blockchain
Jeremy Kauffman – LBRY
Jeremy Kauffman, founder of LBRY, talks with Rob McNealy video content publishing, censorship and competing with YouTube.
Jeremy Kauffman – LBRY Transcript
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
Lennix Lai – OKEx Exchange Transcript
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
Lennix Lai – OKEx Exchange
Lennix Lai, Director of Financial Markets for the OKEx Exchange, talks with Rob McNealy about the global crypto trading and exchange industry.
Joe Roets – Dragonchain Transcript
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
Joe Roets – Dragonchain
Joe Roets, Founder and Chief Executive Officer of Dragonchain, talks with Rob McNealy about the Dragonchain ecosystem.