Crypto Goldrush - Vinny Lingham @ TOKEN2049

[Music] hello cool is gonna be yeah it's my first time in Asia believe it or not never made the trip watch us excited to come to Hong Kong thanks for being here today so a slightly different presentation style I have a couple of slides going to go through talk about some things and then I'm gonna get Andrew back up on stage to have a fireside chat about some of the ideas and thoughts so a quick background I'm on Twitter I run Civic fall time it's a decentralized any platform I'm a partner at Newton partners which is an token economy design company and multi coin capital is a crypto his friend so with Civic our vision is to decentralized identity we want you to be able to go through passport control one day using just your phone and your credentials which are validated by by a blockchain and ensuring that ID credentials are stored by you when big companies get hacked and the information gets out there hopefully it's not yours because it would be decentralized but that's the vision we're building towards and we did an Icee a year ago and it's been it's been great for the company and putting out a utility token something which I think it's it's still a very new and emerging type of technology and categorization of tokens and I'll jump into that further but just quick background on Civic details at any platform users are in control of the data it leverages the existing Bitcoin blockchain and the node infrastructure that's there so we don't store any of your personal information it's all stored on on your device and the hashes are put on the blockchain and that's all token sale and it's a real utility token so when companies want to ID verification they have to use this token to make a a validation check so I want to talk with today about something in sunny outside this it's more on the governance of crypto and so I started start off with talking about what I call intangible social constructs this is the stuff which you know a company it doesn't really exist there's no physically you can go to this building sure but the notion of a company it's something which is it exists under the laws of our jurisdiction you have a deed a register you have shares these are not physical objects you know data extent as well debt collateralize data etc these are documentation this is these are social contracts society recognizes these things money as well marriage you know marriage certificate it's not a physical object and identity as well who you are and who you tell people you are to a large extent is based upon social contracts that we've constructed over centuries but we agree with you know we agree today what it is in society what what are regulations more regulations are what enforces a lot of these social constructs and so regulators exist today to ensure this fair play in society so shareholders get returns their own shares they there's obligations owed to them etc enforcement of the laws and punishing bad actors is an important part of regulation so again the regulations have come out of decades and decades of seeing what works what doesn't work in the securities markets etc and as we go into this era of regulations in crypto it's becoming a hot topic of discussion and so when we talk about protections from regulators who are they protecting they typically protecting unsuspecting or unsophisticated investors people who are buying tokens we all know the I think Andrew gave it a stir that the bit connect situation and how people are just pouring money into into scams and into Ponzi schemes etc and these investors they don't know better so reggae is a now waking up and saying well we have to protect our citizens we have to protect our people because this industry as is emerging has we've got a lot of bad actors in it and so if you look through history what happens is when industries don't self-regulate in the sense that that the business leaders don't come together and argue for a code of conduct and operating practices that becomes uniform across the industry regulators get involved and they impose regulations and this can be a scary thing for companies that are operating even with good intentions because it drives up the cost of doing business in a big way so what I'm seeing right now today is is we're waking up the reality that the crypto community cannot survive without being somewhat within the the purview of regulators so we have to make a decision are we going to sit back and watch the regulators regulate us or we're going to advocate for more sensible industry best practices that we can we can take across the industry and enforce ourselves and push our bad actors without having the government's come in and tell us how to regulate so when we talk about governments coming in I mean if you look at what's been going on in the past year in crypto through the fervor that's that's gone on in 2017 we've seen Ponzi schemes pyramid schemes matrix schemes pumps and dumps you name it it's happened and it's still happening and so this is this is going to be under the microscope for the rest of this year and I believe it we will see the regulations come in but there is there are some things we can probably do around that as well to try and prevent too much regulations from bearing down in our industry so dilemmas if you look through throughout history and again I think a philosophical view and there are a lot of dilemmas out there there's the scaling dilemma where you're trying to trade-off decentralization for security with security with scalability with cost these are these are these dilemmas that haven't been solved yet and we're still trying you've got Hobson's choices one I like is where you you have a starving donkey that's right now Hobson's choice is different that's the next one yeah buddy ins s-sorry Hobson's choice is you have two bad choices which one do you take right and and this is a philosophical dilemma but Ian's asked is one way you first off Racal one where you have this donkey where it's starving and it is it's hungry at the same time and if you put it in the middle between equidistant from the from water and from food it'll die it won't know which way to go and so again we have all these for the Safa called these these philosophical questions around dilemmas and then Morton's fork was losing their whanau who remembers this one sorry I blanked and then the value trap dilemma was the the one I wrote a blog post yesterday on Vinnie lingo calm talking about what I defined as the valley trap dilemma this dilemma is an interesting one it's basically when you have a token sale as a company you have you actually have two masters at that point to an extent you've got taken money in from token holders who bought the token but you have shareholders on the other side who want returns and shareholders in a company one profits the right thing so that the social contract work world custom to is you buy shares in a company there's an expectation of profit if you're buying a utility token or security token you have different expectations what do you do when a company issues a utility token to utility hole token holders but the shareholders want profits how do you balance the resources between you know between those two assets I mean for example if you have a if you have a company that's functioning today with existing revenues and not you issue a utility token and you have a client that comes to you and says look we really like this done we'll give you a million dollars in development fees please develop it for us what happens if you take your two best developers off the token economy project and move them to the other project where the token holders don't benefit in fact it slows down the roadmap for what's happening in token economy but the company shareholders benefit now because there's a million dollars in extra income that's coming to the company because the project is taking on weight there's the fiduciary responsibility to token holders and Shielders begin and end and this is a philosophical debate so Shielders again when they want profits so how do we change the mindset that chilled is buying into companies that issue tokens that there's no profit there the profit is is in the future yeah it's it's what how do we capture the imagination of shareholders so that they realize that the company is a vehicle for building something bigger and if you look at people like Elon Musk and and Jeff Bezos what they've done I mean Jeff Bezos deferred profits and Amazon for a very long time I mean you know decades and a lot of people didn't buy into that vision that you could just bull bull bull bull DaVinci get to profits but in the world we live in today most of us that have investors of had investors that demand short-term returns and if you then selling a token you have that revenue in coming in from the token sale how do you balance the two out token holders one to piece the ecosystem when they buying the token from you they're expecting you to put those resources to work to further the the the goals and whatever you've laid out in your white paper around around the token economy that you're building so you have to be very smart about how you do it and how you allocate those resources and so balancing these resource demands is something which I think a lot of CEOs and and board members and people within companies are struggling with today it's not as simple it's not a simple problem I can tell you and when we look at the crypto companies there because they're not foundations so the etherium foundation is actually a very good example of a foundation where there's no they don't have shareholders there are answers anyone they put the money back into building in theory amount and it's been very successful over the years so Andrew where are you right here all right cool so we're gonna get into a it's kind of a fireside chat around some of these these questions that aren't they said I can't let this man have the stage all to himself I got to get my digs in you know thanks for letting me share the stage with you he's not my cousin Vinnie but I am glad to be up here with them you've outlined something really really interesting and something that I think is one of the least considered aspects of icos and how companies are structured I mean the token tommix is typically the most neglected part of what's done but also the most important on you know there's this conflict is you know that you've just outlined between shareholders and token holders is the new dimension and then you know customers who I mean how are we gonna square that are we gonna square that circle so this is so this is the dilemma right this is the dilemma how do you get what do you do and your best customers are coming to you and willing to pay you money but you've already taken money from token holders to build an economy like how do you balance that out and so it's a it's a lot more difficult for I'd say existing companies two three four five year old companies to do this because they've got company they were customs paying in money they were overheads etc but they've also sold a token and and there's where is it you know it's a classic agency problem times ten yep right the the founders you know a lot of them don't have the incentive they kind of drift off into the ether and nothing happens so you know how do you manage rewards especially their shareholders and holders I can tell you what we've done at civics so we've taken the view that that our token economy the CVC economy is a public service and the company exists to further that that service and build off that infrastructure so we operate to a large extent as a foundation for at least the interim period where are we busy building the infrastructure out and we can only do that because our shareholders have been on board with with the notion of what we're trying to do we're saying look there's no profits we're not we're not going to be selling services we've had companies come to us and offer us a half a million dollars to do projects and what it's a we just if it doesn't benefit the token economy we don't do it even as a for-profit company no Jeff Bezos he somehow managed that with you know the people that back dam is on you guys seem to have done it but that can't be easy I mean you know the old way of doing things is an easier sell how did you sell and how did you find the people that would buy into this vision so I mean to large extent obviously I've been unfortunate because I've had a previous exits I had a lot of my old investors coming in and backing me again on this company and so you know a lot of it is just trust they trust that we will do the right thing and we will we will build the company out I think it's it's a lot harder when you also have a high concentration of shake control in one in one company in our company the founders control the company in terms of the shareholding and all our investors have smaller stakes sub 10% each so there's not enough control from investors to force to be short-term focus as a company so we are long-term focus and we are looking to to build out this token infrastructure and and and this is why we did what we did with the token sale and we using those funds to build it out and investors are gonna have to be patient for it how is it different and convincing the token community because you know we all say it's all about building a beautiful ecosystem but let's face it a lot of the people that are that are trading in tokens they're not on board with that mission you know mm-hmm so this is this way it comes into like the utility versus speculative nature of tokens if you look at utility tokens today they many companies are selling or producing a utility token that doesn't actually have utility today and this is where the the ACCC and the regulators are getting you know their backs up if it is a utility token it needs to be able to be used today in completing a task if it's a security then it was used for the purposes of raising money and financing you know a an economy so I think it's it's it's a tough it's a tough one right now it is really it's the too many companies going out there and promising utility but the the token economy hasn't been well formed yet yeah is is there anybody that you think is doing it right out there like I know you you've kind of identified this problem you know you just kind of put the you know kind of put the word out there put your your flag in the ground do you think anybody is there anybody you can point to you think is doing a really good job of considering you know these different these competing interests and how they're gonna be resolved I'm the answer is I'm not sure because I don't sit on the boards of these companies so I can only judge people from the actions that they take publicly not the discussions they have behind-the-scenes and I think I don't want to make I want to say people are not doing it but I just some of the actions are concerning the the speculative nature of the markets right now means that if the utility isn't forthcoming the prices are gonna come down because it's just speculation if there's really Tillet in demand I mean we've seen with the theorem for example because of the demand for a theorem for icos and you know see 20 tokens the price did move up substantially and now the price is moving down because of the regulations coming in to large extent yeah it's a new it's a new field so we're gonna judge people on their actions you know as those develop but are people in your space are you having conversations with people like yourself the leaders yeah and there's a lot a lot of them are here today I mean you having those conversations over drinks sir I've hinted towards some sort of industry body so I've had some conversations with some well you know high-profile entrepreneurs in the space and I think that the general consensus is that we need to form an industry body to create some level of you know self regulatory governance where we agree on what the guardrails are for what we're doing it is happening it's happening slowly but I think once you have one or two or three or four-inch industry bodies you can have one for each country and all sort of work together it's gonna make a big difference because at least people buying in will know that the companies who are committing to the a certain basic level of governance are a bit more trustworthy than ones that just pop up and I mean we've we've all had all the scans people running away using the money to buy Lambos etc it's you know we need to clean up the industry to the extent do you think that conversations would happen at a national level because you know what you see are people saying well if we if we gather together we self-regulate we're dealing with our national regulators we're trying to keep our national regulators happy which is different from creating you know a truly innovative you know self-governing system that is going to take care of customers that's gonna take care of token holders I mean on one hand it's like to satisfy the regulator's or is it create something really amazing that's gonna change the world and is that conversation up at the national level or a global regulators around the world and I can say almost emphatically across all regulators worldwide that I've spoken to they don't want to crush innovation they really don't like they're excited about what's happening they just want to ensure that the you know that they their job is protecting people from the bad actors so you the more you can give them the more ammunition you can give them to basically allow the industry to operate as freely with as little relation as possible the happier they are to support that but at the moment you know you you endorse the bad actors that's when they it's gonna get a little tougher yeah I mean the regulators they want to do the right things sometimes they can't help themselves but stifle it happens um what is the platform for having that conversation and in these bodies these have you got something in the hopper right now or is it you're looking to connect with people here so they come and talk to you know I think it's everyone in their circles knows people get doing something in this space I would just encourage you to get involved a few yeah or you want to start an industry body for your for your part of the world do it if you you know someone's doing it join them I think the more active we become in in in in self-regulating the better it is for the industry so the more that people get involved in this event I think sounds good you want to remind people where they can find your piece that you posted the DVT post yes I do you want to remind people you posted your manifesto so they can track it down oh I'm calling it a manifesto I mean I thought my blog post I think we're out of time yeah we're running a little bit oh there's no one time you got any parting shots that you want to take Vinny well yeah actually I the one thing I'll just touch on quickly is token economy design yeah so utility tokens need to actually have utility if you're trying to sell a utility token and it's a security just be honest about it because quite frankly the rate environment is gonna get tougher and so if it's if you're using the utility token to raise money call it a security and go through the process of raising money as a security don't don't try and probably a wolf possible for from sheep's clothing yeah we just we just had a company get smacked down by the SFC here in Hong Kong yesterday and I mean you know already the reverberations are coming across other token sales have been told the halt operations I mean it's out there and it's yeah there's every bad this is bad for the industry the more the negative stuff comes out it's just bad overall yeah and this is this is so let's be honest with ourselves of what we're trying to do you and you can actually sell a security token I mean a bunch of security exchange is coming out there the liquidity is not quite there yet but it's happening and you can deliver returns so there's no reason why you shouldn't you know what the one of the things I'm seeing from a lot of entrepreneur is they coming in and they saying look we've got all these buyers lined up we can raise five million bucks tomorrow we'll worry about the token economy design later then is just a bad that's a bad approach like token economy design is an important part of what you're doing don't take the money in and then worry about how you're gonna make it work later on I look it is a good argument for why you should we take the money quickly but I think be thoughtful about what you're doing because if you can't make the token economy work it's gonna be bad yeah but I mean where do they go for expertise because I mean there's no shortage of people that will help you with marketing that'll manage your telegram accounts it'll help you get the word out and push in a pump pump pump but if you say who are the real experts in designing solid to economics they're these people are hard to find there are a few firms out there that are really good and there's a lot of bad ones who are your faves well I got a co-founder of new town partners so that's we can't we do that but we're a boutique we do a couple of deals a year that's it and there's a few others out there okay you've thrown a question up there that's something you know when you see people reform their token ah mcc's mid I see oh you know I've asked I've talked to other people about this and said you know is that a sign that they're just in full panic mode and they don't know what they're doing or does it mean that you're they actually undertaking something useful that helps to make for a better so I'll tell you what actually happens from my perspective in this world okay so you have this token design you go out there you put it on you get a whole bunch of so-called dumb money in and the dumb money is people who don't understand how this stuff works but they start saying yes five thousand years a million bucks etc all of a sudden you have ten million dollars and now you want to go and close your 20 or whatever it is and then you start going to the smart money fund so like multi coin capital example of you know and you start giving us your token economy designs there we go back and say well we're not get put money in because of this or because of that and then entrepreneurs start saying okay well hang on a second we can get the dumb money in and just because diamond is in doesn't mean smart money comes behind it the smart money wants these changes let's go make these changes and that's a it's kind of a slippery slope because basically what you're saying is we don't really believe in what we're doing we're just trying to market to you and get you guys excited about about this and we'll listen after we've raised the money but how do I know that after we give you the money you won't change again for the next group of people who want to come in okay so you know people's hearts got to be in the right place they've got to think deeply about how they're serving not only their shareholders but also their token holders and their communities they got a pride in their work and maybe pride in the community which you could also call civic pride ladies and gentlemen Vinny Lingam the CEO of Civic all right thank you thank you