Blockchain Insider Ep. 44. Deutsche Wish Your Profit Was Hot Like Binance

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ST:  We are here, in the 11FS offices in WeWork Aldgate London, for Episode 44 of Blockchain Insider. I'm Simon Taylor, back in the host's seat, at long last. Today, we bring you, Binance blows Deutsche Bank out of the water, Nasdaq open to becoming a cryptocurrency exchange, apparently, and Pitbull, the rapper, turns to blockchain. 

[Break]

ST:  Great. Well, I'm not alone today, I'm joined in the office by my co-host, Sarah Kocianski. Sarah Kocianski, how are you?

SK:  I'm very well, thank you. 

ST:  Thanks for being back on the show, and thank you for ably steering the show in my absence, and, I think, making it much better.

SK:  Ah! Thank you! You're welcome.

ST:  And, uh, we're joined by Assistant Producer Petrit Berksha, Petrit, how are you, sir?

PB:  I'm very well, thank you Simon-,

ST:  It's Berishka, not Berksha, I can never say your name. It's Berishka-, 

PB:  Berisha.

ST:  Berisha. I'm-, one of these days, I'm going to not butcher your name-,

SK:  [Laughter].

ST:  [Laughter].

PB:  It'll come. It'll come.

ST:  We're all believing. Alright. Before we get started, I just want to say a quick word about our sponsors, who apparently don't live near a field, and shout out to Colin, we miss you. Today's episode of Blockchain Insider is brought to you by Corda. Corda's an opensource blockchain platform that allows businesses to transact directly in strict privacy using smart contracts. Corda enables complex transactions, using real assets, and legally binding agreements, without the need for a trusted intermediary. Corda is the result of a collaborative effort, led by R3, and over 160 of the world's largest banks and tech partners. It is ready to build on today. The financial community is deploying Corda to manage their agreements, and move assets globally. Now you can transform your business ecosystem with a platform selected by the world's largest institutions to build their future on. Go to Corda.net to learn more. 

Alright, let's do this. First story comes from Reuters, and this was one heck of a headline. Do love a good headline on this show. Apparently, one in five financial institutions are considering cryptocurrency trading. This comes from a survey, and among respondents who said they were willing to trade cryptocurrencies like Bitcoin, 70% said that they were planning to start trading in the next three to six months. That's one heck of a stat. What do you think about this one, Sarah?

SK:  Uh, so, me being me, I want to dig in to the methodology, a little bit more. So, it's 400 clients across Thomson Reuters Corp, so these are clients of Thomson Reuters, and that includes, you know, your large asset managers, your hedge funds, and your trading desks, but it also includes lots and lots of quite small, private family offices. So, that stat, of one in five, if you look in to it, doesn't actually feel that high. So, that's 20%. 20% are considering it. Mm. Yeah, okay. I mean, I know we're going to, kind of, look at this in a little bit more detail later on, but I think it's-, I think I would be surprised if that many weren't considering it, and I am surprised that actually, to me, that feels a little low. I would have thought maybe more of the-, of those companies, would-, would be looking in to it.

ST:  So, the-, the timeline's interesting to me here, it's "the next three to six months". Banks usually say, "We're considering something in three years," which means, "We haven't really thought about it," uh, because they want to feel like, "Oh, yeah, of course we've thought about doing all the AI. We'll do all of the AI in about three years."

SK:  [Laughter].

ST:  [Laughter]. Uh. But-, which is basically, "We don't have a clue." This is-, if it's three to six months, for 70% of that 20%, which is still a good chunk, this is coming pretty soon, and this is on the back of-, of a few other, you know, kind of, signals in the market, that they're considering this space.

SK:  I mean, is it-, is it, um, three to six months for people like, you know, Falcon Bank, in Switzerland, who are quite small, have very niche clients, who have very niche needs, and it's very easy for them to roll something out? It's interesting to me, I think you're absolutely right, I think it's a signal of things to come, I just think that we shouldn't get too overexcited just yet.

ST:  But what I'm hearing is, some of the larger institutions, there's stuff going on there. Like, this isn't a rumbling without-, there's no smoke without fire here. The interesting thing is, by most regulators, and, uh, kind of most large institutions, Bitcoin's kind of gone from pariah to, "Eh, you know, it's-, we kind of get that, it's kind of regulated, we kind of understand it."

PB:  Yeah, I mean, like, the institutional interest has certainly grown, like, hand in hand with progressive regulation, and I think that's-, that's always going to happen, with these big banks and financial institutions, as well.

ST:  But it's also on the back of regulated futures markets. So, CME Group have now been out for, what, four or five months with their futures product, and the volumes for that are growing. Now, granted, they started from a low base, of around 3,000 to 4,000 contracts a day, and they're up to 11,000 contracts a day, but that's-, that's not nothing, right, and that-, that regulated space is-, is interesting.

SK:  Yeah, I mean, I think-, we talked about it a little bit last week, but we did mention that-, I'm sorry you weren't here, but, you know, just to fill you in, we mentioned the Goldman story, we didn't have time to talk about it on the show, but, like, the story was that Goldman Sachs have hired a former crypto trader, his name's Justin Schmidt, he's going to head up their digital assets division, and, you know, they are very-, exactly what you said, you know, big bank, "We're exploring how best to serve our clients' needs," but if you add that to the story we've just talked about, then I guess there's slightly more weight there?

ST:  Well, there was a rumour, I forget the website, we'll try and catch this in the show notes, about Barclays apparently opening a-, a desk, and there's rumours coming around of a few more popping up now. So, you know, again, no smoke without fire, on some of this stuff. I think it has, kind of, shifted, and part of that is the progressive, kind of, legitimisation of Bitcoin in to having a futures market, but also some of the work of global regulators like the financial stability board, like, uh-, but also the-, the infrastructure, itself. So, GDAX is now, you know, a reasonably well-known organisation, to most global regulators, but you have organisations like DRW Cumberland, who are a major OTC desk, in fact, I heard an interview with their CEO on Laura Shin's Unconfirmed podcast, which was really, really good, sort of, clearly articulating who their client base are. And yes, it has largely been, sort of, large family offices, or multi-family offices, but the interest in the institutional level is there, and what's interesting to me is that the larger institutions have wanted in, but felt the space wasn't very legitimate, and maybe that's starting to, kind of, flip a bit.

PB:  Well, you-, you mentioned how institutional investors and big banks are actually looking at Bitcoin, and saying, "You know, we might have to take a look at this," and looking at it properly. I mean, the Goldman Sachs CEO once tweeted, you know, "Still thinking about Bitcoin, no conclusion, not endorsing/rejecting it. I know that folks also were sceptical when paper money displaced gold." So, there has been that public interest, on Goldman Sachs's side.

ST:  Did anybody see this tweet from the St. Louis Fed, as well, that came out?

SK:  Yeah. Yeah.

ST:  That was really cool. So, the St. Louis Fed, you know, pretty much a-, a foundational institution of the US dollar printing, actually equivocated-, you know, sort of said-, and you've heard, many times, people say, "Oh, well, Bitcoin has no intrinsic value." And their tweet was along the lines of, "Yeah, neither does cash-,"

SK:  Yeah.

ST:  Like, the US dollar has no intrinsic value, we just all think it does.

SK:  Yeah, I mean, the-, the tweet you're talking about, I mean, if people haven't seen it, you can find it on-, on my Twitter timeline, you can find it on Simon's, as well, it's a really, really clear and simple explanation of, kind of, how to explain Bitcoin to people who don't really get it. I think that the key point they were making [laughter] is that, um, the US government has declared the dollar legal tender, they have not yet declared Bitcoin legal tender. But your point is absolutely right, like, and if anybody wants to look at a £5 note, it doesn't say, you know, "This piece of paper is worth £5," it says, "The Bank of England promises to pay the bearer of this piece of paper £5." So, it's a promissory note, rather than-,

ST:  It's interesting, you say about the-, the US government, what they have said about Bitcoin, though, is that it should be taxed like property, uh, it should be, kind of, considered by the CFTC to largely be regulated like a commodity in financial markets, and if it's moved as a means of payment, you should probably be looking to be regulated as a money transmission business. Now, granted, that's pretty confusing, but those are all official statements.

SK:  But is that not an acceptance of the fact that there is no one-size-fits-all here? And an acceptance of the fact that we are seeing divergence? So, different tokens are being used for different things. So, it's-, so, there probably will be some that will be property, there probably will be some that will be means of payment, and there probably will be some that are commodities.

ST:  I think that's fair, and-, and I also think that taxing something like property is actually a really beneficial thing, that the community probably wants, because Capital Gains Tax, versus money taxation, is-, and foreign currency taxation, is a bit different. Just bringing it back to this Goldman thing, that they hired the former crypto trader. Don't forget that Goldman does have an investment in Circle, and Circle, kind of, Trading Limited bought Poloniex, so they now have a very-, one of the larger exchange, front-end UIs, but they've had, for some time, one of the larger trading desks, as well. So, their desk, there was an article I saw recently, that they're doing, sort of, $2 billion to $3 billion US per day, in-, in volume and value. That's really significant. I mean, granted, in the world of financial services and capital markets, it's not the biggest desk in the world, but it's a meaty desk, and I think it's-, it's kind of, uh-, so, I think organisations like Goldman have had a front-row seat through their investing strategy, in to-, in to how to keep this space legitimate.

PB:  They've also had lots of analysts look at the actual crypto market, itself. They've published lots of reports, talking about-, I know we don't talk a lot about the price on this show, but they have done a lot of reports, particularly when the-, the price was sky-high, before Christmastime, and around about that time, they publicised a lot of reports that were talking about how they were warning their investors and clients about this space, and how it was looking like a bubble, and they turned out to be correct in that-, in that sense, as well. 

ST:  It's interesting how it's moving in to that institutional space, more so than the retail space, and-, and that's coming along, around the same time as we're getting price stability. But I've got to move us on, because we could spend forever on this story. The next one comes from CCN.com, and this is a bit of a-, another attention-grabby headline, uh-,

[Laughter]

ST:  "Crypto Exchange Binance," some-, considered by some to be the pariah, others the hero, of the crypto exchange world, apparently "is More Profitable than Germany's Biggest Bank," Deutsche Bank. So, the CEO said, "Binance is the world's largest crypto currency exchange. In the first three months from inception, profits amounted to $7.5 million US, in the second quarter profits amounted to $200 million US. The third quarter is still in progress, and is expected to have further growth. Any country that can attract Binance to open a branch in their location will receive a handsome tax income revenue."

PB:  It's a bribe! That's a bribe!

SK:  It makes me-, ah, I-, right, this makes me very angry. Of course it's more profitable, it doesn't have any outgoings.

ST:  Yeah.

SK:  It doesn't have a compliance team, it doesn't have any regulation to abide by, it has very few staff, it can charge whatever fees it likes, without any kind of regulation or cap on them, which banks definitely can't do, and, you know, this, kind of, like, "Any country that will-, can attract Binance to open a branch will receive a handsome tax income revenue," well that-, [laughter] yeah, okay, if you can track it.

ST:  Yeah.

SK:  You know, I am-, well, that makes me so angry, because of course they're making more money, of course they are. They're not-, they're a much smaller, much more agile, much less regulated institution.

ST:  And let's be fair, this is all crypto to crypto trading, so they're not touching regular fiat money-,

SK:  Mm.

ST:  They're not touching dollars, they're not touching sterling, they're not touching euro, or anything like it, and the CEO, Zhao here, has-, has been a bit of a, you know, kind of, "Where is he in the world? Has many hotels. Nobody knows really where they're going to be," but has now popped up in Malta, and said, "Well, Malta are geniuses for allowing us to-, to be regulated there," which, granted, there's-, there's two sides to this argument, which is, "Well, somewhere had to bring this in to legitimacy," but I don't know if this is really doing the right thing for-, on the one hand, we see that Bitcoin and Ether are now being seen as legitimate by large trading institutions, and something you can work with. On the other hand, you've got behaviour like this, which just optically looks wrong. Whether or not they are well-intended, with Binance, whether or not building an exchange where you can trade these crypto assets against each other for low cost is a remarkable achievement, I think it is, statements like this really don't help.

PB:  I think when Binance was first coming in to prominence, I think Zhao was actually really good, on social media in particular, being quite transparent when people were talking about rumours, about hacks and stuff, he was very quick to dismiss them. He was also very quick to dismiss certain articles, about certain things. But the more he's allowed to say things in the open, the crazier, and, I don't know, just mad, Binance seems. Because I read a really interesting Bloomberg article, a couple of months back, with-, that interviewed him, and we discussed this on a show before. I mean, one of the quotes there was, "Zhao keeps the locations of Binance's offices and servers secret, making it tough to determine which country has jurisdiction over the company, and he instructs employees to keep quiet about their affiliation with the exchange on social media."

SK:  I know I said I wasn't going to sit with my head in my hands this episode, but, I would like to put my head in my hands, at this point. Like, it doesn't do yourself any favours!

ST:  It doesn't. Now, look, there is a view of the world that says that we want to live in a global future, in which one jurisdiction, which may have controls around currency, or another jurisdiction, which may not be the freest in the world, is something that we, as individuals, have the ability to get around, and-, and live in a-, in a free society. And I buy that idealism. I just don't buy this path to achieving that idealism. Like, I think we all want the same outcome, we just don't want to be idiots on the way there. There was a really interesting tweet he came out with, on the 27th of April. This is on the back of Vitalik Buterin having come out and said that, like, he's going to boycott-, Vitalik Buterin, I'm sure everybody knows, founder-, one of the founders of Ethereum, he's going to boycott the Consensus Conference, which is coming up in New York, from CoinDesk. He raised a number of issues with CoinDesk as a-, as a publication, firstly, apparently, that they-, he's alleging that they've backed scams, he's alleging, as well, several other bits and pieces about their non-journalistic integrity. Then, Zhao comes out and says, on the 27th of April, "I learned that most journalists are forbidden by their employers to HODL any crypto. Should they be forbidden to own fiat, if they write about trade wars? So, now we have journalists who have never done a single blockchain transaction writing/teaching the public about blockchain. Going forward, I am inclined to only accept media interview requests from journalists who HODL some crypto, so that I don't have to repeatedly answer, 'Are Bitcoins only used by drug lords?'"

SK:  I actually rolled my eyes there. This offends me, given my former profession. Like, there are-, there are so many questions there. Like, well, if I'm writing about drug trafficking, do I have to have trafficked drugs?

ST:  [Laughter].

SK:  You know, if I'm writing about-, you know, when you're a journalist, there are a lot of things that you look in to which are not necessarily savoury or otherwise, but that's not the point, the point is that-, 

ST:  If you're writing about murder, do you have to have murdered?!

SK:  Exactly! Like-,

ST:  That's a ridiculous argument.

SK:  If you're a journalist, or an analyst, then you should be able to be neutral. I mean, the argument goes the other way, right? If you do hold cryptocurrencies, then you are incentivised to write a piece that would move the price of that currency, one way or the other, as well, so that's the counterargument to it. There's so many-, I mean, I-, I do think, if you do hold them, you should be required to-, to state, at the bottom-,

ST:  To disclose.

SK:  My former employer, Business Insider, that-, you know, if you-, if you do hold any stocks and shares, or any cryptocurrencies, or anything like that, there is always a sentence at the bottom which says-, and I think TechCrunch do the same, and I think that's fair, because you may be biased, and you're-, you're explaining your bias upfront, but I can't believe-, his argument is completely ridiculous to me.

ST:  Yeah. For the avoidance of doubt, I do have a very small holding of Bitcoin and Ether, but you're looking at single-digit numbers of both. And I-, I agree with disclosures. The journalist, Laura Shin, who's ex-Forbes, is somebody who has that disclosure on every article, because she finds herself in a position where she does hold those currencies, but also does a pretty good job of holding people to account, and you can see that. So, I'm generally concerned about this approach, but again, to kind of, uh, come to that last point, are Bitcoins only used by drug lords, I think we're all getting a little bit sick of that, as well. Like, that view of-, you know, that binary view of the world, that it's either sublime or ridiculous, can no longer be-, we can't reduce things to being that simplistic, and I imagine somebody in Zhao's position brings it on himself a lot-,

SK:  Mm.

ST:  But, at the same time, we have to get away from that-, that simplicity.

PB:  He needs to stop tweeting.

ST:  [Laughter]. And he's probably not the only one. Uh. Next story, moving to the New York Times, "A Former Top Wall Street Regulator Turns to the Blockchain," apparently. Sarah, do you want to tell us what's going on with this one?

SK:  Sure, yeah, so, the guy's name is Gary, I'm going to say Gensler, it could be Gensler, was one of the top financial regulators under the Obama administration. The New York Times wrote a piece about him, sort of, almost two weeks ago now, saying that he was going to give a speech at MIT, which he's just joined, I think as a Visiting Professor, or similar, he's working with MIT, anyway. You know, he-, this New York Times piece was written, where it said he's going to come out and say Ether and Ripple should be securities, um, you know, and then he got a lot of-, they got a lot of pushback, you know, "What qualification does he have? He's not a lawyer," you know, that kind of thing, and he kind of went-, came back and said, "Well, actually, I may not be a lawyer, but hear me out," and then, um, the actual speech he did give, which was a few days later, he was-, I think he was quite clear in his argument, and I think he was fair in it, as well. So, he was like, "You may agree with me, or you may not," but his explanation of it was-, so, Bitcoin came in to existence, as mining began, as an incentive, in validating a distributed platform. So, there was no initial token offering, there were no pre-mined coins, and there was no, kind of, common enterprise. And then he goes on to talk about what's called the Howey Test, which is how you decide if something's a security or not, I think, and then he says, you know, "Litecoin and Bitcoin Cash are both forks off that, so that's why that's not a security," and then he goes on to explain about Ether and Ripple, and, you know, again, he doesn't single them out, he just says, "Here are some-, here are some characteristics of those particular tokens which mean that they probably should be considered as securities."

ST:  "People made a thing up and sold it to people," versus, "A system was set in motion that created a thing that other people could pick up and sell." And I think the-, the-, the term "mining" is actually a really good metaphor for what happens with Bitcoin. An algorithm has the ability to identify and generate Bitcoins. If you run that algorithm, it's the same as speculating for gold. If I mine gold, I do not need a contract with the earth. 

[Laughter]

ST:  I have the ability to sell that gold at anywhere, and-,

SK:  Some would argue you should, but that's another conversation [laughter].

ST:  That's another conversation, but within most jurisdictions, I do not need a contract with the earth. I-, I'd love to see what that contract would look like, I'm thinking that-,

SK:  [Laughter] god, Greenpeace are on it now, aren't they?

ST:  Yeah [laughter] make that happen. But then, yeah, and so the interesting thing about, of course, Ethereum, is it did have a pre-sale. They sold a certain amount, in their early days, for Bitcoin, there was a direct purchase of those, that was issued by a central body, in this case the Bitcoin Foundation. However, since then, you've been able to mine Ethereum, so it's in this grey area, where more of the Ethereum that have now been mined-, uh, that are in existence, came from being mined, than were pre-mined.

SK:  Mm.

ST:  So, that's in that, sort of, halfway between the two. It's not algorithmically generated or centrally issued, it's-, it's a bit of both, whereas Ripple, arguably, is centrally issued. There's-, there's one set of organisations, or there's one organisation that has a set of technology, that creates the ability to issue Ripple.

PB:  Well, it's interesting you talk about Ethereum, obviously [laughter] we were going to talk about the Preston Byrne article, but I think it's quite a good way to tie it in. In that article, he talks about whether or not Ethereum's a security, and he talks about how a lot of Eth was sold to only probably a handful of buyers, at around, like, 2014, right, which is kind of not good, because [laughter] it gives-,

ST:  It gives the impression that it has been issued as a security-,

PB:  Yeah.

SK:  Yeah.

ST:  And I think that there's-, there's definitely a view that, like, in reality, Ether's not behaving like a security today, but it did then, so it raises the interesting question of, if it did then, are we holding out for the statute of limitations to say that any person that has done that should not be subject to laws, or that were above the law? Or are we saying, "Well, it's behaving differently, so we should take that in to account"? Or are we saying, "Well, it's behaving differently now, but we should probably go and look at how we remediate that, and how we put appropriate paperwork in place, to provide the right disclosures"? Because that last thing shows a sign of maturity that I think would be welcomed by many.

SK:  I think it goes back to that point that, you know, we were making earlier, that there are many different types of token, you can't possibly be-, I'm calling them "tokens", but crypto assets, cryptocurrencies, whatever you want to call them, that cannot all be lumped-, you know, swept under the rug, or put in the same bin, or whatever you want to-, you know, whatever you want to call it, you've got-, you've got to examine each one individually. And that is a pain, because regulators really don't want to have to sit down and talk to the guys at Bitcoin, if they could find them, the guys at Ripple, the guys at Ethereum, and, sort of, say, "Well, okay, because of this, you're going to have to be X, but that's going to be an XY, and they're going to be an X and a half Y," but I think, actually, that's what's got to happen, at this point, with these-, with these big organisations, anyway.

ST:  Well, and the reality is, in Singapore, the Monetary Authority of Singapore have come out and said most of these things are not securities, even if in the US they would qualify as them.

SK:  Mm.

ST:  In Japan, they've said, "Well, actually, these things fall within the Virtual Currencies Law, so you need to follow the rules for the Virtual Currencies Law." So, if-, and the reality is, these things are global.

SK:  Mm.

ST:  They are decentralised. They can be traded anywhere, like a lump of gold. So, the really difficult thing is, whilst you are trying to make these things backwardly compatible with an existing set of rules, you have an incredibly complicated web of existing rules, and overworked regulators, who would rather the industry got itself together, and figured out what that looked like, and I think, standard setting bodies, at the global level, have started to pay attention to this. We saw, coming out of the last G20 summit, in Buenos Aires, Mark Carney, the Chair of the FSB, and the Governor of the Bank of England, had come out and said, "Look, by July, the G20 and the finance ministries will report back on how we start to harmonise some of these rules globally." 

SK:  And I think the point is, as well, we've seen this with, as you say, the Monetary Authority of Singapore, and, um, the FCA. They are overworked, they are really tired, and if you can come to them with a sensible plan, they'll almost certainly listen to you. 

ST:  Well, and, let's be fair, in the UK, there have been people that have issued, so I think it's Nivaura, and I know listeners will be sick of me mentioning this, but have issued a regulated security on a permissionless blockchain. It can be done. Like, you can get-, you can get it, it's just you've got to jump through a lot of hoops, and you've got to work really hard to do it, so, how do you make that path easier for innovators and software developers to-, because, the reason-, Wozniak and Jobs were able to start a company in their garage. Zuckerberg was able to start a company in the garage-, oh no, in a college room dorm. Issuing a token for it to really reach its potential has to get to that level of simplicity, and yet that doesn't necessarily work, although there is a flip argument that says, "Well, if you're raising 30 million, you can probably afford some lawyers."

PB:  The simplicity shouldn't be regulators putting-, like, just creating buckets for these assets to fall in to, should it? But it shouldn't be looked at individually. There-, there has to be some sort of meeting in the middle. What that eventually is, I'm not too sure-,

ST:  Sweeping everything in to existing buckets is probably not optimal, but what's really interesting is, if you listen to-, or if you read some of Jay Clayton's recent-, so, the-, uh, I think he's the Governor, is his official title, of the SEC, or he might be the Chair, I forget their-, their exact titles. He's been sort of saying that, "Look, we recognise that there are things that behave like a token, for using a laundromat, and where things behave like a token for using a laundromat, then there's probably things we should think about in terms of consumer protection, but that's not a security." But the reality is, how most of these things have been created don't look like that. So, I mean, this stuff is hard, and it'll come through. There are-, you mentioned, I think, briefly there, Petrit, that there is an article from the-, the never shy Preston Byrne, on his prestonbyrne.com blog, on why Ether is a security, and he's been saying this for four or five years, so I think he's-, he's quite pleased with himself, that-, that the world is starting to come around to that, but, as we mentioned, it started life looking like one. The reality is, now it doesn't look like one, for the most part, so I think there has to be some sort of score draw there, it-, it's not going to be a game of absolutes.

PB:  What you can pick up from that article, as well, is how can anything be truly decentralised, if one party, or a few people, own such a significant chunk of the market cap, or whatever? We see that with Ripple, you know, the company owning that much XRP, and at the beginning of Ethereum's lifetime, a few people owning that much Eth.

SK:  I think then you-, then what you do is you put rules in to effect, about the use, rather than the ownership, or the use of it. So, if you-, if it is proportional taxation, or proportional regulation, if you own, like, then that significant proportion, then you are liable for a significant proportion of the rules and regulations, or tax, or whatever it is. So-, so that's the way you'd do it, you'd use proportional regulation, but-, I would not want to be writing those rules.

[Laughter]

ST:  Nuh-uh! Alright, next story comes from CNBC.com. Apparently, Nasdaq is open to becoming a cryptocurrency exchange, the CEO says. "Once regulation is smoothed out, and the space matures, Nasdaq would consider becoming a digital currency exchange." Um. The quote here is, "If we do look at it and say, 'it's time, people are ready for a more regulated market,' for something that provides a fair experience for investors. I believe that digital currencies will continue to persist and it's just a matter of how long it will take for that space to mature, once you look at it and say, 'do we want to provide a regulated market for this?' Certainly Nasdaq would consider it."

SK:  Yeah, I mean, I think this goes back to the conversation we were having about institutional banks. Of course they'd consider it-,

ST:  Mm-hm.

SK:  Why wouldn't they? Do you know what I mean? It's kind of-, they can see that there's money to be made, as Binance have proved. They can see that people want it. Nasdaq is actually-, you know, they invest quite a lot in to blockchain and Bitcoin startups. They're-, Nasdaq is very interested in blockchain-based infrastructure, definitely, they've-, 

ST:  Mm.

SK:  I can't think, off the top of my head, the name of any, but they have invested in-,

ST:  Chain.com.

SK:  Yeah, and-, and-, and many others, and that are actually-, you know, they're looking at it from a perspective of, "Well, how do we make our own capital markets run more efficiently?"

ST:  Yeah-,

SK:  But, in so doing, as we said about, you know, Barclays and Goldman, they're almost certainly learning from those startups, and seeing, "Okay, well, maybe there's other ways we can integrate this in to our portfolio."

ST:  I always wonder, though, is, like, making what we used to have go faster, um, the right way to learn? Where you can-, if you think about these assets, the experimentation that's happening within these assets, as they're maturing, might be the fastest place to learn what the future might look like. And, so, for example, if-, when the carbon, uh, I think the carbon bond, or carbon trading, was-, was brought new, imagine if that was-, hadn't happened yet, and was happening today. Would you do that, put that on existing infrastructure? Or would you look to blockchain and DLT? And so this is one of those examples where you can say, "Well, why not envision the future with new asset classes that are maturing, rather than always taking the old asset classes?" But then the size of the market thing is still there, and the problem's still there.

SK:  I mean, it's something that I feel really passionately about, is like, when you're using technology, you shouldn't be looking at-, this is where we're getting back in to digitisation versus digitalisation argument, isn't it, but when you're looking at technology, you shouldn't just be looking at it as a way to make, you know, as you said, old things move faster, or be more efficient, you should be looking at going right back to the beginning, and thinking, "Okay, how can we reinvent this set of processes? How can we remove the steps? How can we circumvent that?" or, "How can we simply just do things differently?" I would argue that Nasdaq can still take bits from watching their investments, and use those and think, "Okay, well, we've got resources, we've got a brand, we've got all this learning. Maybe we can put something new together here."

ST:  I was talking to a guy who works for, uh, a bank, at a-, at a roundtable, I think last week, and he was saying that, often, the temptation when a new technology comes along, is to use the way we used to do things, with the new tech, and then we struggle to figure out why we're not getting the benefits. So, the example was, when the first iron bridges were being built, the rivets and the joints they used were the same ones you would use if you were using wood. Of course, iron was capable of a lot more from a tension strength standpoint than wood is capable of, but we didn't know what are the joints to build, like, we just didn't have that knowledge. So, that change in mindset, and change of what the technology is capable of, like, if you're trying to do it the way you used to do it, and then expecting different results, it doesn't matter that you're using a different tech. You have to do it differently, and I think that's the harder mindset shift, and the business model shift.

SK:  Well, that's the-, that's the old saying, isn't it? What's the definition of madness? Doing the same thing, over and over again [laughter] expecting different results, and just because you're doing it with blockchain rather than, you know, a-, a shared database, or whatever, in the background, doesn't necessarily mean anything different.

PB:  Yeah, it's certainly really interesting, isn't it? I think you don't necessarily need to transform your money to just create from the bottom up, right?

ST:  Oh, ASX might disagree with you!

[Laughter]

ST:  Story here from Finextra, the Australian Securities Exchange has set a timetable for switching to distributed ledger. "They'll begin the switch from their Chess post-trade settlement system," which I think was built in 1994, "To a new blockchain-based platform, provided by Digital Asset, between the-," and famously, the CEO of Digital Asset is, of course, Blythe Masters, "Between the fourth quarter of 2020 and the first quarter of 2021." Very specific. So, "ASX says that approximately 50 new business features will be made available over the new platform in areas such as account structures and information; pre-settlement; settlement; and corporate action processes." Wow. Okay. So, there's a lot to unpack there-,

SK:  [Laughter].

ST:  But what I-, what I like about this is, whilst it's doing a lot of the old stuff, it is sort of in that middle ground, right? I mean, corporate actions, for those of you who've never come across the term, this is when a company will announce it's had a change of Chairman, or change at the board, or they're doing a dividend, or their annual report. Just, a corporate did a thing that wasn't a trade-,

SK:  It's legal documentation, basically.

ST:  That everybody needs to know. Now, you cannot imagine the amount of different databases that need to register that, and reconcile that, and have it be the same around the world. It is agonising for most people that work in capital markets, just dealing with corporate actions, and it's considered stupid, because it should-, it could be as simple as, like, "That thing happened. We can all see that that thing happened. Why can't we agree that that thing happened?" It's made for blockchain and DLT surely-,

SK:  Yeah-,

ST:  But, in order to get the benefits of that, you probably need to start thinking about, "Well, yeah, but how do we plug in to the blockchain? How does our existing infrastructure work?" which is why, having a central party, weirdly, like the ASX, is really valuable for getting that value.

SK:  Yeah, so this is a really interesting story, that I've been following, like, since we first heard about it, and the thing that you must be aware of is that ASX is a minority stakeholder in Digital Asset Holdings-,

ST:  Yup.

SK:  They own a chunk of it. So, they have a vested interest in getting this up and off the ground. That doesn't mean it won't work, but you've got to understand that, like, where other-, they've had so many hurdles to get to this point, you know, they had stakeholder pushback, they had pushback from the Australian government, they had pushback from all sorts of people, and they have-, it's taken them two years to get to this point, where they said, "We will do it," not because they hadn't decided in their head, this is the technology they wanted to use, but because they had to go over those hurdles, and through those hoops, and whatever else. Um-,

ST:  But I can imagine that, at some point, there was definitely a view, at the silver-haired level, where you-, you know, "We're going to use some of this blockchain stuff," and governmental people start going, "Oh! The Bitcoin thing!"

[Laughter]

ST:  "Argh! We can't have that!" Uh, and then the reality of this is being-, it's actually a very sober, very well-thought-through upgrade to infrastructure-,

SK:  Yeah.

ST:  That is using something that I would barely describe as a blockchain, in fact, they don't, they're using the term distributed ledger, because if you look at what the core, kind of, white papers that have come out from Digital Asset have, they talk about their global synchronisation log, and they talk about DAML, Digital Asset Markup Language. This is the idea that there's a way of representing legal agreements in software, and then having those legal agreements, so the clauses in those legal agreements, be managed by that software, between everybody.

SK:  It's more, kind of, the-, I suppose the smart contract end of it, isn't it? I think the point that I was going to make is that, if they can get this up and off the ground, then nobody else has an excuse to say, "No, we won't consider it."

ST:  Mm-hm.

SK:  So it-, you know, for all those exchanges looking to replatform, and, you know, a lot of them will have to replatform, just to keep up, because the-, the speed at which the capital markets industry is moving has-, it's always been tech savvy, it's always moved fast, and it-, that's not going to stop. If ASX can get this up and running, and it working, then-,

ST:  Mm.

SK:  They have a model for other people to use.

PB:  That's exactly what I was going to say. If they can successfully create this infrastructure, then that's going to inspire other people to do it, right? So-,

ST:  I would imagine so, and-, and look, some of the things that organisations in the clearing side of financial services and cap markets, and the FMIs, financial market infrastructures, are looking at, is how do we get to the point where a bank, or anybody on the buy or the sell side, who has to park collateral, and collateral's expensive, so I've got to take bonds, and I've got to park it with you, I've got to park this collateral at this FMI, but in theory, I should be able-, if I'm not doing anything there, I should be able to move it from the ASX to the DTCC, to the London Clearing House. I should be able to move it between them. Why can't I have it at multiple places? Because-, why do I need to duplicate it? It's doing the same thing, at different times, why can't I just move it around where I need to? That's extremely difficult to do. If they all move in this direction, you could potentially have collateral on multiple venues, and it was actually our very own Colin G Platt, G-Sass, himself, who suggested that idea to me, early on, so, shout out Colin G Platt, near your field. 

Alright, next story, uh, it comes from thenextweb.com. University College London, also known as UCL, have severed their ties with the IOTA Foundation. The statement read, "The UCL Centre for Blockchain Technologies is no longer associated with the IOTA Foundation." I don't know why I'm putting on a weird voice. "In relation to recent news report, we reaffirm our support for open security research, as a prerequisite for understanding the assurances provided by any blockchain technology. It is appropriate for security researchers to be subject to threats of legal action-,"

SK:  Inappropriate.

ST:  "It is Inappropriate for security researchers to be subject to threats of legal action for disclosing their result."

SK:  Yeah, I mean, you might want to-, the background here, I'm sure we've done the background here, haven't we? So-,

ST:  Uh, no I don't think we have-,

SK:  Okay.

ST:  So, we haven't covered IOTA much.

SK:  The thing about IOTA is that they basically-, MIT basically audited them, and found some bugs, and said, "Here are some bugs in your system," at the absolutely most basic level, and IOTA went, "No there aren't! You can't say that! We're going to sue you!"

ST:  Mm.

SK:  And MIT went, "Wait, what? What? Like, we're-, we're an audit-, we were auditing you, that's what audit is-,"

ST:  Yes.

SK:  Like, you-, you-, kind of, you work out what the problems are, and then you feed it back, and then the company-, you know, then there's a negotiation period, where the company can say, like, "Okay, that's fine, can you give us four weeks, so we can, like, fix it, and then you can tell everybody-,"

ST:  Mm.

SK:  "Because we don't want to, you know, share a vulnerability." But, I mean, I'll leave Pet to read out the statement from the IOTA Co-Founder, because this man is very, very angry, and I would say not entirely rational?

PB:  Well, I mean, I was just going to say that IOTA actually distanced themselves from their Head Cryptographer, which is the guy-,

SK:  Okay.

PB:  That wanted to, like, sue the people at MIT, which is quite strange, right? They wanted to distance themselves from the guy who helped create a lot of the code that was being audited [laughter]. Um, and, you know, one of the Co-Founders at IOTA said, "Making such a drastic statement and decision based on falsehoods on a Friday night, when no one can reach the people involved, is not protocol for a prestigious university or any of its affiliates." So, hitting quite hard on UCL.

SK:  So, UCL decided to release a statement on a Friday night, so, what, nobody could hold them to account for it? like, that-, that feels slightly unlikely, to me-,

ST:  No, that-, that feels very unlikely, which is a-, I think all of this drama is a bit of a shame, because IOTA, on the face of it, with their tangle concept, is a potentially very scalable way of reaching eventual consistency. In other words, getting a bunch of small devices, that don't necessarily know each other, to reconcile and to agree each other the state of transactions. In other words, it could be a way of making IoT a thing. This could-, it's really, really exciting, and academics get very excited by IOTA, for that reason. It's scalable, in theory, it's fast, in theory, and the-, therefore, the interest from academia should be something we welcome. And, of course, they're going to point out holes in it, but they're not doing it to kill the thing, they're doing it so that people fix it, and-,

SK:  That's how academia works! I mean, the interesting thing to me here is, as you say, it's talking about-, if we're talking about maturity, and we're talking about scalability, and we're talking about institutions wanting to be involved, you have to behave like a grown up. Like, if you want to be accepted as part of that world, and you want those guys to-,

ST:  Mm.

SK:  To take you seriously, whether it's fair or not is not the point, you are going to have to, like, play by their rules.

ST:  Imagine if they said, "We're saddened that this statement happened over the weekend, and we hadn't had a chance to react. We'll be looking in to this, and we look forward to collaborating with those institutions to close these gaps. We welcome the contribution of academia." Imagine the difference-,

SK:  Yeah.

ST:  That statement makes, everybody would go, "Oh, that was smart. Woo-hoo-,"

SK:  Yeah. It seems reasonable. Yeah.

ST:  I mean, it wouldn't have made this headline, but then IOTA's not exactly unheard of, I think it's one of the top ten on crypto market cap, or thereabouts. This is one of the more widely held crypto assets, it's one that's considered by academia to be well-known and exciting. I think we just do want to see these foundations start to-, start to reach that maturity.

PB:  Well, I mean, Colin interviewed Charles Hoskinson, a couple of episodes ago, and he was talking about how the Cardano Foundation actually welcome auditors, and they want researchers to work with them, because if they pass those tests, or if they find bugs, and then they can actually fix them, then it gives the-, the whole foundation and project more credibility, which is what you want, right? You want to grow the brand, and also the credibility of the brand. So, how do you do that by consistently arguing with researchers, trying to sue people at MIT, and, like, just batting away every other cryptographer that comes at you? It's not really the right way to go about things.

SK:  Yeah, I mean that-, sorry, I've just remembered that's where I'd heard the story about IOTA, and, um-, and, you know, what the pushback was, and I think his point was absolutely sound, as well. Like, you can't just go, "No! You're wrong!" when somebody points out a mistake [laughter]. Like, that's not how the world should work.

ST:  It's not unlike engineers to-, to react with, uh, with some egotism, but I think the maturity cycle is what everybody's looking for, going back to the-, the Nasdaq comments, everybody's looking for this space to mature. It feels like, on the Bitcoin end, it's sort of getting there. Weirdly, even though Bitcoin, itself, its governance is incredibly slow, and there's all these arguments about how to upgrade Bitcoin, and it's forking all over the place, at least it's understood what that process looks like, and at least it's understood how it fits in to most regulatory markets around the world, and I suspect we'll get there with these. And, you know, IOTA, to my mind, still remains an incredibly compelling concept, incredibly compelling idea, and I hope they can-, uh, they can continue to grow, because it could be really exciting, if they did. 

And so, the last story we have today comes from SWJ.com, and apparently, Switzerland wants to be the world capital of cryptocurrency, and I'm going to let Sarah read this one out, because of the amount of work that went in to pronunciation.

SK:  So, this is-, the first point here is, it's not a new story, like, this has been around for a while, but it's to do with the canton, which is like a county, or province, of a place called Zug, I believe I'm saying that right, but I'm sure somebody will tell me that's wrong, which only has a population of around 120,000, but it has emerged as Switzerland's-, as the heart of Switzerland's crypto valley, and it's literally-, a crypto valley is an organisation, or a conglomerate, that work together to actually push and promote-,

ST:  It's an industry members' association of organisations in crypto assets, and/or that serve crypto assets businesses.

SK:  Yeah, and-, and they've long been pushing for this idea that, you know, they want to be the centre of the cryptocurrency industry. You know, you've bee able to pay part of your taxes, part of your income tax, I think it is, you've been able to pay for, like, your council bill, your council tax bill, in Bitcoin, in Zug, for a while. So, I-, fine, yeah, I mean, they're going along with it, you know, the Swiss regulator is also going along with it, they've been-, they've allowed quite a few things to happen, so we talked about Falcon Bank, earlier, you know, that's a Swiss-based bank-,

ST:  Mm.

SK:  I think there-, there's-, there's two things here. I mean, one is, like, Switzerland and Japan are kind of battling it out between them, to get the best regulatory framework in place, they've taken different routes to it. Um. You know, Switzerland is a place that's kind of known for knowing how to handle money-,

ST:  And Bank Secrecy Acts, and god knows what else, and-,

SK:  Yeah, I mean they-,

ST:  And laws.

SK:  That's the other thing I was going to say, was that they already kind of have a legal system that's possibly more suited to a slightly different way of doing things. That was diplomatic. [Laughter].

ST:  Yeah, no, it was. Om the one hand, when you listen to, uh, the CEO of FINMA describe their approach and the work they've done, they've actually been really diligent in understanding what crypto assets are, they've been really-, like, if you read the FINMA paper in to how they're defining crypto assets, and how you-, how they're regulating them, there are-, there's some belts and braces gone on here, they've understood it, and they've got close to it. I like this approach being described as, "Do your best, and if you mess up, we'll work with you-,"

SK:  Yeah.

ST:  I do think that there is a point at which regulators have started to embrace that, but hadn't really embraced it for crypto assets, and now could-,

SK:  Mm.

ST:  There's obvious examples where there are clear abuses, where that doesn't apply, but what we want to see is that this moves away from being, you know, just-, I think it was an accident of history that Switzerland both had their track record, in terms of being capable of managing large amounts of money for privately wealthy individuals, but they also had something called a Stiftung, which is a-, a foundation governance model, that worked in which, you could acquire different types of assets, and have a board that managed those assets, based out of Zug, which would have almost no tax implications. So, that, again, attracted, originally the Ethereum Foundation, and then a whole bunch of people followed that path.

SK:  It was Tezos who did the similar thing, I know that they're mired in all sorts of controversy these days, but that was a similar idea, that-, that was a similar thing, that they did, wasn't it?

ST:  And I think we are now seeing a variety of that, but in and around crypto valley, there are a lot of legitimate businesses, and a lot of market-leading thought that's coming out, and arguably, it is the-, the number one place in the world, with the largest concentration of people, and technologists, and organisations and foundations, so you-, you've got to say, it's kind of worked. There is an advantage to trying to legitimise a new and emerging market area, but, you know, what can we learn from it?

SK:  I mean, if you're-, what I would say is, there's probably quite a lot that can be learned from it, I would also say it's a very different set of circumstances, if you're a very small, very rich country, you know, with a particular market, a particular audience, and, you know, as we were saying, Switzerland already has a track history of making it very easy for businesses and corporations to set themselves up, the tax regime is very friendly, you know, and particularly in the area of finance. So, they had a head start, but I think, you know, they're doing a lot of the groundwork, and other people can probably-, can probably take things from what they end up implementing.

ST:  Small country, no longer in Europe, global financial centre, and known for having-,

SK:  Mm! [Laughter].

ST:  Good tax incentives for companies. Hm! You could see why countries would want to compete for this area, if it can be legitimised, and I think we'll see more of that.

PB:  Well, that's what I was going to say. Whoever does become the "world capital of cryptocurrency", and I'm doing, like, air quotes here, is going to stand to gain a lot, right? Whoever can regulate digital assets, and in "the best way", again, with air quotes, because no one knows how to do that yet-,

ST:  It-, it's in a global market, but do we want to always follow it, in which there is no taxation, and there are havens? Or do we want a balanced approach, in which this is a bona fide framework, uh, for operating at the global level? And my fear, and I don't know if this is-, is warranted or not, but my fear is that some of the work around crypto valley hasn't helped with that. Some will, and there's some very clear-, and I want to be clear, there are some very legitimate-looking organisations that come out of that space, so I don't wish to insult any of them, but the-, the optics still feel like they need work, to me, anyway.

PB:  I mean, I also like the, "Do your best. If you mess up, we'll work with you," kind of mantra, but, like, to what extent can you mess up? [Laughter]. Which is something they probably didn't specify-,

[Laughter]

SK:  Yeah, I mean-, I mean the question there is always going to be, and as I-, I said this-, I've said this many times, to people who've worked for me over the years. "Regulators are not your friends." They're not out to, like, protect you [laughter] in case something goes wrong. They say they are-,

ST:  mm.

SK:  And that is-, but that is only one element of it. So, the question is, they have to balance, how much is an individual going to get hurt, with how much are we going to stifle an industry, so-,

ST:  But they're also not your enemy, right, so-,

SK:  No, no. No.

ST:  They have information, and they can help you get to the point where you have a-, a seal of legitimacy, i.e. being regulated, that can be very helpful for-, for your business.

SK:  Yeah, no, sorry, just to clarify the point there, I meant with consumers.

ST:  Mm.

SK:  So, the question is, everybody says, you know, "Somebody's going to get hurt big time, and then the regulators are going to act," but they're not necessarily going to act because the individual investors have been hurt big time. They're going to act because of what implications that would have on the stability of the country's financial system, or in fact, you know, their own reputations.

ST:  Mm.

SK:  So, it's just a case of be aware that there's a balance that those regulators all have to strike, every single one of them, I will repeat the sentence, I wouldn't want to be writing those rules [laughter].

ST:  Mm. Tough place to be. Stories we did not have time to cover this week, one from CoinDesk, that I encourage you to check out, Barclays and Goldman champion a new standard for blockchain derivatives called the Common Domain Model, built by the International Swaps and Derivatives Association. The headline was actually much more catchy than that, but I just thought I'd-, 

[Laughter]

ST:  They champion the ISDA standard for blockchain derivatives, and so, standards in capital markets are critical, so that's actually one of those sorts of headlines that's a bit of a dog whistle for most people, it's like, "Oh, what was that? I didn't really hear anything," but for those that know what they're doing, cap markets, uh, it's kind of a significant movement, and I know a lot of work's gone on, from a lot of people, to get that done. A story from QZ.com, "Tencent's latest game merges Crypto Kitties and Pokémon Go," apparently they're using a blockchain behind the scene, to have unique, collectible animals of some sort, with-,

SK:  It was only a matter of time.

ST:  Yeah, no, and I don't-, a few other people had had this idea, I'm sure, but Tencent doing games to spread their network, that's definitely happening with PlayerUnknown's Battlegrounds, and-, and other things, so, you know, will they see that as a way to-, to, kind of, grow their market share?

PB:  Go on, Tencent!

ST:  [Laughter]. And, last one, CNBC.com, "Pitbull is turning to blockchain in hopes of saving the music industry."

PB:  He's a cool guy. I don't really know what to say-, say about Pitbull, uh, talking about blockchain. You do often speak about how there could be a use case for blockchain in industries like music, and-,

ST:  Oh, the music industry is ripe for it.

PB:  Content creators, as well, who aren't-,

ST:  Let's just think about it from a couple of angles, right? First of all, what is music? It is a digital file that is owned by-, is created by a person, so it's-, it's intellectual property. That intellectual property is unique, right? Somebody has created a unique thing. The problem with the digital world is, we never have digital uniqueness. So, if I send you an MP3, you have an MP3and I have an MP3. If you forward it to your friend, now three people do, and if you forward it on-, so, the issue of-, of digital uniqueness is being solved. It was solved by Bitcoin, but it was solved by the humble Crypto Kitty-,

[Laughter]

ST:  And so, as daft as the humble Crypto Kitty seems, if you think about it, in terms of, there is only one of these songs, like the Wu-Tang album, for instance, you could have a unique collectible of an album, and be the only person in the world that had that album, or have one of 100.

PB:  Mm.

ST:  That has real value, in the music industry.

SK:  Yeah, I mean, it already has, you know, when people were buying limited edition LP covers, like, you've already seen that model work.

ST:  It's-, it's well known. And then the second thing is, um, Imogen Heap has been-, has her own project, called Mycelia, so Imogen Heap is a recording artist, I think triple-platinum, done well for herself, and tells the story of, she booked a big advertising deal, I think at the other side of the world, um, I can't remember if it was Australasia or somewhere, and, uh, had then, sort of, put a deposit on a house, was really excited to move in to a house, was expecting the monies to come in, from having booked this advertising deal, and found herself in a great deal of financial trouble, because two years later, she hadn't been paid. So, if you think, like, two days, or six weeks, for the banking system, is bad, like, the music industry is just atrocious, because of the layers of intermediaries that send each other bits of paper, and take 90 days to send each other the next bit of paper, before they can send the next bit of paper. Uh, yeah, it's just outrageous.

PB:  I mean, artists don't even make that much money anymore from their music. So, I think this could be a way to rectify that, whether we like it or not.

ST:  I think that we'll-, we'll see a lot in the creation of digital art, and, um, digital assets, generally, or natively-digital assets, assets that are born digital. So, not just music and video game pieces, but also things like software licences. And then, I think about it from a cap markets perspective, I start thinking, "Well, is that a security?" [Laughter].

PB:  [Laughter].

ST:  But also, if it is, is that an opportunity for financial services? So that's where things get really exciting. But anyway, before we give Pitbull's music-industry-saving blockchain any more airtime, let's figure out what the Tweet of the Week is.

[Tweet of the Week jingle]

ST:  This week's Tweet of the Week comes from, is it @Sicarious_, and it reads, "Occasionally, I hear dollar crypto folks talk about finished projects regarding ICOs. 'They raised $25 million and don't even have a finished project yet!' angry emoji. Or, 'Found a gem ICO, they're launching with a finished product,' dollar happy face emoji. I'm here to tell you that finished projects are where dreams go to die." [Laughter].

PB:  Uh-,

SK:  Wow.

PB:  The beauties of a speculative market.

SK:  I mean, but also, like, an ICO is to-, to raise money, right? Like, it's the-, like, you're raising money to do something with it, not to hold on to it. Like-, the-, the whole-, the anger behind this, and the-, the kind of construct is, uh-,

ST:  This is symptomatic of an industry that is looking to abuse not being regulated, and unfortunately, it's behaviour like this that means that the regulators will continue to pay attention, and eventually, it becomes a cat and mouse game, and it becomes-, the cat and mouse game eventually gets pushed so far to the fringes that the liquidity gets stamped out, or it becomes harder and harder to get liquidity in to these markets. So, it-, the-, behaviour like this is, kind of, rife, and it-, and I can see why regulators, kind of, want to-, want to stop it, because who's benefiting from this idea that we're going to make something up, and then we're all going to abuse it, and then somebody's going to be a sucker? Like, do we want that, as a society? I think there are some out there, there are some anarchists who will be like, "Yeah, that's fine, let it go on," but I don't know if that's the majority of public opinion, and therefore, if it's not the majority of public opinion, how are you going to enforce it on the world, and how are you going to make it happen? Because usually, if-, if that's not the case, then the dominant myth wins out.

PB:  I think this tweet was, like, kind of summarising crypto Twitter quite a lot, but, uh, I think it was off the back of all the EOS talk, and whether or not that market cap could outgrow Ethereum, I don't know if you wanted to shed any-, any light on that drama.

ST:  Uh, well, we did interview two of the EOS founders, I think way back on Episode 10, or Episode 11, so do scroll back through iTunes, to hear from, I think Dan Larimer, and some of the guys at EOS, to see what they think of that project, but yes, there's been a lot of hype lately, around EOS, and, of course, EOS was a token that was issued on top of Ethereum, uh, and it's considered a third-gen. So, they issued in ICOs an ERC20, and so you would send Ether to this address, and in return, you would get these EOS tokens. Those EOS tokens were written as a legal contract that was covered-, I think it was Kadhim, in the FT, covered it, and said, "This token does not represent a security, claim, product, consumable, or-," 

SK:  Oh, that one!

ST:  "It has no-, it has no commercial value, and cannot be used, it is entirely useless-," I am-,

SK:  I remember this [laughter].

ST:  I'm paraphrasing. But what they've done is they've built what is being looked at now by people in the blockchain space, from a consensus algorithm standpoint, and from a project standpoint, there's-, there's a great deal of momentum, and people buying in to the technology, I've been talking to a number of folks who say, "Look, the-, I think their distributed proof of stake algorithm is making sense in terms of pragmatics, they've gone for some-," this is me paraphrasing, it's not me saying this, and so they've gone for something whereby you select around about 20 to 21 nodes to perform a proof of stake consensus, which gives you a lot more scalability, and they're saying, from experience, that any more than that isn't practical, and you always have to balance, "How many countries around the world do I need a node in? And how many places can I-, do I need that?" to have the reality of, and pragmatic version of, decentralisation, in other words, nobody-, it's not controllable as a network, no-, no-, there can be no central authority, which starts to look a bit like what we have with DNS and the internet, so there's definitely people, kind of, coming to a new level of building distributed systems, and these third-gen platforms are really gaining traction at the moment.

Alrighty, that does us for this week. Before we go, Petrit, do you have a Twitter account, that people can find you at, to give you, uh-, give you all kinds of abuse-,

PB:  I do, but it-, it's very Year 7. It's @Petrit996.

ST:  Wow. That is-, that is like a-, a 7th Grade vibe there. I'm feeling that. Um. Sarah, how about yourself?

SK:  As always, I am on @SarahKocianski.

ST:  Brilliant. Thank you both for being on the show, and thank you to the production team. So, I have to thank Laura Watkins, our amazing producer, and we have Terence, our Editor, um, and Assistant Producer, Petrit, who helped to put together the show notes and performed on the show-,

PB:  Thank you [laughter].

SK:  11FS, the company that brings you this podcast, are a challenger agency who help banks, asset managers, FMIs, and anyone with a challenge in blockchain or DLT, to achieve more. If you want to understand how to commercialise blockchain projects, or just have a speaker for your next event, we hope that you'll get in touch. Hit up our website, 11FS.com to find out more.

ST:  Alrighty. Thank you very much for listening. A reminder, if you like what you heard, please, please subscribe to our podcast, leave us a review on iTunes, those reviews help us so, so much, and spread the word. Tell your friends and colleagues to listen, too. We'll have more Blockchain Insider for you next week. Goodbye. 


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