Crypto

John Bocker – FFL Consultants Transcripts

John Bocker is the Managing Director and co-founder of FFL Consultants

Note: This transcript was automatically generated by artificial intelligence (AI) and therefore typos may be present.

Rob McNealy – RobMcNealy.com
Hey folks Rob McNealy here. And today we’re talking to John Bocker. He is the co founder of FFL Consultants out of Colorado, and they specialize in helping the gun industry actually be compliant. So, John, how are you today?

John Bocker – FFLConsultants.com
Great, Rob. Hey, thanks for inviting me.

Rob McNealy – RobMcNealy.com
Well, you know, I appreciate talking to you. I know you’re super, super busy, and especially with the state of the gun economy right now, it seems a little crazy. But I think we can jump into that in a second. But before we get into that, tell me a little bit about you. How did you get into this space? And what is an ffl? consultant? And what does an ffl consultant do?

John Bocker – FFLConsultants.com
Well, if anyone’s inside of the firearms industry, everyone knows the ffl is the Federal Firearms license that the ATF actually issues to gun dealers and manufacturers and distributors inside the United States to actually manage and manufacture and sell firearms. As I tell our clients for the government, the government is not allowed to do that and enter into commerce with firearms, so a licensed gun dealers, around the Americans, you do that for them. So we got into it, JC is a john clock, my partner in this business, we’ve been working with the National Shooting Sports Foundation for about eight years. And typically, we would be at SHOT Show and talking to audiences of about 200 at a time about different things they can do to secure and protect their guns against burglary, and how to deal with how to deal with straw sales and how to maintain that compliance so that they, as we say, stay out of hot water with the ATF just do things right. And one thing led to another and we realized there was a whole nother you know, arena of gun dealers out there beyond the nssf members. So we we started ffl consultants about three years ago, and now We service the entire firearms industry.

Rob McNealy – RobMcNealy.com
So how did you get so experienced with the compliance of this sector? It sounds like it’s pretty involved.

John Bocker – FFLConsultants.com
And I get that question a lot so that everyone wants to know, where do you go to school for this? Well, you really don’t go to school, you can come into this business a couple of different ways. You can come in through the government sector, which is working for the ATF for years and working in and around the the regulatory compliance that the ATF imposes and the government imposes. Or you can come from the private sector. And that’s what JC and I did. At one time, I ran compliance for galleon sporting goods. And at any given time, we had 85,000 firearms in stock. We saw over 300,000 firearms a year. I mean, it was a it was a significant company, and that company was purchased by Dick’s Sporting Goods years ago. And then JC did this basically the same thing for sport, the Sports Authority for many, many years. So we’re very versed in the everything from importation to license acquisition, to compliance, security, sales and operations and inventory control. And, you know, we’ve JC and I have both been in the risk management business for companies since college. So JC has a little bit of military and law enforcement background. I’ve been in the private sector for about 20 2030 years, just maintaining compliance for companies and as we say, keeping them out of trouble. So it all evolved into this nssf program. Like I said, about eight years ago, were asked to start that up for them, and just turned into my full time gig.

Rob McNealy – RobMcNealy.com
So what are the kind of problems that you see, or at least the common problems that a lot of you know, new ffl? Or even maybe some of the old ones? What do you think they where do they start running into that hot water? What are the things that are they doing that they what are the common mistakes they make?

John Bocker – FFLConsultants.com
Every every year the ATF actually puts out a list of the Top 10 issues that they are violations that they see in the management and control the firearms from their auditing programs, and from their results that their field inspectors actually report. But you know, it does change by year. And we see it more so recently in not only demographic but the startup ffl versus, you know, 20 year ffl. And but Rob dancy a question I want to say it probably comes down to training and turnover in every ffl. The laws don’t change that much in the forms, you know, the changing this form this year, the forms changing and as of November 1, but the 40 form 4473 which is the firearm transfer record. That doesn’t really change but once every four years if and if it gets revised and if there’s reason for it to be changed, because it’s a major overhaul a major I want to say process. For every gun dealer to convert to a new form, and train that folks, but what we see is newer gun dealers having a biggest struggle getting up and running, and understanding the very complex, what we call the ffl. guidebook issued by the ATF, it’s 263 pages of laws, regulations, and statutes that, you know, new, a person new in the business has to absorb, digest, understand, and then apply. And there’s little nuances to do. And each one of those right and wrong, there’s a lot of exceptions to the rules, they have to, you know, understand and possibly call your ATF agent about, or just continue reading and asking, you know, veteran ffl, or someone like us, you know, how do I do this? So we always say, you know, your first place to start is with the ATF. But if you don’t want to call the ATF and ask a question, that’s, that’s what the nssf and ffl ffl consultants is all about. We’re there to answer the question, we give real answers fast. And that’s what a gun dealer needs, you know, when they’re selling guns and managing inventory,

Rob McNealy – RobMcNealy.com
Is there like a school or like an orientation program offered by the ATF for these new FFLs?

John Bocker – FFLConsultants.com
Not so much any type, of course, or school or, but they do, you know, and that’s where we were actually involved with them as the nssf experts and consultants, we actually were traveling with the ATF and the FBI, every year conducting what we call regional workshops. And I want to say that’s the closest thing to any type of training that the ATF or the FBI in the next division will actually provide. There’s not much if anything available online is not many video or, or training tools online that you would expect from, you know, a perform process such as this. So that’s where we come into, you know, that’s what we’ve started to develop, because we know there’s such a need for that to occur. And it’s the only way really to keep, you know, people on the straight and narrow and doing things right, and getting up and running when they’re new to the business when the new to the business.

Rob McNealy – RobMcNealy.com
So right now, at least from what I’m seeing, it seems like the gun world is a little busy right now?

John Bocker – FFLConsultants.com
That’s an understatement. Yeah, so this is, you know, the fourth going into the fourth quarter of 2020. And we’ve seen more firearm sales in the last six months than we have in, you know, in any in any six month period, actually, in the history since the a test been keeping track since 1968. We’ve had over 8 million firearms sold in since since March of 2020, a stat breaking all records and for a variety of reasons. It’s just not, you know, someone says Well, why? And I say, well, it’s just not COVID. It’s just not the election. It’s just not civil unrest. But I think it’s a combination, depending on where you live and who you are. It’s a combination of a few of those elements that are just, you know, causing people to turn to a firearm for personal safety. And the other interesting fact is this is the first time that we’ve seen such a just an astounding number of first time gun buyers. And when we were getting that information through our dealers or dealer networks and surveys we’ve been conducting, but we’ve seen and it’s a little bit scary because you want training to go along with all those new firearm purchases. But for the first time, we’ve seen an overwhelming number of first time gun buyers, and in states where we haven’t seen high gun sales before.

Rob McNealy – RobMcNealy.com
So with all these guns being sold, it sounds like you know, gun dealers are pretty busy. Do you see a lot of mistakes happening because of that just with like another you know, the paperwork side of things and the inventory management side of things.

John Bocker – FFLConsultants.com
I want to say yes or no. Again, it depends on which who the dealer is how you have someone who’s spiked in business, maybe they were selling 10 guns a week 10 firearms, and now they’re selling 50 to 100. Just because of the run on on firearms and the supply and demand issues. We have firearm dealers we have clients all over the country from Miami, Florida to Seattle, Washington. But we have everything in between and we’re getting calls from the strangest from the strangest gun dealers and the strangest places but the strangest questions. An example would be you know, customers are some states are running out of firearms, basically, high population, low density of gun dealers, you’re gonna sell out pretty fast. So someone who someone who wants a firearm may have to travel 50 to 100, even 200 miles to actually pick to purchase the firearm they want. So we’re getting a lot of out of state purchasing requests and questions about clarification. There’s a lot of state regulations that that supersede the federal regulation. So you know, a gun dealer in Mississippi, for example, might call us with a question about someone from Louisiana or even Georgia coming over to purchase a firearm in this state. And that is restrictions on long guns versus handguns. There’s restrictions on magazine capacity. Types of firearms for certain states. So it’s caused a little bit of confusion. So on the gun purchasing side, we’re seeing a lot of confusion with out of state residents coming into buying it in a different state where they don’t live. So that that just leads to the paperwork, compliance issues. Am I doing paperwork correctly? Am I legally selling his firearm to those other people that aren’t my regular local customers? So we’re getting a lot of those questions. And that’s probably the greatest area where we’re finding compliance issues. Then it was a big because of the overwhelming number of firearms been purchased. You know, it’s put a real strain on the FBI background checks program, which is commonly known as Nix. And there’s one point back in April and even into May, though it delays the firearms of the next verification division of the FBI was, was backlogged maybe two, three, or even four weeks in getting an answer a determination to some of the firearms dealers for customers who are awaiting background checks. And there’s laws in place that say you can transport a firearm anyway. But there’s a lot of dealers who just don’t feel comfortable doing so. Yeah, typically, the law says you can, if the FBI doesn’t get back to you on a background check, you can transfer or sell that gun after three days, three business days. But a lot of gun dealers, you know, are more say, have more loyal to the constitution and safety aspect of selling and transferring guns, they don’t want to transfer a gun just because the law says they can. The law also says they don’t have to. So we were getting a lot of questions back during April and May about you know, what do I do? Do I have to transfer this firearm? Can I can I not transfer it? You know, because I don’t feel comfortable? I want to wait for your firm confirmation that they don’t have any background check problems. You know, and that was a big that we we were getting several calls for that about that question each week. But then we were we’re out visiting. Now, again, we’re doing an in store audit program, Rob, where we actually go into gun dealers. And we basically review all of their past transfers since the last inspection by the ATF just to make sure everything’s correct. And if we find issues, errors, we highlight them for correction. But you know, we’re finding errors all over the place from dates of birth, not correct. The wrong date, you know, you I’m supposed to put a date of birth on my transfer form, but I’m putting an expiration date on my ID was saying, you know, little technical clerical leprechaun, Clara, Clara’s administration error is not that they’re serious major problems with the gun transfer, but the clerical errors on the paperwork, all of those add up to violations with the ATF and they come to visit. So we try to claim that all up before the ATF next visit. So the gun dealer, we say passes with flying colors.

Rob McNealy – RobMcNealy.com
So I, I’ve talked to a lot of gun people and a lot of gun retailers. And there’s a lot of trepidation about the B ATF, in general among a lot of these guys. Do you see out in the field the be ATF being supportive and helpful? Or do you think they’re more adversarial when dealing with retailers?

John Bocker – FFLConsultants.com
Well, this is 2020. So if you asked me this question, 10 years ago, I might give you a different answer. But today, I want to say we were very we work very intimately with the not only Washington bureau, ATF office, folks, but we also deal with all more than 50 regional and local offices around the country, for the ATF. And I want to say that it was probably a change in regime over the last 10 or 15 years with new folks coming on a lot of retirees, you know, taking that option. And I want to say the ATF has a new perspective on support for their for their gun dealers. And I think it’s instead of the old gotcha type of scenario, which you might be referring to, I want to say that predominantly, I find that they all supportive. You know, when you do call the ATF, when I was answering the phone is going to try to give you the right answer or get someone to return your call your inquiry the same day. But they’re they’re a government agency. What I mean by that is they go into state fact versus fiction and eliminate opinion and not offer advice, but they will tell you where to go to find an answer. Make your own determination or interpretation of the law. And that’s that’s the I want to say that the gray area that we still find. It’s not like you can call the ATF office and ask a question and get advice. You can get an answer a firm answer based on statute, something that’s in writing something that’s a law. They’ll refer you to a process or procedure that’s already documented and issued publicly. But beyond that, you got to get to rely on your instincts, your opinions, your lawyers, your consultants, your sisters, your support team, your colleagues, maybe you’re part of a buying group where there’s a lot of ffl compensation. That’s the tough part is who do Who do you go to when you, first of all don’t want to go to the ATF. And second of all, you want more than just, you know, a black and white answer. That’s, that’s where we find a lot of our, our support being administered.

Rob McNealy – RobMcNealy.com
So with you with ffl consultants, where would your advice and maybe where would an attorney’s advice pick up from there? How do you work with that?

John Bocker – FFLConsultants.com
Great question. Great question. So we are not attorneys. And we stipulate that if you, if you work with us, we tell you that right up front, yeah, we base all of our knowledge on experience, practical experience, work practice, personal experience of being deposed and investigated and inspected, and now being training with the ATF and the FBI next team. You know, we see all sides of that JC and I and our consultants see what we call a 360 view of this business. So we can actually give you advice not only based on the legalities, but based on the business aspect of it profit and loss, you know, revenue generating perspective of what you’re doing as a gun dealer. But we have to, we have to draw a line when it comes to issues and situations of liability. And concern weathers the what if question, what if I do this, what if I do that, you know, we will give you our best experience and advice. But we will partner partner, you as a gun dealer with someone, we have attorneys around the country as well, we work very well with two of the very well known firearms attorney groups that are nationwide. So I pay to also have great relationships with the ATF. But we will with smart enough to stop at a certain point in giving advice, making a determination or proposing a decision and offering it up to one of our partner attorneys. You know, we of course, are insurance insured and bonded and have the right protection in place. But there’s limits to what we what risk we want to take on, especially when that firearm can impact someone else’s life, or be stolen and be involved in a crime, etc. So we want to be a little cautious in that area.

Rob McNealy – RobMcNealy.com
So what do you see what like manufacturers? Do you see the different set of problems? Or do you work with manufacturers very much or more with the retailer side of things?

John Bocker – FFLConsultants.com
Manufacturers, most of the manufacturers have been around a while. So we do our work with new manufacturers standing out helping stand up the business on paying the licensing and insurance. And, you know, set up our operations and basically explain the foundational fundamentals of all of the acquisition and disposition record keeping the marking program, make sure they are congruent with the local ATF team so that they understand what they’re doing from the get go is, is 100% we’d rather spend a lot more a lot more time on the front end of a firearms, new firearms business, such as manufacturer and we have some ammunition manufacturers now we’re dealing with and some fellows who have moved from retail into manufacturing of AR type firearms and manufacturing kits into AR. So we have some minor manufacturing. So that’s what I’m talking about in this prior discussion. But on the line in a larger aspect, will it be browning or others and some of the major distributors, we find that they although we do support them through the National Shooting Sports Foundation, they typically have their own in house team of attorneys, compliance folks, people have been with them probably, you know, 510 15 years and or retired ATF folks who specialized in those areas. So we see less of that on our side. And most of our business and support goes to the retail gun dealer and the firearms range operators.

Rob McNealy – RobMcNealy.com
So it’s interesting politically out there. with things like the government changing its mind. Some things that come to mind would be say, for instance, the the recent bump stock ban signed by you know, Donald Trump, and I don’t know if you saw this even recently, but there is a thing with the honeybadger pistol, it’s a race issue. And it seems like sometimes ETF just shifts course, very, very quickly. What do you see? And how would you recommend that, you know, a retailer or something? How do they respond to that kind of shifting political landscape?

John Bocker – FFLConsultants.com
We don’t see a lot of it, but obviously, I think any of it, you know, and a few of the two issues you mentioned obviously, and prior to that was magazine capacity bands, and different things. They what we do see of it, and I’ve been in this business, basically in the business for about 20 years since I you know, worked directly inside the firearms retail business. But we’ve been what we do on a daily basis, Rob is not only stay connected on a daily basis with the ATF open letters and rulings, but the nssf obviously is very intense. And then legal team and government relations team is very astute to what’s going on when it happens, whether it be at the state level, federal level. But I think I think historically, if you go back and look, there’s always an instance, where that sparks this change in demeanor or change in legislation or these these shoot from the hip restrictions, as we saw with the most recent one. But what we see is, if you go back and look at the incident that sparked the change, in statute, a ruling, whether it be a shooting in Las Vegas, or shooting at a school, or, you know, maybe there was a lawsuit in the news with, you know, a major retailer, and a shooting, that’s what we see, oh, is to be the issues that always catapulted this type of of item, you know, in the news. And the first thing, first of all, is to understand what the issue is. Secondly, if there’s an immediate notification, or if this is just something being spoken about, which most of them are, you know, it takes a long time for a bill to be introduced legislation to actually be approved and, and supported and voted on. And a lot of these bills, you know, Virginia just had an overhaul of their entire channel and less last year, I think they put five or six different new rules in place. The one we’re hearing about most across the country is the red flag laws with whether your firearm can be taken away from you for a variety of reasons. And that’s all based on states and municipality. So there’s a lot of rhetoric out there. But I think it’s important for a gun dealer to know what’s what’s impacting this state, you know, locally, are they in touch with their local legislators? Are they in touch with the senators and congressmen help them with some of the these these new call nuisance bills or legislative changes that are going into effect, you know, you really got to be connected, some of the best gun dealers and biggest gun dealers we deal with are connected, and have a direct line to their support legislator who can help them with some of the local laws. But when the ATF comes out with the honey badger, for example, this is this is making news for the last two or three days, everywhere yet, the the conversation is based on not based on anything specific xx except some wording that was used in a website, where the about a manuscript by the manufacturer that was maybe a little bit and probably could be edited or changed to resolve this issue in the description of the firearm itself. But the firearm itself was approved by the ATF design committee, design division, it was approved for manufacture as an AR pistol. So it’s very confusing to the the firearms industry yesterday and today, seeing all this news about it, and saying, you know, which end is up. So there’s obviously a lot of attorneys working fast, including NSSF, right now to figure out, you know, what the determination truly is before we run out and declare a million million firearms to be 100,000 firearms to be boating illegal in the hands of citizens illegally searches.

Rob McNealy – RobMcNealy.com
So tell me a little bit about that case, specifically, I saw an excerpt from a letter from the, you know, in the ATF, but it didn’t specifically state what the problem was. So I, you know, I don’t know what the actual problem was with the honey badger. What is the the issue they’re having with that?

John Bocker – FFLConsultants.com
Yeah, and I don’t have the I don’t have the website up. But basically, it was determined on their website that because, as I understand it, again, this is I’m not an attorney. As I understand it, this discussed we had this discussion this morning. And, you know, they might they might have built and manufactured and marketed this firearm as a military, they wanted this military, this firearm to be introduced and accepted as a military weapon to replace a very common automatic firing weapon that’s used by the military without mentioning names but long story short, it was not adopted, it was not. It was not adopted to replace the long standing current firearm that was being used. So the website basically advertised as honeybadger. It was an it’s an AR pistols what it is, it’s not fully automatic, it’s semi automatic. But they advertised that as a military weapon built for the military. And I think there’s someone got a hold of that, I don’t know. And they they ran us up, up some flagpole to get some backing behind the argument that it’s not a citizen. It’s not a non licensee, a citizen regulated firearm and it shouldn’t be and should be regulated by the NFA. Now that’s the general discussion that I was involved with as early as this morning. But technically, it has no other reason, because of the design of the firearm to declare to show up our rifle. You know, it’s got an arm brace just like every other approved AR pistol is able to have. It’s got a it’s a magazine fed. It’s a short barrel. But it’s not, it’s not a long gun. And anyway, and it’s not a rifle because the rifle is technically a firearm that has to be shot yet has a permanent shoulder stock on it. And as his shot is you can shoot with two hands. So this is a single hand operated firearm with an arm brace. So technically, it fits the description as as described before and as approved as an AR as a pistol. So this confusion, there’s a lot of confusion, I think within a week or two, there might be some more determination on this, but no one’s running real fast to know we also spending the deal is we are we are talking to or we’re advising him to suspend the sale of that firearm until we hear more about it. If there’s any, there’s some in stock, there are still some available. But the manufacturer has halted production of it and well, you know, it’s Q, I believe it’s in Utah, right. But based in Utah. So, you know, we’ll see what happens with this, but it’s fun to watch.

Rob McNealy – RobMcNealy.com
It’s interesting. And it you know, I understand a lot of people have these braces. So I think that’s why there’s a lot of concern out there. And some of these braces are not cheap, like the maxim defense or the SP tactical braces are they’re pretty proud of them, those products, so it would be I think, devastating if those somehow became, you know, illegal contraband. Now, I mean, there was a lot of bump stocks out there, but I think there’s a whole lot more braces running around than there are bump stocks.

John Bocker – FFLConsultants.com
Well, yeah, and the brace itself is a legal accessory for, you know, a pistol, you know, and, you know, that’s as far as if you go back and look up, if you go to the ATF website and research this, you know, the arm brace is approved by the ATF to be attached to any pistol pistol, and they had an open letter in 2017, that even went on to expand the usage allowance to allow, you know, because there was all this, all these issues about people on YouTube and on video, you know, being shown or being seen using it as a shoulder brace, so to speak. So as long as it’s not designed to be used permanently as a shoulder brace, you know, or substitute stock for the firearm, it’s permitted. So, again, there’s a lot of gray area on this one, because there’s nothing new invented on this as an accessory on us on the honey badger to make it any more than what it is, which is an AR type pistol. That’s, again, my, my experience, in my opinion.

Rob McNealy – RobMcNealy.com
Well, this is why FFLs have to contact a guy like you to explain all that complicated nonsense and, and kind of diluted down and distill it down into something that like I said, Be distilling, not diluting. But distill it down into something simple, like a guy like me can understand all this bureaucracy and craziness.

John Bocker – FFLConsultants.com
Yeah, that’s all one thing, we get some panic calls, you know, when the bump stock ban went into place, and in some places they are bands have gotten into have been introduced and approved and made into law. I mean, I’m in Colorado, in Boulder, Colorado, outlawed ar, ar rifle, as of May 2019, a year over a year ago. And there was a surrender day either register it or move it out of the county if you if you reside in the county, and actually city limits, or register with the place or transfer it out or surrender it. And now, you know we get it. We were getting all these calls primarily from the dealers but also from a gun owners. You know, we’re on our website, wherever websites, so we get all types of calls, whether it be gun dealers, or people looking to buy guns or buying ammunition, or trying to license their firearm or whatever they might be doing. So but the interesting thing in Boulder, Colorado, Colorado, is he had a gun dealers had to worry about and no one else really did. I think and I think out of over 1300 estimated AR type rifles that they had in the county, just about 135 or registered. So it just goes to show that you know, some people are reacting, but some people aren’t. And there’s always gray area for discussion. And then there’s always the question of Well, what’s going to happen if I don’t, you know, so we get in the middle of all of it, you know, we don’t never disclose who would call him that we often call police department or they are the ATF or someone and ask the question on behalf of one of our clients. So someone calling, so it’s fun to be in the middle of it without being exposed, personally as to you know what the issue is, but firearms legislation, the laws, you know, are pretty straightforward on a federal level, it’s the state level you gotta worry about.

Rob McNealy – RobMcNealy.com
It sounds like a lot of fun that they’re not your problems, in other words?

John Bocker – FFLConsultants.com
Yeah, most of them are my problems but but also services that help people with problems. So, you know, on any given day, you know, because of what we’ve done JC and I have been risk managers for large corporations and companies for almost 30 years each. So as I, as I tell people, I basically kept people out of trouble for all that time kept companies out of trouble and CEOs and but we also protected those businesses from from unnecessary liability. And we just didn’t want to incur the problem, you know, do things right, stay out of trouble and have no problems. And you never want an OSHA or the ATF or the IRS coming to peek in, you know, to look at your business, I mean, and it’s just a disruption and distraction when that occurs. And if you doing anything illegal, when they do show up, they’ll come they’ll look and leave. And that’s all goal is to is to help them do. Let’s do that.

Rob McNealy – RobMcNealy.com
So it seems to me like, or at least it sounds like what the retailer is that it seems like paperwork is the problem, like just keeping simple errors to a minimum would impact that a lot.

John Bocker – FFLConsultants.com
Oh, absolutely. And the biggest problem in a gun dealership right now is the human we call it the human factor, its people its turnover, training, a lack of training as new hires, there’s a lot of great software packages out and available now for gun dealers to do a couple things for and if you’ve been to a big box retail, like ballasts Academy, or a sportsman’s warehouse, you know, they’ll have you go up to the computer, laptop or the computer screen and fill out the 4473. And that eliminates the nice thing is it eliminates a lot of the human error issues that can be logged at the time at a transfer Can you know that way, it helps the gun dealer speed up the process. And you know, you don’t have to review the form three or four times you can let the software manage that for you. The software has built in controls and filters to make sure you put a date of birth, that’s that’s all of it an 18 years old for longer. And that’s all it and 21 years old for a handgun, those types of filters are really cool. And make sure every box gets filled in and make sure that you know the alternate the optional boxes are filled in with with hints and why it’s important to do that, like your social security number. It prevents the gun dealer from having an empty box and therefore having mistake itemized for them when they have the next ATF inspection. But then on also on the inventory side is great software for creating the databases for acquisitions and dispositions. And, and in most cases, if you if you buy more sophisticated software package, they’re linked. So if I sell a gun, my inventory is adjusted and a disposition occurs and a timing so good. So we do recommend when we find gun dealers with higher volume of transactions, or excessive training issues to implement some of these software packages. Of course they you know, they’re not free. The ATF does provide some free software that helps. But for the most part, it’s the training process, the paperwork process that is hard to harder to manage. And there’s lots of statutes about how long do I keep my form, how even a denials where it was somebody turned down for a gun transfer, I still have to keep it for five years. And we still get questions on what you know what to do with this paperwork in this type of transaction. Because some of it is just confusing. And not everybody can keep up when they’re running a business. You just can’t keep all of those answers. Top of Mind.

Rob McNealy – RobMcNealy.com
That sounds a little crazy. I mean, we see that a lot in the crypto world to like. And in fact, at least in the gun world, there’s a lot more clarity like we already know what the rules are. In the crypto world, there’s a lot of lack of there’s a lot of I guess cloudiness, there’s not a lot of clarity. it because it’s so new blockchain and cryptocurrencies are such a new thing. Now, and I think that’s one of the things that is hurting the United States right now, a lot of these big crypto projects and blockchain projects are moving to other jurisdictions, because they don’t like the lack of guidance and clarity from the regulatory side from either than the CFTC, the IRS or the SEC in the United States. And so there’s a lot of stress there. And even with us with our test project, we focused very heavily over the last three years that we’ve been around on, you know, making sure we do our best to avoid, you know, regulatory risk as much as possible. But it’s so new and that, you know, you don’t necessarily know what you’re going to do something wrong, necessarily. And I think that’s it’s been interesting, you know, kind of in this space and at least in the gun world, you know, what the rules are, it’s pretty concrete. You know, the ATF changes its mind like you’re saying they let you know, they’re changing their mind. But right now it’s in you know, how this is what’s government paperwork, Number and regulatory enforcement is that the government’s not going to tell you if you’re if you did something, right, necessarily, they will tell you if you did something wrong, or they think you did something wrong, but they tell you, we’re not going to give you advice, you need to figure that out on your own. And then if you screw up, then they’re going to hammer you. And I think that’s actually not good governing in general. Especially if people are open and trying to do the right thing. They you know, if the government won’t tell you, this is not going to work if you do it, or this will work. And I think that’s a big problem. And it’s hopefully again, it gets figured out over time, because I think with these new financial technologies and and technologies that are coming around, I think that the United States should be able to be a leader in this space, and it is changing the world. But

John Bocker – FFLConsultants.com
You’re asking me all the questions. I want to dig into your stuff in just a bit. This whole crypto world is getting a lot of interest from gun to gun dealers, mostly the you know, the online gun dealers who are hearing about it, whether it be you know, Bitcoin or other type of cryptocurrency, and it being so new. I know it’s been around a while. But it’s still pretty new, especially with the firearms world where our business has been pretty, pretty normalized for the last 10 1520 years. And to your point, the laws have been around the law hasn’t changed much since 1968. With the Gun Control Act, it’s just like, as I said earlier, as some of the state laws that are confusing and challenging to keep up with, but um,

Rob McNealy – RobMcNealy.com
Well is what we’re trying to do is we we’ve created with TUSC, which stands for The Universal Settlement Coin, what we tried to do is we’re trying to solve a problem a payments problem, and a lot of people outside the gun world won’t necessarily know this. But in the gun world right now, lawfully regulated, heavily regulated, licensed gun dealers are having a real big time and a hard time with payments. And it’s not because of the loss, it’s because of a designation from politically active as banks have made it that the guns are treated like cannabis in prostitution and gambling. And so banks and financial institutions and third party payment providers don’t want to work with gun dealers and the ones that do want to take the risks charge a lot of basically a much higher fees for those services. And so with TUSC, we’re creating and have created a decentralized payment system. That is much cheaper than any credit cards out there. Right now, our network fee to the network is only half percent, and some of the gateway providers I think, will be adding 1% to that. So the idea is that instead of using a credit card that might be anywhere from three to 6%, depending on who you are, our network fees for every transactions only you can get the max, it’s gonna be as like a percent and a half. And then with a crypto payment scenario, you can’t be shut down. Right. So like a lot of

John Bocker – FFLConsultants.com
Yeah, that’s a great glad to leading into this, because that is a question we get very often. And as you know, we’ve sent some folks away just to talk about this, like with credit card regulations, and the banking Institute’s you know, basically becoming, you know, non NIH supporters, non to a supporters rather, it’s very confusing to a gun deal and threatening actually right now as to what to do so. So stay on this topic for a minute what, what solutions is TUSC bringing in that regard?

Rob McNealy – RobMcNealy.com
So we’ve created TUSC It’s a cryptocurrency it’s a standalone crypto coin, kind of like Bitcoin. Everybody’s heard of Bitcoin, but we built TUSC for the gun industry. So we’re a bunch of passionate gun owners and gun builders and, and to a supporters. And we’ve been working on this project almost three years now. But we’re kind of we’re called a decentralized project. So that means that we’re kind of like a cross between a co op and a nonprofit. So no one owns TUSC. We’re not a for profit corporation. And the decisions about how TUSC is operated, are made by the members of the communities meaning that if you own a TUSC coin, you get to vote, you get to have a decision or a hand in the decision making on how TUSC is operated. So it’s it’s basically buy the gun people for the gun people. And the network itself. It’s pretty straightforward cryptocurrencies. Imagine, like a lot of people are familiar with how PayPal works. And but no one really understands how the back end of PayPal works, right? No one really understands how the back end of Venmo works and most people don’t care, right? They just want to have a payment solution. But right now in the gun industry, the banks who operate all those different Different types of Venmo and cash app and stripe and square and all those. They don’t allow gun retailers to use their systems, because of politics, it has nothing to do with legality. And so because they view is the gun industry is, you know, like prostitutes and gambling and hustlers and everything else, which we know is not true. But so what we’ve decided is said, you know, we watched in and as a group, we decided to try to solve that problem. Like right now, for instance, and I’ve talked to a lot of, you know, gun related people, is that there’s this whole, like, political debunking, and D monetization, you’re seeing that on the social platforms with Silicon Valley. You saw that with salesforce.com, you saw that was Shopify, these these CEOs are just activists, and they just basically write an open letter and say, if you’re under the gun world, we don’t like you, and you’re off our platform, they just say we’re not going to work with you. So the in essence, how we we solve the problem problems, one, we eliminate chargebacks, there’s no chargebacks with TUSC. So if you’re a custom gun builder, and someone’s impatient, they don’t want to wait for the gun to be built, they can’t charge you back on TUSC. Whereas with a credit card, can because they’re considered a red flag industry, they don’t get much of an appeal process when they have a chargeback. The other thing is TUSC helps on cash flow. So for instance, right now, if you accept the gun friendly credit card processing, processor, you still might have to wait anywhere from three to 14 days for that, you know, acth to hit your bank account. Well, with cryptocurrency it hits instantaneously hits their wallet, their crypto wallet, so if I bought a gun, or if I bought a gun from you, with TUSC, you would instantly two and a half seconds to three seconds later you have that cryptocurrency in your wallet, and you can verify that it’s there. It’s just as fast as credit cards. But you don’t have to wait for the bank to drop it into your checking account. And then on top of that, it’s like an insurance policy because we don’t have the ability to shut you off. So right now, and you’re seeing that right now, like especially a lot of mom and pops, you know, gun stores will set up a PayPal account, right, but they won’t do it in there, they’ll they’ll set up their business name like JC enterprises or whatever. And it’s a gun store. And PayPal work for a while Pay Pal were for a while, then bam, PayPal stops working and freezes their account. And once because PayPal has ways to figure out over time, if you are a gun dealer or an illicit business and they freeze your account. With cryptocurrency, we’re not a company, I have no ability to shut you down. It’s not even in the code doesn’t work like that. And so if even if I wanted to shut you down, and trust me, there’s some people I’d love to shut down, I don’t have the ability to shut you off. And I don’t own in any ways. I’m just a, you know, a member of the the co founder team, but I don’t control it. I’m not a CEO or anything. But the network isn’t designed to be shut down. So if you host all basically host a wallet on your own website, and you’re willing to accept TUSC, you have an insurance policy against being d platformed. In addition to it. So we always tell people look, you know, crypto is a new thing, right? This is new technology, there’s a lot of pieces, it’s got a little bit of a learning curve. But let’s just say you got a gun friendly crypto, or a gun friendly credit card processing account already set up on your website, you can download a plugin for TUSC, put it into your website, and it’s another backup payment method. So of some day, that credit card processor that was gun friendly decides to be not done friendly anymore. You can still be in business with TUSC. And we don’t have the ability to shut you down.

John Bocker – FFLConsultants.com
So as a gun purchase as a firearm purchase, would I be able to go out and buy I noticed is all new and evolving. But right being able to how do I go out and buy TUSC or get enough TUSC. So then I can go online to use my TUSC currency to purchase my firearm.

Rob McNealy – RobMcNealy.com
So that’s kind of the infrastructure we’re building out right now. So we’re a new project, really. And so one way is you can buy it on set one of seven exchanges that we have were listed on right now or traded. So this is interesting about cryptocurrency is that they’re traded like stocks. And so the value is always shifting. So that’s a little harder for people to wrap their heads around. But right now you can buy TUSC very easily through seven one of seven exchanges and you just log into an account and set it up for free and then you can buy it with a credit card or if you want to buy a large amount, you can do a wire transfer through your bank to whatever exchange you choose. We are in talks right now and we should be on an ATM, crypto ATM network very soon. So I would hope like I can’t give a timeline but we’re in talks with the biggest one right now. And they’re talking about integrating us and so once that happens, we’ll be available on the big ATM network. So you can just go to an ATM and By TUSC, right through an ATM, and it goes right to your mobile wallet. And then we’re currently in discussions with several places where we’ll have the ability for people, for instance, that you can buy right from the website. So, and we’re gonna be working with the retailers on this. But if the retailer wants to accept except TUSC, they can set up an account with a variety of companies that we’re talking to, that they’ll have a little widget on their website that they can instantly buy house great then in there. And so we’re making it as easy as possible for people to get TUSC. But with any cryptocurrency, the we call it, the on ramps are the off ramps to get into crypto and get out of crypto. Those are the those are the things with pieces that we’re kind of building right now. And, and we’re not going anywhere. So we have a roadmap and where we are, we’re still I still think of us like a startup though or not. But there’s a lot of that infrastructure we’re building out right now. But we’re going to have all those pieces, you know, pretty quickly, you know, set up for retailers. So when we go and sign up for retail, we’re like, Look, here’s how you deal with the wallets and the plugins. And this is how your customers can get TUSC and things like that. So we’re gonna help hold the hand of retailers, which you won’t get with any other cryptocurrency, like if they want to accept Bitcoin, there’s no one from Team Bitcoin that’s going to come to your shop and help you set up or, you know, walk you through the process. Whereas with TUSC, we will because we are part of the gun community and we fully support it, and we want to help we created the solution because this has been a big problem.

John Bocker – FFLConsultants.com
Yeah, you know, we saw you had a SHOT Show, we got talking to you and thought this whole platform was state of the art ever, you know, quickly evolving. What did they got? Did what did the gun dealers, a logic guys that you spoke with on a lot of meetings? What What was their take on moving in this direction.

Rob McNealy – RobMcNealy.com
So I think that’s like how I think it really fell down how you would think of it the younger ffl the guys that grew up with social media, the guys that are you know, you know, a lot of the vets than that community, they get it, it’s not even a lot of them already have cryptocurrency, so those guys already get it, the guys that are already doing, you know, spending their time doing a lot of e commerce and really leverage a lot of Instagram, those guys get it. The I think it’s like the people that are a little more resistant or more the the Fudd guys that they always sell 40 fives in their gun store. You know, those guys, you’re never gonna win over to this. And so but i think i think it is a demographic issue. And we don’t expect every gun retailer to accept us right away. We think this is gonna be a long term process, but we’re going to be a long term project. So we don’t we’re building something that’s going to last and be here in 50 years. And so we also..

John Bocker – FFLConsultants.com
It also depends on the financial community, right? How many, you know, Citibank, when Citibank doesn’t take care, your credit card doesn’t lie credit cards to be processed anymore, because your gun dealer or Bank of America, I mean, it starts to raise some eyebrows, right. And, again, like I said, we’ve had people panicking, because of their 48 hour a 72 hour notice, you know, what do I do? And, you know, it’s nice to have an answer on the horizon here.

Rob McNealy – RobMcNealy.com
Yeah. And so and we’ve run into that to you and I and I can tell you even as shacho, I talked to a lot of merchants that really had that same problem, that they literally were using something and they got a short notice, then boom, they’re out of business for two months, I was on a website, the other day, I was looking for a component because I build guns as a hobby. And I was looking for something and the website, and I’m just like, I tried to get ahold of the guy. But the website said, we’re down because we lost our merchant processing right there. And it was just like, we got the solution for that. And so and what we’re doing right now is we’re we’re kind of going to be launching this beta pilot program. So we got some, we got a bunch of things that are going to be put into, we’re gonna be launching a bunch of products to support retailers here in the next couple months. But any, if you have any ffls that are interested, we’re going to be launching this beta pilot, so we’re gonna want to bring in a bunch of retailers that want to be guinea pigs, so to speak. But for that, the they’ll be they’ll get some share of TUSC coin for their own risks. So there’s gonna be some compensation involved for them taking the risk and some pre free promotion, free marketing that comes with that. Because it’s going to be a learning curve, we need to get some feedback from the industry. And so we’re going to make it worth their time if they want to come on board and be an early adopter of TUSC. But I think this is the future. And you know, we don’t know what’s going to happen politically in this country either. Right? It certainly seems that one side of the ticket has already told you what they want to do, right? And you know, and you would know this too, just like in a lot of retailers, the words operation choke point come to mind back under the Obama administration back in 2012 2013, when they really put the hammer down on the financial industry to basically mess with the gunnery world. And so you got the same type of people going maybe in maybe in In a couple months, and you know, you never know when they’re gonna try to pull the rug, they’ve already said they’re anti gun, they already said they’re gonna try to come down in the industry. If they can accept task, it basically decentralizes and pulls away some of their tools to screw with people, at least on the financial piece of this. And there’s no. And again, remember, though, like if all of a sudden, the somehow the Gov the Treasury Department or the Comptroller of the Currency or whatever government agency they leverage, tell banks that you can’t let them buy guns with credit cards anymore. What are they going to do? Because if they can’t do that, that affects Venmo, and all those other places, too. So they don’t have another option there? Because those are all based in dollars. Yeah, I think currency solves that.

John Bocker – FFLConsultants.com
It’s been kind of a quiet issue for the last six months to a year overall. But I want to say, you know, we’re not sure what’s going to happen with the election. And, you know, this would be one to definitely watch. It might be something just sleeping on the side. That can be, you know, resurfaced here flooded very quickly. So good luck. How so? What’s the ETA Rob on your, your platform being available?

Rob McNealy – RobMcNealy.com
Right now we are available, we already have a working protocol we already have. I mean, we already have a product out there, you can buy TUSC on exchanges, right now, we do have a cloud based wallet. So if you want to get your fingers wet, and just try it out, you know, people can reach out to us at TUSC dot network or just me, I’m just at Rob McNealy calm. And you could contact us either one of those two websites. But you know, so if anybody’s got questions, I’m really easy. Just plug Rob McNealy into Google, you will find me, and I will be happy to answer any questions for anybody out there. But I think also, you know, even if they’re not the banked, cryptocurrencies cheaper than normal credit card processing, because you still have that issue, right now in the gun world, even when they got have gun friendly payment processing, with credit cards, they’re paying really high fees, with those even gun friendly, because there’s only you know, there’s a few merchant processors that will do the whole gun thing, but they’re expensive.

John Bocker – FFLConsultants.com
TUSC. Yeah, I hear that the risk is being assessed as a premium to those who are staying and, and sad to say, but you know, supply and demand is not there. So the ones who are still in the game are raising their prices, I think artificially, and I don’t think that’s a fair thing to do so.

Rob McNealy – RobMcNealy.com
So when we tell people half a percent charge, or half percent transaction fee, no charge back and you get instant settlement into your wallet, and you get free promotion, and you’re getting insurance against the banking, the economics make sense, just on that to compete with normal credit card processing, and so on. And so like I said, it’s a new thing. But I think it is the future, because, you know, it’s interesting, the CEO of cash app, which is also the CEO of Twitter, jack Dorsey, they this week, just bought, they just diversified 1% of their company holdings into bitcoin. $50 million worth this last week. So corporate America is coming into crypto now. Okay, and this isn’t going anywhere. The crypto world is about a, you know, almost $400 billion market cap right now. Okay, this is not small money anymore, their institutional money, the State of Wyoming just allowed it that they can make crypto banks in Wyoming now. It’s the first state in the country that allows banks to actually hold crypto now as a custodian, okay, the crypto world is coming. Okay. And there’s there’s thousands of cryptocurrencies out there all kind of competing with each other. But none of them are focused on the gun industry, like we are with TUSC. So here’s the thing, it’s gonna happen. And it solves a problem now. So it just makes sense, to at least look at it. dip your toe in the water. You know, if you’re interested in coming on board, let me know, we’ll make it happen for you.

John Bocker – FFLConsultants.com
Yeah, it’s nice, nice to see you’re isolating and dedicating all of your research and platform development, everything to the gun industry, because I think it’s going to be an industry is lagging the lag behind just like, you know, other industries, you have the cannabis industry, you know, that’s highly regulated, the regulated depending on where you go with the gun industry is not going to be acceptable to everyone in this crypto business. So I applaud you for creating this, this community. So

Rob McNealy – RobMcNealy.com
Well, well, then, john, I really do appreciate it. And I appreciate you coming on the show today. Where can people find out more about you? Where can they find out about ffl? consultants?

John Bocker – FFLConsultants.com
Yeah, that one’s really easy. It’s ffl consultants calm, you know what, and that’s how most people find us or Google or when they’re looking for an ffl consultant. You know, we hopefully pop up first, and our phone number is available at our website and all the contact information. And let me just remind our listeners that your first call is always free. So just go online and schedule a call with us and we’ll make sure we get you get we get your questions answered fast.

Rob McNealy – RobMcNealy.com
John Bocker, thanks so much for coming on the show. And folks, I will have Have all of John’s information contact information and website at Rob mcnealy.com and tune in make sure you hit that subscribe button on all the major pod catchers and our library and YouTube channels. And thank you so much for listening.

John Bocker – FFLConsultants.com
Thanks, Rob.

Episode Links

Audio Interview
Video Interview
Interview Transcript

 

Jeremy Kauffman – LBRY Transcript

Jeremy Kauffman

Note: This transcript was automatically generated by artificial intelligence (AI) and therefore typos may be present.

Rob McNealy – RobMcNealy.com
Hey folks, Rob McNealy here. And today, we’re gonna have a good show because we are talking to the CEO and founder of library, Jeremy Kaufman. And we’re going to talk about a lot of different things today. And I’m actually kind of like schoolgirl giddy about this, because I love their platform. So, Jeremy, welcome to the show. How are you today?

Jeremy Kauffman – LBRY
I am doing well. And I’m also excited to be here.

Rob McNealy – RobMcNealy.com
Well, good. Well, thank you. I know we’ve you know, we’ve chatted a little bit on, you know, social media over the last few months, and you guys have been very helpful and onboarding me to your platform. And I really do appreciate that. And I can tell you in and you’re not paying me for this, just so you know, everybody out there full disclosure, I am literally a fanboy. I’m not even trying to build up my YouTube anymore, I just find that YouTube’s a waste, it’s a waste of time for me as a creator. On that side of it. It’s not worth me putting the energy into building up a YouTube following anymore. I’m putting all my energy into building a library following not only because of the democratization of YouTube, and but the fact is that I deal with controversial subjects that, you know, the people that run YouTube don’t like, and so I think there’s too great of a risk, long term building on that platform, at this point, and I’m putting my energies in the library. So Jeremy, tell me about you. And then let Tell me about library?

Jeremy Kauffman – LBRY
Well, first, just want to say that’s, that’s awesome to hear. YouTube has definitely become very corporate, you know, they’re basically the cable that basically cable news now. And library, we think is, is a big part of the answer to that, you know, if if I introduced library to, to Super do in the super normal way, I might call it something like, Oh, it’s just your library TV is just YouTube with better policy. But ultimately, what we’re doing is much, much more ambitious than that. You just can’t always express that ambition in a single sentence. You know, since your audience is, is nerdy, you know, maybe I can, you know, we’re trying to build a decentralized digital content marketplace. You know, the idea is to make services like YouTube possible, but to do it entirely via open technology to do it in a way that’s not owned or controlled by any one entity, just like the Bitcoin network or any other public blockchain network. It’s, and so I think that idea is really powerful. I think it’s part of why we will ultimately succeed, because it’s also it’s different in a fundamental way. You know, like, if I if I started another video platform, and it was just YouTube with better policy, well, you know, who else had a better policy than YouTube? YouTube did 10 years ago, right? When you’re, you’re the underdog. You know, you’re super nice. And then when you’re the when you’ve won, you become a big jerk, right? That is the pattern of Silicon Valley. Right. And I haven’t talked about myself much. But this is not my first venture. I have been in the software industry for some time, and have built a much more traditional SAS company, before starting this company, and working on working on this one. Um, but I’m much much more motivated to work on this one. Because I think what we’re doing is so important.

Rob McNealy – RobMcNealy.com
So tell me a little bit about your structure. How are you governed? And are you a company foundation? Are you decentralized? How does library function and govern itself?

Jeremy Kauffman – LBRY
In a pretty boring way? We’re actually so there is a separate library foundation to be that to be that nonprofit, and have that set of incentives and be community run a library Inc, which is the company that originally created the library technology is a, a pretty boring, Delaware, C Corp, traditional Corporation. All the corporation is almost entirely owned by people who work here. So I will say that’s different library did get a little bit of VC funding, but the the VC has a all investment actually all investors in aggregate, have a substantially minority stake in the company. So the company is effectively owned by the people who, who work here. Right? So it’s they that we, and then we function like a traditional Corporation, there’s a board of directors, the board directors, Alexa CEO, which is me. I am also on the board, and that and then I I run the company. Now, what’s different is that what the company produces is all completely open technology. It’s all open source. It’s all open documentation. And there’s the key. The key difference in terms of what we ended up building is this ability to leave this ability to, essentially to, to exit to change the rules with which you’re governed by and I think This is the key component in systems that actually prevents them from sort of going downhill. And that email would be an example of a system that is interoperable and not owned by any one entity. And this means that one company, even though Gmail has cornered the has has a lot of the email market, I went to the corner, because you can’t really, they don’t have that same potential that a Facebook does, or a YouTube does, where once they’ve gotten a certain segment of the market, they can now you know, squeeze, start squeezing you and start taking advantage of you. We don’t see this nearly as much with email as we do with large social media platforms, were all of a sudden bad policy, right? Like, no one knows Gmail, Gmail has never Google would never consider you filtering emails out of your inbox without your permission, but they’ll filter videos because they, they can. And that becomes profitable for them to do that. So that’s what we want to do. We want to turn video distribution, digital content, publishing, not just videos into something that is, I know, it’s not the sexiest word, but we want it to be a little bit more email, like in terms of not being locked into one piece of software not being locked into one way of doing things.

Rob McNealy – RobMcNealy.com
So what prevents you devil’s advocate, and I’m genuinely curious, what prevents library from growing, growing, growing, growing, and you guys have been growing exponentially, especially in the last six months, at least what I’ve seen what prevents you from being the big YouTube in the future and turning into a bad guy? What, what have you put in place to, you know, try to make it so that doesn’t happen? How do you mitigate that risk?

Jeremy Kauffman – LBRY
Yeah. So that’s, that’s a great question. And I would in general, like, be skeptical, ask, ask hard ask hard questions, we want this stuff to stand up to scrutiny, because that’s how we know that it works. And it’s possible that there’s a key distinction. And this is actually something we’re working on, we had a blog post out about this, about how we’re going to be straightening out some of the and changing some of the naming of some of these things. So there’s library.tv library.tv is like Coinbase, right? It is not a fully decentralized experience, it’s interacting with the decentralized network, right? Coinbase interacts with a bunch of different decentralized networks. But Coinbase itself is not decentralized. Coinbase is Coinbase. It’s a company you’re interacting with Coinbase. Though, we are currently providing both the coin based experience, and we’ve built the software that powers the the Bitcoin experience, right? In the center, I say the Bitcoin experience, I mean, you can use it locally, you can use peer to peer version, you can use a desktop client. So that client is always going to be completely up to the users how they want to use it, they will never be something at that level, where there’s censorship, you know, network wide, or anything like that, you will have the ability to use that software locally, configure it now, you have to know you should still follow the law, right, you still have an obligation to use that software legally. But that software will not be controlled by us will not be censored by us that interacts with a peer to peer decentralized network. And so that will always be there, that level will always exist, and really can’t be interfered with the web versions are going to have to set policies, right. It’s not as simple as it’s both not, but it’s both not legal, nor as simple as like, just try to serve everything as as much as possible, right. And so our goal with the web experience is to provide something that works for large numbers of people, if that ever means some people, that that experience doesn’t work for them, there’s an ability to have both a multitude of web experiences, you know, so if Gmail stops working for you, you go to protonmail, you go to Hotmail, whatever you go to where whoever else you want to go to. And so we expect the same thing to happen with, with any web experiences that we provide, ultimately, that following that you’re building up, all of that is not owned and controlled by the company. So you can take your wallet out and go take your wallet and go put it into another service or go use your wallet locally. At which point, we don’t have, you know, we don’t have that level of, of influence or control of me. So that that’s a huge check. You know, there’s no if you stopped liking Facebook, or you stopped liking Twitter’s policy, you’re there’s no ability to like all of a sudden all of your friends on Facebook to with better policy, whereas in the library design of things, that’s all possible.

Rob McNealy – RobMcNealy.com
So what kind of drove you to do this? You guys have been around since 2015?

Jeremy Kauffman – LBRY
Yeah, the first work began in 2015. The company, I don’t believe technically existed in 2015. The the no one was the first sort of like full time real work began. Like mid 2016 and onwards, shortly after the blockchain launch, we basically launched the blockchain in 2016. And did some fundraising actually after that when we were a we did no Ico and no Uh, no real fundraising until after we put the blockchain up. And we didn’t we didn’t either. Yeah, nice. Excellent. Yeah. I actually potentially strategic mistake, who knows. But honestly the reason it all went this way and was like, you know, to me, if I have like if I have a certain itch when it comes to building something, it’s just like really, really hard for me not to scratch it. And so I was working at another company where it also sort of built that company up. And it’s another software product much, much more boring than this one. And that company was doing decently but I just couldn’t stop thinking about this idea. I am a computer scientist by, you know, education and I was learning and going into blockchain and thinking about how it works and thinking about other technical systems and like, where, what’s different about blockchain? How could it be used, and I just couldn’t stop thinking about this. This this idea of building using a public blockchain to serve as a registry of content that exists. It’s why the company is called library. And I’ll continue to make unsexy metaphors and references here, you know, like, we wanted it to be something like the old card catalog, right? That everything except for everything right? can we can we use a public blockchain this permissionless system to keep a register of stuff that exists? Because we already had good peer to peer tech like BitTorrent works. BitTorrent, censorship, resistant, BitTorrent, user experience sucks. BitTorrent is not great for creators. But as a peer to peer tech bit torrents amazing and it’s elegant, and it’s well designed all these things. And so really, the core idea, we did several things on top of this and afters, but the core idea was a public blockchain could solve some of these problems with BitTorrent around indexing identity payment.

Rob McNealy – RobMcNealy.com
Sure, um, compliance is a big deal. And in the censorship is a big deal. That’s it’s all the rage right now. Right, especially in Silicon Valley. They just seem to like want to wield that hammer. Yeah. How is censorship and in house bad content, for instance, or maybe potentially illegal content dealt with on your platform?

Jeremy Kauffman – LBRY
Yeah. So this is a this is a great example of some of the things we were talking about before. And those answers can be slightly different, right? If content is illegal, there are strict things you have to do, and we follow all the laws. And I’ll talk about specifically what we do that there’s also content that could be damaging to a brand or that people may just not want to be associated with, right. And how you deal with that stuff can actually, that’s also very tricky, right? In fact, all the debates with YouTube, right, it’s generally not around illegal content. Everyone think, you know, right? It’s generally around stuff that’s legal, but debatable to certain populations. So I’ll let me give the full answer on like the illegal stuff. And then if we want to talk about the legal but debatable stuff, we can talk about that as well. On the illegal stuff. We are a Registered Agent, with the federal government, United States government. And so when we received DMCA I assume we’re mostly talking about DMCA is but for other legal stuff, it’d be a similar process. But basically, we receive complaints, we validate the complaints, it’s illegal, we maintain a list of essentially hashes that are known to be illegal. And then those hashes are circulated to other operators in the network, who who choose to if they want to use the software legally choose to respect those lists. So this basically comes down to your wallet server when you’re using the desktop client. So your desktop client, by default connects the wallet servers that we run, which are then going to listen to our our blacklist, and we encourage our wall, all wallet server operators to obey the blacklist. But if you’re in a country with a blacklist don’t apply or whatever, you could run a wild server and then not not listen to those blacklist and return whatever metadata or data you wanted to, that you wanted to return. So basically, we provide those lists as a service and circulate them so that operators can, can follow and listen to them. And of course, all the websites that we run and everything that we run a baseless blacklist.

Rob McNealy – RobMcNealy.com
So that kind of almost voluntary kind of methodology. Is that, I guess it sounds like it’s compliant with us regulations. And like, have you had any pushback from the government on that?

Jeremy Kauffman – LBRY
We haven’t had any pushback from the government yet. I’m sure. I’m guessing you and your audience will appreciate that. You know, the nature of the law is frequently that there is no clear Answer and ultimately find out in court. So you were trying very much to follow the law, I pay lawyers amounts of money that I really don’t like paying them, for them to tell me. Well, this is probably how you follow the law. But we don’t really know. I mean, because you don’t know, you don’t know, sometimes it goes, sometimes the cases are so ambiguous, they go all the way to the Supreme Court, right? cases, like the the grokster case, or the Aereo case, are two examples of case law that come up when you’re when I when both I or the law, the lawyers attend to do research on this. And, you know, these cases made it all the way to the Supreme Court, because it was unclear, right. And so we think very much that what we’re doing follows the law. If, however, like a you know, real challenge, like it would have to go probably through some layers of court, because you’ve got a bunch of laws that aren’t written with decentralized networks in mind. They’re written with a traditional sort of client server model in mind. So when they’re using some of these terms, your What do they mean? Who is responsible? You know, like, for example, not trying to I hope the federal government is listening to your show, I think the federal government could argue that every, every person mining on the Bitcoin network is violating money transmission loss. I’m not saying that this, this argument would hold up. I have no idea what the courts would say, right? I think it probably wouldn’t work. But I think you could plausibly argue it. And if the government decided to argue it, it would have to go all the way to the Supreme Court. Right. Right. So that’s a that’s the unfortunate, unfortunate answer.

Rob McNealy – RobMcNealy.com
Well, it’s interesting, you know, because we’re a project as well. And it’s like, we’ve done things that are gray, like we you do everything, we as a project have done everything to avoid regulatory risk, right? We’re not out there thumbing our nose at the government and things like that we we want to focus on lawful markets and things like that, and do really good things, right. But there’s still some like, basically, areas where the guidance from the SEC doesn’t apply to things that we’ve done. Like, just doesn’t cover it. Like they don’t address it. And so that’s what I always say it’s gray, because no one’s determined or tested the theory legally, one way or the other.

Jeremy Kauffman – LBRY
Yeah, I mean, it’s awful. It’s awful. I mean, the case of the SEC stuff, it’s like, I’ll give you an example of like, there’s no pro you can’t get any proactive assessment, right? You can’t spend any amount of money for the SEC. So I like Oh, okay. It’s not and I’m talking about like, yo, you can’t pay $100,000 sec, go, please tell me what the legal status of this is new doesn’t you can’t do that. All you can do is operate. And then one day, they may or may not. They may or may not come and ask you a question. That’s the way it works. And in terms of some of the SEC stuff around our token securities, the SEC has said this. Ethereum was a security when it started. Right. That’s what they said security means that it’s not a security to that. Right. Okay. Logically speaking, something that started as a security and is not a security now had to, at one point transition from one state to the other. Right, you can’t go from it. Okay, When did it happen? Well, we’re not gonna tell you. Right. So they’re saying that at some point between the founding of it there, because they have no precise criteria, they don’t have it. What they do is they, they they write laws, so that they’re incredibly vague. And then there’s a bunch of discretion that’s left up to, to the people. And so we have no idea what tokens are securities or not. I mean, they’ve been very, very few cases that have actually, you know, even happen, for the most part, the ones that the SEC has chosen to do a case on have been the ones that are like they’re pretty, very pretty, very clearly a security. So there’s a whole bunch there is a whole wide swath here where we have no idea what’s what’s legal and what’s not.

Rob McNealy – RobMcNealy.com
Yeah, and it comes back down to is that there’s always that that hammer, like hanging over your head, right. And like, you know, I choose to ignore the hammer because I want to be able to function and work hard on our project. But there’s always that little gray thing like, Oh, yeah, if someone really wanted to be a jerk, they could, you know, cost you a lot of money going to court. Yeah, ultimately,

Jeremy Kauffman – LBRY
I hate it. I hate it. Honestly, it’s Sunday. It’s like a real it’s something I’m actually pretty passionate about. Because I think it’s I think it’s sad. And it holds back a lot of things. It means you have to be like a we like I’m a risk tolerant person, like I’m very comfortable with risk. And it means that you’re basically like, I you’re restricting like that. The only weird people like me, are going to do some of this interesting work, right? Yeah. Yeah. But like, but there are lots of people who are like really smart people who are not as risk tolerant maybe as you are, I are, and they’re not going to enter this space, and they’re not going to do interesting things. And that’s sad. Like there’s no because I could have been I could have in 2016 describe for you exactly what library is what the network is going to do. How’s it going to work? And like it would be nice to be told, even at some expense even if it’s $100,000 even a million dollars or more? Can you tell me like before we spend way more than a million dollars? Like, is this allowed or not? Like, is this the right way to do it? How do I do this? It’s legal, you can’t do that. All you can do is spend, you know, we’re talking about hundreds of thousands of hours of human effort has been put into the library project at this point. And I fully expect it to be legal. I want to be clear, I don’t think it’s like some 5050 thing. But I don’t think it’s literally zero. Like, I don’t think it’s because I would have said there’s no way that area, which is this antenna case in New York City, I would have thought I said there’s no way area is gonna lose the Supreme Court case area is definitely legal. And then the Supreme Court made up a law made up a rule to say that area is not legal. And we can talk about that case if you want to get into, but it’s like, it’s so you never know.

Rob McNealy – RobMcNealy.com
Yeah, I think that’s it’s really unfortunate. But I mean, even if you spend hundreds of thousands of dollars on attorneys, you might get something called a Saft. And then you try to call it a utility token. And we know how most of that’s ended up already. So it’s like, like….

Jeremy Kauffman – LBRY
I should be able pay the government, like I should be able to pay, like if you’re gonna if you’re willing to investigate people on your own dime sec, like, let me pay you to get a proactive judgment. Like even if the sticker fee is really high, that you should be able to get a proactive judgment from courts before you like to say that like the only way we can tell if a technology is going to be legal or not, is to build it. And only after you built it, dispute it, it’s just crazy. Like, why can’t we have some more more proactive way of getting some of these judgments? It’s just incredibly inefficient, like area a bunch of people spent their lot, you know, multiple years of their lives building up a company in the Supreme Court says you can’t do it. I mean, why couldn’t the Supreme Court like why couldn’t do it, even if it’s, you know, $10 million 100 million dollar areas probably spent hundreds of millions of dollars before they’re shut down? You know, so you never, it’s just, it’s just, um, well…

Rob McNealy – RobMcNealy.com
What were the circumstances in that case?

Jeremy Kauffman – LBRY
The area cases the one so this is I love this case. So the, this the, it was, it’s like a rebroadcasting thing. So Aereo, did antennas in New York City. So they would, on your behalf by you, personally, an antenna, so you would own an antenna in New York City, your antenna, one antenna per customer, a discreet antenna, that antenna was yours, and then they would rebroadcast the output of it over the Internet to you. Okay, so you could basically get in New York City, over the air television, anywhere in the in the US by buying an antenna and letting area post it for you. That’s the Supreme Court said that, because users interact with this service as if it were a cable company. It therefore is a cable company. So they said that this makes Aereo, a cable company. In the same ruling, they said that it would be completely legal for me to go onto Craigslist and post and say, Hey, will you put an antenna in your house for me and hook it up? In this way? I’ll pay you $100, right, that’s legal. So I can still hire someone to do this exact service. If a company tries to proactively do it, they basically said that makes you a cable company. Because users think that you are one, therefore you are one and you’re governed by cable, cable company law. Like nothing in the cable company law says this, like they basically made it as far as I can tell. I mean, they didn’t literally make it up. They they come up with a chain of logic. But I think it’s like utterly crazy to say that, like what makes something a cable company is whether people perceive it as one, you know, they’re not a cable guy. They’re not they’re not running cables through the line. They’re taking a you know, they’re, they’re taking something over the air. And, and you know, so it’s like, were they, you know, to me, if you want to be part of a society is you need to have like laws with clear meaning. And I think that we have a lot of laws that basically end up with these very vague meanings. And so you never know what how they’ll actually be interpreted-until they’re interpreted.

Rob McNealy – RobMcNealy.com
So where do you see the future of library? What would you say your main goal with library is at this point, you guys are humming along? You guys have millions of users on your platform now? Where would you like to see library over the next three to five years?

Jeremy Kauffman – LBRY
Uh, so I think we’re close to I think we will absolutely be cementing ourselves as the number one alternative to YouTube. And then soon YouTube will be, you know, the number one alternative to library, I think. I think but I think I actually I want to grow beyond video. I think we’re gonna be everywhere be YouTube. I’m not saying it’s like, easy, like we’ve won or something. But we’re gonna be we’re gonna be YouTube. I mean, YouTube’s done. Like, there’s just like everything about the way that Google works as a company, all of their policy actions. It’s like, I like if I were observing the way that I guess I kind of observe them from the outside. I don’t work there. Like it’s seriously like someone in my company is like paying them or has like blackmail on them. Like, they’re my, they’re our best friends. Right? They’re literally helping us succeed. And everything they’re doing is just driving people over to library. And I think that what we’re doing is is so fundamentally different, that they can’t adopted, that’s really important, by the way, in terms of success in business, you know, like, one of the reasons that underdogs frequently don’t win is the, the the established the overdog, whatever, can just Co Op, right? The same reason that third parties don’t win in politics a lot, you know, a lot of the time is that if a third party has a really good wedge issue, well, just one of the major parties will just adopt the wedge issue, right. And so, same kind of thing. But in this case, our whole competitive advantage is tying our own hands. And so it’s like YouTube, you know, and when your competitive advantages is so fundamentally different companies tend to not adopt it, like YouTube would have to blow up their entire business to defeat us. And I just don’t see them doing it. What I want to do is, I want to begin pressing into different areas. Like right now, everything’s been library library library, it’s been all one, one single, multi purpose app. That’s not the way we ultimately experience media. We use one app for podcasts, we use another app for news, we use another app for video. And even then, for video, we might use a different app for user generated content versus for, you know, more corporate content. And there’s even other things, there’s CAD files, there’s comic books, you know, there’s all kinds of even niche, digital media. And ultimately, I think library can disrupt any number, any number of these spaces. And so I want to start looking at forming partnerships, business development deals with other entities that could adapt the library technology and and disrupt, begin disrupting some of these other verticals as well.

Rob McNealy – RobMcNealy.com
I might have someone I want to introduce you to off the air. That might actually be beneficial.

Jeremy Kauffman – LBRY
Yeah.

Rob McNealy – RobMcNealy.com
So I know you’re kind of pressed for time today. So well, Drew real quick. Where can people find out more about you and library and how can they get started on the library platform?

Jeremy Kauffman – LBRY
Yeah, so the number one thing I’d say you can ignore everything else after this. I’ll say a bunch more things. Go to LBO. YTD create an account. Follow me. Follow Rob. And follow some other creators on there. There’s lots of great youtubers making their way over. There’s lots of great original stuff. And just start there. If you’re a creator yourself, and you’re on YouTube, you’re not safe. At a minimum use lbr y comm slash YouTube to copy everything over. We are on basically every social site, I would say we’re the most active on Twitter, but we’re also on Facebook and everything else. We have a Reddit and you can find all those just type them in. I won’t say all the links. And if you want to follow me personally, I’m probably Twitter’s the best. My handle is my full name. Jeremy Kaufman.

Rob McNealy – RobMcNealy.com
Jeremy, thank you so much. I’ve enjoyed chatting with you today.

Jeremy Kauffman – LBRY
Thanks, Rob.

Rob McNealy – RobMcNealy.com
You have a great day.

Episode Links

Audio Interview
Video Interview
Interview Transcript

Dalton Skach – Gold Gate Transcript

Dalton Skach - Gold Gate

Note: This transcript was automatically generated by artificial intelligence (AI) and therefore typos may be present.

Rob McNealy – RobMcNealy.com
Hey folks Rob McNealy here. And I’m excited to be talking to Dalton scatch of gold Kate. He is a kind of an all around really interesting guy as far as being involved in commercial real estate and financial markets and entrepreneurship. And the kind of guy I’d like to talk to, because he reminds me a lot of me so welcome. So Dalton, how are you today?

Dalton Skach – Gold Gate
I’m doing well. Rob, thanks for having me. Thanks for that nice compliment that you think I make you think of me or even yourself?

Rob McNealy – RobMcNealy.com
It’s all well deserved, man. I you know, I really I talked to a lot of really interesting engineers on here. But you know, my hearts with entrepreneurs, I can relate to entrepreneurs and investors a lot more than I can engineers sometimes. And, and I think we as entrepreneurs look at the world a little differently than a lot of people do. So it’s always good to kind of talk to like minds, so to speak. So I guess before we jump into what you’re working on, can you give my audience a little bit about a little bit about you? What’s your background?

Dalton Skach – Gold Gate
Yeah, so Dalton scatch is a entrepreneur and this is my second business. Gold gay. I’m also a world traveler. I’ve been spending the past few years traveling around the world. And a little bit of background about kind of where I came from, as I grew up over in Reno, Nevada, and went to school in Boulder, Colorado. And then after I graduated, I started my first company six months afterwards, my company ended up being successful. So I went out and I traveled the world while I was working. And then I spent some time this year in Latin America, and then Coronavirus happened, and then I started this new business. Sothat’s kind of a short story.

Rob McNealy – RobMcNealy.com
Very cool. Oh, yeah, I was in Colorado a long time my wife went to University of Colorado for medical school, and I went to Colorado State for my MBA. So it very much is and I was just in Reno actually just a few weeks ago. So get around a little bit myself. Um, so what was your first business?

Dalton Skach – Gold Gate
My first business also called gold gate, what I was doing as I was doing commercial real estate, investment consulting, so I was working with private equity groups and retail and institutional groups around the country, in forcing off market, industrial and multifamily deals that were $10 million, and over. And it was quite a niche. But it was very, very high in demand, I got to know a lot of the biggest players in the game in the country due to it. Because these funds and these equity groups, they always need more deals, because that’s how they make their money. So I was I was doing that.

Rob McNealy – RobMcNealy.com
So you’re pretty young guy. How did you make all those contacts, so shortly after college?

Dalton Skach – Gold Gate
Yeah. So when I was actually in college, the University of Colorado’s got an incredible real estate program where they have these case competitions, and they build a team. And they go all over the country competing with teams in schools, universities, from all over the world, and he’s competitions. And so I was able to build a pretty great network through that for like, for instance, when we would go down to USC to compete, we would meet private equity guys and real estate guys there. But basically, six months after college, I said, Hey, I’m gonna you know what I did in college, which was the kid competitions, I’m going to do this in real life. And so I went out and started doing that I started reaching out to all these people, actually, my first, my first deal that I ever did, is I wrote a handwritten letter, wrote a handwritten letter to the largest industrial re in the entire world, I wrote it to their CFO. And a week went by, I remember sitting in my car and getting the phone call from from San Francisco. And that was actually my first deal. That deal ended up being over $10 million. And that was a great six figure award. So..

Rob McNealy – RobMcNealy.com
So I think you, you hit the nail on the head right there with a little secret. So what prompted you to write a cold call letter by hand?

Dalton Skach – Gold Gate
I think it’s all about being an entrepreneur and trying to get that person’s attention. So what I did is I was able to get all the stationery that was branded towards gold, gay, I wrote out the letter a few times, you know, on my Word document, and then kind of prepared it with a sticker and all that stuff. And pretty much what am I in my head, as I said, Yeah, it’s gonna take a little bit more work. But one of these cards really could turn into a very large payday. And it’s pretty incredible because without writing that one card, I would not be where I am today, so forgive me.

Rob McNealy – RobMcNealy.com
So with the initial version of gold gate, did you how did you exit that?

Dalton Skach – Gold Gate
So at the end of last year, so in 2017, and 2018, those were my best years for gold gate in terms of closings and Because people were at least wanting or entertaining off market offers. And what was going on in 2019, however, is that the economy was so great, it was so amazing that none of the property owners, they didn’t want to sell off market, because they were able to put the property on the market with a broker and get a number that they couldn’t even figure out in their own Excel spreadsheet, they were just getting numbers that were just so large that they would never have even imagined, from 2019 we put in a lot of offers is actually the best year for in terms of putting in offers, but there wasn’t a lot of closings, and towards the end of the year, as probably a lot of brokers might feel after a few years of doing this is that I kind of just felt a little bit underappreciated. And I felt like I was ready to go do that next step. And I’d already been traveling for two years. And I said, You know what, I’m going to go, I’m going to go spend some more time and kind of just go work on myself. And so I ended that the brokerage and the consulting firm at the end of last year, spent the first two months of this year in Nicaragua, then the next few months in Brazil, and then Coronavirus happened, and I saw an opportunity. And now I’m here.

Rob McNealy – RobMcNealy.com
So what is the latest incarnation of Gold Gate. what are you working on now?

Dalton Skach – Gold Gate
So the latest incarnation of Golden Gate. And I know that a lot of entrepreneurs do this as well as they start off with what idea and they pivot and they pivot and they, and they refine their business plan and their model. But what we’ve gotten into, which I think is pretty special is what we’re doing. What we’re focusing on right now at this point in time, is that with the platform that I’ve created, and the technology that we’re using, what I’m going to do is go out and acquire ultra luxury residential real estate throughout the entire unit in the entire United States in the world. And then turn it converted into a digital asset and allow investors from all over the world to acquire fractional ownership in these assets for not only tax benefits and property appreciation, but also personal use.

Rob McNealy – RobMcNealy.com
So that sounds a little bit like a security token offering.

Dalton Skach – Gold Gate
Yes, yes, it can be a security token offering. And it’s not only a security token, it’s also kind of a utility token in a way, because you have that personal use, and so be more of a hybrid. But that is how we are setting it up. And what we’re doing is nothing new, right in terms of people buying fractional ownerships and real estate, that’s always happened in terms of concierge services and property management, that’s always happened in terms of even right now with the security token offerings, being able to trade shares and commercial real estate that’s already been happening as well. But all we’re doing is taking everything and put it together. And there’s no one else in this market that is doing this. It’s kind of funny, because I’ve been looking about doing that myself. So curious here, what, um, what platform Are you building on? Or are you building your own platform, building my own platform, so it’s going to be, as of right now the minimum viable product, we were using a few different third party providers in terms of the investor management and the KYC, AML process and all of that stuff. So we’ll use so I use a few different parties for that, for that minimum viable product to go out and raise money. We’re almost finished with our seed round right now that should be done over the next two weeks. Already have the team in place, all we need is the money to go out and execute and get our first deal done. And but yeah, overall, over the next two months, we’re building out a new gold gate platform, using different API’s and building our own UI UX interface.

Rob McNealy – RobMcNealy.com
But are you building your own blockchain? for this?

Dalton Skach – Gold Gate
Yes, we’ll be using either Well, that’s also one of the things that we’ll be choosing whether we’re using an ERC 20 token or if we’re using an IBM hyper ledger, or there’s a few different kind of block chains that we are exploring right now. And over time, that will continuously improve and be updated similar to an Apple iPhone update, probably every you know, four to six months or maybe even once a year. We just have one of those blockchain updates.

Rob McNealy – RobMcNealy.com
Have you looked at Ravencoin? I have not looked at Raven. Do you know that they have all the Ledger’s and stuff available to make it so you can’t move the tokens to be? Well, you might want to look at Ravencoin. They got a lot of features because they were built specifically for security tokens and they even have the the ability to do the whole back period and everything else on those so built into the protocol.

Dalton Skach – Gold Gate
Wow. I’ll check that out. I’ve heard of Raven coin. I’ve definitely seen in the news. I just haven’t looked into it as a blockchain option as you know that ERC 20 is kind of the the market maker right.

Rob McNealy – RobMcNealy.com
Yeah, but there’s a lot you know, ERC20s don’t have the same functionality and as far as to be compliant with securities because Once you have if you if you give out an ERC 20 token to somebody, they can just move it and put it on an exchange somewhere. And the problem with that is that’s not compliant with federal law.

Dalton Skach – Gold Gate
For that, you can take a letter that one of our investors could take their ERC 20 token and put it and put it up for exchange on a Coinbase account?

Rob McNealy – RobMcNealy.com
No, but you could do it on a DEX, where all you need is the contract Id like either Delta or fork Delta, something like that. You absolutely could. So you got to be careful about that. That’s why I would look at something like Raven coin, that actually is lockable that I you know, I could put you in contact with the the lead developers personal friend of mine. And, and I don’t have, you know, I don’t have any dog in that fight. But I think Raven coin would be a much better option for that. So you got to comply with securities laws.

Dalton Skach – Gold Gate
Well, definitely gonna be complying with securities laws and many things. But yeah, we’d love to have that introduction.

Rob McNealy – RobMcNealy.com
Absolutely. So will you be selling these on a market like tZero? Or how do you plan on being an exclusive secondary marketplace.

Dalton Skach – Gold Gate
So if you want to invest in these properties, and we’ll also be bringing other real assets onto the platform in the future as well, like commercial real estate, our car, stuff like that. So if you really want to invest in these assets, and in case of residential real estate, be able to use them on the journey to be on the Golden Gate platform.

Rob McNealy – RobMcNealy.com
And how are you handling the legal piece of that? As far as sec, I know, you said, you’re gonna be doing you have to do AML KYC. For accredited investors. I’m assuming this is for accredited investors that only?

Dalton Skach – Gold Gate
Absolutely, yes, yes. So for accredited investors are doing some reg d 506. c exemption, in terms of how we’re doing the offering. And then in terms of the back end, in terms of the trading, that’s being managed by a sec registered broker dealer.

Rob McNealy – RobMcNealy.com
So on the assets themselves, so it sounds like you’re doing you’re raising money then to build this essentially a fund, and then you’re going to be selling off securities, from that fund to accredited investors. Is that correct?

Dalton Skach – Gold Gate
No, there’s a lot of fun going on with this at all, each piece of real asset has its own entity. So there’s not a fund going on.

Rob McNealy – RobMcNealy.com
Very cool. And what would you say you’re doing that’s super, super unique compared to like, other normal rates?

Dalton Skach – Gold Gate
Well, what’s different about this with in terms of normal reads, and I guess that’s for the commercial real estate aspect for it, too. But for instance, if you drive by, let’s just say, prologis. If you drive by one of their industrial warehouses, and you own $1,000 worth of prologis, share, you don’t drive by that and go, Oh, I love that’s my property. No, absolutely not. Because you don’t have any pride of ownership. And there’s also different tax benefits when you own properties by themselves in terms of depreciation, and how that’s also all handled. But what you’re able to do on this platform, is you’re in essence, able to create your own reap, right, if you say, hey, I want to have 50,000 shares of this multifamily property in Austin, I want to have 100,000 shares of this Amazon distribution center in Phoenix, I want to have 200,000 shares of this chick fil a in Denver, Colorado, and I want the the ability to sell them whenever I whenever I want. That’s what we’ll be offering. So you’ll be you’ll be able to, in essence, create your own read. But your own, I guess life on this platform, you’ll be able to say, here’s the homes that I own. Here’s the commercial real estate that I own. Here’s the art, here’s the cars, here’s my stocks, here’s my bonds, here’s my crypto. And if at any point in time, you want to liquidate everything and put it into a new business or move to Mexico, you have the ability to do so this is perfect for family offices. I mean, imagine if you were to go into your family office and tell them to liquidate everything. That’d be a pretty weird morning.

Rob McNealy – RobMcNealy.com
Exactly. What you know, I always like to ask this about projects. What do you think the blockchain and cryptocurrency bring to your project that you couldn’t just do this with a database and like normal shares?

Dalton Skach – Gold Gate
Yeah, we’ll bring like what like what what I also marketed as like a digital security offering, all we’re doing is turning it into a digital asset and creating that marketplace that is where people can trade. So I guess creating that liquidity and that trading, which you’re not able to do, for instance, if you buy maybe your shares on crowd street or fundrise. I’m pretty familiar with both those companies, but from what I understand, you can’t you know, you get paper shares, well, you can’t just go out and just, there’s not a marketplace where you can go sell those, but then also be able to have that accountability and transparency piece and also have That confidentiality piece too. And then to also bypass all that legal piece, right? Like, for instance, if you own shares in a commercial real estate property, it’s March 2020. And you want to sell your, your shares in that retail center, well, you’re pretty much sLl, right? There’s, you’re pretty much screwed. You can’t go out and sell these, and if you’re going to do is, it’s gonna be huge last year principals and be a lot of legal costs can take a long time to find somebody. But with this, you’re able to reach people from accredited investors from all around the world, a click of a button.

Rob McNealy – RobMcNealy.com
Did I lose you? No, I can hear you, you kind of popped out there for a second.

Dalton Skach – Gold Gate
Oh, weird, weird, weird. But uh, I think I was just saying that, rather than the traditional way of buying and selling, I get shares and residential or commercial real estate, where it’s very hard to do. So now you have the ability to reach a marketplace that includes thousands of accredited investors all around the world, we’re able to reach them with a click of a button.

Rob McNealy – RobMcNealy.com
So that’s interesting. So how are you guys able to do the AML KYC on the international investors?

Dalton Skach – Gold Gate
That will be we will be working with a KYC AML company like verify invest, or some of those other companies that manage the entire KYC AML process for all of our international investors. And again, when in order to in order to go on to the Golden Gate platform and create an account and everything I mean, these people are investing millions of dollars into homes and commercial real estate, whatever it might be. So they’re gonna go through a pretty thorough KYC AML process, not like one that you would do on a t zero or Coinbase.

Rob McNealy – RobMcNealy.com
So when do you think you guys are going to be like, open to the public? When do you get? When do you guys gonna be live with this?

Dalton Skach – Gold Gate
For the website, and that’s in the websites already ready, I just have a private right now. And so that will be going live over the next two or three weeks. And we’re going to start introducing educational material and all that stuff. And then the new platform will be ready in December of this year. And between October and December, we’ll be meeting with lots of brokers throughout Southern California, but also the United States, trying to get as many properties as we can on this platform. As you can imagine this this kind of fractional interest and the training and all that stuff for residential real estate is very attractive for family offices or athletes or CEOs or celebrities or musicians. So we helped out our first closing our full closing in January of 2021.

Rob McNealy – RobMcNealy.com
Very cool. So Dalton, where can people find out more about Gold Gate?

Dalton Skach – Gold Gate
People can go to www.GoldGate.co .co, not .com. And you can also go on our LinkedIn page, just Gold Gate.GoldGate, gold gate. And also feel free to email me at Dalton@GoldGate.Co. Those are all ways that you can reach me.

Rob McNealy – RobMcNealy.com
Well, Dom I do appreciate your time today and I look forward to seeing when you go live.

Dalton Skach – Gold Gate
Appreciate it. Rob. It’s been a great time talking with you. I look forward to that introduction to Raven coin and I look forward to our next conversation.

Rob McNealy – RobMcNealy.com
Very good. A Rob McNealy here and make sure you check us out on the web. I will have all of Dalton’s information posted at RobMcNealy.com, and this is going to be a good time. I think it’s really interesting what he’s doing here at blockchain. So make sure you check it out, folks, and hit that subscribe button.

 

Haider Rafique – OKCoin Transcript

Haider Rafique - OKCoin

Note: This transcript was automatically generated by artificial intelligence (AI) and therefore typos may be present.

Rob McNealy – RobMcNealy.com
Hey Rob McNealy here. And today we are talking to Hyder Rafiq, he is the global Chief Marketing Officer of oak a coin, which is an American based cryptocurrency exchange. And you don’t hear a lot about American exchanges too often, because they’re just frankly, aren’t many of them. But I wanted to get his take on the crypto world. And so well, let’s welcome to the show. Hi, there. How are you today?

Haider Rafique – OKCoin
I am. Well, thanks for having me, too.

Rob McNealy – RobMcNealy.com
I appreciate you coming on the show today. I think based on some of our earlier talks, you got a lot of really, really good insights. And I wanted to share some of those their audience. Before we kind of jump into that though, can you give us a little bit about your background? How did you get into the crypto space? And how did you join the ok coin team.

Haider Rafique – OKCoin
My experience with crypto started when I left Microsoft, I believe it was 2014. And I was playing around with an e commerce idea that we had with a two engineers from Microsoft, we ran into a payments problem. Most of our customers were coming from China, South Korea, India and those markets. And by allowing Bitcoin as a form of payment, we were able to increase the amount of orders we were able to fulfill on on our e commerce platform. So that was my first exposure to crypto and Bitcoin. I ended up working for a few years in enterprise enterprise Product Marketing, b2b product marketing for a software company, only to find myself in 2017, like most of us and the sense of urgency that hey, I should actually go work in crypto, it’s more exciting than than what I’m doing. I got fortunate I ended up becoming the first head of growth@blockchain.com spend two years they’re building out their growth function, their their marketing function, and also their monetization while I was there, and I was hooked, I was in the rabbit hole deep. When I decided to leave blockchain I was looking for the next gig I wanted to take on was something ideally at an exchange. And I came across Okay, coin long with a few others and Okay, coin was fairly unique in what they were trying to build. And, and the leadership was was, you know, one that I really resonated with. So that’s, that’s how I ended up at Ok, coin. There’s a lot of exciting stuff going on here.

Rob McNealy – RobMcNealy.com
So what would you say differentiates Okay, coin from some of its other competitors, both globally, and you know, domestically?

Haider Rafique – OKCoin
So we are a Global Exchange? A lot, oftentimes, the question I get is, are you guys the US entity of because you’re now headquartered in the US? Are you a US entity? For Okay, coin? Are you similar to say, for example, by Nance us, and we’re not, we’re actually truly a global exchange. And the difference is, we’re actually headquartered in the US, in San Francisco, the way we differentiate ourselves is ultimately at a very macro level. The reality is Rob, we all have a lot of choices. When you think about buying crypto, whether you buy crypto through a wallet product, or you buy through an exchange, there’s just so many brands out there for anyone to choose from, what we try to do differently is we try and ultimately create an experience that is going to be really meaningful for the customers. We’re on that journey. Are we there hundred percent? Not yet. But we’re working really hard towards essentially differentiating on customer experience. So part of that means we’re not going to maliciously charge customers, fees, high fees you’re seeing that happen in the industry. So our fees are very competitive in the industry. We’re about one of the lowest fees exchanges out there. We’re also Fiat based exchange for for retail investors who don’t know that language, it’s essentially the ability for anyone to link their USD account, most say your chase or your Wells Fargo account very easily with the crypto exchange just like you would with any traditional brokerage firm like TD Ameritrade or fidelity, and being able to make a deposit and use that deposit to buy and sell and trade crypto. So in addition to that, we’re constantly adding new high quality projects and assets on our exchange, we’re giving investors and traders exposure to those to those emerging investment opportunities. Generally, when we step back from all of this, I think the ultimate goal for okay coin is to be the best customer service and customer experience. And like I said, we have a we have a long way to go.

Rob McNealy – RobMcNealy.com
So one of the things that you know, I see is has been a barrier to adoption of cryptocurrency. It has been the difficulty Using crypto the on ramps to user experience user interface, what are some of the things that you’re doing with ok coin that maybe helps that out a little bit and simplifies that for more unsophisticated investors or people that are new to cryptocurrency?

Haider Rafique – OKCoin
Yeah, the relationship I would share with you is when you think back 20 years ago, and there weren’t any digital brokerage products, or if there were very few people used it. Typically an investor with some disposable income and savings, and a portfolio would go through a financial adviser that called him up and say, hey, how should I How should I get exposure to the markets? What should I invest in? You know, that kind of thing. And that financial advisor would tell you how to allocate your you know, how to allocate your your savings, essentially, with digital brokerage firms, that sort of paradigm changed a little bit. People want to believe that they can actually take ownership of their investment decisions. So now you’re seeing this over the last two decades, you’re seeing a wave of retail investors, people with disposable income and savings, signing up for these brokerage platforms, and learning about what are bonds? How do I buy stock really easily? How do I get exposure to x company or that company? How do I read earnings reports, so on and so forth. So the user now the customer now is a lot more savvy than the customers a generation or two ago, they’re more familiar with these financial tools than they were previously. crypto is hard. There are a couple of aspects of crypto that have been really challenging for us onboarding, a big wave of customers with disposable income with an appetite for investment exposure. The reasons are like You teased up. Historically, it’s been really hard because of regulations and compliance and what have you to work with banks that that world has changed a little bit. Now you have products like plaid, you can integrate with and it’s really easy for anyone to use their credit card or their bank account acth rather, to fund their account. This is as simple as, say, downloading the Uber app and linking your your bank account to it. So you can start using that app on a regular basis. So the world looks much easier now than it was say back in 2017, when it was really hard to get get to, you know, purchasing crypto somewhere. And even if you did it, the trust factor wasn’t there. So a lot of people kind of shied away from it. So that has become easier. I think the part that really still needs a lot of work is oftentimes what I see having worked at Now, second, crypto company and advisor view in the middle is we are still using nomenclature and language as if we’re speaking to engineers, as if we’re speaking to people who actually understand crypto already have been in it since since its formation. But what we’re not doing a great job of is rewriting the way we we talk to our customers in a way that they understand. And customer you know their way, okay, coin looks at customers is a couple of different ways. We look at customers as folks who have not had any exposure to crypto, they’ve heard about it at family dinners or to a friend or to their financial advisor. And they’re intrigued. They wanted to sign up for a trusted platform, one that they feel secure, their money’s not just going to evaporate, somebody is going to just you know, get off the radar and their money’s gone. And then there’s another segment of people which, which is, you know, essentially people who’ve actually been trading a little bit here and there. They’re not professional traders, they have a full time job. But they like the aspect of trading. They’re a little more savvy. And even for them. This crypto language that we have, is sort of new and intimidating oftentimes. And then you’ve got the third category, which is like folks that are just day traders. This is what they do and live in breed. And what we’re finding is even those folks, that segment of people who haven’t traded crypto previously come into the crypto ecosystems and they’re kind of lost, they have to spend a lot of time educating themselves on you know, what does defy mean? ledger mean, or what is an explorer, all this kind of stuff. So a lot of the things that we’re trying to do at ok coin are not there yet, is fundamentally create a product create an experience that welcomes everyone. Any investor any trader, not just the crypto traders or investors who’ve been in it, and have high conviction and understand some of these things.

Rob McNealy – RobMcNealy.com
Well, I think one of the things you, I think are kind of alluding to is is the ease of use and that abstraction I agree with you, most of us in the crypto industry, we take for granted that our audience understands, you know, all these weird nuanced things about the technology and the language. But I think if we look at how we can abstract that away, I think that’s important. And I think, you know, crypto projects would be best served if they tried to figure out how not to educate people, I think that’s really difficult, right? To try to educate people on a new technology. People, for instance, don’t know how credit card work, you know, they don’t know all the middlemen, the swift technology and all that kind of stuff. We don’t when people don’t know that, they just know their credit card works. And I think that’s one of the things that I see it been missing from the conversation with dealing with the masses, is, you know, not about how we educate. But I think we need to focus on, you know, how do we abstract all that technical stuff that people really don’t need to know, in order to leverage and use the technology? What do you think?

Haider Rafique – OKCoin
I agree with you, I think a lot of the early projects that start that actually are trying to build or have a great utility or a use case, are often creating the project or the product in a way that captures the network that’s really fully sold in and knee deep in this stuff, because it’s easier for them, to onboard into a product, give them feedback, so on and so forth. So you have these like pockets of networks, and and communities that are being built around each of these protocols or assets or projects. And those folks are not your retail investor. So you keep seeing a shift of like these 3040 50 million, you know, crypto users around the world who go from project to project, what I’m not seeing is this like high velocity of increase in adoption. We have a lot of people in the world, not just 3040 50 million people. And I think that that onboarding new customers and new retail is not happening. My fear, oftentimes, maybe fear is not the right word is competitively speaking, we don’t necessarily focus on competition, we focus on customer experience. But as a marketer, I don’t worry about you know, other exchanges or other wallets and what they’re going to do or what have, you might sometimes oftentimes, my worry is that we’re in crypto, we’re doing all the hard work from an engineering standpoint and technology standpoint. And here comes traditional brokerage firms or consumer apps that have the trust of consumers. And they’re going to come in and turn on the knobs and now offer really easy exposure into crypto. And when majority of the market share that’s there to be had for us in crypto. I think that’s I think that’s the biggest risk to crypto industry is traditional finance and FinTech coming in and reaping the benefits of what crypto engineers have been building over the last 10 years or so.

Rob McNealy – RobMcNealy.com
Well, you know, I think crypto is doing it to itself, though, to be honest. And I’ve been in this space for more than three years now, which is in dog years is a long time. Right? And, but as a project, you know, I I’m always looking at what other projects are doing or not doing, as far as you know, doing outreach to other communities outside of the existing crypto community. And at least with us, we’ve tried to focus on with TUSC to not cannibalize. I’m not trying to steal people’s I’m not trying to steal people from Bitcoin, right? I’m not trying to steal a theory of people into our and bring them in our community. That’s not our focus, our focus is bringing in people that aren’t already not in crypto, and and I think one of the reasons people aren’t doing it is hard. Okay, it’s hard to go and do that marketing. It’s hard to go knock on doors and do traditional sales. And I think I think there’s a couple of reasons for that. I think one of the reasons is developers and engineers hate those activities. They don’t typically like to do business development and sales and marketing. And so they don’t, but I think the other thing is that going out and going out and knocking on doors, kind of goes against the ethos of decentralization, because now you have a centralized sales and marketing function. And a lot of people don’t like doing it. It’s hard. And I think, and I do believe long term, the projects that exist now that start focusing on those activities are going to be the long term winners. And I agree with you, I think is is it’s inevitable that traditional finances coming into the space, the question is, who’s going to be left standing after they do? And I think that those are things that people in the crypto world probably really need to think about.

Haider Rafique – OKCoin
Agree, I absolutely agree with you. I think it’s gonna be an interesting next few years. There’s so much opportunity for all of us, I think, to to get out of our comfort zone and, and, you know, see what we’ve not typically been comfortable with doing. I think there’s this sentiment in Silicon Valley or in tech or even in crypto. If you build they will come. Well, the reality with that that notion is, if you build and they will come takes you to a certain point in your product, then you hit a saturation point, take a look at Uber, they were running marketing campaigns, meaning they were creating flyers and shipping them to people at their homes at a certain period of time. And eventually, Uber was doing out of home billboard ads, they did all kinds of marketing to get to becoming a household brand name. All products do. eBay did it. PayPal has done it. I think I think my hope is that crypto is, you know, not just that, okay, coin, but the entire industry gets out of that comfort zone and realizes that if any of us want to become a household brand name, we’re gonna have to look at the playbooks of previous consumer brands who’ve done it really successfully. And what have they done that were reluctant to do? And, you know, how can we learn from them?

Rob McNealy – RobMcNealy.com
Well, it’s interesting, I read an article not too long ago, about that exact thing, like what are the top crypto or sorry, what are the top tech companies do to get their first you know, 10,000 users. And it’s pretty interesting to see all the all the little legwork that those guys had to do. And and you wouldn’t even think that those guys were hustling. But every one of those guys hustle, they’d been even watching what Etsy did and Uber and Airbnb and some of these projects, it’s a really good good little historical research project, if you or anybody in the audience has time to look at it. And we have, because we believe that is going to be important. And you have to have a plan to do that. Because I you know, I am like, I’m not a developer. So I think of things a little differently. I’m more of a marketer, like you. And when you go and look at, you know, I view crypto, even a decentralized crypto projects, they’re still a product, right? They’re still a service and used and they’re not somehow above the laws of marketing or supply and demand. And this is where that like, it’s, it’s interesting, because there’s a lot of engineers in Silicon Valley, they get this right, these tech engineers and these tech companies get that. And it seems like there’s it just hasn’t really translated yet to the crypto projects. And I really don’t know why that is yet. But I still think that there’s a lot of opportunity there for the the crypto products that do do that. And I think in the next probably five years or so, I think the projects that do focus on those things are going to be coming out in front after the hype and, and what I was saying earlier is about crypto is doing it to itself is that we’re getting all excited about you know, I would argue a lot of these defy projects and Ico kind of projects, they take away from the attention from the you know, the more legitimate, you know, projects that are doing the dirty work and focusing on just, you know, wheels down kind of stuff, but and I think we we’re cutting our own legs off, so to speak, because we’re focusing on just getting rich quick in these really obnoxious, you know, ROI of yield farming and things like that. And that takes all the excitement away from like, Oh, you guys are actually building something long term. And I don’t know what to do about that. Like, I can’t control that, of course. But I mean, what do you think? I mean, you’re an exchange, I know, you guys have been listing a lot of defy projects lately as well. And is this something that’s gonna be a permanent thing? Or is this just you know, the fact is, you know, we’re writing other hype cycle.

Haider Rafique – OKCoin
It’s a bit of both, I think, but don’t quote me on this, because I’m not an economist. I think the way I look at it is the other day, I got an ad in, in Gmail, my gmail account, which was from Marcus by Goldman Sachs, and it had this interesting message, which was, you know, get the highest yield on your savings, if you deposit to Marcus. And we we offer a yield higher than national average. So I went on their website, and the yield that they were offering on deposits was point 6%, I believe. And, you know, it occurred to me having been deepened, defied now, especially the last like month or so, going through our listing process. We have crazy numbers and defy reality is again, what does defy even mean to a regular person? Do we even need to say that it’s a defy product when we market this stuff? Or do we actually focus on the utility we focus on, hey, if you put x money in, here’s the API you can earn. And here’s why it’s important. You know, we’re in an economic downturn, there’s that really high unemployment rate, people are depleting their savings. You know, the markets sort of really volatile. So people are looking at other instruments in which they can protect their investment and their savings and in dire times, Have an outlet where they’re able to creatively earn, earn money for the lack of better term. We offer and defy their protocols offering 60% APR even more than that, right? And sure, there’s a volatility in that number. But the reality is a way I think about it as a marketer is, this is not about defy, if we go out there, if and when we launch our own earn product. And we go out there and we position our earn products, as Hey, you know, participated in our defi ecosystem or what have you, we’ve failed because again, we’re going after capturing that, that crypto user, not the folks that actually really, really need this stuff that have taken a hit because of COVID, the last six months or so. So if this is true, and how do we position this stuff? Ultimately, the utility is you have exposure to higher API, a ridiculously higher API than what you would find through traditional banks. Mark is being an example. So why don’t we go out there and not include any defy language and just say, subscribe to this or opt into this or put your deposit into this into this product? And you get between this and this percentage API, which is much higher than what you would find in traditional markets? Now, the obvious question, anybody who’s not in crypto among my network asks is, well, what’s the risk? Because crypto has this, you know, the optics and perception that it’s, it’s a, it’s a tulipmania? You know, it’s the Wild West? You know, there’s no regulation, your money can just completely evaporate. I think that world has changed. I think it is a lot more trusted now. For example, okay, coin, all your USD deposits are FDIC insured. So things are things are happening in terms of winning trust from customers, but ultimately, any yield product, high yield product, even if you look at markets, they have this like long, ugly legal disclaimer at the bottom of their landing page of their website, which says something along the lines of this is a really high risk instrument. Be aware. And that’s how we should educate people, retail investors and crypto users about these crypto instruments. Every every crypto asset has its own risk level, I think the best part we can do is a humanize the language focus on our utility, because people largely speaking outside crypto really don’t care about 99.9% of the stuff we talked about. So if I go and tell my mother and father or my uncle or somebody in my family, hey, if you put $10,000 in this instrument, you will you will have the potential to get exposed to 50% plus KPI. Suddenly I have their attention. Okay, great. Now I’ve done the first part. The second part is I need to warn them hey, by the way, this is a high risk instrument, don’t put all your savings in it be responsible, get the right level of exposure, I never go tell my friends, hey, buy bitcoin and just spend everything you have and just buy bitcoin and just keep buying Bitcoin. I don’t say that I what I tell people in my network is if you have a portfolio and you’re building a portfolio, make sure you have exposure to crypto, and I tell them about the high value assets and the thesis behind them. And then it’s up to you and your risk appetite, how much exposure you want. Is it 5%? Is it 10% maybe you have higher conviction, you want to go a little higher, but I think that’s generally how we should all explain this stuff if we really want to attract the broader market.

Rob McNealy – RobMcNealy.com
I agree and so I you know, personal financial literacy is kind of one of my little you know, pet peeves in the United States and, and when I see people saying I’m all in on crypto that scares me To be honest, because I think that’s how people get really, really wrecked. And, and and definitely I’m very pro crypto. But I also am very pro This is super high risk in a lot of these projects. And and I don’t think a lot of people are good at assessing risk. And I don’t think a lot of projects, kind of point that out. But I think that’s one of the things that I see as a kind of a thread that weaves through the crypto world is that you get a lot of people that are not financially literate, that are investing or mal investing or investing too much in things. And and ultimately, I don’t like seeing people get hurt because of that. And I wish more crypto projects would say what you’re saying is figure out a port, you know, you should have savings outside of crypto In other words, and you should have investments outside of crypto, it’s prudent to do that. And I’m glad to hear that you at least philosophically also agree with that. And I think I think it’s important and I think you’re right. I think we need humanize that language. Um, I know we’re getting close on time but….

Haider Rafique – OKCoin
Banks By the way, are not not doing it any or traditional brokerage firms are also not like the you know, the North Star you want to look at, for example, if you sign up for TD Ameritrade or any of the brokerage firms out there, and you have to see $100,000 deposit in your account and you’re day trading, you’re going in and out of positions. Eventually, very quickly, TD Ameritrade will say, hey, by the way, Rob, you know, we see you have 100,000, how about we give you margin, how about your five for margin, so you can trade more. And I think like, getting it back quickly, and I speak, I say this from experience, there was a time that I had some disposable income. And I started day trading. And it was scary how quickly I started to get that five x 10 x leverage from from one of the brokerage firms that I was trading on. So my point is here, it’s not that crypto needs to take that responsibility. These tools have now become consumerized, you now don’t have the financial advisor or the middleman warning you. Hey, Rob, be careful what you’re doing here. So now you have access to these really complex instruments that typically were, you know, designed for professional traders or investors. Now people like you and I can sign up for it. And within a couple of minutes, we’re off to a start. So I think the responsibilities across the board and finance we all need to do a better job of driving responsible investing behavior.

Rob McNealy – RobMcNealy.com
You know, I couldn’t agree with you more on that either. I really, I’m really glad to hear you say that. So Hyder, where can people find out more about you? And okay, coin?

Haider Rafique – OKCoin
So, my Twitter is HaiderSF, it’s pretty easy to find me. But I think more importantly, for your audience, I would I would want them to come on. OKCoin and give us a try. We do have the lowest fees. Unlike the challenges that other exchanges are facing in crypto, we have really low downtime, most of our downtime is related to announced maintenances. So what will not happen is the market is hot and you’re trying to place a trade. And suddenly you can claim as I say that worlds are locked and your deposits are locked or you know, the fees are like just ridiculous. We’re we’re trying to build a trusted platform we have a lot of work to do. We have a lot of high quality assets to add. We have a lot to improved in terms of our user experience. But I can assure everyone that we pay attention to every customer. We’re looking at everyone’s experience and we’re trying to make it better. So if you’re ultimately looking for an experience that’s trusted, and you’re gonna you’re going to be heard. I think I would give Okay, quite a trial,

Rob McNealy – RobMcNealy.com
either. Thank you so much for coming on the show today. I know you’re busy and I do appreciate your time.

Haider Rafique – OKCoin
Thank you. Thanks for having me. Talk to you soon.

Rob McNealy – RobMcNealy.com
And folks, I’ll have all those links up at Rob McNealy calm and make sure you hit that subscribe button. We got a lot of other great shows coming up and you’re gonna want to stick around and thank you so much and you have a great day.

Episode Links

Audio Interview
Video Interview
Interview Transcript

Lennix Lai – OKEx Exchange Transcript

Lennix Lai - OKEx

Note: This transcript was automatically generated by artificial intelligence (AI) and therefore typos may be present.

Rob McNealy – RobMcNealy.com
Hey folks Rob McNealy here. And today, I’m pretty excited. We are talking to Lennox law. He’s Director of Financial markets of the oke x exchange. And they’re one of the biggest exchanges in the world. And I’m really excited to see what they’re up to. So Lennox, how are you today?

Lennix Lai – OKEx.com
Hi, Rob. Yeah, sure. I’m really appreciated as we on the call. We were happy to see you folks here.

Rob McNealy – RobMcNealy.com
Well, so, um, let’s just jump right in here. And, you know, tell me a little bit about Okay, x hat, and how did you get involved with the crypto exchange world?

Lennix Lai – OKEx.com
Yeah, my other background, the traditional finance background. So basically, I was a quon trader in Hong Kong for around 10 years. So I’m, I’m also kind of like compliance and regulatory guys in Hong Kong. So, like three and a half years ago, that’s where we’d like to join. Okay, yes. Because Because the okay group back in the time, would like to expand the exchange business internationally. back in time we are, we’re actually very big in China already. We overing Bitcoin Exchange servers for local currency, that becoming one of the best one of the biggest crypto exchange in China already, and we would like to expand to the international market. So that’s the reason I joined and starting to build and branded as the name of Okay, yes, the Okay, x name, actually very benchmarking Hong Kong exchange is also called H key x. So we will lie to branding, our exchanging expertise, and also the traditional financial knowledge, so to brand in the world to bring crypto to traditional finance. So that’s how it gets done for Okay, it’s like three and a half years ago.

Rob McNealy – RobMcNealy.com
So what would you say some of the biggest challenges are of running an international exchange right now.

Lennix Lai – OKEx.com
So we are actually one of the earliest player in the field. So back its time we gather a lot of good player like pinole nacer, but Phoenix, Khan base already in place cracking, that’s all the big we’re, we’re accurate, very, very small compared for we’re the biggest player back in the field. So good. So we think we we are facing several challenges. First, we are primarily and very, very Chinese based exchange. So everything in terms of the team in terms of the product, in terms of the gods are all very, very Chinese. So we have to change the entire organization style, the language or the culture within the organization. So if you think about it, every every, every anyone will ever run come in your thing that would actually agree that changing the culture changing how an organization work, can put upside down use agile for football. So bringing the international value and international culture back to your very China exchange is the most complex and complicated task that we ever engage. And also, we we do have a lot of problem on our product. So so we have to SM be a team with the financial known edge cells to completely redesign for every single aspect of all okay, yes, from all across all our products, spot derivative, so everything else from the gods. So I think that might be yourself a big challenge we we come across, but at the same time, we are facing regulatory challenge all around the world. So that we have the assembly of really big compliance teams to tackle regulation everywhere, and apply proper licensing and getting the proper sandbox in crypto. So while we’re talking to regulators, we have splaying of this as well to convince that we are trying to be a good guy. So we have to, I think, in general, we, we are actually building a rocket, but at the same time we are driving a Ferrari. That’s, that’s the whole that’s the summary.

Rob McNealy – RobMcNealy.com
Well, you know, I like Ferrari, so that’s good. But so what would you say the, the biggest challenges from a regulatory standpoint, at least geographically, which countries are the hardest ones to work in?

Lennix Lai – OKEx.com
Yeah, I think back in time, like 2017 2018 our, I think all the Gulf Money can’t like being skeptic or some, some of them are actually quite hostile to, to crypto or to virtual currency. They have no knowledge at all to what’s going on in Bitcoin area. They are actually interest but they think that virtual currency or crypto actually engage a lot in unless it activities, anti money laundering. There’s some of the areas that regulators are mostly very concerned. And at the same time they’re trying to fit in, they’re trying to bring crypto try to explain crypto in a way that the current regulation that they’re already implementing, they’re trying to fit and crypto onto their current regulation, which is very difficult. So. So back in 2017 2018, most of our job is to explain to our regulators, to all those regulated, hey, this is crypto, this is just some kind of digital xx. And this is some kind of a digital asset that we would only allow KYC people to buy or sell, and exactly like a meeting your financial standard that your AML standards, so to explain all those stuff to all kind of regulators. So we starting to see some progress. So we see the US come over digital as a framework. We see some of the government like multiskilled, Malta government to have a virtual currency framework. We see Korea and Japanese government, they do endorse and have some kind of regulation related to cryptocurrency after after the industrial of commitment for around two years or more.

Rob McNealy – RobMcNealy.com
So would you say is there a particular jurisdiction that’s been harder to work with?

Lennix Lai – OKEx.com
I think there’s no jurisdiction that is hard to work with as long as they they are open to talk about are they’re not being hostile companies shut the door. Most of the jurisdiction I would say they would eager, eager to learn were, were very eager to learn from the biggest player in the field. They will like to understand they of course, they will raise a lot of question. But each of us have the jurisdiction of particular friendly, like a Singaporean governments and the Korean government. And even the Maltese government actually quite proactive to want to draft local regulation or specific regulation just for crypto. The other jurisdiction, I think they are very interest, they would like to bring in the crypto, the crypto xx into debt, the security law, or the derivative law, they are interest, but at the same time, they were actually very difficult for them to to actually blend in the current regulations.

Rob McNealy – RobMcNealy.com
How do you see things like the travel rule affecting your operations?

Lennix Lai – OKEx.com
I think the travel rule did actually spend spent a lot of effort for us to completely redesigned out how the how the AML KYC would be implemented into into the current operation. So before that is accurate, we don’t need to, we only need to worry about the global standards update our KYC AML AML. But travel rules actually means that we have to specifically design our checking procedures for all the European biggest customers across the field. I don’t think that is a trouble a big problem to our operation. But it’s just caught one of the costs of the business if you want to play the field with the big boy, we want to be a global platform. That’s just part of the cost of operation. We’re happy to pay for that.

Rob McNealy – RobMcNealy.com
So do you have much of a footprint you would say in the United States at this point?

Lennix Lai – OKEx.com
We don’t have we don’t allow us customers at the moment that is fun. It’s fun time.

Rob McNealy – RobMcNealy.com
Is that something you’re going to do in the future? You think you don’t have to look if it’s proprietary you don’t have to answer but I was just curious is that on your roadmap?

Lennix Lai – OKEx.com
Actually we do have a partner exchange as you belong to a similar group is called okay con. So a ready get up basically orderlies in in us say over the open to the US customers. So it’s really completely different platform is that is basically a partner with Okay, yes. But only that the product that available on Okay, Khan platform is very very different than OKEx, but the technology and the and and the matching engine is using similar technology OKEx.

Rob McNealy – RobMcNealy.com
Actually got the one of their marketing guys is coming on my show on Wednesday. This week.

Lennix Lai – OKEx.com
That’s awesome.

Rob McNealy – RobMcNealy.com
Sure. So yeah, it’s gonna be fun. And so I think, you know, that’s always fascinating to me is, you know, how, you know, the regulatory piece of this looks from the inside. Like I always say, when I’m when you know, I’m kind of mixed, are kind of in a weird position, because I also have a project, but I’m also you know, and you doing a podcast and things. So it’s like, when I see crypto from a very different angle on because on the project side, you see, you see the world very differently in crypto when you’re working inside of it. And, you know, you see all the warts, and, you know, the good and the bad all the way around. But I always like to hear, you know, what does it look like on the exchange side, because, you know, there’s a lot of there’s a lot of, you know, unscrupulous exchanges out there. And I can tell you, having dealt with several of them in the past myself, and so that’s why I’m always interested in you know, the more legitimate exchanges like okay, x in what they’re doing and how they’re handling it. So let’s shift gears a little bit. You know, there’s, there’s a lot of exchanges out there. That seemed to be dodging regulation as part of their business model. I’m not gonna name names. Mm hmm. But there’s some exchanges that you don’t even know where they’re where they’re domiciled.

Lennix Lai – OKEx.com
Mm hmm.

Rob McNealy – RobMcNealy.com
In the row, and so since you don’t know where they’re domiciled, and it’s even interesting, even with smaller exchanges, you know, you go look up try to look up information on the exchange. And on coin market cap, it says they’re based here, and then you go to their website, and it says, their base there and you never know where they’re really located. And, and so that’s always kind of a red flag for me, is, especially at the centralized exchange, because they’re not you don’t know where they are. So there’s supposed to be a centralized routing, that correct, there’s no central location to go. And I’m not saying you should go after people, but, you know, you don’t know who these people are, in some cases or where they are right. And it seems like some of these exchanges are doing it deliberately to avoid complying with you know, international regulations. Again, not going to name names but how do you guys compete with that?

Lennix Lai – OKEx.com
We don’t need to compete wave the wave this some the exchange was smaller Sykes Chang that’s trying to doubt regulations, okay. He exists 1000 people group already so we cannot doubt any regulation, we actually equally comply to the jurisdiction that we allow to surface that we offer our service, we cannot we have to we have 1000 people to be responsible. But for all the other smaller sigh exchange, they have the reason maybe they have the reason to, to try and get up regulation as much as they can, because some of the really small sites chain is kind of like us using hidden ranch approach. They just want to open a small exchange trying to grab the users based on can’t if there’s some trouble there’s as close down and reopen Yeah, in another one using similar technologies. And so, so, so, of course, I would like to invite other users to be aware of the of the of the of the really, really small size exchange, and they you and you basically apparently you cannot find where they are they do they do not have a register overs, or they do not have a property you may you don’t need to know where they base, they don’t show up on time. So, and some exchanges do not have a long history with short history you you have to be be aware of that because talking about central exchange, meaning that all the crypto acts act as an custody with the with the hand of the founding team or the wallet team. So so so actually, you carry a lot a lot of counterparty risk, if you will lie to trade with them. So girl someday, some of this most exchange also do not have a high priority or high high scrutiny of the project that allowed it to list on the exchange. Most of the exchange mode most of the project is required to pay a huge sums of listing fee in order to get listed two bonds of small exchange that grabs exposure users, traders as they can and try to win the way in in a relatively short period of time. The the opening exchange in terms of module cars is relatively easy. But running an exchange operation with proper cyber security Republic compliance team, the proper operation team is take the years of years of efforts. So I would also always to emphasize the SSA only focus on the major exchange in the world because they already there they have the history and and and protecting your crypto execs from millions of millions hacker in the world is not an easy task. It’s a date and day by day commitment. So we we care a lot about our reputation, we care a lot about regulation, we have to comply everywhere in terms of regulation. So it’s I don’t think it’s the as a direct competition with us, compared with the other smaller exchanges.

Rob McNealy – RobMcNealy.com
So right now the the best I can see there’s at least probably, I don’t know, 500 exchanges out there right now floating around. And there seems to be more popping up, you know, every single day. And there also seems to be a lot more decks is kind of in various, you know, stages of development. Oh, how do you see the market for exchanges in the future? Do you think centralized exchanges are going to be you know, the most popular? Do you think dex is going to become more popular? Do you think there’ll be more exchanges out there fewer exchanges, what do you think your? What do you think the future is gonna hold that way?

Lennix Lai – OKEx.com
Yeah, I think I think that the potential with DAX is actually for interesting. So that’s can be the only problem for DAX maybe before or, or for this few years, as people have been talking about. It’s mostly related to the capacity, the technological capacity of whatever chain, whatever blockchain that you’re implementing. So but we see silver these years that we see a lot of breakthrough in the under underlying technologies that have a huge promise on on the TPS, that transactional per seconds, right now, per blots. So those look like that DAGs, if they can manage to handle a search even a certain portion of the trading volume, that’s currently our central exchange is currently trading per day, I think that would give us an interesting use case potential to crypto so that everyone will would able to trade universally. And also everyone collects their own token universally, and that technologic technology is free. It’s open source. So everyone would have the capability to operate to open it DAGs and, and and eventually, everyone can compete with each other with a unique event age or unique appetite to different tokens. So tasks can be can be very interesting. Can I think if somehow, if the technic tech, technical side, transform your technical side becoming really promising, like the TPS reaches certain thresholds, and it’s safe enough to be trustable to two to four traders, and the UI and UX the user experience side of using das has been substantially improved it the tags in terms of trading volume and the size can could be grows exponentially. But while the central exchange, I think that’s still play a very important a crucial role. In in crypto in crypto x RP uses carry a lot of expect in in, in, in in define. So for example, like center central exchanges do are happening to having a lot of products very complex product that’s basically right now cannot cannot able to cannot able to undertake by the tax for now, for example, like derivatives of perpetual swap, we’re talking about millions of millions of borders or of thousand thousand trade per days, but it cannot be executed with our proper high frequency matching engine at this point moment.

Rob McNealy – RobMcNealy.com
So essentially, as the technology improves, and maybe you start getting these non custodial cross, you know, chain indexes, those are probably increase over time, but it’s just not quite there yet, I guess.

Lennix Lai – OKEx.com
Yeah, I think I think it’s getting a lot faster right now, but per lepromatous standing, we’re talking about some of the Kings don’t care about thousand TPS compared to 20 or 30, TPS in one or two years ago. So if it is go around two or three times more, I think we can handle probably on spot exchange ready. And some of the really, and, and I’m talking about some of the DAX, that’s able to manage derivatives, if they are able to manage the liquidation engine of the derivatives under this certain time of DAX under that under, under, there’s a dow around 1000. TPS, that will be so interesting because because read when you’re talking about highly leveraged Chang, when the market is move, you have to execute and use, you have to send your orders in the blink of a second otherwise, otherwise, you’re you’re you you would trigger Casa de liquidation or you create, you create problem of trouble in onto your problem, I’ll do a platform. So that I will be very, very interesting to see that how does handle highly leveraged instruments?

Rob McNealy – RobMcNealy.com
It’ll be interesting. What’s your take on the latest sushi sandwiches and hamburger de fi products that are out there?

Lennix Lai – OKEx.com
Yep. I think that everything is everything is looking to be right now is having having an insanely high yield for some of the token, I think, in general, I think is an other way for distributing token or distributing newly the newly minted token to user this looks exactly like the another way of the Ico or default token in 2017. Or, or or or the ieo. That that changed initial offering is a new or or B. I think it does vary because airdrops so whoever carrier one token you got, you got a candy. We’re called airdrop tokens free token from the token. So similar mechanism. The ultimate purpose is is also a sales of my own newly minted token. But what defy or sushi or hamburger was over sashimi is actually having a mechanism in place, meaning that you have to stick one token first, for for an for an odd token in order from any other token. So that would that actually the sticking components normally is over collateralized, meaning that you have to deposit more token first, in order to in order means or farm, relatively smaller size of token. So the risk compared to other risk compare if the other the other? The other mechanism dies? The other distribution mechanism? I think that would be a lot a bit a bit more healthier to token holder. And I think that define innovation would last for really a long time. I think. I think I agree. The the either inflation rate or youth right now is insane is not sustainable. But the way that how we understand defy the way that people are interesting participant divide a project that allowed it or that we would be perfectly to participant divide would be becoming a really, really hot trend for for upcoming years.

Rob McNealy – RobMcNealy.com
I think the future is going to be very interesting in this space. I you know, I’ve haven’t been shy. I’ve been saying that this, in many respects is Ico 2.0. And, and I just hope that the fallout that comes out of this is good innovation. But it’s gonna crash back down. Right? I think you said it too. It’s not sustainable. What we’re seeing out there, but what I’m hoping is that there’s new innovation in the technology is and I’m hoping that’s what comes out of this. But I’m afraid we’re probably gonna get a lot more regulatory scrutiny from this, as well. So it’ll be interesting to see how it plays out.

Lennix Lai – OKEx.com
Yeah, you’re you were there. You cannot deny that every new maybe new technology or new money or new new way of thinking has to be crazy from chaos. So So these kind of define chaos, this might not be sustainable. The river market corruption. Now were they there Painful correction to their way might be a rousing, regulatories good knee, as you mentioned, but eventually these kind of token distribution method would be an interesting insight for the upcoming define development. So people will actually think about, hey, that’s going to work. But if we want to do it sustainably, I think we have to change it to certain matter. And that will become a healthy growth order for the industry.

Rob McNealy – RobMcNealy.com
Totally agree with that? Um, so where do you see crypto changing in the next couple of years? What What do you think will be the next big innovations coming out and say the next three to five years?

Lennix Lai – OKEx.com
Wow, that’s Sir, I would. I would, personally Personally, I would the very exciting dad’s similar model as in Filecoin, that people can actually share data on chain and tray, that data on chain with the development of fire codes so far gone, it just might be a spark of the entire fire. So, so similar project lifelike on even what your tablet data privacy, your personal data that can be exchangeable, or, or your physical might be stuck with storage, you can just tray, or buy, or sell your own personal storage within every kind of computer that can be traded or transact, via on trading. But these economic and trading mechanism would be an interesting insight or interesting. Hence, for the other data driven industry. So people can sell everything if they carry a data. So fire icon might be the success of the fire gone, hopefully, would become a very interesting development for crypto for the next three and a half, three and five years because right now, if I can sell my idle storage, either virtual drive online, like like a cloud based server, but but so that I can basically sell everything I can using the exact similar mechanism, or similar blockchain or similar token omics to say everything that have data currently available. That’s might be the beauty the very first through adoption for blockchain technologies.

Rob McNealy – RobMcNealy.com
I think that’s very interesting. And, and I think there’s gonna be a lot of interesting use cases. For instance, I really have a library, you know, library credits, I like bat is doing the brave browser, where you actually are developing ecosystems that are using the crypto. And I think that’s important. And even with our TUSC project, that’s what our focus was, is is, you know, getting people to use the coin, not just speculative hype. And and I think that will be the future. And I think the big or most, I think some of the the products that are most likely to be mass adopted in the future are going to be ones that you don’t even think about right now. They’re they’re going to be ones that just slowly start building up an ecosystem where people are using their coin for a practical purpose. And to me, I think that’s really important. So I guess that one last question for you kind of wind down? Do you think there’s too many assets? Do you think that there’ll be more assets in the future, like more blockchains more coins? More tokens? Or do you see that that over time, that’s going to consolidate down?

Lennix Lai – OKEx.com
Um, I would say, bro, for To be frank. So I think the the barrier of cause of issuing or maintaining or creating tokens for hype or speculations, whoo, still be there is this part of the crypto ecosystem, but but when you when you get speculate more people will lose money. And people getting smarter and smarter, when it gets smarter. And when they get the a lot, a bit more cons cautious, a lot a bit more conservative, they were looking to they would be tend to be looking for the true nature, the true adoption of certain tokens. So that money will be will be really concentrating back into 1% of top 1% of the token to actually bring the value of the world that we’re starting to look at fundamental. So I think I would say New token was still there. There were a lot more, getting a lot more sizes. But but growing, so going from yours, right took about one two years or more. I think the capital, or the capital that all catered to crypto access will be mostly or heavily concentrated to a real project eventually.

Rob McNealy – RobMcNealy.com
Yeah, I think so as well. I think what I’ve said I’ve said this in my circle of friends is that the first kryptos does start getting a real adoption even, you know, Nish adoption, not even mass adoption, but just niche adoption are gonna eventually change the way the speculative part of the market values those projects

Lennix Lai – OKEx.com
Right , correct.

Rob McNealy – RobMcNealy.com
How I see it is you have billion dollar market cap projects that don’t have any customers.

Lennix Lai – OKEx.com
Correct. You’re right. You’re actually you absolutely right. I think people right now is like looking for answer right. If you can save a spark to fire and you provide true answer. You got all the you got everything. You get all everything that’s pay people for speculate money. We’re just crunching and advice to your own projects.

Rob McNealy – RobMcNealy.com
Exactly. Linux Ly, where can people get ahold of you? Sorry, how can people find out how can people reach you?

Lennix Lai – OKEx.com
So I think you can basically reach out now traitors and my email is Linux at okay yes.com You can find my traitors that us as well. So you can reach out anytime. I’m happy to answer all the questions.

Rob McNealy – RobMcNealy.com
Thanks. Thank you so much for coming on the show today. I really appreciate your time and I’ve learned a lot.

Lennix Lai – OKEx.com
Thank you, Rob appreciate, talk to you again. Thank you. Thanks so much,

Rob McNealy – RobMcNealy.com
You have a great day.

Episode Links

Audio Interview
Video Interview
Interview Transcript

Joe Roets – Dragonchain Transcript

Joe Roets - Founder and Chief Executive Officer of Dragonchain

Note: This transcript was automatically generated by artificial intelligence (AI) and therefore typos may be present.

Rob McNealy – RobMcNealy.com
Hey folks Rob McNealy here. And today I am super excited. I am talking to Joe Rhodes he is one of the founders of Dragon and coin. They are project been around for some time and i think it’s it’s gonna be a really fun show. So make sure you listen to the whole show because I know you guys out there. He listened for five minutes and then you shut it off. You got to stop doing that stuff, because I can tell that you’re doing that stuff. All right, I really can’t. I’m just guessing. But anyways, Joe, welcome to the show. How are you today, sir?

Joe Roets – Dragonchain.com
Thank you. Thank you very much. I’m great.

Rob McNealy – RobMcNealy.com
So, let’s let’s just jump in here, man. You know, typical questions for a podcast like who is Joe rotes? Tell me about yourself.

Joe Roets – Dragonchain.com
Okay, um, I’m..I’m I grew up in the Midwest. I’m a 25 plus year, software architect. I’m all about software all about open source all about scaling software. And I’ve worked for Lockheed. I’ve worked for Disney. I’ve worked for a lot of interests. firms that that had interesting projects that attracted me. And I came across Bitcoin, one of my guys brought it into the team in 2010. And we looked at it started playing with it, experimenting with it, doing a lot of different interesting things, some stupid, some fun, you know, we’re really early stuff. And this is the only time of namecoin and and you know, way before aetherium and way before much else was out there and ended up jumping around between a few different startups, you know, because I was very interested in the tech and and specifically in its philosophical value, you know, where, why, where it came from, why it was even there. And then ended up at Disney to build what became dragon chain and the Disney released from you know, from in its its own in in enterprise to the world and You know, after that we commercialized.

Rob McNealy – RobMcNealy.com
So tell me about that. So it was initially a Disney projects that got spun out. So did they just open source it? Or was it you know, something that was always kind of that open source community kind of thing? What’s the relationship there now?

Joe Roets – Dragonchain.com
We originally built it, it was very much an experiment is very, you know, very much a bunch of us that were interested in the tech and how we could use it inside of Disney. Um, but I, I knew because we were in, we were working inside a W three, see their blockchain group two, you know, basically explore enterprise applications, and you know, what can be standardized and everything else and we, we ended up realizing that, you know, all these other entities, you know, IBM, Microsoft, a lot of the other groups, some of the banks that were in there, were interested in how we were doing it because what we were describing was stuff that they hadn’t been able to do Because we started from scratch, we didn’t work, Ethereum we did aetherium didn’t exist when we started. We didn’t work Bitcoin or Litecoin, or anything else, we literally started from the beginning. And we had you know, I’m, that’s the reason I even say that I’m primarily a software architect, I’m a software guy. And these things that are patterns in all systems, that’s that’s what I focus on. So I find the, the abstractions inside of a software system that can either make it more flexible, make it more scalable, make it more secure. And I applied that across the board to know basically blockchain and crypto that’s what dragon chain is. And when they realized that we were using devs, that that weren’t blockchain devs they were the devs we already had and that they were able to come in and just build stuff. When we were able to show them that we could actually scale in a radically different way than what they had seen. If I was able to then take some of their questions that we couldn’t answer, because it was all in the inside back to Disney and say, Hey, can we, you know, go through a process and you know, try to source this and you know, they had they already had a process in place. And so it just, it made sense. It made sense for Disney, it made sense for the project, and it made sense for, you know, our working with these other groups. So, that’s how it kind of ended up and yeah, they basically we went through and it’s, it’s now you know, we’ve made it public the process we went through, but it’s, it was a pretty intensive and interesting process that was involved legal involved patents, trademarks and involved the code itself security. And you know, making sure we pulled out proprietary code and things like that, but they just open sourced it and part of that they have a really interesting process that they they have to hand over the code To the person on the outside, and typically, it’s somebody who’s still working at Disney, and who, whose manager or VP sponsor has basically said, Yeah, you can spend every Friday working on this or, you know, something like that. And with with our team, we had a team that was cross a whole bunch of different business units. And so our sponsoring manager didn’t have anything on my time. So we had to, like broker deals between the groups and stuff like that and on Viet on the way out, when they’re going to hand it over to me personally. I asked them, Hey, can you guys approve me to create a foundation so we can, you know, say that will own the IP will own the code? So won’t be Joe, you know, and it worked out. So it’s pretty interesting.

Rob McNealy – RobMcNealy.com
So what did you intend for your blockchain to do was there like a specific problem you’re kind of trying to solve with it?

Joe Roets – Dragonchain.com
Um, enterprise adoption. If that were the Specific because core capabilities of blockchain and cryptocurrency being proof that something happened at a particular point in time, you know, and that being the core of what even Bitcoin actually gives, is used to, you know, in Bitcoin is that is used to prevent double spend to, you know, to provide scarcity, but it’s all related to the fact that that block can with with a measured amount of security, you know, that’s an actual measurable amount of security that’s been applied to whether you trust that these transactions occurred between these two points in time. And so, you know, we basically were looking okay all of the core, abstracted cases capabilities of the technology itself blockchain. We wanted to to leverage in ways that you know, you couldn’t do with time with Bitcoin and you couldn’t do when aetherium came out, which is, you know, any any reasonable business is not going to put customer PII on chain. They’re not going to, you know, there’s HIPAA data, there’s, there’s all types of things they can’t do. And we wanted to make all of that possible. And to make it much, much more straightforward for a real business to use.

Rob McNealy – RobMcNealy.com
So how did it end up working out?

Joe Roets – Dragonchain.com
Um, we did. We also want on the inside. I mean, we did over 20 different use cases. We did a lot of different things. Some of them were, you know, internal hackathons and things like that. But there were a lot of groups that were that were using and building and when we open sourced, we went for a year, fully on just straight open source. You know, managing Community Education trying to, you know, figure out what we needed to work on most. And in that year, we realized that the actual rollout and scaling, you know, it was, it was missing, the ease of use factor, the, you know, the architecture is very simple, it’s easy to code to, but to deploy it on, you know, the model that came out of Disney was a large, very large organization that can run all of the nodes themselves if they wanted to, because they have enough business units that you have the diversity, you know, so that all of the enterprise can see, okay, these are the transactions going through everywhere and all that. But we very much needed it to be a situation that if someone wanted to build something, they didn’t have to worry about the verification network, right? That that it would be provided for them. And so that’s why we commercialized and we, you know, created an entity and, and really decided to, you know, build an network and to build the infrastructure to allow people to deploy more easily.

Rob McNealy – RobMcNealy.com
So you build something from scratch which you know which in blockchain is kind of weird right everybody just kind of forks an existing code base that’s been vetted and beat up a little bit. How would you say dragon chain is different than say the base the code base for a theory amor, the code base for you know, Bitcoin or some of the, you know, graphene based block chains.

Joe Roets – Dragonchain.com
Um, it is it’s an interesting thing because like all of the pho policy would have for saying, Okay, I’m going to create my own are not necessarily clickable because we are definitely not coding our own encryption or coding or you know, any any of the cryptography is all, you know, used for outside. So I wouldn’t want to say that it is more than anything a structural peace, where we, for one thing, there are a lot of different things about it. That it is primarily just software and that at every level of our consensus process, we are actually working with independent nodes where every node has its own blockchain. And the consensus is not it’s a hybrid network. So the consensus is not universal. That is, I own my own business I haven’t I have a business node that I’m either ledgering transactions on or I’m running smart contracts on and I can keep that you know, by default is fully private on and the only thing that moves up through consensus is the the protocol elements, which are the you know, basically the wrappers. So my payload itself is fully controlled by me I can expose it publicly if I want, but I’m for a regular business. It’s very fitting all the the same models apply that it’s as if I’m working on a on a server, and I’m storing my stuff there. I’m using it but the difference is that the wrappers around what I’m doing are all going through a six six separate dragon that nodes and then a combined security of aetherium and Bitcoin and aetherium Classic and whatever else we’re entertaining with the time on, which is for the proof so now I can basically show vendor or you know, later the courts if I’m getting sued, I can show somebody, this is exactly what happened and you don’t even have to trust me, you can actually you can actually do the math all the way up to Bitcoin and aetherium. And, and, you know, we we really, from the early days, knew that we wanted to leverage the tremendous hash power of Bitcoin and at any other network, but also the utility that is, um, you know, especially early on when we knew that You know, the ability to entertain with stores or with saya coin or any, you know, any of any of the other important utility networks that we could add as well as traditional that, you know, we’ve done plenty of integrations with RESTful API, very traditional systems that because of our model, it’s remarkably easy. And they are our time to market or most of the projects we’ve been on are really short, really fast build outs. So it’s pretty cool. And it also help with scaling. Because then the fact that every node has its own chain means they can all be independently scaled. They can they can run in with full cloud environments. And Gosh, yeah, is this a really long answer, um, the good the other. The other side of that is when you get into that, one of the other very unique pieces that most people Don’t don’t get yet is our actual scaling is based not on hardware because we’re, we’re cloud based. So we already knew that we could have ended up if we’re trying to incentivize people to run nodes that we have diversity there, that you could have a race to the bottom. Because, gosh, I’m just going to deploy it to Amazon, I’m going to throw up enough nodes to handle 80% of network and undercut everybody on my, my, what I’m going to accept you charge for fees, right? And in order to prevent that, we flipped the scarcity on its head and said, okay, instead of saying hardware scarcity, where you know, most blockchains out there, if you have more transactions coming through, there’s hopefully more fees usually, and therefore more people will procure hardware and put it in place and build a network, right. And you hope that it’s sustained traffic, so that If the person doesn’t know, the fees continue and the traffic continues. And the issue is the time between the traffic start, and when people can actually deploy hardware, which, you know, if it’s in cloud, it can be pretty quick. But, um, it’s not immediate, right? And in particularly, you know, if it’s not something that’s easily done in cloud because of your requiring hash power or anything else, it’s even more difficult. So, what we did is we took what was called DDS s, which was a slumber score, which is a time based component to our token. So if you hold a one dragon for one day, you get one time. If you hold a million dragons for one day, you get 1 million time for that day. And we take that time and that’s the scarcity. So all the nodes in the network competing based upon how long they’ve held how many dragons And they get more of the cut but on the other side the the the radically in at least to me interesting part for for adoption of scalability is the fact that the more time I have as a business that I want to apply to my node, the lower my fees are right and so it but it’s a deterministic fixed price fee for every transaction I sent through and the token price inside the system adjusts every month based upon market but to the general business user, they don’t really care they’re basically I’m gonna pay my you know 5000 10,000 a month for my node or nodes and I know that I have at least this many transactions and I know that the transactions will not go up in price that I won’t have trouble getting a transaction on chain or anything else no matter who else deploys on network right the you know, crypto kitties comes out, it doesn’t kill me. You know, defy comes out. Kill me right cuz right now it’s it’s really hard on aetherium to do business um, and it’s really unpredictable you know minute to one minute to next but with with Dragon chain you know that if you lock in the feed the fees and your lowest fee right now is 2510 millions of $1 per transaction and so you can lock in that number and you know when you have these you know you have the 500 million transactions you’re going to have this month that is absolutely going to be at that fixed price you don’t have to worry as a business you don’t have to worry about getting lunch chain all that’s cooked so..

Rob McNealy – RobMcNealy.com
So would you say it’s so can you launch a token on your your platform on dragon is there is that part of that or are you do not do smart contracts the same way.

Joe Roets – Dragonchain.com
Um, we do smart contracts and we do have tokens and we have something that we’ve termed a wormhole tech. It’s basically Consider something as, consider a theorem as a different, different universe and a theorem classic is a different universe. And maybe I don’t know what other preferred, you know, maybe EOS or somewhere else that I might have a token that we can map them back and forth. We do that with Dragons. That’s how dragons operate already where we use aetherium for its ecosystem, its token standards and security, right. And it means that we didn’t have to build our own hardware wallets. We didn’t have to do a lot of things. We were leveraging Ethereum for that utility. And you can do that already. We’ve had quite a few people do it. And we’ve we’ve helped out a lot with that. But it’s a it’s a, it’s a scaling question for that right where, you know, there’s no reason instead in many cases for every single transaction to be on aetherium instead If you put it on dragon chain it’s secured to a theorem and secured a Bitcoin and so you can prove all that but then when you’re actually integrating like say is a game that you know the game can be played you could you could roll this into a normal game where there’s no blockchain sold as part of it, but when people realize, Oh, I have this, this device this sword this, you know something that that I have accumulated enough of and maybe I don’t need this one or something else that I can realize at that point. Oh, this is crypto. You mean I could sell this somewhere? How do I do that? And they say it’s an adoption question because then you can get people to play your game without them already being crypto people which is such a you know, nice have a nice have a nice to get normies to play it but then to attract normies into your token, where they’re like, Oh gosh, I’m gonna I was already having fun. Now I realize I can make money doing this right where that At that point, that’s when you integrate with the crypto side and the others cost involved where people pay fees or whatever else. But at that point, it’s it sets its own threshold. Right that you know, right now, you’d have to have a lot more value in a theorem to exit in order to make it worth the fee. Right. But kind of depends on how much is sitting there.

Rob McNealy – RobMcNealy.com
Well, I know I’m going back to when with our project with TUSC. When we started out, we weren’t eath token and it for us the nail in the coffin to build our own blockchain and move away from a theory was the F coin debacle two years ago, where they were just spamming the Ethereum blockchain and like it is right now. The cost to move tokens costs more than the tokens people wanted to move because of the transaction fees, which makes no sense to me and I have a lot of strong opinions but because I’ve been in as a project for a couple of years now as well, and, and I just It doesn’t make sense to me the way his theory was designed From a usability standpoint, and it’s like it, there’s, it’s baffling to me how they came up with the system the way it did. But, you know, it’s, it’s fascinating. So I always like to talk about what I when I talk to people that are developing projects and stuff and how, how do you get adoption? What is your strategy to get people to use dragon chain to build things on?

Joe Roets – Dragonchain.com
Um, well, we’ve gone through a number and some of them were, you know, you can get into libertarian side of things with, you know, we our initial piece to the engine was to have what we call the incubator or early on became dragonscale, which was supposed to be a very clean way to get incentivized input from people on the outside as to which projects should be moved forward. Right. And so there’s some funding to that, but there’s some selection to that and attention and and had a lot of really key features where it would have flatly solved a lot of the problems that the SEC is concerned about or other regulators were, you know, how do I avoid people? You know, how do I avoid exit scams? How do I avoid you know, and we had all that cooked in where it’s very clean way to be fair on both sides, where you know, early information, if, if it is correct, could be well rewarded, right. So, you know, people are incentivized to not lie, people are incentivized to end in on the other side, the projects are incentivized to actually deliver, because they don’t deliver, they don’t get their, their distributions of, you know, whatever the funding is on. And we had to pull back for some of that for us based on which was sad because that was clearly an advantage for adoption between a lot of interested parties. And we’re trying still to find we have a new take on it, that we think we could launch in the US but It’s not a top priority right now. And we we, we are actually actively looking actively looking for partners to do it internationally, you know that whether it’s for grants or other selection, but you know, VCs would be kind of primary. But right now what we’re working on is simply scale, you know, to be the the the system that can actually compete against traditional systems for scale. And definitely Trump them on security, and various other features that, you know, blockchain makes, you know, it’s pretty obvious and in that world, and so, you know, we’re really focused there and you know, we just launched a new pricing table where you know, we’d wanted it updated for quite a while. We’re now at transaction fees anywhere from $1 on the high end to, like I said, the 25/10,000,000 of a dollar and we’re getting a lot of interest because of that, and a lot of people are starting to realize what’s possible. And we’re also trying to do a lot of things that might to some seem a little bit you know, like they might not understand but you know, we launched launched on den den dot social and that’s basically a community forum that is native blockchain. So everything on the back end and there’s mining, and we really are trying to build out stuff that people can use both normal people and enterprises, right. So, you know, we just launched dragon factor my five which is a decentralized identity system that the back end has been operational for over two years. And you know, we’re just now Okay, we want to productize this now. We want other people to be able to use this like we have and and we have some really interesting aspects that we found a partner that could help us with some of the integrations that, you know, frankly, were more, you know, banking focused, you know, the typically things that banks do with identity were needed. But we were rolling in the ability to do it in a decentralized way where the user holds their own identity factors and can’t expose them as they wish, right? They don’t have to expose everything, they can expose just the smallest bit of information that passes whatever the business wants needs. And, um, you know, we’re basically, I mean, our strategy overall is very fundamentals based where we build and build and build and we figure out, you know, what does someone need we build it, we figure out okay, what would be a good demonstration of that capability, we build it and we’ve done it enough. I mean, we have a couple of systems that really are well used. You know, we get a lot of Transactions on eternal as an example people saving tweets and saving out various arbitrary information that they want to be able to prove later, you know, make some prediction on bitcoin price. I’ll put it there. And I can prove to you that is not just a screenshot that I photoshopped, you know, it’s this is literally data proven to, you know, hundreds of millions of dollars worth of security, you know, so interesting stuff like that. I don’t know. It’s hard to cut through noise though. There’s so much noise out there right.

Rob McNealy – RobMcNealy.com
And it’s only getting noisier isn’t it?

Joe Roets – Dragonchain.com
Yeah. Yeah. And all the all the speculation and all of the that that I you know, sometimes that’s a big complaint that I have.

Rob McNealy – RobMcNealy.com
Right, I hear ya. No, opinions, right? What do you think of DEFI?

Joe Roets – Dragonchain.com
I don’t want to, I don’t want to say anything early. Right. I mean, I saw the Fenton. We always played the Fenton thing yesterday on our show, because it’s so well done. If you haven’t seen it explain DEFI, you know, but my take is I think that there has to be, and I’m too busy to really research projects, like I used to, I used to know everything about everything coming out, but, you know, there weren’t as many then either. There have to be, I would make, I would put money down that there are at least a handful of amazing projects in that space, right. And stuff that’s really needed. That’s really well done. And it’s an amazing future. But somehow, they get cut, you know, they get they, they lose attention to, you know, 10 Ds and yams and stuff, and it’s just, it’s crazy, and it’s not good for the industry. I don’t think that stuff, right. Um, and, you know, it’s always the thing where money is such a powerful driver to all of this. And the reason I even got into this, I’m a software guy. So the reason I got into this is this was frankly, the most exciting place to be in software forever, right? That’s the next near the next closest would have been, you know, Linux and open source itself. And you know, that’s very general thing but it’s funny because Linux is very much about liberty. Right? And whether you talk to Stallman or you know, it’s very much about Liberty This is such a key component. And basically Bitcoin embodies that Bitcoin is radically so you know, I’ve talked before about how the fact that it has I say this it basically enslaves humans it incentivize humans to such a level that it’s the most massively focused on processing in on earth is Bitcoin mining it you know, blows away supercomputer metrics and everything else because there’s a money driver. And so the key that, that the world missing is at least that this industry is missing is keeping a balance between that and the fundamentals. Because it’s so easy for something like defy to come along with like, Oh, it’s a way to make money, it’s going to go up next week. All it matters is a green bar. It doesn’t matter what it does at all. And there’s, there’s, you know, there’s value to that, because it can drive people to be interested. But the problem is when people are lazy, and they don’t actually research or they buy tokens, and don’t actually try to, you know, the real incentive should literally be if you hold a token. And based upon your holdings, really, you should be focused on how can I help those projects? Because literally, that is the best thing. It’s not good to say I bought this token or what are you guys doing? Right? Why is this token not for real? Why is this token price not going up? as well? It’s so backwards. It’s like, people shouldn’t be lazy. You You hold it,in our case, our tokens, our software licenses, literally they are modeled from the beginning. We even have a patent on that, on that the token model as a software license that it was supposed to be the answer the licensing answer to what happens right now with commodity compute, you know, with Amazon, you shouldn’t be paying monthly still, you know, it you should be paying as part of and you know, the fact that you are paying for however much CPU use on fits, and we just tokenize that and so if you’re holding dragons, you should be actively seeking integrations business, even marketing, whatever your talents are, right? Um, but a lot of people get lazy and you know, it happens on all projects, you know, where people just want it to go up and you know, it’s, yeah.

Rob McNealy – RobMcNealy.com
Well, I always say you can’t bank on people not being lazy. In fact, I think the reverse I think you have to build systems. That is assumes that and then tries to figure out how to incentivize those people. Because I mean, we’ve run into the same thing right telegram group, why not go up or whatever it’s like it’s it’s pretty interesting. I do agree with you, I think, you know, people should do their research should do homework and, and should be more active and supporting. I’m just I’m not sure that’s realistic.

Joe Roets – Dragonchain.com
It’s like, I could see that, um, it’s the weirdest thing though, because you think about it. Most businesses, they have customers and the customers have their products and they don’t care otherwise. Right. But, um, you know, Apple and a few other few other companies have had something where it’s almost like a cult where people will actively promote for for no money, right? So there’s some there’s something psychological there on the intent, though, of, of crypto is that the the incentive is built in you hold that you actually own the token. Nobody can take it away from you. You You should literally be as incentivized as possible to actually try to promote, and sometimes you can see it, but it’s not maybe fun. focused, right, anyway.

Rob McNealy – RobMcNealy.com
Well, it’s interesting because, you see, I say success breeds success, right? Like if it’s starting to become popular that people want to be a part of that and talk about it. It’s that’s that tribal mentality, I think, and even with us when you know, our project, I mean, we’re not anywhere near where you guys are, but it’s like, you know, we can see when we have an announcement or you know, something cool really happens. It just gets people excited and they talk more about it when things are boring or low or not going the right direction. People get quiet about it. And I think part of that with crypto, you know, it’s it’s about that tribal identity and people want to associate with the winning team. They don’t want to they want they don’t want to associate with losing teams. That’s why it’s like you know, Bitcoin maximalist right I mean, you know, I’m not a big fan of Maxis on any project but if you look at Bitcoin maximalist it’s like okay, well you just like went to the number one football team and then you signed up for them and you’re there chiller. Well that’s that’s lazy, you know that, you know, it’s just like, okay, just sit there yay, yay great number one team keep going, you know and it’s like there’s more to it than that. But I do I mean I do appreciate your time and I think this is it’s good stuff and I and I you know I I’m gonna be doing a little more research and dragon I haven’t, you know, you in you know, inspired me to kind of do my own research here and and spend a little more time looking at what you guys are doing because you are doing some different things. And I think I hope the listeners here will take a look at dragon chain as well and see what you guys are doing. And you know, I hope in the future, you guys can come back or you can come back on and let me know when you got some cool, you know, projects happening or some cool announcements. I’d really like that. So, Joe, where can people find out more about you and dragon chain

Joe Roets – Dragonchain.com
Dragon chain.com primary we also do various things on den Deus social. And you know, you can reach out to us on telegram. I mean, there there are multiple official and unofficial telegram groups and multiple languages we have. We even have multiple language layers now and dim dot social so people can at least read about and ask about dragon chain in their own language with their own, you know, people that can answer directly so it’s pretty nice. And there are a lot of places I guess.

Rob McNealy – RobMcNealy.com
Joe, thank you so much for coming on the show today. I appreciate your time.

Joe Roets – Dragonchain.com
Thanks Rob.

Episode Links

Audio Interview
Video Interview
Interview Transcript