Interview with Lior Lamesh, Co Founder at GK8 | EBC11

[Music] Hi everyone, thank you for joining us. We're here at the European Blockchain Convention number 11. Uh I'm Alona, coco at Riblon PR Agency. Joining me now is Leo Lamesh, co-founder and CEO at GKA. Hi Leor, how are you?

Hi Alona, I'm doing great. It's very exciting event and uh thank you for having me for the interview.

Of course, thank you so much for joining us. How have you been enjoying the event so far?

Uh it's very nice. I think it's a very interesting balancing between uh not being uh too busy but with the right uh people. Um I think any any of the sub events other than the event itself is managed very well. We like the team. So uh yeah, we're enjoying joining.

So tell us a bit about JKA and you know what have you been you guys been up to in the past year or so?

Of course. Um so yeah we it's not our first interview but but just in a high level um my my my background is cyber security at the level of national security uh GK8 is a galaxy company uh galaxy is a NASDAQ listed company uh it's a market leader in the digital asset space and AI space uh GK8 we started our journey in 2018 uh with the mission of increasing the level of trust in the market uh by providing the most secure self- custody solutions in the market. Uh we're leveraging uh both main solutions which are impenetable wallets which is the next generation of cold wallet. It's our unique ability to make the full process of communication with the blockchain without being connected to the internet. Uh alongside the MPC, we have a unique UMPC technology which stands for unlimited MPC.

um we have a more secure version of MPC which is a pattern that we have in the company that allowing us to split the key into a lot of parts which make it more hard for hackers uh to compromise that uh we're working with both traditional institutions and crypton native institutions uh including DTCC in the US uh with our folk from POGU which is one of the largest cash logistics we're working with which is the only regulated custodians in South Korea. Um and uh yeah, yesterday on stage I also shared about our experience with the all unity uh which is an interesting uh stable coin projects which is a fully regulated euro stable coin uh under the buff regulation. It's a joint venture between uh Galaxy uh DWS which is formerly the uh treasury arm of Deutsche Bank and the flow traders uh GK providing the custody and the tokenization technology for the projects. uh it has been pretty successful since the launch in August. Uh the TVL is ahead of schedule.

It's uh offered over multiple chains. Uh so we are very proud to be the technology infrastructure to support this project. Uh so you know for us it was a very exciting year right uh since the beginning of the year uh since Trump election I would say uh the regulation in the US become all clear and us being a American company again as the listed uh I think it's uh opened a lot of opportunity for us um historically Galaxy was traded in the Toronto Stock Exchange uh but since May of this year uh we've been uplisted to the NASDAQ um so I think uh It's very clear today that we see a lot of tokenization project in the market as uh the most uh immediate use case for traditional institutions to join into the digital asset space. Uh and I think that if you were participating mainly in uh project in Europe uh such as the US stable coin uh now we see more and more traction in the US uh with some uh very exciting projects uh that we're working on right now uh that going to be announced also sometime soon. Uh so I'm very excited uh about how we're going to uh finish this year and uh yeah market is interesting that's for sure

and so what does JK role within those tokenization can you tell us a little bit about the process and the company that you work with? cost I think in order to enable tokenization it's uh really different than just enabling a custom right I think uh you know originally the need to manage uh private keys and uh functionalities around custody um is more basic I would say um I like just holding the keys now you also need to interact with smart contract over the blockchain right so GK8 eventually our role in tokenization including three main things uh the first thing is the issuance of smart contract. We have additional product called tokenization waiver. Uh what we do there leverage uh the private key technologies that I mentioned before the impenel vault and the MPC uh technologies that we have uh and use it in order to create uh a smart contact within a wizard that doesn't require our clients to write any code. literally can uh decide what functionalities you want to have in multiple instruments that we support such as a stable coin and such as money market funds and deposit tokens uh and then the smart contact is automatically created in the offline environment and uh then it could be deployed to the blockchain.

The full process of issuance and deployment of smart contact per different organization instrument is being done in a very secure fashion. The reason why it's important is because um that's how you can ensure that no hackers can include malicious code in the smart contracts and then exploit it down the road when the uh economy of this token will fortune and it makes sense for hacker to compromise it. So you can secure the deployment of the logic of the token since the beginning. So it's very interesting and that's the first to all the second thing is the management of the smart contact once it's on ship right um eventually uh the smart contract of the token include a lot of administrative uh functionality that uh this uh uh banks and other entities that you are collaborating with need to have in place. So for example, they need to be able to do a minting and burning uh like printing new token or revocation of existing tok to tokens uh or updating the allow list which means which parties can participate in this new uh tokconomy uh right because behind the scenes of chain there are KYC processes that being done to any party that want to be involved because you know these projects are fully regulated uh and then there should be onchain representation so you need to update in allow list this party that could participate in this new token.

Uh so this uh what we call superpowers are so sensitive because if hackers uh possess this private key it it's a it's a huge damage and I can explain more about it later. Um so the management of the smart contact after its own chain that's the second role of GK8 and the third role is obviously the custody of the tokenized assets right because uh once all unity for example uh tokenizing the stable coin and uh do the minting the burning and distribute it to the right partners um they also need to custody the stable coin just as another cricket um so that's where our solution the same way that it custoes it also custody tokenized assets uh to ensure the same level of security and uh yeah you know I think that uh since you know we are not I would say a regulated entity right because we don't need to hold the money of no one but our clients do um there are different things that we need to design the product accordingly right there are different regulations that we need to meet as the technology providers right for example here in Europe uh it's Mika Dora in some projects also buffin right so Um there are needs that we need to do around um segregation of assets right the entity need to segregate his own assets compared to his client's assets we need to do uh permitation tests and audits on the annually basics uh both on the whole system and on the smart contact by um we need to enable AML capability right so we have integration with different ML providers uh so according to certain scores I would say of addresses and uh uh transactions uh the compliance team can decide ide whether to freeze or unfreeze assets and manage it accordingly to ensure uh that all of the the the rules are forces and then also on the policy engine level, right? There is a needed different level of control. If in standard cryptocurrency custody, all you need to do is just put different groups of different users and um how much money everyone can just send to certain addresses and and mix and match around it. Now it become more complicated.

you need to do policy engine on the smart contact levy. So for example, who can do minting? How much mint you can do? Right? So it it required us to do uh different scope of functionality that we included in the product to meet uh this increasing uh demand for tokenization and management solutions around it.

Um so uh yeah, we're excited to be ready with the right offering in the right timing in the market. And uh as I mentioned before there are some exciting things on the table that uh will be announcing.

Yeah. Super comprehensive and massive offering there you know from end to end. So tell us um as a tech provider for tokenization uh from what you see what will make a tokenization project a success. What do they need to do? What do they need to have?

So since info involves in a few of the again high profile projects um I think there are a few things that we recognize already as patterns that makes project success. I think the first thing is uh having a trusted partner in the traditional uh finance world, right? Uh so uh companies such as DWS or you know T1 banks, right? Um having them involved since they already prove themselves in the traditional asset world uh is a real gamecher because they really provide the needed level of trust, right? Eventually it's all about trust especially with regulated products that should uh um serve the the regulated market and the traditional market and once you have you know a very strong brand name that proved it trust level in the traditional world it makes a a huge difference so so that's I would say um one of the main enor partner right somebody who is already uh rooted in the digital assets eosystem gift them and already have the connections and uh can really make things happen.

uh that's where Galaxy comes into play right uh you know other than uh GHography from the technology side galaxy do so much and are involved in so many projects so in such projects for example uh you know we also provide uh the distribution and the liquidity and the market making I really have the knowhow from a relation perspective how to do things in the right way uh to ensure that these projects are being operated and being done in the needed way and also we have a lot of connections with a lot of uh the needed partners right so for example we can bring in blockchains and foundations at willing to you know invest in this project. So it's kind of making the tokenization project successful even before it started right. So imagine that uh foundation that want to encourage this the the token to be um tokenized over their blockchain and we support multiple chains in in these tokenization projects. Uh they're willing to invest like hundreds of millions of dollars sometimes um to work with these tokens. So it's a real it's a real impact.

Uh so I think Galaxy do amazing job in bridging the gap between traditional assets, traditional finance companies to the digital assets world and you know we see that everywhere. Uh but we see that also a lot in the infrastructure and and tokconization also with taking by the way uh which we do a lot around that. So yeah that that's I would say the second thing and obviously the third thing is really the the the technology parking right in our case is uh the custody and the tokenization as I explained before there is a different set of meats uh around the tokenization such as the policy engine on the smart contact level uh as I mentioned before um but even for staking to be honest right you know at galaxy we have also notes validator steam uh and to do staking it's not necessarily foration By the way, but it's worth mentioning it. Uh you need both the private key side of thing and also the nodes validator side of things since Galaxy is I think the largest nodes validator for Solana. Uh so we already integrated right uh and we serve together um very large entities in the market uh including a I mentioned before BX which is the one of the only and the largest regulated custodians in Korea uh to do uh staking in Solana and and a lot more uh partners in the market.

Um yeah so anyway to make tokenization project successful trusted traditional finance partner uh trusted digital asset partner such as such as galaxy and a strong technology infrastructure provider uh such as GKE obviously that you are very proud about what we build here for capital tokenization

so it's impossible to wrap up an interview with you without talking about security let's talk a little bit about the security aspects of you know tokenizing stable coins or mmfs Let's talk a little bit about the process there.

Sure. Um, so it should be clear and that's really one of the main uh messages that they're bringing in into the this conversation. The main risk in blockchain in general and the one thing that make blockchain uh centralized I would say is the private keys right. Um blockchain is irreversible protocol and once a hacker possessing the private key it can do uh things that cannot be changed later on. Uh so it's a huge risk and when it come to crypto custody it's a hacker possessing the the key of the custody it can steal the bank's assets and run away which is very painful but when it comes to tokenization it's even worse in tokenization the admin key the one that I mentioned before that could do the minting the burning um if someone possessing this key it cannot just steal the bank assets who can destroy the all economy that the bank or the other organization that in charge of this organization in once right he can kn to himself as much money as you want or you know burn the assets of everyone and uh I think we see more and more projects where the source of truth for the token is on chain right so if hacker uh for example mint himself as much stable coin as he wants and then going to some of the centralized exchanges or or default protocols and there are centralized exchanges and different protocols already right now very reputational uh one that we need to accept the stable coins as collateral and then bringing you uh uh uh lending in according uh to that and um so if the data over the blockchain is manipulated with hacker printing to himself tokens he can run away with crypto and it's a huge damage and again the old economy that the c the token created could go uh lost um so so it's all about private key security that that that's how we see that and uh you know it's very important with that understand how hackers think right uh hacking is a business, right?

How much hackers will invest to compromise into a bank and into tokenization project? It really depends how much you can get. It's about ROI and hackers will invest millions to steal billions. And um you know today based on our experience which as I mentioned before from the government, it's safe to assume that $1 million is what hackers need to invest in in in average to compromise one public internet connected computer. And uh today there is a misconception in the market that uh multi-ig or MPC solutions are sufficient for custody of crypto or admin key.

But that's not the case because the ROI for hackers to invest few millions in order to potentially compromise two or three internet connected computers and then control the old shards of multiig of MPC sorry or a few keys of of multisig and then it can uh potentially steal bills right. So multi single NPC are definitely not a solution to custody the uh admin key for tokens or in general the the private key for crypto custody and then on the other end there are uh cold solutions which are not necessarily cold right they're all connected at some point we see uh call solutions connected with micro USB cables uh such as the popular you know thumb drive uh oriented solutions some connected with NFCs with cure cameras or even HSM that constantly connected to the internet and they're not secure enough, right? Because at some point there is input from internet connected computer to another computer that's supposed to be air or offline, but the instance when you take data from internet connected computer to another computer that's supposed to be offline or airup is not urged anymore. Uh so we don't see the current code solutions in the market really fall. Uh and that's why GK by Galaxy we come up with a new security approach for private keys management for tokenization custody projects which called impenetable wallet, impenitable custody.

Right? Because in our case, you are able to create the full process of creating, signing and sending uh blockchain messages either for assets movement in custody or to do the minting and burning and tokenization uh without ever receiving input from the internet. We can create it fully offline and we use only outbound communication to send already defined messages and that's why we can ensure uh that assets or the private keys cannot be exposed and money cannot be stolen and no hacker can mean to himself uh tokens. Um so I really think it's crucial as a market going in the coming two and uh in the coming uh two or three years um that the projects that uh running tokenization will ensure that the private keys are managed properly uh in order to ensure that they will succeed uh in their projects.

Perfect. That was super insightful. Thank you so much for your time.

Yeah, my pleasure. Thank you Alana.

Thank you. Always great being here with you.