Bridging Physical and Digital: RWAs and the Web3 Payments Revolution - TOKEN2049 Singapore 2024

All right, nice afternoon. Um So, thank you so much, guys, for jumping on the stage. Um I've been super excited to come here and make sure that we have this panel because we have leaders who are doing phenomenal work in building governance, decentralization, all of that from Zebec. And uh we have leader who is leading it from the front with AI data and future of payments. So, thank you so much.

So, before we dive into the panel discussion, um Trevor, I want to start with you. Why don't you give us a quick introduction and talk a little bit about your journey. Absolutely. And Zebec, wow, you guys are amazing. I got to know Raj, your CEO, recently and just to host everybody here this week, we really appreciate it.

Um my background is very Web3 heavy. I'm from Toronto, and that's where a lot of the early kind of smart contract scene came from. That's where Vitalik's from. Uh I was very early in kind of the Bitcoin scene as well. I um bought my first Bitcoin on eBay in 2012.

So, they actually sent you the private key in your in the like the delivery box. Um and then as time went on, I got more and more excited about um Web3. It wasn't even called Web3 back then, it was just called Cypherpunk cryptos. And after Ethereum, I eventually launched my own project called Polymath. It was an early tokenization network in 2017-2018.

And our thinking there was that, and this is kind of ties into our topic today, is that all financial assets will eventually be tokenized. So, we were early on with that thesis. Um with Polymath, we helped adopt standards that are still used today like ERC-1400. That was co-authored by Fabian Vogelsteller and myself at Polymath. And and then we kind of hit a wall because I had this huge vision I would say on stage that everything's going to be tokenized.

First, there's protocols, then it's cash, stable coins, then it's commodities, and then it's securities, and then it's private equity, and it's kind of like this inevitable thing that we're on. But the problem with these inevitable things is that they don't happen uniformly. Sometimes nothing happens, and sometimes everything happens at once. And so there was about a 5-year period since when I launched Polymath to when we actually pivoted to building a layer one that nothing happened. It was like a bear market within a bear market.

So we actually decided, "Hey, this might be a good We didn't waver on our thesis of tokenization. We just extended out the timeline. So we decided to move down the stack and build a layer one infrastructure to support cuz we're we're thinking if you have a city and everyone's going to move into your city at once one day, you got to make sure that the roads and the infrastructure and the plumbing is ready. Um so anyways, we launched Polymath. It turned into a layer one called Polymesh, which is one of the better performing L1s this year.

And um it's still one of my favorite things to just stay in touch with the research is how the financial system and Web3 are going to coexist and be symbiotic with each other. Wow. Wow. Quite a journey, huh? Yeah.

Early early OG's getting Bitcoin from eBay, that itself is a mic drop moment. A lot of scar tissue along the way. Right. So I I have the pleasure and privilege of working with Keshav Pandya, a very talented guy from India, very early adopters of blockchain, the guy who has built a lot of helped a lot of exchanges build stories. So as a co-founder, I had a lot of ups and downs dealing with him, dealing with a tech brain, dealing with a visionary.

So, so Keshav, I know you helped one of the largest institutional banks in India go digital. Take us through your journey. Yes, so my journey has been around the tech, payments, and the innovation from very beginning. Uh I started my career by with one of the leading tech tech shop in India. And after that, I ended up working uh with a Kotak Bank uh where my responsibility was partially to implement the core banking system and world's first transaction banking platform.

I'm talking about 2007 and 8. Wow. Over there, working I realized how the in inside out bank works, the financial modeling happens, and the money movement within the bank. That came to the first exposure with. Sure.

In 2011, I started my first gig, which was enabling uh instant payments between the banks. So, it was within the India. So, India have lot many banks. Uh public sector banks, private sector banks, community banks, and the money movement for remittances within the local space has a very big market. But, there were no platform which enables the instant payments between them.

So, that was my first gig uh which I uh took exit. It was a fantastic experience where I realized like how the banks cannot scale beyond one point in time, and you will need a neo bank. You need a modern payment system to enable the next billion people for adoption. So, the targeted audience over there was unbanked people, the migrants who are working in different states. They want to use payment system for remittances, sending back money to their home.

So, uh they need a very very simple robust system, and they are not going to use it. They need some intermediaries. Right. So, at that at that point in time, realized like what are the ecosystem players, how you can use different players and pillars to build up a real money movement within the within the space. After that uh while I was working in uh with the bank one question was always pissing me off that that the ledger system itself creates so much of artificial money movement.

Like if you see the core banking entries between two different banks, so there are no real money comes in. They go to the central bank. The money generation happens in their bank uh their books as a loan and then the money movement happens. So that is practically not the interconnected capability. After taking exit from my first gig, I started working on a research that how all of the banks can have the interconnected environment and that's where I got first exposed towards blockchain economy in 2014.

Uh which was my second gig. I started working on on a system where I can enable the bridging layer between the banks. How I can implement blockchain so that the banks can have interoperability with each other and the money movement can really happen on on the blockchain. So that was the first area, but after within the same space, I also face started challenges related to like the trades and everything because I'm talking about 2013-14 around the same time when uh Polymath was uh one of the prime time of the discussion as well, right? So I ended up creating a high-frequency trading engine and the match engine before moving on that particular space and helped uh work with couple of crypto exchanges and the the entire engine was capable of doing a tokenization.

So in 2017 and 18, I worked with two of my customer, helped them for creating entire tokenization of their fund. One is based in uh Houston, another in Dubai. So they were they were like very early adopters like how their entire fund economy can be brought on blockchain and the money movement was one of the element into that. So, in in that entire path, I worked with different elements of the crypto industry, and as Trevor said rightly, the Web3 world was not there. After 2018, the metaverse and all these new words started coming in, and the Web3 world started coming up.

And just to give an example that's really practical of why innovation in payments is so important in a in a silly way and why what you guys are doing at Zebec is so important. I did a an angel investment recent recently, not even that long ago, and as I only really invest in Web3 companies cuz I stay stay to my lane. And and mostly they let you send stable coins, so you can just like it's super easy. But this this company is like, "No, no, no, we need you to send a US wire." And I'm Canadian, it's a bit but you got to get a US account, whatever.

And so I send this wire, and I'm like I'm not going to tell you the deal that this was cuz I never got the subscription agreements back. And I messaged the guy and I'm like, "What happened?" He's like, "The money never arrived." And I was like, "Yes, it did. Here's the the payment thing."

Like I remember I got on my horse and buggy, I went to the bank, I filled out the Swift like in in writing, and and then it never worked. It never executed. And so I called my bank, I'm like, "Guys, I just missed out on this amazing deal because I didn't get the wire in on time." And it turns out I forgot to add the $30 wire fee to the wire. So, it wasn't just the 10K or whatever, it was 10K plus $30.

$30. So, I had to go back to the bank and send a $30 wire that had another $30 fee on top of it. So, this is our modern payment system, guys. And it's kind of embarrassing, if you ask me. I I think I think that's that's kind of the pressing need.

That's what kind of brings players like us to make payment seamless, to make transfer seamless, and to leverage the power of blockchain and crypto in you know, value transfer mechanism. Now, just extending this example, imagine when you as an individual were doing this and there was so much bottleneck, extend the same example to B2B scenario, right? I mean, we deal with large telecom carriers. Each transaction size is runs in multi-million dollars. And imagine the pain they go through when the wire transfer delays happen, you know, the currency is not available, the bank just doesn't have enough foreign currency and the fluctuation rates, all of that.

I think that kind of gave birth to Zebu and what So, like for individual, as you explained, our frequency of payments are retail and such payment, like doing a wire or transaction for international is in a lower magnet, lower count. But, when it comes to the businesses, that's where the birth of Zebu happened. For them, it's a daily pain. They cannot predict when my money will reach to the other merchant, and predictability is very much needed in the business. So, based on like when I was collecting payments from my international customer, I was always feeling this pain that why is this much so much unorganized?

And that's where I started working on on Zebu as a fundamental idea in 2020. And Bankai came in the came in forefront that okay, this this is really a need of our for the telecom company because Bankai is having very big exposure of two decade into telecom, and telecom business in the international space is very very very weird because they have to deal with all 190 countries. Each country have more than three operators. So, for them, hedging all of the currency needs different approach. It cannot work with the standard approach because first you're let's say I'm sending it from Dubai to somewhere in the Ukraine or Europe.

So, AED gets converted into dollars, dollars again gets converted into euro, and there are multiple banking partner comes into the intermediary, which will clear the transaction, which not only delays, but it also becomes expensive when the frequent money movement happens. So, at Zeebu we we we saw this problem and started working on a model that how the the biggest network of the world, which is telecom, which is seamlessly interconnected. We never see that internet that are multiple players in between, and it's near real time everything happens. So, how we can create the similar payment experience, and that's where we adopted blockchain in the same space that how let's bridge telecom and the blockchain networks together to create a seamless money movement for them as well. Sure.

So, very interesting point, Keshav. I think you know, if we can rightly summarize from pre-Web 3 days, before Web 3 was called Web 3, to the Web 3, and then crypto, and then payments, blockchain, um now if you attend any conference, I'm sure you have attended a lot of them, Keshav. I see country hopping from one country to another attending conferences. Everybody's talking about AI. Everybody says AI is going to replace humans.

AI is going to automate the out of this world. All of that, and uh banking and payments are no exception. So, with two stalwarts on the stage, I wanted to understand take from you guys, where do you think uh you know, this whole AI and intersection of banking, transactions, payments happening, and and how far are we from a day where the whole thing will get automated and AI will do everything end-to-end? I think the the main question on a lot of people's mind right now is where is value going to accrue for businesses and and society in general in the AI stack? Is it going to be cuz there's really three things that make up AI.

It's compute, it's algorithms, and it's data. So, those are the three pillars. That's how you make AI. And if you look at compute, it's it's chips and data centers, but that's not a competitive advantage. The next guy can just buy more chips from Jensen, and now he's beating you, and the next day it's someone else.

And what about the algorithms? These are things like the transformer models and the RLHF models. That's like um algorithms that help adjudicate the data and the compute. Those are kind of not competitive advantages, either. It's at parity now, like everyone uses the same uh models.

It's open source in a lot of cases. So, that leaves data. And data, to me, is is the most interesting area of AI. It doesn't get the most attention. Everyone All you hear is like Jensen and Elon Musk and Oracle, you know, brokering chip deals on CNBC.

But, I think data is is where the exciting competitive advantages are going to lie. So, I'll give some examples. There's three kind of main sources of data to think about uh in the broad AI space. There's open data. So, that's data that's just on the internet.

Um that's actually not a competitive advantage. So, everyone kind of trains on the same open internet data now. ChatGPT, Mistral, OpenAI, everybody is using the same open internet data, and 100% of it has been crawled and trained. But, I heard an interesting stat the other day. Um JP Morgan has 120 petabytes of data on its on-prem servers.

Wow. So, like think of an iceberg, right? The tip of the iceberg is like the open internet on on the data. Underneath that tip is enterprise private data. That is not accessible to these models yet.

Um so, 120 petabytes, just one company. Guess how many petabytes ChatGPT 4 was trained on. The answer is one. So, 120 times more data one company has than the biggest, fanciest model was trained on. So, this is the next If we want to progress, we're kind of plateauing in model performance.

If we want to progress to the next kind of level of AGI or closer to AGI, the next big 10x to 100x improvement is going to be getting access to these proprietary data sets, especially in enterprise. But there's an even bigger one. There's another iceberg underneath that iceberg. Um and that's the one that we're most excited about, which is kind of you can call it frontier data. So this is data that doesn't exist at all yet.

And it turns out it's not enterprise as much in this scenario. It's it's people. It's humans. It's it's knowledge that we have in our brains as experts in certain areas. This is like another 10 to 100x um data step change improvement that doesn't happen yet.

So the So the next To get from A to B, we got to get enterprise data. To get from B to C, we've got to get inside the brains of billions of humans around the world, and that's how we get to AGI. So that's kind of my my thinking on where Well, the excitement is. So So do you want to spend some means if Sapien is building something to intercept that human data and then do something around your platforms? And It's really Yeah, that's the name is Sapien.

It's really taking expert humans and helping it work in kind of conjunction with machines. So anyone can now We kind of see a future now where um the biggest gig work will not be Ubers and Door Dashes anymore. It's going to be AI gig work. What does that mean? It means radiologists and doctors and lawyers helping train models with their specific verticalized data.

So that's what we do at Sapien is we help humans unlock potential to earn money by giving AI data sets information. Wow. Kishore, that that brings me to the discussion that you always have in the boardroom and keep pushing all of us. Um I know as part of Zebu Labs, one of the mission that you have set is how do we kind of bring in open innovation and more, you know, around AI. I know you've been talking to a lot of players like you said in the healthcare sector, you know, merging the healthcare and AI together.

Why don't you talk a little bit about AI with, you know, AI and data in the real world and also in the payment scenario? Yes, so AI will literally transform so many different aspect of the payment industry because right now when it comes to the payment, the payment is not that much personalized. The hand-to-hand transfer which we have been seen in the real world and in the physical world, the way we have been tuned. So, the form and factor is still going to remain same, but as a human when I am interacting with you, it's a personalized transaction between you and me, right? Which is not happening in the digital world.

So, we can make that decision-making process because we have in our brain the data which is helping us to make decision for how to do this transaction, what can be the precaution when I'm transacting, what should be the terms and condition I should be agreeing upon first before remitting this So, right now the payment is on a very nascent stage where we are just doing the value exchange, but the physical agreement of the thing decision-making is still it is being being controlled in our hands and whenever the disputes happens, the fraud happens, there so many different aspect are not in taken into consideration which cannot be seen in the digital world. That's where the fraud and so much of different error happens as he was giving an example that he forgot to mention the bank charges and the transaction was not performed. Similarly, there are so many different old age people and unaware people they are getting targeted by the fraudsters. And in the payment industry, the magnitude of fraud is beyond a trillion dollar every year. Like we are going digitalized, but parallel with digitalization, the education is not there that how to safeguard themselves.

That's where the role of AI and data comes in. The payment companies have to marry with AI in a way that how they can use the data which is consumed and available in all of the available user base, how they are behaving, how what is the pattern, how the entire matrix is getting created between how you transact, where you are sending the money, and based on that it can create the autonomous safeguard system for all of us for for safeguarding against fraud, for safeguarding against a wrong spending, and it can also help in in the other dimension for encouraging right savings option, right investment option for them. So, that's where the data and AI will going to marry the payments. And we are also working on that as a Zebu because our merchants are producing lots of data. As we speak right now, in our repository we already reach It is a public data available on blockchain.

Right? So, we are producing lot more data every day with each transaction. We have processed 86,000 invoices so far, and we have a very nice intelligence. Now, we can give a predictive analysis to our merchant using the AI and data that what can be the timeline of the expected payment in the future. I'm not talking about delay in payments, but how he'll his cash flow will look like.

Basis on that, he can plan his purchases, his expenses, his business expansions. And that that's a new thing coming in, and that's where the AI and data is helping us a lot. And we are going to extend this to give them interim lending services from the Zebu platform, which will not only help them for availing credit at a lower facility, but it will also help lenders to land at a risk-free side. Because right now, they have to depend on data which is produced by someone. It can be manipulated, but with the AI and the data intelligence, which this will become so much of predictable.

No one will be able to tamper at a core scale. Wow. Wow. Yeah, I mean I think I think it's super interesting and exciting times ahead, especially with the intersection of data, AI, predictive analytics, and all the deep tech, right? The machine learning, the self-healing algorithms, and all of that.

So, so before we come to the last part of our conversation, I wanted to ask both of you, both the leaders here, what are you most excited about, you know, in the road map in terms of your organization, from an innovation standpoint? Where do what are the next big things that people can expect, you know, from you guys? Um from your platform. Yeah, and just even just to tie back to the payment side, so the way I, as a just an individual user, get excited about payments is myself, is stablecoins. Like, I'm have most of my business assets for my companies not in US dollars anymore.

And this isn't like some because I'm trying to like be a web 3 maximalist for no reason. It's like a selfish thing. And the payment rails of blockchain are just so much more transparent and dynamic than the traditional payment rails. And I'll I'll address those both individually. So, transparency.

You have no idea what's going on in the black box of your bank, and you have no idea what they're doing with your money. They are not obligated to tell you. They don't pay you enough interest, and it's it's kind of a scam. And uh it whether it is a scam or not is kind of irrelevant. The point is transparency in and of itself, I think, is an important primitive for a payment system.

And I just love the fact that if you go on Etherscan, where USDC lives or another block explorer, you can see exactly what's going on. You know exactly where it's currently being held and who has ownership of it. Um So, transparency, we need that. The second thing is is dynamicism dynamicism like having more things you can do with a stable coin than a US dollar. When I have a stable coin, I can go put it in a lending protocol that's also transparent, by the way, and I can get instant yield paid every block to my wallet without having to pay any transfer agent or any wire fee for accepting it.

And there's a thousand other things I can do. I can use it on a DEX, which is another transparent um distributed system where I can trade it for uh another ERC-20 based token instantly for literally trivial fees. Uh so, it Why would I have a US dollar when when stable coins, you know, they're open 24/7, you can you don't have to worry about it closing on a bank holiday or on a weekend, and it just feels like my money is is more free. And yes, it's true, like a US dollar is only good as the underlying fiat that it represents, but I think it's just really interesting to kind of separate the the Bitcoin from the blockchain. And now you can insert another token on the this blockchain, which is a a stable coin.

Um and I'm just really excited about where I'm not an expert in payments, but as a user of it, I'm already starting to see me and friends and even not even super Web3 native people starting to like really consider stable coins as a big part of their cash portfolio. Uh-oh, Uncle Sam is going to have a tough time now. And and and all the the there's a big incentive to prevent this from happening. Oh, there's a lot of middleman in the banking system that do not want this to happen. It's It's ridiculous how antiquated the system is.

A lot of it's still built on like 1980s COBOL code, by the way, still. And and there's a reason for that. There's a lot of special interests that do not want to change because all these rent-seeking middleman have a special interest to keep um the good times coming. So, I think it's important for society to really like put pressure on these institutions to um cannibalize themselves, to to put it frankly. I I was speaking to a very dear friend recently, and he's building a revolutionary thing in the payment system.

And uh when I was telling him, you know, why don't you write a white paper or why don't you publish this? He said, "Raghav, you have no clue how strong the banking lobby is. And you know, when they get to know that you're doing something that is going to replace or even come close to replacing traditional banking, it's going to be a tough journey." So, yeah, I get it. I fully understand.

So, Keshav, um I know there are a lot of exciting things that you are doing. I mean, the I mean, since I have a privilege of working closely with you on a daily basis, I know every second day you have a brilliant idea, and you put people on execution. So, why don't you tell us a little bit about what's in store? Yes, so uh as we speak right now, we have processed 4 billion in transaction volume. So, now we are working on making it completely decentralized, because this was considered consider Zebu as in it is in it was in the alpha version.

Now, the businesses are demanding demands are huge. They want to process 14 billion in transaction volume. To do that thing, we need a much larger infrastructure. So, we are bringing in first of its kind innovative uh on-chain clearinghouse process, wherein investors, similar the way you run nodes for the blockchain, you will set up the smart contract-driven clearinghouse, which is completely decentralized on blockchain. Now, uh that's one thing.

So, we are uh scaling up our capacity to 300 TPS, and for that, we are inviting 300 different participants, uh investors, credible uh institutions to set up the on-chain clearinghouse. That essentially brings trust network for Zebu. Uh which will also help for scaling the entire infrastructure. Now, this is not the end. Uh we are setting up entire decentralized governance process, where we are adopting real world governance as a benchmark where we have seen that so many different governance models are coming up, but the participations are very low.

So, we are coming up with the very very new and fresh real world governance model where in each of these 300 council member governor node runners will appoint their own representatives in the governance and they will focus on bring bringing in and scaling their Zebu as a ecosystem. And the other side we all of the crypto fraternity can be a part, take advantage into the liquidity provisioning side because to process this huge demand, we need different assets in the liquidity pool. But from the day one of Zebu as a fundamental idea, we are going very lightweight. We don't want to reinvent the wheel which already exists. So, we are going with balancer, Uniswap, and CakeSwap on all of the leading DEX.

So, investor can choose wherever they want to provision liquidity. They can choose the asset which they want to provision liquidity in because the decentralization has grown so much. So, the liquidity which needed for secure for the settlement for the businesses, we will consume it and and that's where the change factor comes in. We have seen the crypto world paying the yield into their own token which is like an incentive, but the real when it comes to the redemption, it's very much speculative. That's where we come as a change maker.

All of the yield as I was emphasizing on stable coin, it will get paid in the stables. So, it gives real participation when for businesses. The revenues are coming from the business and we are trying to come up with a set stepping stone for the web 3 as an industry that you don't have to just come up with the problem which doesn't exist. Work on a real problem which exists, try to solve it, and there are nicer incentives available, and your adoption will will very fast. In in last 1 year, we scale we reach from $0 to $4 billion in settlement every day.

Businesses are consuming 25 to 30 million dollars in transaction volume worth of Zebu. So, that's the new new thing. And beyond this, we are working on setting up the lending model with the AI so that all of these businesses institutions can avail their short-term working capital financing on chain from all of the liquidity available on the different decentralized exchanges. So, we are focusing on re-staking as a core fundamental and bringing optimal capital efficiency in the overall ecosystem at all. Wow, wow, wow.

So, this is amazing. I know guys, I didn't even find how we the time passed, but Trevor and Keshav, it was such an honor having both of you on Zebu panel and on the Zebu stage and getting to know so much. I'm sure users are curious. They can follow your communities and get to know more. But thank you so much for taking time and getting on this panel, guys.