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Some Future Day evaluates technology at the intersection of culture & law.Â
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Join Marc Beckman and his esteemed guests for insider knowledge surrounding how you can use new technologies to positively impact your life, career, and family. Marc Beckman is Senior Fellow of Emerging Technologies and an Adjunct Professor at NYU, CEO of DMA United, and a member of the New York State Bar Association’s Task Force on Cryptocurrency and Digital Assets.   Â
Marc Beckman: Nicholas, good afternoon. It's great to see you today. That's a beautiful view behind. Where, where are we? Where are you
Nicholas Lyons: we're in, in, in darkest, deepest, darkest, uh, south of France with a very moody, very moody backdrop today. But, uh, it's always a pleasure to see you in New York. And, uh, I miss, uh, I miss New York. It's one of the great cities.
Marc Beckman: It's good to see you. So just to uh, open up, I, I was giving some thought as to some of our past discussions and it seems to me like luxury brands, I think in terms of maybe Gucci or Vuitton, they're missing a big opportunity as it relates to capitalizing with regards to [00:03:00] cryptocurrency specifically.
And I'm curious, um, in your opinion, if that statement is valid and how you would suggest a luxury brand consider capitalizing on cryptocurrency in the future. all for
Nicholas Lyons: straight in with a good, uh, a good question. Well, I think that, I think what we have to understand is that brands and the future of brands is about acquiring. new
Marc Beckman: Bye.
Bye.
Nicholas Lyons: a new, territory, shall we say, and that new territory is best characterized as being community. So I think that where brands at the moment have, fans.
That fan group is going to, become more and more of a community and that community will have benefits. And so, [00:04:00] if we were to look at what, you know, we consider to be the The big leap forward is the move from network effects to network economies. And so I think you can think of luxury brands as an economy and that that economy is going to expand beyond bags and apparel.
And as we've seen, it moves into fragrances and, other different economic arenas, this is new land to be conquered by those brands and that those brands will need to expand into this virtual arena. And so We see economies growing through, productivity leaps and then, the benefits of digitization, which happened with, you know, the last version of the web.
The next version of the web is about enfranchising people who are your customers and into becoming your community and about uniting [00:05:00] the group of people that are your employees, who you're, you're advocates, you know, professionally, you're, Brand consumers who may not necessarily be yet members of the community, but growing them into being community members and mutualizing the brand value with them.
So it's about sharing the brand value amongst the constituency that is what we call the six critical stakeholders. So that would be your supply chain, your regulators, your brand consumers. all brand owners, the equity holders, and, uh, and the wider community.
So, the opportunity for Luxury Brands is to build network economies in the digital space beyond the website, and that may take place in the Metaverse, which we could just refer to as the immersive internet, or it could take place inside of a digital wallet that stores, uh, Entry cards that [00:06:00] gives benefits like, you know, in the UK, not a luxury brand, but, you know, a good brand example is Orange Wednesdays.
I think it was where they gave people who were loyal to Orange as a brand of telephony would get to go to the cinema cheaply. All of those things will be gated through the use of digital assets. That is to say, what is currently referred to as NFT may just be a. proof or an attestation that you are a member of that luxury community, which entitles you to go to New York Fashion Week if you've got a balance of a million Vuittons, it may enable you to go to a, you know, a show, uh, or a movie, or it may be that the brand has affiliation with a musical star or a, um, a stadium, for example, and so you get some preferential benefit.
So it's the mutualization of that luxury. Real estate, new real estate in the digital arena, which is most interesting to all brands. Doesn't matter if they're luxury, [00:07:00] it's all brands have this opportunity.
Marc Beckman: So, you hit on a lot of topics there, but I guess my question to you is, what would be the difference for a brand in the way it behaves today with web 2 and physical brick and mortar, right? Like, one concept you spoke about is, if you have a certain amount of wetones, you can then access a unique experience, but it seems like a brand like LV can do that today and then second, the question is when you refer to Vuitton, Is that a new form of cryptocurrency that you're suggesting the brand's issue and that's where the new monetary value is derived for the front comes from for the brand?
or is this a stakeholder economy where different elements you mentioned, for example, supply chain, where different key stakeholders are then [00:08:00] participating in the growth of a company and is that for feasible for some of these big brands like a Gucci.
Nicholas Lyons: look, I think you have to look at it and it depends on the business. Like every business, you know, could use any amount of tools. Does every business use the equity markets, the debt markets, the, you know, mezzanine financing markets, you know, the, the tools.
That are coming, that are going to be the evolution of the web are about removing unnecessary frictions that when you're coming and when you're talking about brands. So what you want to remove is the friction of, processing of payments, for example. So, if you're in a high volume retail environment, let's say you're Starbucks, if you were able to use a cryptocurrency that was settling, and it could just be USDC, it doesn't have to be Starbucks, but if you were using USDC to settle, you could settle without the 3 percent or whatever their interchange fee was for Visa.
So that would be a payments [00:09:00] use case. At the same time, Starbucks do You know, these music promotions and therefore you could have a digital good, like what would otherwise be referred to as an NFT, that that would entitle you to membership benefits. So the way that I would look at it is to say that whether you call it cryptocurrencies or whether you call it digital assets, those digital assets are about more efficient ways of doing things that We're done in the past, so payments was done in the past.
It just has high cost and it has high latency because you know, if you're, I don't know if you do business, well you do do business with large Fortune 500 companies. They have a very long payment cycle. You might wait 90 days, you might wait longer for that. Well, 90 days of payments. Uh, delay is extremely, painful for small businesses and medium sized businesses.
And if they gave you the choice of saying getting paid in dollars or getting paid in, let's call it Starbucks or Vuitton's, if you were in the supply [00:10:00] chain and you knew that they were good for the money and they offered you payment in Starbucks. Today, in five minutes, versus waiting 90 days for payment, as long as you had liquidity in Starbucks, and they were backed by something, they were reserved, right, like dollars are reserved by deposits in the bank, they are 10 percent reserved, you know, broadly speaking, then you should be happy to receive that if it is a payment mechanism solution you're looking for.
So there are multiple different solutions that Brands can avail themselves of, and some of them are just cheaper, better, more secure ways of doing things they've done in the past. And some of them are novel ideas. And those novel ideas are characterized by being direct to consumer, essentially. So What existed for brands before is, yes, you've got a loyalty scheme and it's intermediated by a software provider that runs your loyalty scheme.
Yes, [00:11:00] you have a credit card or a debit card, but it is interfaced by Visa MasterCard and you get an interchange fee, you know, or depending on what your relationship is, right? And so those are all different methods or all different things that Digital assets can and will do the big differences. You don't need the middleman.
The whole point about the blockchain is the removal of rent seekers. Well, what is the, who is the rent seeker between Vuitton and, it's customer. It is Google who sits in between when they want to talk to them and advertise to them. It's Visa when they want to accept payments. It's the banking system when they want to move money.
And they don't have a way to market digital assets at the moment unless they go through middlemen like Rarible or, you know, OpenSea, etc. The whole idea is that The customer should be able to connect with the brand directly and exchange [00:12:00] value with them directly, and the brand wants to exchange something of value in exchange for something of value.
And the thing of value that they can get directly from the user. In the next version of the web is their identity data in a secure, private way. At the moment, they get their identity data via cohort data, via Google or Facebook or Meta or whoever else. The big leap for a brand and for a CMO and a CTO and You know, probably the CEO and the CFO is they can have a direct relationship with their customers.
They can directly incentivize the behavior of those customers and indirectly, uh, incentivizing the behavior of their customers. They create a real relationship and that real relationship can be optimized because the value that they have earned [00:13:00] can be traded with Another form of value with another peer to peer user of a network, so that you're not locked into a walled garden of Vuittons.
You are being allowed to participate in the open internet. So,
answer to your question is Every single traditional financial product that is used by a corporation will migrate to the digital asset space. All of the security will move from a mediated or intermediated world to a direct world. And the value savings in the disintermediated Middleman is somewhere between 7, I would assume, and 14 percent of the operating costs when you're talking about legal, compliance, advertising, etc.
Average CPG company, 24 percent of budgeted cost is advertising. If you think that you can bridge that gap, [00:14:00] every brand is going to say, I would love to see, you know, 24 percent or anything from 3 percent of its payments processing savings to 24 percent if it includes advertising. Fall to the bottom line.
It makes a major impact on my, on my bottom line. So my CEO should care, my CTO should care, my CMO should care. And if you think about it as currency, you should think about it like a pseudo currency. Forget crypto. These are pseudo currencies because they're centralized. So they're much more like air miles or coupons or loyalty points that have superpowers, right?
So you can change the price of a flight in air miles if you want to incentivize people to fly to Rome tomorrow. You can make it, oh wow, you know, you can fly to Rome for a hundred air miles, right? This is the pricing power brands will get directly when they embrace value from the brand directly and enfranchise community to join in that value.[00:15:00]
Marc Beckman: So, recapturing that. Effectively, that profit margin is huge, but when you think about these, what you refer to as pseudo currencies, can those pseudo currencies create a new valuation for a publicly traded company, too? So, on the one side, you're, you're, it's monies that's spent already, right?
And you're bringing that back into your profit margin. But on the other side, can we create new value for these companies, whether it's a luxury brand or not? Like, like, for example, maybe we, we focus in on your concept of Starbucks, right? Starbucks is interesting because they have, you know, arguably one of the strongest consumer facing loyalty programs on the planet.
And with Starbucks Odyssey, They're starting to move into leveraging the blockchain and Web3. So, is that feasible, the idea of, of creating exponential growth through a pseudo currency?
Nicholas Lyons: So I would say that, you know, the intangible asset that, that you can monetize is brand itself. [00:16:00] So brand is an intangible asset, but the name, when I say Starbucks, conjures coffee. So what they really have is a coffee currency. And if we are being You know, very clear about what happens. You know, if we make it as simple as possible, somebody comes to, uh, Starbucks and they take $50 out of their wallet, and they buy a Starbucks loyalty card with $50 of coffee on it.
Now that $50 of coffee is actually $60 of coffee, let's say, for the sake of argument. because you get a discounted price when you buy with your loyalty or your, your, your card. So you are buying your, what you're really doing is you're depositing cash, 50 into a bank of coffee, where you have coffee credit, essentially, in an amount that is greater than the 50 that you deposited, right?
That's the deal. Yes, you're buying forward discounted coffee. Yes. Now that isn't what they're doing with [00:17:00] Odyssey, that isn't what they're doing with Starbucks, but that's what you're doing with a regular card. When you walk up and you put money on a gift card, you're basically funding a bank. And so there is a bank of coffee that resides within Starbucks.
And that bank of coffee actually is very large. I believe, I haven't checked the numbers recently, but I believe that it was at some point up to 2 billion was sitting on the balance sheet as what would be known as deferred revenue liabilities. They are, they are revenue that has yet to be, accounted for because you haven't yet redeemed the coffee.
And so this has a very specific tax treatment. in the U S and around the world. So yes, those things do exist at the moment, making those more efficient and making them a true asset that resides, with you as a user in your digital wallet is going to become the norm and your loyalty will be rewarded both in incentive in terms of price, but [00:18:00] also liquidity in terms of People that would like to
trade or exchange those points with you, much in the same way that people buy points, for Amex or buy points for, uh, other, loyalty schemes, et cetera.
You can top up air miles, et cetera. So, I think you have to You know, look at brands and say they do have a conception of this, they do have a conception of this in payments, they do have a conception of this in pseudo currencies, they do have a conception of this in couponing, if you look at like Bed Bath Beyond for a good example of a permanent couponing, 20 percent off type of thing.
So there are all of these ways that value is exchanged with consumers. What The blockchain enables is the digitization, well more than the digitization, the valorization of the relationship between the customer And the brand, and then contextualizes that relationship, the individual with the brand, with a collective, [00:19:00] that it effectively gives a sense of identity.
Now, I'm not sure you're gaining identity from being Starbucks, but people do gain identity from, you know, wearing Adidas, or wearing Nike, or wearing Supreme or Vuitton, et cetera, because those are, you know, human signaling, you know, modes and methods. So, to your question, will it add value to, the traded value of a brand?
I can see Through, you know, removal of costs from provisioning of a new digital balance sheet, from the ability to make brands, you know, acquisition of customers more direct and more sticky, that basically you will add net margin from a valuation perspective, but you will add new real estate. So it's sort of like saying, well, did adding a website to Vuitton make it more valuable?
Well, yes, because the surface area that the brand can. The people that can experience the brand widens [00:20:00] and the same with the metaverse with if you add an immersive space to your website that people can explore you in 3D, whether it's through VR or AR or XR or just a gamification of an environment, a digital twin, that's new real estate.
In that new real estate, there will be new goods sold that will expand revenue. And cost savings through the removal of payments, compliance,
Marker
Nicholas Lyons: information, friction. That's where the value is delivered.
Marc Beckman: So, it's interesting in looking at Fuitom because this summer, they dipped their toe in the Web3 space with the launch of the, uh, VIA. Treasure trunks, they sold on average for 41, 000. And in this case, it's my understanding that they were soul bound. You could not, if you were an owner, trade them on secondary markets.
But what they did, which is interesting is only [00:21:00] owners of the treasure trunks would have access to future digital assets, like these immersive drops and the digital keys that unlocked. additional NFTs that were tradable, that are tradable on the secondary market, like the, the Speedy that Pharrell built, and then also give you access to the physical goods.
So, does that concept that they're launching, a soul bound, digital assets starting with the the via the Louis Vuitton via Treasure Trunk for 41, 000 create additional financial value for for LVMH and for that stock price and then the interaction of unlocking with a tradeability component NFTs effectively that lead to real world you know to physical assets how do you see that that that play?
Nicholas Lyons: everything that people are doing at the moment is very experimental and it is limited in my opinion, by the comprehension of the, people deploying the technology and, you know, the [00:22:00] risk, uh, upside risk versus the downside risk, obviously the EVM and the Ethereum related, environment is subject to A large amount of, hacking and bad code and, losses that no big brand wants to be associated with.
So, you want to be very careful, dipping your toe into this, uh, these waters. And clearly You know, this treasure trunk at 41, 000 is something new, and so it's expanded its revenue. Is it scalable? Could it get, you know, deeper and bigger and wider? Yeah, absolutely, of course it can. the issue of NFTs or that type of offering as, uh, in America and around the world is limited by the knowledge, uh, also around its regulatory status.
So if we look at what happened recently with Mila Kunis and Ashton Kutcher, and this other one, Impact Theory in [00:23:00] LA, they were censured, uh, Impact Theory I think got a 6. 1 million dollar fine, Kutcher and Kunis, I think, uh, I'm not sure what's happening with that, I think it's Progressing.
and it's really, you know, the SEC saying, you know, if it walks like a duck, cracks like a duck, you know, it likely is a duck. And so it doesn't matter what you're selling. You could fall foul of securities rules and you could create issues with your customers. Now, brands are very wary of doing that type of thing and, you know, causing themselves more of a, you know, uh, more damage than, than good.
I think that. Regulatory clarity will assist that. And furthermore, you know, we also saw CEN was delivered to those who were influencers, like, Kim Kardashian and, Floyd Mayweather who were censured a year or two ago for pumping, essentially. So I think we are going to move away, and I think this is really, the SEC and the, the wider world coming to the realization that Bitcoin is.[00:24:00]
Fundamentally, an innovation that stores value and is, let's call it, digitally native currency. So it's an internet currency, it's an internet reserve, in the same way that we can say the dollar is the reserve currency of the world, Bitcoin, you could say, is the reserve currency of the digital world, Ethereum is a global computer, not a very good global computer because it's, you know, slower, more expensive.
Expensive and less secure than the existing compute platforms that we use, but it's notionally decentralized, which is supposed to be something that's of interest. I don't think. The decentralization piece of the equation for someone like Vuitton or Starbucks is at all relevant because they're not decentralized, they're centralized.
So this becomes much more about commerce than it is about decentralization. The question is, how do you bring your community into that commercial relationship without giving them a tax [00:25:00] headache, a regulatory headache, and a liability?
Marc Beckman: It's interesting that you're saying that, because going back to the, the Stoner Cats example, what the SEC said is they essentially, charged them for trading unregistered securities. The creators, in their primary push, generated about 8 million in revenue and, an additional 20 million in revenue off of secondary sales.
So a lot of money was created through the sale of the Stoner Cats NFT collection and I think as, as recent as today, major marketplaces including OpenSea have said that they're no longer going to trade Stoner Cats. So this concept of trust between Your consumer, the end user, and the brand is critical.
Do you think that, the Stoner Cats community might have some sort of a lawsuit against, that they can pose against the creators in that now the, um, NFT [00:26:00] digital asset isn't, capable of being traded on platforms like OpenSea?
Nicholas Lyons: I mean, this is, uh, this is where you learn your lesson about decentralization, right, because if they would have launched this on a DEX, if this would have all been done decentralized and wasn't done with a profit motive, but with a true community, then you wouldn't have the censorship that is, you know, because you can identify You know, the leaders, you can identify the part of, you know, what they were trying to do.
And, you know, I do believe that, you know, the SEC is acting in such a way that they're trying to bring, you know, they're trying to regulate through enforcement. I know this is unpopular with other members of the commission, like Pierce or Hester Pierce, et cetera. But the fact of the matter is most of the issuance that was done, you know, In the ICO boom days of 2017 and the DeFi summer and the NFT craze were really, [00:27:00] you know, money making schemes of, and likely all, uh, or, you know, the vast majority of them were unregistered securities with, you know, smart, motivated, profit oriented, um, leaders at the helm.
Uh, you know, I'm not a lawyer to give advice, so I don't know what. You know, the holders will do relative to the promoters, but I think that the SEC is trying to make the point that if you get people to buy something in hopes of it going up and it is, you know, in reliance on your team and you know, you are, not yet produced this and everything else that goes with the Howey Test, it doesn't matter whether it's oranges or stoner cats.
You owe a fiduciary duty, and by the way, that extends even further, because let's leave aside NFTs, donor cards, impact theory, etc. It also applies, if you come to understand that this is about, you know, the financialization, of [00:28:00] The Internet and an Internet that is owned by the users. If you have centralized counterparties providing services, those services will fall under the purview of the regulators, and that includes all the trading services.
So, to your point about being de platformed from OpenSea, I mean, That's the whole point of decentralization. You're not supposed to be able to be de platformed from the market. You're not supposed to be de platformed from OpenSea or Rarible or Coinbase. But if you get de platformed, it effectively says that, you know, this is not decentralized.
So, you know, these things are proving the problem. Now, even if you go back to the protocol and you look at what's going on in Ethereum, Ethereum has got regulatory problems. With the fact that it institutionalizes front running, it institutionalizes bribery, you know, tipping or bribing to get your transaction, processed first by paying a larger fee, is not the case.
[00:29:00] Allowed in regulated markets. If you were going to Goldman Sachs and saying, I'd like to buy this stock and I'm gonna give you a higher fee to buy it now so that Joe Blow doesn't get to buy it now, that would be a problem. Right? You only benefit you can get is by being faster. Right? That's why high frequency guys get closer to the exchange historically, right?
You wanna be closer for latency to execute your transaction. All of those rules. As the regulator comes to understand them, are going to come to bite, including MEV, which is not maximal extractable value, it's minor extractive value, and it's not minors anymore because it's stakers, and stakers have to have money, which is privilege.
Essentially, you got to have, you know, money to stake and those stakers get to be, you know, those that order the transactions and they can front run you by slipping in an insider trade, right? Because that's what it is. if you're the block, uh, proposer and you're ordering it and you get to put your trade in [00:30:00] ahead, front run your, all of the orders in the block.
That's called insider trading. So as we mature, the regulator is going to mature and it's going to affect a lot of the pieces of the, of the organizational jigsaw puzzle. Now, Vitalik is talking about, you know, how do we, spread MEV and create an MEV pool and no, that's just a design error, right?
If you're trying to remove costs from a system, it needs to be cheaper, faster, and more secure to replace Web2. Having systems that create insider trading, front running, back running, sandwich attacks, time bandit attacks, you know, hacks and loss of capital is nothing of interest to the world's most valuable brands.
They do not want to be associated with Ponzinomics. That's the problem.
Marc Beckman: So, have we seen any cases yet? Have, has anybody been kind of caught doing what you're describing right now?
Because I know the
SEC like continues to go after the centralized entities, right, Nicholas? I mean, [00:31:00] for example, even this week, I know
David Hirsch,
who's like, you know, the enforcement arm of the SEC came out publicly and he said, look, beyond Coinbase, beyond Binance, we're coming after other marketplaces, cryptocurrency marketplaces.
But how could they control what you're talking about in a decentralized space,
Nicholas Lyons: Well,
Marc Beckman: in a pure
Nicholas Lyons: If you're truly decentralized You are immune because you are censorship resistant. You cannot be told what to do because you're not reliant on the centralized infrastructure. So you have this de facto. Exposure, which is that most of the DeFi applications are not truly decentralized and they have this processing, or we're going to be decentralized, or we're going to be doing this, that, and the other, but very rarely do they have.
credibly neutral origins, very fair, very rarely do they have fair launches, very rarely is there really a, you know, governance that is fully [00:32:00] decentralized or, you know, not incentive, not collectively incentivized through the economics and that, is going to be the, you know, the limit, you know, the law protects Thanks.
free speech. So if you create free open source software, and if you are self sovereign, that is to say that if you are not entrusting your valuable digital assets or data to a third party, Then you are self custodial, then you have the protections of Fourth Amendment privacy.
you have to do it properly if you want to be censorship resistant.
If not, you will be regulated exactly the way that your national regulator sees fit. Exactly the way.
Marc Beckman: so really what we're talking about is Verus. We're talking about your, your, ecosystem, which, has a lot of features, that I think progress beyond where we've been in [00:33:00] this, you know, blockchain and crypto space. And to a certain extent, I was giving it some thought and, and I wrote notes on it, I kind of see Verus as this.
like almost like we have these tech stacks in web 2 and to a certain extent, Verus is like an independent crypto stack, right? It kind of progresses and gives so many features. And I think in fact, it might even help us reach a certain level of mass user adoption. And comfort in the decentralized world because our
independent crypto stack seems like it's easier for onboarding too. So maybe take a minute and describe this independent crypto stack as I'm calling it, um, and then maybe segue also as to like, why it's predictably easier for users that crypto space to come on board with Verus.
Nicholas Lyons: So contextualize so much, you know, there's such a range of [00:34:00] comprehension that exists in this space and there's so many people that have their own, you know, worldview. So my worldview is that we are moving to a more and more coherent world that, you know, most people talk about tech, right?
And I, and I often say this is, I believe we're more talking about. IT. people drop the references to IT. Do you remember when
Marc Beckman: Of course.
Nicholas Lyons: technology was called IT?
and I don't know if you remember what the I stands for. Do you remember what the I stands for in IT? Information. Exactly.
We dropped the information part and we just referred to tech, right? The blockchain and the future internet is about, is about information. Information, and I always use this mantra that I coined, was that all information is valuable. In any relationship, any information that is offered is [00:35:00] valuable. You know, the way someone behaves, the way someone speaks, the way someone eats, the way Every shred of information that exists in the physical world is valuable.
Valuable when observed and enables you to make a decision, you know, I like this person, I don't like this person, etc, etc. I like this, I like that. Every, every part of your life is based on an information input that is sensed through your five senses. You either see it, hear it, smell it, taste it, or touch it, yes?
That's the physical world. And the digital world is About to go through and has been going through that same, you know, sense of, you know, sensitization, right? That same way that you're moving the physical world and the digital world are merging and they're merging. Yes, through technology, but it's really information, right?
You need information to get a mortgage. You need information to buy a car. You need [00:36:00] information to get to the airport. You need information to get to your destination. Just imagine trying to get to a destination these days with a map rather than your GPS, right? It's all information technology. And that information is currently owned by the group of people that made the technology that gave you access to that information.
The internet information that you navigate to through Google is owned by Google and they've been logging that information about you. They know everything about you. They know everything about your cohort and they are correlating that data to predict your next step. That is your perception field.
Your perception field is augmented, right, through the services you use in the information space. So, the big innovation of the blockchain, of Satoshi's Bitcoin, is the removal of the necessity for The information [00:37:00] space to be intermediated by a party that is the trusted party. It's the removal of trust, which is that terrible word that people are trustless, permissionless, you know, trustless sounds terrible.
Doesn't it? It's like, Oh, it's trustless. That's like, Oh, that doesn't sound good. Right? What it should say is it's trustful, right? It's trustful without the need to rely on someone else, right? So you have these terrible words that confuse everyone. I don't want to trust this. I don't want to trust this. I want to trust this person, right?
So this whole thing is about Coherence of information through the medium of technology, which is now part of your perception field because all of your information flows through to you from this little device or the computer. And so that space now needs to be owned in the same way you own your consciousness in your physical world, you need to own your digital consciousness and you're not going to allow For your identity, if someone says, oh, I'm [00:38:00] holding Mark Beckman's, uh, uh, identity, uh, just down the road, uh, you know, on, on, on Broad Street or on, on Wall Street, you'd be like, well, that doesn't make sense.
Why is my identity owned by you over there? That makes no sense. My consciousness needs to be owned by me in here. In the same way, your digital consciousness now needs to be self sovereign, owned by you, controlled by you, you are the king of your castle, and all of your perceptions, your digital perceptions, can be owned and controlled Using your identity, so identity becomes a key building block, but that identity can't be an Apple ID, or a Google ID, or a Samsung ID.
It needs to be an ID that you own and control, and that you allow access to, just like you do in the physical world. You allow people access to your physical space, to meet with them, etc, etc. In the same way, you're going to mediate that, and that has value. So [00:39:00] all information is valuable, but The truth is priceless.
That's the critical point. Is that people are liars. You know, sad as it may seem, and we don't want to say bad things about people, but most people have a tendency to economize with the truth. And so, the problem that we have, and we saw this with polling, is that if people ask a loaded question, if they don't have privacy to provide information privately, They will often give you the answer that they think you want to hear, which is why the polling was off in 2016 and 2013 and all these things.
Because if they say, do you want a Brexit? And you know, someone thinks that you're going to judge them, they can say, no, no, no, I'm a Remainer, right? And then you get all of this perverse outcomes when people don't have privacy. So the primitives that you need, if you're going through coherence and all of these things are happening, you need identity, you need privacy.
So you [00:40:00] need security and then you want to find a way that if you own all of these things, why when I trade them, do I need to go through a middleman? Why can't I trade Mark to Nick directly? And why do I need to go and pay 3 percent to Visa, you know, X percent to this one on that one on the other one?
That's unnecessary. So you need an market maker, an automated market maker, but not an automated market maker that's trying to sell you on Ponzinomics, just an automated market maker that removes front running, removes back running, removes time bandit attacks, removes back running, removes All of the stuff that the SEC is trying to, to make sure people don't do, right?
You know, you want to make sure that you get a fair exchange. This happens all the time. People go on holiday. They say, well, I'm going to get some dollars when I go through the, you know, through Bureau de Change. And then they go, oh, there's no commission. But the spread is, you know, wide enough to drive a truck through, right?
So they made all the money on the spread. They turn and say, oh, no commission. Someone goes, look, I paid no commission, but you paid 120 for [00:41:00] your, your, your Euro dollar instead of 106. So you got absolutely skinned. Now, those behaviors are allowed, right? It's not allowed if you're going to operate a marketplace.
It's not allowed, and it shouldn't be allowed in the airport either. But the fact of the matter is This is the way that markets work. So you need to have a system that is built to remove the things that rip off customers. So that's why you need AMMs that are, MEV free, and you need to be able to provide liquidity without having to put that liquidity.
Into somebody else's control. That's what people talk about custodial and non custodial or self hosted and, you know, all these other words that confuse everyone, but it's basically, I want to keep my money Under my control, and I want it to stake under my identity, and I want to be able to not have to answer to, a third party if I want to, to, to remove my [00:42:00] liquidity.
So you want liquidity pools, AMMs, and then you want the ability, just like when you create a company, you don't want a monolithic chain. You don't want one store of value. that isn't the way of the world. There is a multitude of value in the same way. There's not one, you know, diet. Drink, right?
There's Diet Coke, there's Diet Sprite, there's all these different flavors, right? There's variety. There's not, you know, the idea that there's going to be one monolithic chain that's going to store all the world's value, and by the way, it's non scalable, so it doesn't even, you know, this is a trilemma that exists for the EVM.
It is not, the trilemma is not real, in Verus, that's for sure. But the trilemma exists for any EVM because there is a problem between decentralization. And, scalability and security. So those are real issues that now, if you don't care about decentralization, it doesn't matter, but there are, there are costs, there are costs of doing that.
So in our world, we believe [00:43:00] that just like anyone can start a company, anyone should be able to launch a token or launch a public blockchain and have all the software that they need and all the primitives that they need. That's identity, security, exchange, peer to peer exchangeability, namespaces, vaults, all of that should be just like Apple has that all at the platform level.
And available for developers to interface with, the various protocol provides those primitives as RPC APIs that enable developers, just like, you know, when you talk about developer networks, Apple's got 35 million developers, I think, when he last spoke, like, that's how many are in that ecosystem. That's a giant number of people, and that's an amazing achievement.
They built. Apple's App Store, right? Because Apple gave them the primitives where they could just be creative. They didn't have to worry about smart contract security and audits. And no, [00:44:00] Apple said, we'll look after the basics. You go and be creative and do your best work. That's what the next version of the internet needs.
And that's where Verus is an internet protocol, not A threat to Bitcoin and the dollar hegemony, we're not trying to replace the dollar, and we're not trying to be a global computer, we're trying to be an internet protocol that is owned directly by the people that participate and the brands that participate, so you could create a permission chain and access A user that is self sovereign.
So if I have end points where I've proven my identity, I'm an accredited investor. I'm a qualified institutional buyer. I am, driving this car and I put my spend, you know, my privacy protected spending patterns that say that I am a target for. Vuiton or a Target for Walmart, doesn't [00:45:00] matter. They can speak to me directly and offer me something of value in exchange for being able to speak to me.
That's the next version of the web, where we don't have to go through, you know, A subterfuge of advertising to then get, you know, an identity that then relate, requires a CPC, you know, payment, right? Because that CPC payment is going to Google. That should be going to me. If I'm proving to you I get, make 50, 000 a year, then pay me and pay me in your, if you're Starbucks, in coffee currency. And if I don't want to drink your coffee, I can sell that token to someone who does want to buy your coffee. So it's just fine.
Marc Beckman: So I
know like the
Verus protocol has some remarkable and innovative security features, which I'd like to get into with you, but I'm curious, um, before we do so have any big entities that really require a higher [00:46:00] level of security used the Verus protocol yet? Or is there any, specific use case that you can share with our audience today?
Nicholas Lyons: yeah, so, um, so we finished the, you know, the full protocol. So that's everything that was in the vision paper. So security, so the blockchain itself launched on the 21st of May, 2018, has been up and running for, you know, five years or whatever it is now, five plus years now, with no downtime. So that's been up and running since Identities, I think it was December 2019, we had identities at Mainnet, and then we've just put, DeFi and public blockchains as a service, all went to Mainnet.
21st of May this year. So the full vision is now complete. No ICO. Thank you as well. Thanks to the community, the community effort. Uh, so no ICO, no developer awards, you know, no VC money, just truly a bunch of people that said there has to be a better way for the internet to work, who had credibility and capability, a [00:47:00] truly decentralized, just like Satoshi, did with Bitcoin.
Same ethos completely that says the only way we can be protected under the law is if we do it this way and we don't take anything from it. We just build it and support it and make it accessible to everybody. So that's part, one. Part 2 of what we were delivering is a fully decentralized, root cryptographic, self custodial bridge between Ethereum, because we appreciate Ethereum for what they've built, and the ecosystem exists Hotelier podcast.
of developers exists on Ethereum. So you need to be able to allow ERC 20s, 721s, 1155s, and Ethereum contracts to come backwards and forwards to the Verus. And that is going to mainnet in the next couple of days. So that's another big thing because all the other bridges are buggy and dangerous, like [00:48:00] we saw what happened with Wormhole and Ronin and all the others, which are multi sig, they are custodial and dangerous.
So this is self custodial and fully decentralized. So that gives. Access to all of the tokens that exist on Ethereum will be available on Verisk. So that's the, end of the beginning and the beginning of, you know, these tools being available to everybody. To the question, therefore, of who's using us, the, the, uh, we won an award from Fidelity last year.
in March, called the Fidelity Advanced Center for Technology Innovation Award. And, we have done some work with Fidelity, but I can't tell you too much about that because it's, it's under, NDA, but I can tell you about the work that we're doing with the Energy Supply Board of Ireland, which is the national grid operator that generates energy for the Irish nation.
government, it's a government entity and, their partnership that was created with [00:49:00] VMware, which as you know, is 97 percent of enterprise cloud solutions. And, uh, originally it was Dell computers as well, was, was a part of that, work that we were doing with them and with them, it was showing them how you could utilize the various protocol to certify the.
outputs from a wind generator and enable for that wind generator proof that's called a guarantee of origin for that proof that that, megawatt hour was, generated from a wind resource in, Ireland and that, the data center that VMware and the, the compute partner was, uh, uh, Operating was consuming energy to operate its data center, and it needed to, certify that it was consuming, let's say for the sake of argument, a megawatt hour of power to power the data center, and that between those two, you can now [00:50:00] prove that data center A is using power, green energy, from wind generator A, and that it can exchange a payment for a guarantee of origin that they, the data center operator, can now provide that guarantee to its tenants, which are predominantly telcos, and that that telco can now present in its ESG report to its investors, whoever that might be, typical of a telco.
Vanguard or BlackRock or whoever else is the institutional investor who requires ESG compliance, they can now provide them with a guarantee of origin that is effectively provable on chain that this telephony company used this VMware based, data center to, provide Services to this end customer [00:51:00] via the Irish grid that came from this megawatt of our generator.
That's a real time energy token. We, are able to do that and we provided that POC to ESB in Ireland and we continue to work with them. So, This is not about stoner cats. This is about if you want to be sure that your telephony company is using green energy in Ireland to deliver, you know, your services on the internet in order that we don't have problems with our climate, that can be done and provable and so forth.
You know, very efficiently and without, or any of the greenwashing, you know, that's, it's, it's, it's designed to fight greenwashing because people are cheating the systems. You cannot cheat these systems
Marc Beckman: Because it's fully transparent,
Nicholas Lyons: and it's on chain and it's not maintained by ESP or that wind generator. The wind generator independently generates the token that says, I created a megawatt hour of hour from wind [00:52:00] blowing on the West Coast and I sold it. To this data center for this hours operating for Deutsche Telecom or T-Mobile, and I paid this amount of money and I've got this guarantee of origin that can track the whole provenance of the process.
This is the dream of blockchain, by the way,
Marc Beckman: it's kind of interesting
to touch on the climate change issue, um, just to go there for a second. How, what kind of an impact can that have in smaller markets in perhaps underdeveloped regions of the world where they don't have these massive grids? Can companies then go into remote areas of Africa, of India, perhaps the Middle East, and set up some sort of renewable energy system that would allow for individuals to, um, take advantage of the business model you just discussed, whereas maybe perhaps they couldn't before because
there's no existing
grid.[00:53:00]
Nicholas Lyons: what I just described to you was an example of, refining a frictional process that unlocks value for. Investors, grid operators, data center operators, and wind generators. It doesn't talk about where the business opportunity really is. So that's, that's a business opportunity through savings and, and an efficiency.
The opportunity is, of course, that the wind blows at night when there's not very much demand. So one of the big problems with environmental solutions is, you know, the sun doesn't shine at night, but the wind blows at night, and there's often more power available than there is demand because factories don't work at night in Western Europe.
they may work all night in China, but they don't. And so you have these, needs, you have excess power that is not being used and you have pricing inefficiencies. So what the [00:54:00] technology does is it unlocks value. Why? Because when you have a protocol, and this is another something exciting about Verus, when you have a protocol that can be mined on a regular mobile phone, an Android mobile phone, any 64 bit processor, or even a RockPi, or computers that sit in a data center, what you now have is a use for what would be otherwise wasted energy.
So, to your question, what would you do if you had excess Energy in Africa or wind in Africa. So it doesn't change the necessary, the business model for renewables, the use of that technology means that the wasted energy can be turned into, Network security. That's what you're really doing. You're transforming wasted energy into security. And so if you can use what would otherwise be what's known as curtailed [00:55:00] energy. To create security for a worldwide network, you would then have a, an abundant green energy supply and having a way to offtake what would otherwise be just wasted and burned or curtailed and turning that into something productive means that you can raise the marginal value of of renewables.
Because you can't store renewable energy, the battery technology does not exist to store it. That's what Elon's been working on, right? His Tesla Powerwall. His problem is you can't store it for very long, right? And it doesn't store well. Now if you think about that when talking about, you know, massive installations of solar and everything else, until battery technology gets better, all that energy is just wasted.
Now think about taking that wasted energy to provide Security to a global network. That is the real exciting thing, is that excess wasted energy is turned into computational [00:56:00] power
that we
Marc Beckman: I haven't
heard of any companies or, um, any governmental entities, articulate the vision that you just shared. Are you, are you aware of anybody that's
looking
Nicholas Lyons: so, yeah, I don't want to be disingenuous. Bitcoiners talk about this, right? So this has been the big fight. And this is where, as the Bitcoin ETF nears its approval, you see the pivoting moment. of positioning around Bitcoin's, you know, brown and bad to green and good, right? Now, Bitcoin is really a little, you know, I don't want to go against the maximalists, but Bitcoin is Really, burning energy in the same way in order to provide security to a store value coin, right?
But the problem is that it's not a very efficient miner. So you have to have, you have ASICs, you have, you know, custom designed, silicon that only performs that [00:57:00] service. The difference between Verus and Bitcoin is that Varus is optimized for the CPU, so it can use the installed characteristics of the CPU in the existing machinery that's out there in everybody's computer and in everybody's mobile phone to mine the protocol, and it's 50 percent proof of work using the CPU and 50 percent proof of stake, so once you've won, block, uh, On the proof of work, you can then stake it using your ID and make more money on that.
So it's got a way to bootstrap the participation of a decentralized distributed network. That's why you want to have your processing at the lowest level of compute. So everybody can participate. So it's fair. So you don't have an unfair internet where you need 32 ETH to stake, and it all goes into Lido and it's all centralized, right?
That doesn't make sense. You want it distributed. So because systems should not only be decentralized. distributed and decentralized. So having this type of technology [00:58:00] enables mass participation and mass utilization of underutilized equipment. And this is a big issue for, you know, BNY will tell you, you know, they want to optimize load, you know, load.
they're basing, across their network and, the internet wants high availability. So, you know, having this is the right way to do it. So, Bitcoin has been the enemy of ESG because you're burning energy, essentially, just to, provide. Security to a new form of money, and it's not very efficient, and they'll tell you how inefficient fiat is, and that's fine, but the truth is, you can do it better with a 64 bit processor, or just a, an Android mobile phone, and I'll send you some pictures you can put on the thing, with loads of people that have got, like, 10 crack screen Android mobiles, and they're just mining away, and, and they're making a little bit of money, and the other thing with Verus is that you could merge mine up to 22 chains, so the same hash can provide going security to 22 chains so that you've got an economy.
So [00:59:00] it's like you're without, you can effectively choose 22 of your favorite chains, or you could just optimize and mine, 22 most profitable chains, for example. And anyone can do that as long as they've got, uh, you know, an Android mobile phone.
Marc Beckman: sounds like the Verus protocol then is really an evolution. of sorts, coming off of what you've witnessed with starting with Bitcoin, but then expanding, taking bits and pieces of things that were concepts that need to be improved and bringing it all together bringing us, I guess, into the forefront of Web3 in a way.
Nicholas Lyons: Right. So, you know, this is exactly the point that, I make. To people and say, first of all, it's a community effort and the lead developer is the founder of NET. So, you're talking about someone who's already built systems that are used all over the world and he was the founder and original, ideator of NET for Microsoft.
And then was the technical fellow in advertising and their big data and AI business. That's Mike Titongi, who's the lead developer of Verus. He's the lead developer, [01:00:00] he's one of, you know, the greats out there, and, you know, definitely on a level with Satoshi, in my opinion, and in my experience, and so, Mike had the, you know, the starting knowledge and experience, given that he was also lead architect of the Windows 95 kernel, that he understood, you know, computing plus, Application development, plus UX, plus UI, you know, all of those things, you need a lot of knowledge to, you know, not be distracted.
And what we saw with Satoshi was this fundamental innovation that's this giant leap forward that means that you don't need middlemen. That's a giant leap forward for humanity. That really is a big thing. And then we evolved from the UTXO blockchain, that innovation, to say what other primitives you need.
You need security, identity, peer to peer marketplaces, and the ability for anybody, without needing to know how to code, to create a currency, or a token, or you know, a [01:01:00] form of value that just stems from that namespace. So, you want to create an album, and you want to have, you know, many owners, you should be able to do that.
Just as easy as you could create a website on Wix or on, you know, Shopify, uh, shop on Shopify, it needs to be that service. So, you know, it wasn't only about the technical solution. It was about a technical solution that abstracts away the complexity of the new, the new paradigm and gives, you know, APIs, which is the way that developers want to interface these days, to developers so that they can be as creative as they want to be without having to be protocol developers and without having to be, copy paste error replication machines, which they are in the smart contract arena.
So we call this smart transactions versus Smart Contracts. That's, that's a fundamental difference when you have primitives that you can compose. So when people [01:02:00] talk about composability, what you want to be able to say is You know, my name is Nicholas. I own this bottle of Kwayzac. This bottle of Kwayzac is, you know, it, everything needs a name, you know, if you're going to speak in words and words create contracts, and I say, I promise I'm going to send you this bottle of Kwayzac, right?
Everything is contracted in words. Now, in the same way, you need to be able to do that in digital space. So there needs to be a namespace that allows you to address everything and then say, you know, if this, then that. And it's far better to do that with a primitive based suite of tools that everybody can rely upon as being, secure and cryptographically, decentralized and distributed.
Marc Beckman: so Nicholas, you just kind of implied that, you know, Satoshi, you said in [01:03:00] your opinion and in your experience, you use those two words, opinion and experience. So, I guess for the audience, could you explain who Satoshi is and then, um,
Nicholas Lyons: Well, I don't want to range across this because it's such a, you know, uh Difficult subject, but I will say that, you know, there is a person that I believe, is Satoshi, and, I believe that he was based in London, and I think that, you know, the London Times article, Chancellor on Brink of Second Bailout, is David good evidence of, that fact, and, it doesn't really matter, you know, who he is, he is a, you know, extremely intelligent mathematician and computer scientist, and he developed something amazing for the world, and we have to be extremely grateful that he did such a wonderful thing, and we have to understand Math, mathematics, and an innovation that can be [01:04:00] learned from and evolved, and we learned from it, appreciated it, and have evolved it.
Do I believe that Bitcoin is going to replace the dollar? No. Do I think it's a massive innovation that is going to change humanity? Yes.
Marc Beckman: So a colleague of mine here in New York, actually an NYU colleague at Stern, has a philosophy that Satoshi is actually a New Yorker and lives right outside of Manhattan in the Westchester area. Uh, what are your thoughts about that?
Nicholas Lyons: well, first of all, anything is possible except for the fact that the, as I said, the, um, the article that was included in the Genesis blog was from the London Times and only available in the UK, so he must have been in the UK. Also, the profiling of the Times that Satoshi, operated, seemed to conform with, um, GMT and the timings would, would be surprising if.
There was someone on, um, EST out of New York and all of the [01:05:00] syntax, like, um, Satoshi says, um, I don't mean to be a wet blanket. I've not heard many New Yorkers refer to themselves as being a wet blanket. It's a very British way of, uh, you know, turn of phrase, you know, and he talks of things being, you know, bloody difficult, which again would be strange for a New Yorker, but, um, I am always open to being wrong, but I did post on my Twitter feed an interesting document that went between myself and the person that I think is Satoshi, which is on one of my Twitter threads, which is called Bitcoin is a Prototype. and I do believe that Bitcoin is a prototype. It is the beginning of an open internet that solves for the problems.
And I believe that, a mind as, Good as Satoshi's and his technical writing, which is, you know, a triumph, is extremely, likely not to be, an American, in my opinion, just from the [01:06:00] way it's written and the way that, you know, the Bitcoin talk, uh, he talks. but, you know, anything is possible.
And it doesn't really matter. The point is that this is an innovation for the ages and that Satoshi showed, A great deal of restraint and a great deal of good sense, you know, he noted when Julian Assange wanted to take contributions to WikiLeaks in Bitcoin, that he did not think it was a good idea and he didn't want himself to be referred to as a CEO.
Shadowy, anonymous individual. He had, you know, great sensibility, also great knowledge of the markets, you know, he referenced the Hunt brothers, you know, cornering the silver market, you know, I'd had specific conversations about the Hunt brothers and the silver market with this individual that I think it is as well.
So, you know, there's many things plus this person is also a, a Japanophile. So it made sense that he would choose a Japanese name. So, you know, [01:07:00] for me,
Marc Beckman: it is, so you, so you, so you really know who
Nicholas Lyons: I mean,
Marc Beckman: is.
Nicholas Lyons: whether I, I have a view as to who I think it is, but it's irrelevant. It's just an amazing achievement of
Marc Beckman: the
fun
Nicholas Lyons: who is a
Marc Beckman: for the fun of it,
Nicholas Lyons: amazing
Marc Beckman: You got to,
for the fun of it, you got to name the
person.
Nicholas Lyons: never, never, never,
Marc Beckman: All right, you've given us, you've provided
You've been super generous and patient today. You've given us a ton of knowledge and, and time. Um, something that I do with all of my guests before we end is I lead with the name of the show, Some Future Day, and ask you to end the sentence.
So, you know, on your toes, Nicholas. In some future day, Verus will mean
Nicholas Lyons: Consilience, the unity of knowledge. Consilience means the unity of knowledge. So in some future day. The world that we're approaching is, as we said, information technology, the information space needs to be [01:08:00] attached to its rightful owners in order to have value transfer and in order for each one of us to fulfill our life's potential.
So, in some future day, we will Own our own life's potential, and we will be able to move towards the unity of knowledge, which is known by this one word that was employed very well by E. O. Wilson, and he used the word conciliant. So in some future day, we will become conciliant, and we will unite as people, and we will no longer need to have trust gaps.
They exist between us. We will be able to verify and then trust and our world will be a much, fairer and, uh, better, uh, world to live in. So that would be my view. In some future day, we will be able to benefit from the unity of knowledge and use AI to [01:09:00] free up our time to do the things that we love.
Marc Beckman: Beautiful. thank you so much.