just go to shapes of thought I oh and get it done in less than one minute with no account or sign up required here's how it works you head over shape shape that i owe you choose the current you wanna sell let's say you want to get rid of some big coins and currency want to buy let's say you want to buy dogecoin you then simply send the big points to the shapeshifter they change it for you and put the dose points directly into your wallet super easy boom done no account nothing required by the way shape-shift it's just been running an equity crowd sale campaign so you were actually able to

buy equity in shape shift unless you're American and you can check that out if you're interested at Back to the Future com that's en que UD future com will put a link in the show notes so thanks so much for their support and you can give it a try and trade some altcoin straight some coins on shape shape that I oh so one of the main reasons why we wanted to get you on is because you are one of the investors a long way of andreessen horowitz and union square ventures I think two of the best known venture capital firms in the world in the company ob one which was started by the guys the main guys behind open bizarre so Brian Hoffman who we've had on the

show as well and I think this is really interesting because as far as i know this is the first vc investment in a protocol sort of that it can be monetized rectly you know it's not owned it doesn't have like a token like ether that hopefully will appreciate if the platform gets used so it's it's really unclear where the business model is can you talk a little bit about why you decided to invest in obi-wan and when you see the potential here sure I mean it's not an obvious answer obviously I

had been aware of who Oh be open bizarre and almost from the day one where when they started as you know the history of open bizarre is that it started as a as a hackathon a winner at the Toronto a Bitcoin conference more than a year ago here in Toronto just what I am right now and I was actually in that room when they presented back in April of 2014 that was I'm here talking at the time with air bits but their Genesis was a dark market kind of application a few weeks later Brian Hoffman saw that and decided to fork it but give it a very

different departure from the dark market roots that it had and the vision of open bazaar is is to really empower peer-to-peer commerce without any intermediaries in the middle so the idea is that anyone should be able to conduct commerce to buy and sell products services digital goods as well without having any intermediaries in the middle either slowing things down or taking transaction fees or not adding any value so that is really the better the division of open bizarre so we were

attracted by their vision and we were attracted by the team and the quality of the team that had that vision and it turned out that they came together because several of them had been having the same ideas in their minds and they came together as a meeting of the minds and they were both but not both they were like four of them and he shall need to go for and they all had the same similar visions and and brian off and the leader of the project put all of that together and they turned it into an open source project and they started to add value to it and where it is today is very different from its roots one of them one of the key contributions that

they added that that they came up with is adding what is called the record junt contracts and recording contracts are really agreements is really a way to say illegal agreements and how we're going to put them in code and how we're going to enforce them so what they did is they are they attach the multi sig aspects of Bitcoin and they tenet ate it to the to a legal agreement process the Ricardian contracts and that then allows any two parties to conduct commerce according to rules that they both

understand yeah I mean we will link to your episode on amazon assurance I think where we talk in depth about that but what we didn't talk about there and there and what we would love to talk about with you especially is and the idea of you know where's the business model so I'm quoting here i read a blog post before from bad burnham who is a VC at union square ventures one of the other investors and so he wrote because the marketplace is defined by protocol and distributed across every participant server the hosting costs or share and there is no way for central authority to leverage network effect market power to extract went from distance no that's

sort of the fundamental a challenge about open bizarre so what do you see as the the potential ways for that company ob1 to become a profitable large company so that you will see a return as an investor I don't have a clear answer to be honest we we went within the inlet with the investment with our eyes open obviously and we would love for them to be able to deploy that protocol if nothing else but the way that they've structured the company is with the formation of 0 B 1 and 0 B 1 is the for-profit company that will provide

services that will run on the open bizarre protocol so open bazaar is the open source protocol currently it is being managed by the same team that also is part of what we want so our investment is really an OB one of a legal perspective I'm on the board of directors of OB one not of open bizarre open bazaar in its mature stage it's going to be an open source a protocol that eventually will be turned to the community I mean the community has a lot of say in determining the future of open bizarre

as a protocol what the team at obi-wan is doing is kind of leading it and managing it and making sure that it's going to happen according to the milestones according to the timeline according to the results that are required to kind of move that protocol for word if I may paraphrase I don't know if this is the way but this is sort of I guess how I think you guys are thinking about this and correct me if I'm wrong but right of course and the open bizarre guys will be in a great position in some way right if Hogan bizarre becomes very successful because first of all they have a great weight in the community to known I have a weight

in the development of the protocol and they will presumably also have the deepest knowledge of the technology so perhaps in the first to see the business opportunities where one can build money so in that way maybe makes sense to invest in them if they didn't late later leverage that position that influence and that knowledge to build profitable things right even if it's not clear today what those will be I mean what yeah I mean one one area that they've said that they are interested in entering is being a like in the area of escrow services so when you do commerce between two two parties with nobody in

the middle I mean it's kind of it's not exactly how two percent correct I mean there will be a new form of intermediary in the form of an escrow agent in the middle in terms of if there is a dispute resolution or it could be a requirement so there could be possibility where they would offer escrow services as a new form of intermediary but the fees that will be taken there are our kind of minimal are not going to be similar to the data crates that the central ecommerce marketplaces are taking today in the forms of the ebay and the 80s and

the Amazons and the ones we know about so that's one way of thinking about it I mean there will be services on top of the protocol that will be developed that will be innovated upon and that could be one one logical way for them to to be to be taking part of where some revenue might might come from I'm curious were there any parallels like this at the beginning of the internet where you had one companies or standing behind a protocol and developing it and with time losing their monopoly as everybody adopted the protocol the that's third sort of thing happened 20 years ago that's a good question I have to think a

little bit more maybe maybe maybe at one point Netscape if you recall Netscape is the company that became what when Marc Andreessen developed the web browser as we know it today in the form that we know it today and then Nicki Netscape and I mean they were they were the best they were the browser that had the most market share at one point in time and then they started to develop software services on in addition to the browser itself so they had server that they had commerce servers they had content servers and they had transaction servers

they had payment server so at one point it looked like that maybe maybe they were the only game in town but the reality is that that became fragmented afterwards and I am NOT able to think of a mean maybe one way to think about is tcp/ip a like at the porter at the technical protocol level yeah we have protocols that are standards if you think of the maybe not directly internet related but local area area networks at some point they were like three calm and there was no veil again this goes back more than 20 years ago and it looked like it was a battle but then then became a non-issue and I mean chua Lee a protocol should be

neutral a protocol should be available for everybody and that that's the only way that it's going to propagate and the value becomes on top of the protocol is what you add in addition to what the protocol offers so I mean HTTP is a protocol and and so it's I cannot see a pair direct parallel where a protocol was commercialized that way with venture capital perhaps maybe it was commercialized by government grants or by donations to have it developed so

that's the only thing I can think about but it should certainly it makes things interesting it makes things more interesting so speak speak speaking of a VC what is the current state of VC funding right now in the cryptocurrency space in your opinion uh it's it's still timid I would say it is still timid it is not a totally on fire I would say I see a lot of proposals and is it is it not on fire or is it not anymore on fire no it's not on fire in terms of its I'll tell you where there's one there's one

area where it's a bit problematic is that some of the valuations at the seed level are a little bit high a little bit too high for me at least and a little bit high as well for the market in general so you think valuations in the Bitcoin space are high compared to Serbs in general early-stage startups I'm seeing the whole gamut I'm seeing some reasonable ones and I'm seeing ones that are coming with evaluations in the close to 10 million dollars for a seed-stage investment with two people with the technology that they don't have

yet with a lot of questions with a lot of uncertainties which is fine but really with with with a very immature product and with a lot to build upon and they they think they want to have 10 million dollars as an early early and isn't isn't that just a bunch of people who don't have a clue of the market and have a slightly exaggerated opinion of their own self-worth or I mean zoom those people aren't getting funded by anyone I'm seeing the whole range I'm seeing some really smart people that I don't know have been told that they can get 10 million dollars for the fair for evaluation from day one and and they

only have to raise half a million let's say I'm only give up five percent of the company but that kind of investment is going only going to appeal to maybe a few angel investors that are willing to take to take a bet and and putting 25 or 50 thousand dollars but then it makes it more difficult for this particular entrepreneur because they have to go and raise money from 10 or 15 people I would rather have them I would rather have companies be more reasonable have variations in the range of three four five million even six million dollars and and and that opens up the

opportunities to to micro feces or vc's or angels that are a little bit more level-headed that know that there is a certain return that is expected that if you only give me five percent of your company I'm not going to be as interested that if you give me ten or fifteen or twenty percent so obviously one of the things that gets a lot of a 10 in the press and I think also of course in the pecan community is the price and if your people in meaning is there is to pick on price and as we all know the become price has not been doing super well especially if we compare it to november december 2013 so how has that

affected the ability of cryptocurrency startups to raise financing but i think it's becoming a neutral effect right now like whatever I really finds the interesting still is is the price is reacting more to still too speculative parameters and I'm asking about the ability to get funding on the price yes ok it's a neutral it's a neutral low point right now it did not enter at least in my record did not enter the the equation in the last two deals i was

involved in with the Bitcoin blockchain related it it's really it's really a non-issue right now i mean if if the volatility would be much higher it might be an issue but at the end of the day what you're investing in at least what I investment is is the potential of the business model the potential of the technology so I look at the blockchain as a technology as an enabling technology and I look at what it's going to enable on the in the business sense so are you seeing what what what types of companies are are you seeing a VCS interested in investing in and what companies are you particularly bit well what types of companies are you

particularly interesting I think it's going to start to get down to the industry level so you're going to take every every industry is going to have perhaps five or ten companies that will take a shot at changing that industry or will take a shot at providing solutions for that industry so we're going to see some vertical industry specific solutions i'm also going to see horizontal plays like content the content space is is one aspect right now we're take digital assets or or content ownership it's a

very natural application of the blockchain to be able to peg to attach an ownership of a digital asset or a physical asset on the blockchain so that you can transact with it I mean I agree about the about the industry what you mentioned about sort of disrupting industries I feel like right now there's sort of a shift from like in the last year we've seen a lot of startups getting in these or consumer space you're pushing for adoption of Bitcoin wallets this type of stuff and now there seems to be some sort of shift towards more these Ledger's blockchain technologies for finance etc is this

something that you've noticed as well yeah I was going to talk about the financial aspect financial services I'm going to issue a warning here the warning is is really it's going to be up to the financial services companies and the banks themselves to figure out how to use the blockchain and most of the companies that are developing solutions for that honestly don't have a clue about how a bank runs or how a financial services would be one I mean they are trying to they are trying to understand it but the reality is that the innovations is going to come when people from that industry start to really

really really understand the potential of the blockchain in terms of what it enables because only they understand their business and only then they can figure out how to apply this technology to enable something new now they will some exceptions of new players that will come up with something innovative but trying to displace the existing and company the incumbents in the financial services space it's going to be very difficult you cannot take them head-on the innovation unfortunately has to come from within so what I'm going to be

spending a lot of my time is educating is educating the financial services executives on the potential of of this technology the same thing was happening with the internet for the first few years a lot of the cios did not even understand totally the impact of the internet and and they took them a while to to figure it out the same thing is happening today it's one thing to have a little project in one part of the bank with five people to understand that try to understand the blockchain and then if you go down the levels it and then you ask to see you or what what they understand of what the blockchain does that there's a big gap in in between having somebody having a project using

the blockchain and having the CEO and the executives at the very top believing that this is a a very innovative and very enabling technology that's going to change things yes I mean similarly to how e-commerce I first was just like one little pet project and then after a while company started having e-commerce a sort of a global omni-channel strategy within the strategy of the business I think is what is a similar analogy right yeah definitely I mean there there's one one exception maybe I'm not providing her any promotion mrs. an endorsement you have a Blythe masters who came from

the industry and now it has joined the digital haces holding so that is a person that understands the financial industry and if if she can really really understand the block chain capabilities then there could be some interesting solutions coming out of it so I think it's kind of something that I wrote in the you and I wrote the paper the veggie theorem paper explaining the business value of the business imperative and I said there is the onus is really on the business people to understand what the blockchain technology can do the blockchain innovators and the blockchain developers

on their own cannot make that change happen so the business people have to kind of meet them halfway through as much as experts they can be in the development side they do not understand the business problems challenges opportunities that somebody has on the business side today's magic where it is commerce comm rce head over to let's talk bitcoin calm to sign in enter the magic word and claim your part of the list and reward you mentioned by masters and you know they just purchased the

hyper ledger when we've also had gone on the podcast and then we just said in Episode with Tim Swanson about this idea of permission block change with high perch is also accompanying at face and that always creates a lot of a lot of controversy and people criticize us and wish that we get cancer in the comments and things like that for bringing these topics up so I'm curious about you what do you think when especially when we talk about financial services big banks adopting this kind of technology will they use Bitcoin and the Bitcoin blockchain or will they do their own things with you know operating their own consensus systems at school I think it's

going to be all over the gavotte used what 11 difference that I see between what happened when he was ago and now 20 years ago the banks were a bit conservative they were fairly conservative they waited they waited they waited and then what they had to do it they did it because it took them a while to understand and if you look back in retrospect the banks did not make any mistakes back then and and sue today they did not innovate too much I mean what's the biggest innovation we have that combines banking and the internet today it's having our bank account on the smartphone or having online banking it's not a huge innovation is really going from paper to seeing transactions online

so I would be critical of the banks so far with the internet however what I'm saying today is that the banks have an intent to try a few things so what I would predict is that they will make some mistakes I have a feeling it is not totally factual but it's it's kind of putting some pieces some bits and pieces together from what I'm seeing at this time they are not going to be afraid to making some mistakes and trying a few things and that's why you've seen you're going to see a lot of pilots a lot of projects at a with a smaller scope which might fail by the way which is fine but

hopefully they'll learn from these failures and and then some of them will be inside the banks like back end this is perhaps and some of them will be between the banks I think there's a big kind of open space between the banks in terms of clearing funds settlements everything in the middle that has a clearinghouse kind of label on it is really up to grabs because a clearing houses are an intermediary and the blockchain threatens intermediaries in the same way that the Internet has threatened intermediaries and it has created new intermediate as a return amazon being one you enter visually and

then others so it's it's going to be a long road I mean we're not going to see all of that I Ravel next year okay yeah well I think we were sort of a up with her time and at the end ever episode but William thanks so much joining us also what we will do of course is link to your blog in the show notes and link to your blog posts because you've written you written quite extensively on the stopping and you're right we're going on this topic so i think we're having anybody who's who's interested you know they taking video posts and also get in touch i think review so yeah thanks so much for coming on i think talking about is like really important issues thank you for having me

bye-bye and of course thanks to a listener for joining us so we will be put out new episodes of x and a bitcoin every monday you can subscribe to the show in itunes on South cloud or in on your favorite podcast app and you can also watch a video which you put out on youtube and sfx and BTC and if you're loyal is her and like to show then do us a favor and leave us nitrogen we haven't asked for that for a while and you haven't left one for a while but so we'll ask again now please do so we really appreciate that and of course send us a tip if you want it so thanks so much and until next time