Show Notes
https://www.forbes.com/sites/laurashin/2016/06/14/bloqs-matthew-roszak-discusses-blockchain-enterprise-strategies-business-models-on-necker-island/#3cd986ed6462Transcript
Female Speaker:
Welcome to Forbes Podcasts.
Laura Shin:
Hi, everyone. Welcome to Unchained, a Forbes Podcast produced by Fractal Recording. Thanks for tuning in. Today we’re launching with two podcasts, both from Sir Richard Branson’s private island in the Caribbean called Necker Island. After today you can expect one new show every other week. For one of our inaugural podcasts we’re talking with Matt Roszak, the founding partner of Tally Capital and cofounder of new blockchain enterprise company, Bloq, which aims to be the Reed Hat of blockchain software to enterprise companies. Matt tells us what he’s up to in the blockchain space as well as his thoughts on other events in the world of blockchain.
Hi, Matt Roszak. Thanks so much for coming on my show.
Matt Roszak:
Thanks, Laura. Great to be here.
Laura Shin:
So here we are on beautiful Necker Island in my hotel room, which is also equally beautiful. What’s been the highlight of the Blockchain Summit so far for you? And it can be either personal or…not personal, but recreational or professional.
Matt Roszak:
I think when you come upon this island you see it from a distance and it’s this lush, green, beautiful island, and you see all these different animals, flamingos and lemur monkeys and turtles, and you kind of realize that if we were like, movie producers, this would be the setting for this amazing island that we’d want to make a movie, in this amazing setting.
Laura Shin:
And a great setting for a movie about people who are about to change the world.
Matt Roszak:
Yeah. No doubt. It’s such an honor to be amongst all these folks from industry and academia and banking and policy. It’s truly an amazing group of folks.
Laura Shin:
Yeah, and I want to thank you in particular for coming during the recreational hour, but as far as I understand I think you have a fun appointment after this.
Matt Roszak:
Yeah. I’m kind of trying to get mentally prepared. I’m playing Richard Branson in tennis right after this, and I just went to the gift shop to buy some clothes because I didn’t really bring tennis gear, and so I’m trying to, you know, get ready for that.
Laura Shin:
Okay. Well, good luck to you. I suck playing.
Matt Roszak:
Actually, yeah. I mean, yesterday he played the former prime minister of Haiti and he’s got game, so I’ve got a lot in store for me here.
Laura Shin:
Yeah. I saw, and for our listeners, I’ll try to give you the update later on whether Matt won or not.
Okay. So let’s get down to business. Tell me about your company and I’m interested to hear about it the way that you might pitch it to somebody. You know, in this case it’s our listener, but maybe adapt it from what you might pitch to an investor or a potential client.
Matt Roszak:
Sure, and maybe as background, so I’ve been in the venture capital business for the last 20 years, and along the way cofounded six enterprise software companies in areas of HR, video surveillance, public safety, and really had a lot of broad exposure selling to enterprise customers, and the opportunity that was kind of the catalyst for Bloq came about from my experience in enterprise software, and then over the last four years now have invested in about 21 companies in the Bitcoin blockchain ecosystem, so lots of infrastructure players, wallets, payment processers, exchanges, one miner in Bitfury, and gave me a really interesting heatmap of what was working, what wasn’t working, and the white space that really came about was this march of the enterprise in blockchain.
Every global bank on the planet has pronounced their blockchain strategy, Fortune 1000 companies are looking at this space much like they were looking at internet in the nineties to say, what’s my internet strategy? Now every CTO on the planet is saying, what’s my blockchain strategy? And so with that demand, with that interest and seeing the kind of evolution of technology my cofounder and I saw this as an amazing opportunity to really think through and develop these scaffolding layers, software layers for enterprise customers wanting to manage blockchains and build blockchains.
So much like if we were developing an internet stack of software and we said, oh, what do you need to have to be online and able, kind of instincts would be content management and ecommerce, and you would have all these layers of the onion that you would build out to enable people to go online, and so much the same where blockchain is just a raw protocol, and most enterprise customers don’t want to go to a lumberyard and pick out lumber and hammers and nails, they want finished product, they want platforms they can build off of and innovate and manage.
And so that demand coupled with what’s happening in the ecosystem, which you have a lot of developers, lots of innovation, lots of companies that are great products, great features, but we are taking the suite approach, this product stack, and delivering it in a way in which enterprise software has been delivered for the last 30 years to this end user, which is product that is hardened, supported, maintained, and all kind of wrapped in a service level agreement.
And some of that is not an innovation, it’s delivery mechanism to service these large global companies, but the innovation that we’re driving is we’re taking the fount of innovation from open protocols like Bitcoin, like Ethereum, and we’re delivering that in private blockchains and the blockchain management systems that these customers need.
So my cofounder, Jeff Garzik, who…we actually had some of the kernel of the idea last year here at Necker Island, so that’s when we had another meeting about Bloq, and one thing led to another, and given Jeff’s experience at Red Hat for over a decade, it was a very natural intersection to say let’s start this company and really kind of harness this demand and this technology, so it was very intuitive for us to get kicked off, and now we’re about seven months into the ballgame.
Laura Shin:
So tell me why you chose to cofound Bloq with Jeff Garzik.
Matt Roszak:
I think we kind of found each other. I was the director, Jeff’s first board member at Dunvegan Space when he launched a company to develop a software system on a non-terrestrial basis with CubeSats, cube satellites, in outer space, and then when we met last year we saw this opportunity to build out this technology stack for the enterprise.
But Jeff, I mean, he’s a core developer, he’s been at Red Hat for ten years, he’s a type of visionary, and starting a company with Jeff was just an incredible honor, and we built the company around his energy. We started with people, I mean, and Jeff was the key catalyst to each and every hire that we’ve had, and that really sets a trajectory of the company, the culture, the ethos, and our first 15 hires are going to affect our next 15 and our next 60 hires after that, but we wanted to make sure out of the gate we had the right people, and so Jeff has been able to attract some of the best engineers in the space.
We brought on board Andreas Schildbach who runs the bitcoinj after Mike Hearn left, the Bitcoin Project, now Andreas is managing that repository, he’s the inventory of the Android Bitcoin Wallet. We’ve got a guy named Paul Sztorc who is kind of the brains behind drivechains, and we have Jordan Kruger, first female data scientist in the blockchain ecosystem. So we’ve got lots of amazing engineers, core developers, and we’re building out a great team at Bloq, and I kind of owe all that to Jeff and kind of his energy that he brings to this ecosystem.
Laura Shin:
Yeah. I met both Jeff and Paul, and they were both just so great and so funny, and I really, really enjoy talking with them. And how did you hear about Bitcoin and blockchain?
Matt Roszak:
So in 2011 I was a cofounder of a social gaming company in Singapore called Viwawa, and if you’re in social gaming in Southeast Asia you’re dealing with payment processing in the Philippines, Indonesia, Korea, Malaysia, all over the place, and there’s a lot of friction in payment processing, and they have gaming credits and all this stuff, and then Bitcoin came on the scene and it was almost like, truly it was like, that’s like magic internet money. How is that even possible? And then you realize that you could mine this, and that’s like a digital golden goose. It’s almost like…
I discounted it out of the gate because I was like, that’s almost too perfect of a solution, and so much like anything else, whether, Laura, I tell you about a favorite restaurant of mine that you have to try, and like, okay, fine, but if ten other people tell you, you’re going to drop everything and go to this restaurant. Bitcoin was much the same to me, where that was my first exposure, I kind of discounted it quickly, and then over the next six to nine months I kept getting reference points of Bitcoin, and then so by 2012 I basically, you know, I did what I tell everybody else, is like lock your door, turn off your phone, and study this technology, learn about it, and slowly get into the ecosystem and start investing in companies and quite frankly, building my education set in the space, and engaging with amazing entrepreneurs, which you know, certainly led to the journey I’m on with Jeff Garzik at Bloq.
And so it’s an honor to be, you know, a contributor in this ecosystem, and we’ve got a lot of work ahead of us, so it’ll be fun.
Laura Shin:
Okay. Great. I’m kind of curious, a lot of corporations are choosing to go with private blockchains. Many of them, you know, prefer that because it’s maybe more the equivalent of like, choosing to build an intranet, it feels safer. Why have you staked your business on public blockchains which are more like internets, and are you finding that enterprise companies are reluctant to go that route, and how do you overcome their concerns?
Matt Roszak:
Yeah, I think it’s a great question. It’s part of the phenomenon that we’re seeing now, certainly in the last year, year and a half you could not have predicted dynamics like the march of all these banks, or Ethereum coming from a crowd sale to now a billion dollar market cap, and so the ground shifts in this space and you really have to be prepared for that, and some of the common denominators at least for Bloq is, part of our go to market is we believe it’s going to be a multi-token, multi-network, multi-chain world.
And so private blockchains like you are looking at rightly, they’re intranets, they are closed systems, and very purposeful because a lot of these industries, a lot of these companies are in highly regulated industries, and they see the innovation, there’s a regulatory framework that they have to behave and play in, and they’re conscious of that. They’re also conscious that tech and software evolves over time, so they need to, for the most part, get blockchain enabled, you know, and kind of jump into the pool and run financial, nonfinancial use cases, and really start to swim in this pool, this pool of innovation, and over time you’re going to see a constellation of chains, and everybody has an opinion of the Bitcoin protocol. Ethereum, Hyperledger, R3, Corda, Chain has an open source protocol. I view all that as innovation.
I view all that as an incredibly important stepping stone, an investment of time, energy, and money to get this broader fabric, this broader blockchain fabric that we’ll see, which in my mind will be a constellation of chains. We’ll see lots of chains for industries, geographies, different assets, but over time what you can imagine is that there’s going to be interdependencies, there’s going to be connectivity, and that connective tissue is very important software, that connective tissue is what’s going to really create this network and this constellation of chains that will kind of be the money layer, the data layer, secure and private data layer over the internet.
Laura Shin:
And so are you saying that Bloq is creating that connectivity layer?
Matt Roszak:
Yeah. Absolutely. Yeah. It’s one of the fundamental things on our go to market. So the fount of innovation really comes from public networks, that’s where developers want to change the world, that’s where they wake up in the morning and say we want to build the new frontier of the movement of money or data, and so you harness that in the way you engineer and architect private blockchains, knowing full well that there is going to be interdependencies and connectivity between public and private blockchains over time. So you might be trading something on a private blockchain and everybody in that chain, the traders or the market participants might trust each other, might not trust each other, there might be auditors involved and they have to hash data to some public chain so that can be verified by a third party.
So there’s going to be utility, interdependency, and that’s one of the most trivial examples of how they could interrelate, but the other dynamic that we will find with the interrelationship between public and private is security, and what’s truly a secure, immutable ledge, and an unhackable protocol, and all these dynamics that play into that, and if you’re building a private blockchain that’s going to have certain pros and cons in terms of security and the use case that it’s trying to solve, but if you could find a way to tether that private blockchain with certain security elements of a public blockchain which has much broader and deeper security benefits then this whole ecosystem really starts to build lots of momentum and steam.
So you know, like I said, it’s an amazing time of innovation and we’re seeing lots of investment and innovation within enterprise, customers, every single day trying to explore this, where it goes. I think it’s going to benefit the whole ecosystem given that amount of, you know, attraction and effervescence and investment. Good things come out the other end of that.
Sometimes things get scrapped and you find a new center of gravity and you move towards that, and that’s how things go. When the internet was being developed everybody didn’t have the right answers, they were gravitating towards certain elements, and then you kind of see gravitational pull around certain protocols, around certain layers of the internet, and I think we’re in the middle, not even in the middle, we’re at the beginning of that vis-à-vis blockchain.
Laura Shin:
Okay. So you guys also work on private blockchains, not only public ones.
Matt Roszak:
Correct.
Laura Shin:
Oh. Okay.
Matt Roszak:
Yeah.
Laura Shin:
Okay. So who are some of your clients and what are examples of projects they’re using the blockchain for?
Matt Roszak:
We’re under NDA with lots of clients, but from an industry standpoint it’s, no surprise, financial services, supply chain, health care, and insurance has been probably one of the brighter spots in terms of a propensity to kind of look at that industry and make some significant change.
As I mentioned earlier, the demand for this technology and trying to figure out how it applies to their internal business systems, I think we’re going through a phase of blockchain where it’s almost like companies are…and I’m going to give abstract examples, none of these are customers, but I’ll give you like, an evolution of what’s happening now.
Lots of companies are coming to what I’ll call the blockchain peddlars, let’s call it, you know, the Chains, the Blockstreams, the R3s, the Digital Asset Holdings, the Gems, the Bloqs of the world, and most companies have all these folks in their lobby with contracts of proofs of concepts, they’re all getting signed up, and they’re all testing, and they’re all looking to see what sprouts some…what blossoms, and then they’ll start putting more water and sunlight on the ones that start to take shape.
And for the most part lots of them are looking at ways, and I’m going to give this abstract example of they’re Walmart and they want to optimize their supply chain. They’re going to say, oh, how do I get better days outstanding or inventory turns or a margin or a supplier, you know, finance enhancement, and that’s kind of, let’s say optimization. And then some people will say, well, I don’t want to be a Walmart, I want to be an Amazon. Well, Amazon is like, a 20-year-old concept.
The real benefit of this technology will be when companies say, I want to be an OpenBazaar. I want to jump over these traditional channels, these traditional blood vessels of commerce or of finance and say I want to create a decentralized network, and at the end of the day that’s what blockchain is, it’s a better name or it, from my standpoint, it’s a network enablement layer, it’s a network enabler, you know.
And you look at this from the heatmap even geographically where China is trying to become a major player and investing lots of capital and time and energy into blockchain companies and the space broadly defined, and you know, kind of the current state of play, we’re in the Year of the Monkey, but the current state of play for China and Bitcoin and blockchain is all the stuff we read about where most of the mining happens in China, most of the trading happens in China, but the entrepreneurs, the VCs, the conglomerates, the tech companies, and the government are all very self-aware that the real opportunity here is in the soft layers, the software, the data, and the applications that can be built on this.
And take that a step further, from a macro standpoint how do you, if you’re China or you’re in the EU and you’re seeing the blood vessels of value today of traditional finance between Swift and DTCC and others where you want to leapfrog over that, you know, and just like going into a developing nation and how landlines were leapfrogged to mobile, this is what blockchain can do to traditional either business models or flows of money globally.
Laura Shin:
Okay. So there’s a lot in that answer that I want to unpack. The first thing is, can you describe OpenBazaar for listeners who might not be familiar with it?
Matt Roszak:
OpenBazaar is a decentralized marketplace, so you know, it’s like a cooperative. The other analogy that you don’t really hear about in terms of blockchain, it’s a cooperative, it’s a technology cooperative. You know, market participants all benefit out of that network that gets developed, and you know, much like, I don’t know, the cooperatives that we know of today is like, True Value and Ace Hardware, you know, we’re all cooperative, we’re buying nails and hammers cheaper, and we all benefit from that.
In this case, you know, what you’re trading can be anything, and Open Bazaar is creating marketplaces and kind of decentralizing an eBay, if you will. You know, to a certain extent they’ve even taken the Silk Road model and made it a 2.0 version of that in certain ways, and created this open source marketplace, and now are focused on all the other value added services around that marketplace in terms of how to help merchants and others participate on that.
So I think we’re going to see more and more of those types of initiatives. That’s where I think this technology really changes companies and industries and current, you know, participants that play in the middle, whether you’re an exchange or a broker or otherwise, I think that’s where this technology really, you know, creates levels of a particular playing field.
Laura Shin:
So I’m curious, you were saying that, you know, maybe there might be a company like Walmart and then they look at this technology and they are sort of thinking, oh maybe it can make us more like an Amazon, and you said that for them to be really far thinking with it they should think that, you know, maybe they should try to become an OpenBazaar, and yet when I look at OpenBazaar I just wonder, what is the business model there? You know, if you are essentially creating software that allows people to connect peer to peer, how are you going to make money from it, you know? Because the reason that eBay is very successful is that they’re constantly taking a cut, they’re the central place to go, but if OpenBazaar is just, you create the software and it allows people to connect with each other directly and you’re cut out as the middle man, then why would a business go that route?
Matt Roszak:
This is a great question, Laura, and this is actually, you know, amongst other players in the industry, one of the most talked about dynamics, is what are the economics of a blockchain. So you’re a blockchain enabler and you’re setting up this new way to trade, let’s just say gold or whatever on a blockchain, and how do you make money as a blockchain enabler and a technology company here? And there’s a variety of ways to look at the economics of that, whether it’s a transaction fee as part of that network, so the market participants say, you know, we’re going to go after this particular industry on a private blockchain basis, and say it costs x to get into this network and it costs y every time we make a transaction, or maybe the technology enabler is one of the market participants, so you know, it gets one of the benefits of a seat, if you would, at an exchange, and these would be new kind of decentralized exchanges, decentralized networks.
Laura Shin:
Wait, I’m sorry, and when you say that they would be a market participant, like in what way? They would be a seller on their own network, or…
Matt Roszak:
If everybody on the chain has a one tenth interest maybe the technology provider has one of those seats, and it gets the economic value of that. So the cost to develop it, launch it, service it, the technology enabler is going to have an equity interest in that particular chain or network or blockchain.
Laura Shin:
Like, what I’m not following is you’re saying that you can launch something like an OpenBazaar which is a decentralized company, and yet people can still take equity in it?
Matt Roszak:
Well, that would be a public marketplace. So yeah, it just launched, and market forces prevail. Whoever wants to participate on that participates and buys their goods or services cheaper and more efficient because there’s no middle person. On a private basis when you’re saying we want to focus on this particular asset or this particular element, then there are certain economics involved amongst the participant because we’re all trading gold and we’ve either the biggest banks or what have you, and the economics for the technology enabler could be anything from a front fee, transaction fee, or equity in the consortium, much like, you know, quite frankly R3 has equity in a consortium that it’s built, so it’s not too dissimilar of a concept.
Laura Shin:
Okay. So it’s like OpenBazaar and yet with a central actor.
Matt Roszak:
Well, I mean, that would be an…
Laura Shin:
More decentralized.
Matt Roszak:
Yeah. I think there’s public networks like an OpenBazaar and there will be private networks like a Corda, for example. You know, that’s a private network that has market participants and R3 is one of the beneficiaries of that in terms of fees or transaction fees or equity stake in that enablement layer. So there’s different ways that you could take a bite at the apple on the private side.
On the public side, so back to OpenBazaar, you know, the value-added services around the edges of that network and some of the concentric circles, whether it’s marketing or peer to peer lending or other merchant services that they provide for a fee, once the network effects start to take shape with OpenBazaar, I think that’s an opportunity for them, is how they start building these value-added services.
Laura Shin:
Yeah. I did hear that one business that people could…you know, if they could have an actual business model that generates revenue it would be to maybe provide reputation services on a decentralized marketplace like OpenBazaar, to say like, I can vouch that, you know, this is a seller with reputable ratings and stuff like that. Okay.
So then, I wanted to go back to, you know, what you were saying about China which was pretty interesting. Like, you kind of made a bit of a comparison between what we’re seeing with like, the mining and the trading volume, and then the startups, but I wasn’t sure actually if you…or the startups and the regulators and etcetera, but I wasn’t sure if you were making that between China and the US or saying within China there’s this difference.
Matt Roszak:
I think within China there’s that difference because it does have a strong ecosystem of mining, a strong ecosystem of trading of this new digital currency, and that’s a phenomenon, that is something that lots of people in China have as a market signal that there’s this new innovation, and by the way, we’re the market leaders in mining it and trading it, and so that’s kind of created this dynamic where people are exploring what else is beyond that, you know.
Even the mining companies there are saying, you know, these boxes with the blinky lights are not going to last forever, maybe there’s bigger chip companies, and dive into this space for the next five or ten years, but along the way, what are the other opportunities in this space, the soft layers, the connective tissue, the data layers, the innovations in terms of how do you scale, you know, the Bitcoin blockchain, how do you do smart contracts with Ethereum, how do you do stuff with, you know, public…private ledgers.
So the signal that we’ve seen coming out of China is that they’re aware of the opportunity and they’re definitely investing and innovating aggressively with blockchain technology.
Laura Shin:
Oh, interesting. So tell me what you think of kind of what my not super well reported observations are, which are that they’re really interested in the currency, but when it comes to blockchain I’m seeing more of that activity in the West, and yet you’re saying that you’ve seen blockchain activity there.
Matt Roszak:
Yeah. No. I mean, there’s an entrepreneurial and investment momentum that’s happening outside of certainly mining and trading, and you’re seeing certain Chinese investors making bets on companies in the US, starting companies in China, and you know, and even dynamics like ChinaLedger launched the sixth largest exchanges by the ex-CTO of the Shanghai Stock Exchange, was launched last month, and you’re seeing, you know, ChinaLedger as a thing, as a market signal. There’s no technology there, there’s no necessarily thing that was launched beyond a propensity to say, let’s organize an effort to explore this technology, see how we could harness it for the benefit of this trading environment in China.
And so there’s enough signals that have come out certainly over the last six months, since the beginning of the year, that have…and we’ve been to Beijing and Shanghai and Singapore, all over the region, and continue to see that firsthand in terms of that dynamic where the energy and focus on these other layers are happening.
Laura Shin:
Okay. Yeah. I mean, tell me if I’m wrong, but it just feels like they are interested now, and I’m obviously aware of some of the investments they’ve made and are still making, but it feels like they’re just a step behind, and I have no doubt that they could very quickly catch up, but that’s my read on things.
Matt Roszak:
There’s enough signals from the beginning of the year to the untrained eye to see the dollars, the platforms, the headlines, and some of the other activities that are happening that they’re changing their game. They’re not just saying we’re satisfied with mining or satisfied with trading. We are going to innovate, we’re going to invest, and we’re going to see what the next chapter of this book looks like, and not only what it looks like, but let’s also be participants in writing it, because now they have enough clout, you know, from the mining and trading perspective now they’re big participants, as the discussions and dialog with the scaling dynamics and Bitcoin, China was a very important participant at that table and will continue to be.
And so there’s lots of, you know, some people, you know, either discount China or don’t have it as part of the discussion. It is part of the discussion. It is part of this ecosystem. It’s a global ecosystem and so you know, the more innovation, the more of a global layer that we’re creating with that specific public ledger the better.
Laura Shin:
And what influence do you think that China will end up having once they kind of get the blockchain stuff working? You know, as far as I understand, in terms of peer to peer payments they’re far ahead of where they are, you know, it’s a big part of the culture already. I think in general sort of this movement of money is a big part of the culture, as we see with the trading volume and just this interest in mining, but you know, now that they’re showing interest in blockchain, where do you see that taking the development of blockchain technology and Bitcoin?
Matt Roszak:
Well, I think that’s a great question, to see what’s going to happen now with some of that, and I think the peer to peer lending phenomenon in China, the mobile wallet dynamics, like a lot of the innovations and the ways in which money is moved there is a lot more easy and frictionless than certainly the US or other parts of the world. I think that stems from some of the lighter touch regulation, some of that is laissez-faire, it doesn’t mean, you know, if weird dynamics show up with either some fraud or hacks or whatever that regulation will come down for consumer, better customer protection, but for now there’s lots of innovation on the deck of a mobile phone in China.
If you look at that you see lots of peer to peer lending, lots of digital wallets, ways to move money and messaging apps that are innovating with money, and that’s being done on scale. I mean, if you look at some of the platforms with Alibaba or Tencent, those are being done at scale and that’s exciting innovation because you know, historically, lots of innovation came from the US, was photocopied in China. Now we’re seeing some innovations in China that can apply to the rest of the world which, you know, that’s a different dialog these days, and that’s exciting.
But you know, from the regulatory standpoint I think that’s a keystone issue in our ecosystem, you know. It’s something that I think globally has been relatively laissez-faire, certainly the US has been very welcoming to Bitcoin and blockchain technology, and we see that continuing. The Chamber of Digital Commerce has done amazing work educating, advocating, and engaging with regulators to not only three-letter agencies, but members of Congress and going on both sides of the aisle to really help regulators, policymakers, appreciate the power of this technology, the potential of this technology, and we’re in the early days.
So you know, if you look at technology shifts of railroads, telephony, internet, you always had effervescence. You always had massive investments whether that was the fear of missing out or innovation, but you always had certain effervescence and even bubbles happening, and that’s rife with fraud and other issues, and then the regulatory pendulum sometimes swings, sometimes it swings a little too hard, and that’s where I think, you know, platforms like the Chamber help regulators, policymakers understand this technology and really help calibrate that pendulum so it doesn’t swing too hard, because if it does that will usher in an impact to innovation, jobs, and investment, and quite frankly, may push that to other geographies, and you know, the debate is always, oh, is the next Wall Street going to be in Singapore or Zurich or you know, I always find that to be interesting. I think, you know, we’ve got a long way to go before we’re going to see those types of sensitivities.
I think this technology is super impactful, and we’re not talking about internet, we’ve revolutionized commerce and communication, and build and app and share a picture of my cat or dog with you is one thing, but if I’m going to move value, move money, title to my house, 100 million dollars of Apple stock or you know, my digital identity and my health records, those form factors, those trust factors for people are way higher, and so the systems and the engagement and the adoption of those systems is going to take a slightly different pace, but once it does you can see the benefit, and kind of the new, again, blood vessels and value and data movement getting really exciting.
Laura Shin:
So I want to go back a couple of questions ago to what we were talking about with China and you were talking about their culture of kind of just trading money more between each other and on their own to make money, and you know, you started to say that, or you tell me if this is where you were going, that we’re seeing startups that are coming out of there that could potentially influence our behaviors, and yet like, I reported a little bit on this, and I don’t pretend to be any expert on Chinese culture, but from the few people that I’ve spoken with it seems like that really is a part of the culture there, to do those kinds of things in a way that it’s not in the West, you know, to borrow money from somebody to go gambling or to come home from work and day trade. So how do you see those startups kind of like, bringing that culture here? And you tell me, maybe it doesn’t need to be a culture change, maybe there’s some value proposition that is just so obvious that once it gets moved over here it will, you know, gain adoption.
Matt Roszak:
I mean, I think some of the ways in which wallets and the peer to peer lending, and I’m not sure exactly about the gambling piece, but some of those form factors and the presentation layers and the apps quite frankly that are developed there are very engaging, and they don’t pop up here because I think a lot of those areas cross over lots of regulatory hurdles here on the peer to peer lending side or certainly on the gambling side. So there is, you know, regulatory friction in terms of doing that. I see that dissipating over time.
I think the notion of a digital wallet is going to evolve over time. I think right now, like Apple Pay for example, is training wheels for the next true mobile wallet, where you kind of manage your identity and assets and you know, not just your airline miles or a credit card that you kind of duct tape to your Apple Pay account. You know, real microtransactions and peer to peer lending with different digital currencies, and the wallet I think over time will become the browser of the blockchain, the browser for your kind of interaction with the world.
You know, the wallet will become your kind of personal data layer where again, assets and money and identity and all these things start to come into play, and the identity model specifically tethered to a blockchain, for example, I think is one of the greatest use cases that we have. Right now we go into a store to buy a pack of gum and if you use your credit card they might ask you for your driver’s license, and right there you’ve given way too much information than you should have. You should have just said, my money is green or whatever, and actually get the transaction and leave. Same thing when you go into a bar, you’re over 21, you apply for a mortgage it’s a different set of credentials, you get a job, a different set of credentials, you go into a hospital, entirely different set of data that’s shared. So this partition identity stack, this wallet, this whole dynamic of our digital ID on the super computers we have in our pockets is I think going to have tremendous innovation afforded to us by blockchain technology and the cryptography and all the benefits in that particular data stack that we call our identity and our digital wallet.
Laura Shin:
All right. So you have a lot of experience in helping to develop and investing in technology. What parallels do you see in the way that this technology is developing with what you’ve seen before and how can blockchain companies do better this time around?
Matt Roszak:
Well, it’s pretty amazing, in my lifetime I’ve seen…I remember going to Kmart on my BMX bike and buying a Commodore VIC-20 computer, and storing my programs on a cassette tape that was connected to a, I don’t even know what color screen I had, but I had that experience. I had a mobile phone that was in a mini briefcase that was over my shoulder, it was a big brick phone. I remember using the internet when, you know, there was pre-browser days where you had to go on things like Gopher.
And so seeing tech in the early days, and you know, not necessarily seeing the, you know, the ten or twenty year benefits that it gave us at those exact moments in time, but now that I’ve seen some of the evolution, some of the ways in which tech has really changed all of our lives, when blockchain came on my radar I immediately resonated with it in terms of the way in which this technology is going to change the movement of money. The true invention here is for the first time ever we have the freedom to convey data or value privately and securely, for the first time without a middle party, so no bank, no Visa, no B of A, and that’s a big invention. That’s a big thing. That’s like life, liberty, pursuit of happiness type of game changer. And so with that, and seeing technology evolve, everything from the early internet to where we are today, I know we’re in the early days of blockchain.
Laura Shin:
So since you deal with a lot of corporations I’m curious, what are the problems you see in the way that they’re looking to adopt this technology? What could they be doing better in their approach?
Matt Roszak:
I think they’re actually…given where the technology is, given where the opportunity is they’re doing all the right things. They’re spending time, energy, and money, and they’re getting started versus you know…I mean, there are two schools of thought, let’s wait, let’s wait until this technology develops and let’s call a bit IT consultancy or IBM or Microsoft and in five years we’ll just buy something off the shelf. That might give them a competitive disadvantage.
So I think much like the internet changed lots of industries, you know, newspaper, voice over IP communications, most of the CTOs sitting in companies today have gone through that. They’ve seen that evolution, they’ve seen that disruption, and there are winners and losers at the other end of all of those transformations, and so there’s lots of education going on, there’s lots of experimentation going on, and nobody has it necessarily figured out, but everybody wants to be in the room and at the table and trying to figure out what’s the best way forward.
And you know, banks have not had a great relationship with technology. I think when the internet showed up they duct taped their systems to the internet, then they were pressure tested in 1999, and then mobile telephony came out so mobile banking was a dynamic they had to react to, and then another pressure testing in 2008, and now fintech has become in vogue for investors, you know? There’s new platforms on the table between mobile telephony and everybody having that super computer in the pocket to do things that they couldn’t do before, blockchain technology, digital currencies, peer to peer lending, robo-investing. So you know, the bullets have been whizzing by their ear and they’re very self-aware of that.
Now it’s like a machine gun with all the innovations in fintech because fintech entrepreneurs are saying, before it was really hard to build a company that’s going to compete with a bank or an insurance company or what have you, but now that technology has evolved to a point where they’re coming in on the edges or doing innovative approaches towards solving a problem, which has never happened before.
So fintech is in vogue right now. Bitcoin blockchain has certainly helped that as a catalyst, but we’re all seeing all these innovations on our iPhones that are targeting the status quo, targeting banks, and they’re reacting in the way they should. They need to innovate, they need to partner, they need to build a community, a fabric of tech and partnerships and relationships, and they’re doing lots of the right things in sitting where they are, and at the end of the day banks, they manage risk, that’s what they’re really good at, right? So they see this as a potential challenge and they’re stepping up to the plate and investing, and trying to evolve.
And the last piece on that is you know, human beings, we have these blockchain networks, these trustless protocols which is true, and there’s also a dynamic where as human beings we trust brands, you know, and sometimes we trust brands blindly, sometimes brands are evolving, the brands 20 years ago are maybe not the right brands today, but we trust brands and I just saw something that people stay with their bank longer than they stay with their marriage, you know. I think it was 17 years an average bank relationship in the UK, average marriage in the UK is 11 years, so it’s more of a…makes you kind of smirk when you hear that, but people trust brands, and so that’s going to take another trust factor and another element to kind of disengage from that world and go into this next new digital world where there’s a new brand that emerges that people are going to start trusting.
Laura Shin:
Okay. So the last thing I was curious about was what would you kind of recommend to enterprise that’s looking to take advantage of this? Like, you said earlier that, you know, we’re going to see winners and losers out of this. What do you think is going to separate the winners from the losers?
Matt Roszak:
I think technology is a difficult animal sometimes to jump on and harness and ride sometimes because you know, sometimes if you do it too early, you’re too early, you do it too late, you’re too late, and here I think you need to get started. I think you need to get engaged. I think you need to, you know, jump in that pool, and much like we all have a mobile phone in our pocket and we’re mobile enabled, and now any new app that you recommend, I recommend, we can download, we can start using, and then 50, 100, 500 million people start messaging or sharing photos or anything on that app, and I think right now we need to get companies and industries blockchain enabled so they’re ready for the innovations that happen on the horizon, you know?
If we were talking about building Uber in 1998 we’d kind of be out of luck because a lot of those layers of tech, those very important layers, and it’s like payment processing, GPS, IOS, all these interstitial layers that have been built up and hardened, some are invisible, some people will never know about, but that’s what enabled Uber to be Uber when it launched, and we’re doing the same thing on blockchain.
So all those layers to make application development, to make the utility of the blockchain easier, and we don’t have to talk about blockchain, we just talk about we’re moving money, we’re moving data, I have a digital identity, and oh, yeah, it’s secure, cheap, fast, and you know, those are the selling points, not that it’s SMTP or HTTP or anything like that, that doesn’t sell to certainly my mother or brother or sister. You know, you really have to make the use case shine in the way it should.
Laura Shin:
So I saw that you’ve produced the Rise and Rise of Bitcoin. How did you come up with that idea and _____ 0:48:32?
Matt Roszak:
Well, over the last four years I spray painted the industry with 21 bets in the space. I’ve been an investor, and that’s quite frankly given me a good education on the space, so everything from investing to starting companies, serving on the board of BitGive, a charity in the ecosystem, was the first financial sponsor of the Chamber of Digital Commerce, helped produce the Rise and Rise of Bitcoin, and so I’m very passionate about this space, so any way I could get into this from industry, philanthropy, advocacy, arts. I gave Richard Branson a Kialara Coin, that’s a piece of artwork in this space, it’s a physical Bitcoin which is kind of funny because we’re talking about the movement of digital money and I’m like, handing out, you know, Bitcoin in a very analog way, but that goes to the storytelling in the space.
And I think, you know, listen, the Bitcoin blockchain is not an intuitive technology to wrap your brain around, but the storytelling, the physicality of a Bitcoin, and hearing that I think is always helpful when you kind of engage with people and want to talk about this new technology frontier.
Laura Shin:
Thanks for joining us today. For those of you who are curious about how Matt’s tennis game went, and just to let you know, he’s 6 foot 5 and athletic, he told me that he got creamed by Richard Branson, which gives you a sense of just how athletic and good at tennis Sir Richard Branson is, and I guess he also told Matt that he’s been playing tennis ever since he bought the island which was 37 years ago, so that’s probably why.
If you’re interested in learning more about Matt and his work, check out the show notes which are available on Forbes.com, and please review, rate, and subscribe to the show if you like what you’re hearing. Thanks again.
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