Digital Infrastructure as a Board Game - TOKEN2049 London 2022

I've got a lot of material that I'm going to try and compress into the 15 minutes but I understand that we might have a little Flex after for a little chat with Shane the topic is not what was advertised on the program we're talking about uh digital infrastructure but I'm going to present this uh through the lens of a board game and I think a board game is a super useful analogy because what a ball game tries to capture is a little micro Universe of how [ __ ] Works in general and I'll explain that in a bit but first a very quick intro myself and BCB um I graduated in 2003 with an AI degree and worked at Lehman Brothers on the credit routers desk the CDO desk I moved to Barclays in 2004 where I carried on doing much of the same in a kind of a quantity geek role and did my MBA at city of London University where I met my co-founder Oliver Tonkin um this uh working in credit I was kind of at the front seat of um what happened next of course um most of you will have seen what happened next um this also inspired a lot of the uh the the the the ethos behind Bitcoin which of course had been developed over 20 25 years component by component but was finally uh out there uh in 2009 would have of course that headline was embedded in the Genesis block of Bitcoin um history um I started um talking on forums uh in 1314 as Bitcoin bro which may or may not be the origin of vcv let's leave it there 2014 my interest and immersion in the crypto space grew BCB Prime was formed in 2017 which is a trading service BCB payments was formed a little later which is a banking flat as a payment rails for the crypto economy BCB group is the group entity which encapsulates everything that we do the API blink and all that good stuff bringing us forward to today now uh we are I mean I'm going to read the slide we're in the crypto Industries I think most popular and capable B2B financial institution for payments and Foreign Exchange in all major currencies with services that also include crypto liquidity we still do what we did in 2017 buying and selling crypto uh investment and storage we've done about 150 bill in payments volume uh we've got um hopefully 300 clients by the end of the year and one purpose which is to connect and Bank the global crypto industry um last slide on me and BCB these are a handful of our clients and a handful of our investors so the board game analogy um why I found this useful enough I'll introduce the the uh the structure I'll then walk us through what that meant for web one web two and web three what we can speculate for web 4 and Beyond and uh and why it matters uh so this is why I see it a board game uh has rules um in those rules are definitions uh we have permissions what you can and can't do and we have Governors who actually controls the rules and enforces them um the setup uh involves a platform that's generally a board or tiles whatever it has a layout and I've included that point to illustrate the centralization and decentralization as we move through the digital eras and of course the players who's playing um when we get into gameplay we need to understand how do we interact uh we need to understand how do we make meaningful choice or are subject to randomness and we understand we need to understand what are the conditions for success or the conditions for progress um and then we score uh we need a unit of value to score your your progress we need incentives and penalties um to drive that score and we need a mechanism to transfer uh those incentives and under the pinning everything is a unifying theme so thanks for bearing with me so far this is kind of a new way I'm looking at things and this is a work in progress so you're on with me on a journey next time I deliver this it might be a little more uh sophisticated but let's see how that maps onto the three eras that we are we Plastering in web so in web one uh the definitions were broadly captured by w3c the Consortium um the rules were really at the code level you needed HTTP to know how to move uh the HTML which is the structure of the page and a URL to actually find it at the governance was super wild a bit like on the beginning data crypto but um that's the structure of web one the setup I'm going to race through these because this is not a history lesson uh it all takes place on tcpip it's pretty decentralized you can set up a server host the page um it does it didn't have the kind of a Google Cloud Amazon um AWS kind of thing we have today and of course super business and consumer Focus this is where things went off the High Street and online so that's the essence of the gameplay where do we talk what is the um uh uh you know how what is the meaningful Choice element well it's just vanilla capitalism it's just who's selling the best thing in marketing the best and how do you win how do you progress you beat brick and mortar um the scoring is money um the um uh I guess the incentives um Drive first first mover Advantage they drive uh market share and to pay um I guess it was all PayPal and credit cards uh the theme of course being e-commerce Revolution roll on web 2 and we have rules that are I [ __ ] hate this word folks summoning but it is a word it's like a taxonomy that's generated by hashtags we Define what the content is by slapping on a hashtag uh freely um and those gather form in a crowdsource way the rules uh I guess driven partly by business regulations vanilla business relations but also by the content creator content creators create the mood the trend um yeah so uh set up well this all takes place on big social media um the topography the layout is very centralized so now we've got these big um personal data gatherers you know Facebook Instagram Twitter whatever and of course the players influencers subscribers um uh advertisers uh are the main players in web 2. in terms of gameplay we gain traction through likes shares comments um the uh meaningful Choice component has a bit more of a random element you at first virality was a driver of success which was quite random in the beginning but now of course there are techniques to go viral and you win by monetizing that um by reality um scoring um the unit of account again this is all Up For Debate this is my own idea is like followers it's content that's that's now the new currency new web 2 currency um uh it's driven by reputation and reach and it's uh it's shared across uh you know cross permo and repost and of course web to the self-publish era Royal on web3 this is why we're here this is a little more interesting what are the rules here so there is a convergent taxonomy and this is a really key element for Progress each regulator in each jurisdiction is starting to get ahead around get their heads around what is um a security what is uh you a unit of value what is a um uh a utility token so right now it's quite disparate everybody has their own idea but it is starting to converge on on uh standards the rules and to play well on the uh let's call it the tranfi world it's kyc and AML these are table stakes and code you know finally we have a system in which incentives are run and ruled by code um which is a very exciting thing it takes uh it makes it a lot more transparent a lot more uh meritocratic uh these are governed by Regulators super important by Dows and by individuals um the setup uh oversimplification maybe but this exists on layer 1 blockchain nodes it's semi-decentralized um I say that because if you take a deep dive beneath any of the layer ones it's really hard to find true decentralization uh if in eth you still see massive pockets of um concentrated value uh so um yeah Solana is you know super super centralized anyway and who who's playing here engineers uh investors regulators and Banks this is how we connect to the real world and Central governments who are [ __ ] themselves um gameplay here you vote with your energy in the case of a proof of stake protocol or you vote with your approval work or you vote with your stake um and you can also communicate over through those blockchains uh the meaningful Choice element um again oversimplification are you speculating are you taking a punch are you gambling or are you investing in fundamental value in how this crypto economy actually changes the world you win by having high tvl which is a good proxy symbol for trust total value locked uh you win by building things that are well really easily composed into larger Solutions and you win in the Fiat meets uh thread five means defy World by having uh Rock Solid compliance how do we score in this web3 world the units of accounts are tokens they are Fiat they are real world assets and how they get wrapped up in in tokens um how do we uh what are the uh incentives I mean how do we um smart contracts effectively govern uh where you know how how that value plays out and um and this is all it's either on chain or it's cross chain or it's Layer Two or it's through defy and again bringing in an element of Trad fire which is super important here Banks and so when you're thinking of the infrastructure of the digital economy in web 3 and we're looking at um you know the kind of Cosmos Polka Dot World in which you can create funky new things uh you're looking at different ways of bridging layer ones but actually like let's not forget the the element which actually allows money into the whole system which is kind of the point of BCB it is to bank the crypto industry so that we can facilitate this flow of value into into web3 the theme of course is to decentralize everything um so what does the future look like um this Slide the next slide changes every time I uh write it and actually this is this copy is 12 hours out of date so there's at least two edits here but here we go I think rules um in the next era we have Global protocol standards I mean ethereum has already done a fantastic job of setting the bar uh it's not um it's not but it is ethereum it's so uh let's um see what emerges there it is regulations that are properly across jurisdiction or right now you can do certain things in certain countries um but that presents a problem for uh for crypto which is effectively borderless uh autonomous governance this is code is law um and code is transparent I I you know I I think we are definitely moving to a space in which we have less four-year political term driven governance the setup uh I think one of the essential bits of the setup will be every one and everything and every business having a single globally recognized unique ID in a decentralized way I think value expressing money or tokens or um assets will be uh ubiquitously embedded so part of the layout of this feature I think is what is is far a far greater degree of connection and of course everyone can play and we have one webtoon web three you see increasing um uh uh like the borders are becoming softer I think the borders become even like vanish in in a in a web four web five World everyone can play the gameplay is uh thinking about the user experience what do we want that's really sticky in this what are the problems in this iteration of digital infrastructure it's quite hard it's quite technical there's still a lot of friction to get in and out so I think I'd love to see a space in which engaging with the digital economy is its easiest talking um the uh I think um choosing um which part which layer of the Maslow hierarchy and I'm not gonna you know which layer of the Mazda hierarchy is your business addressing is it the bottom is it the shelter or is it all the way at the top for the self-fulfillment gameplay will be about businesses that focuses that Focus specifically on those layers that's just my model I'm just [ __ ] speculating um but it it fits the board and then the result of that if we can gamify addressing each layer of that matter hierarchy we get less uneven prosperity um yeah don't read too much into that scoring arguably what blockchain has brought us is uh trustlessness um so if we start to think about trust as a unit of value um then you can see businesses that that accumulate size not based on AUM or anything but as how widely are they trusted I what is the quality of the network um and to match up to what we're building for different layers of what we as humans need um scoring incentivizes uh appropriately at each of those levels and um how do we make sure that that is shared across participants in web 3 inclusion I think is uh the bullish term now the the theme that underpins this is one I keep um flipping around on on this version it is trust I think it's a bit woolly I think it's a bit wishy-washy I think maybe everything and everyone is connected is probably a more meaningful theme for what went for and Beyond looks like that's my last slide door uh that was my last slide um so that's um how I view the evolution of digital infrastructure using a board game as analogy I've stretched the analogy a bit but I think it's useful because it does actually capture the Essential Elements of how we get [ __ ] done um yeah thanks but hold on don't go anywhere because we're gonna have a little bit of a chat awesome um when we look at the CB group certainly from a venture perspective you're a really good point of contact to understand which way the market is going uh almost like a testing board when you look at what's happened this year with regards to the Celsius the anchors and probably some of your clients are potential clients what type of conversation are the institutional asset classes that are coming into deploy Capital having with you because you're a great barometer for that you're very much involved in crypto but you're involved in the integration of a lot of the business banking so what are the common concerns that a lot of traditional type businesses that want to enter in crypto are having with you guys and and how do you answer it and explain and also looking at just what's happened in the last 24 hours Oliver so what I'm seeing a lot of especially from an Institutional quality conversation is a kind of not to us but to The Wider crypto economy we told you so kind of vibe um so Trad fire has got Decades of being able to take risk and manage risk crypto has got 10 years of life and it's got really good at taking risk but it's forgotten the super basic bits of managing risk um you know three hours Celsius you know the kind of the credit issues this like how what is the counter play Risk you know when you've sent somebody your cash um manage it um if you're taking a position uh in which you have spot risk Market risk manage it so there's like spot risk there's credit risk all of these things that are basic building blocks in Trad Phi that are still so far behind in crypto so I think for um you know what we're starting to see in the client in our clients who are succeeding are those who have a bit of a bit of gray hair and who do know what good risk management looks like and there's going to be those who who punched through to the next uh to the next stage um and ultimately um how do you view what's happened in the last 24 hours with regards to finance and FDX is it any concern with your business do you position yourselves in any other way um or is this just something which is happening in crypto Twitter in a way but love to get your take on it if any of the audience have had any exposure to FTX or you haven't been able to withdraw any funds or you've also got any information on it that you'd like to share or ask any questions please jump in but I'd like to get your take on how you see things unfolding the experience of having a big ass lunar position earlier this year was traumatic okay the experience of having a personal account okay Celsius and any of those is is traumatic okay uh just like it was traumatic having any like uh aside Prime Mortgage 15 years ago so I think um uh there is that trauma that we have to be sensitive to but what's so cool about crypto is that these traumas play out over days yes you know we watched Lehman Brothers fail over a month signals showed up in months yes and um now like I posted something on our slack last week hey something's up Sunday night Monday Tuesday it's like it's insane but this is traumatic because it's positive because this rapid failure gives us a space to improve and do it better again yeah so it's almost and I don't know the details on on FTX but I certainly know a lot about Celsius and what happened with uh anchor Luna Terra um do you think it's almost a cleansing of the decks before we move higher no one wants to see anybody particularly a PA investor lose any money right um but do you think that this is important for us to move higher and to have this cleansing I wish it weren't necessary but it kind of is and I hate seeing these awesome projects that are really have great intent I I hate seeing them fail but those ones that have ignored conventional wisdom hedge your [ __ ] risks are getting washed out and these washouts are necessary for a robust growth and it's the only way we're going to get to a properly sustainable uh crypto future is if we take the time to learn the lessons from history and build better um would you say that it was fair to assume that all traditional decentralized Finance the proper defy the compounds the makers the avees actually performed exactly like they should have and if there was any built-in smart contract liquidation that had occurred at the point of that contract being built and actually when you look at the very defy core elements they actually performed exactly like they should have right none of them went down uh code is Law and the code worked in those instances sometimes it doesn't but um to your point I think there's a spectrum of uh uh you know defy equality the ones that I that I've noticed that are surviving like are they are built by not not just fresh Engineers who are super smart but they're built by lawyers and business people and people have got a bit of experience like the Ave protocol if you dive into it it's the the the the uh as you know it doesn't backstops for um rapid liquidation events for Gap risk they're there um the the lockup of value so that um you don't get run on the bank scenario that kills you they're there um of course you do need to be you do need to have integrity as well you can't just have the code and I think we've seen examples this year in which all funds are back one to one and you look under the covers and they blow up and they won't um how do you navigate through a landscape whereby crypto is so correlated right now and so we'll have an issue with a Luna or we'll have an issue with an FTX and the whole Market because it is highly correlated will unwind I understand that some of that will be margin calling and in any type of tradition your financial asset management when you've got to reduce your book or you've got to meet margin you'll sell everything across the board but certainly when you look at some prices which were totally unrelated to the FTX portfolio you're starting to see crypto across the board being down yeah I mean how do you think about that from an investors perspective um I think about it on a 10-year time scale and I'm seeing the Cycles or I'm seeing the dips are higher than the previous dips and I know that as you know and as most people here because you're here because crypto this is irreversible so there is a trend in our lifetimes the 10 20 30 year view in which these things build quickly and they build better so this is this is a horrific uh uh storm and it's there's good we haven't seen the last of it in the next few weeks um and it won't be the last on the 5-10 year scale but again it's like do you agree I mean it's irreversible where we are now the crypto world the the the pace of development grew massively dramatically outstripping the pace of development in Trad fire you can't reverse that [ __ ] absolutely um I think from our perspective there's two things going on at Swissport Ventures one is the price action which is driven by sentiment which is driven by fear and greed we've just seen a lot of fear in the market the other thing which is way more interesting is the tech build out here and that goes from bottom left to top right keep building yeah at swissborg all we've done over the last 12 months is continuing ship new products and that's been reflected in our keep up you guys are amazing yeah so it's the engineers that keep on building and ultimately what will happen is the price action will catch on with the execution and development the same thing happened in the.com space right there was a lot of Hope Market's got ahead of themselves they've recreacted 90 of stocks fell 90 and then we started to build base and then we started to have profit so you could have PE ratios and cash flow forecasts and you could have comps and execution and followers and users and The Business in the tech world started to form its own industry and we're going to start to see that in crypto I suppose what's difficult with crypto is that although we're pre-pre-pre-ipo we've still got a 24-hour ticker tape stock price which drives and catches everybody's attention and reflects on days like we've seen in the last 24 hours very very clearly I couldn't agree more I haven't slept since 2018 uh 24 hours but um like with uh just a few minutes left on the clock I just want to maybe uh so this is the third bear Market I've been in I think probably the same for you third or fourth um what's going to get us all through this is grit it's going to be hanging in there it's going to be like just keep building and it's uh um do what's this book we're doing uh do what we're doing just like um build and like don't lose sight of that North Star what do we what's the point why are you here what is that North Star I can express it from what I think it is and what drives me in BCB do you have a view of what the ultimate crypto North Star is so I can yeah I absolutely I I think it's the decentralization of everything right the tokenization of the world as we see it you know that doesn't happen overnight and it doesn't happen by one initiative it happens gradually and I think people are always saying hey you know this has failing this hasn't worked the markets are down but actually you're looking at where we are today I look at where we've come from and how quickly we have done that in the space of time oh God yeah and when you start not looking at just one industry sector but you're now looking at the ability to tokenize real estate like Simon said earlier on we're looking at the ability of decentralized Finance we're looking at the ability to have the Creator economy and be remunerated we're looking at metaverse we're looking at the store of value like this is just not one industry that is being disrupted this is the world as we know it and the attention going forward for the Youth of today so things don't happen overnight I think about it generationally um I know that we will be on the right side of history but of course we're gonna have these speed bumps which are going to be very very very hard and difficult because it's attached to price emotion and that's difficult to see people lose value in certain aspects I agree that's what it's way more articulate way uh of putting what I often express it as which is we're upgrading money fundamentally we're upgrading economy we're up getting upgrading governance uh and we're decentralizing everything I think if we can focus on being part of that change which is a generational change um then all the ups and downs in in the middle don't really matter um let's just uh let's fix money and let's uh let's fix value um it's like it's it's so awesome working in this industry before we let you go I have one thing because we're at token 2049 here in London and you guys are operating out of London how do you find working and building the business which is focused on digital assets here in the capital of the UK and and what's it been like to do that because I'm sure you could have got offered to go off and incorporate everywhere to have your head office how do you find operating your business and what's the positive sides of that I'd be lying if I didn't say it was challenging working in in a UK regulatory environment but the FCA are looking at it in the right way what we needed to create is an environment in which we're proving ourselves that this is a legitimate economy and we and we must take every opportunity to feed back education and information to the FCA so that they can keep up um at the moment it is easier to do business in Switzerland uh in Germany and France and you know in the US even uh in the crypto space um but the FCA are looking at the right way we just need to give them a little more love and a bit more resource and bring them along the journey um and like uh that means that's a sound patronizing I just there's a there's an education deficit that we are in a position to fill um and let's do that because the UK is awesome this is and we have a great crack at being the digital financial center of the world let's do it uh Oliver that was awesome thank you for the keynote thank you for the conversation a big round of applause for Oliver thank you so much thank you very