Beyond Crypto Currency: What is the business value of blockchain?

March 27th, 2019 / Published in: Interviews

Blockchain provides infinite possibilities for business value creation. Are you ready to disrupt your competition or be disrupted?

Scott Mairs is the CEO of Blockchain Business Solutions. A proven technology and business executive with over 25 years in telecommunications, banking, insurance, private equity, risk management, and digital transformation, Scott has served in multiple C-level, Partner, Managing Director and other global leadership roles including Citibank, Bank of America, Sungard, and multiple IT and Strategic Advisory Consulting Firms.

He is a frequent speaker on blockchain, business performance management, leadership, and emerging technologies. Mr. Mairs served as global team leader for supporting implementation of the European Monetary Unit on Citibank’s General Ledger and other core systems. He has worked with the Federal Reserve Bank and US Department of Treasury core systems controlling currency circulation, and serves on the Board of Directors for Elevated Analytics and Vulcan Capital.

Scott also serves on the Advisory Board of North Texas Block Chain Alliance and University of Texas at Dallas’ Center for Finance Strategy Innovation, where he also served as a Fellow and Visiting Professor in the Executive MBA Program. He holds a Bachelor of Science in Computer Science and Mathematics from University of North Texas, Masters’ Certificate in Project Management from George Washington University, and MBA, International Business from Hankamer School of Business at Baylor University.

Podcast

Transcript

Kim: Hello good afternoon thank you for joining us once again on DojoLive! today Wednesday the 27th of March 2019 where we talk about the future directly from those who are creating it my name is Kim Lantis I broadcasting live from one of Nearsoft offices in Hermosillo, Sonora, Mexico joining me are two my teammates the regulars here Carlos Ponce and Tullio Siragusa hi guys.

Tullio: Hey, good afternoon.

Kim: Good afternoon, so today we’re going to be discussing crypto currency and more specifically the business value of blockchain I’m here to tell us more about this is [John Mayer’s ]the CEO of blockchain business solutions welcome to DojoLive! Scott.

Scott: Glad to be here.

Kim: Perfect, thank you so Scott to get us going today why don’t you please share us a bit more about yourself as well as your background.

Scott: Sure, so I started my undergrad graduation with city bank’s executive training program so have the pleasure did a four-year program with them in technology and opening city Corpse Technology Center for object-oriented and advanced technology so an opportunity to really get some great fundamental training got to work on projects like a global customer server replacing our general ledger supporting the European European monetary unit implementation across Europe so I really got involved with currency and governance and and global trading because I did a big project as well run global trade finance early on in my career so really hard core technology and I’ve helped now five companies go through exits to EMC and Accenture and another number of other companies and also done a lot of work in merger and acquisitions with boatman’s bank and Barnet Bank and nations Bank and Bank for America so long background in FinTech started hard core technology got a master’s in project management and then my MBA international business.

Kim: So you’re like the currency guy.

Scott: Starting with fiat currencies and graduated to now a lot of work in blockchain.

Kim: Perfect, we have to come up with a cool nickname for you I think, so let’s talk specifically.

Kim: Do you have anything out there, if you do please share.

Scott: Not that I can share online.

Kim: Sure you can work for relax here yourself.

Tullio: I see you went to Baylor, awesome.

Scott: A lot of work in their executive media program, really fantastic program.

Kim: Perfect, thank you, let’s move on then to more specifically your current business which is blockchain business solutions so what is your product and what problem are you solving.

Scott: Yeah, I’m watching business solutions we do a lot of work with the business side of blockchain so I’m inviting a security token offering company that’s tying their Bitcoin, not their Bitcoin their Blockchain solution to mining assets so asset backed tokens to mines in Peru and also oil and gas assets and then advising another company who is raising money in Europe for US real estate investment also using security tokens working with drone companies are using IOT and blockchain to help first responders get drones over sites before before the vehicles can even get their senior commanders on the first responders can see the site before they even arrive and no equipment that need know how to get how to get there safely and whether they need backup so there’s people stranded contest for toxic gases so a lot of really exciting things happening in technology right now that are really improving the future and the quality of our lives.

Kim: Very interesting, congratulations we could probably talk on not about those I we had to talk about some drill the drone technology a while back it was really really interesting but we don’t want to diverge to it so before we continue more in this conversation today I have to admit that I myself I am pretty clueless when it comes to currency blockchain or anything like that and I know we’ve had a couple talks about this theme already until July but for those people who those viewers who are like me clueless but curious and haven’t been had the opportunity to watch the other videos yet can you quickly just give us this cryptocurrency for dummies kind of introduction.

Scott: I really think about blockchain in three areas the original use case is cryptocurrency developed by Satoshi Nakamoto you know originally to supersede our current banking structure to allow Global Payments low cost Global Payments anywhere in the world and so that was really what the foundational technology for Bitcoin since then there’s been Ethereum among other all coins you notice over 2000 created of different types of coins these different types of underlying technologies but all built on the original Bitcoin technologies back then I think about it in terms of the blockchain technology itself being able to be used for an alternative investment vehicle so we talked about security token offerings ICO’s were big for a while and I’ve kind of been squashed now because of regulatory issues but security tokens are still alive and well and then there’s utility tokens which are either fungible or non fungible which is a fancy word of saying they’re either all the same or they’re all different so a non fungible token is a unique asset that has unique qualities and typically associated with a serial number so baseball card right a one-on-one baseball card or a one on one art piece is an legible token and a fungible token would be something like coins so any coin that’s identical can have the same value and it really doesn’t matter what number they are and they’re meant it is as a pool and you can interchange them so that’s really the fancy name for fungible and non fungible tokens so the business value the utility value the finance value and then obviously the cryptocurrency that most people know about which is Bitcoin.

Kim: Wait, so before we move on I think we’ve got some questions coming in from some of our viewers but before we do that let’s quickly talk about the benefits what’s the benefit of cryptocurrency?

Scott: This is a real big benefit is is to disintermediate trusted advisors so you’re able to essentially do point-to-point payments without having to go through a PayPal or go through the financial institution that was really the original and use case for Bitcoin and then you get into other usability such as you know gaming is a really popular one right now so let’s say and with eSports you have the World Championship sword that was used to strike the final blow right in the in the chain of the World Championship of eSports that sword now you can put on the blockchain right and now you can sell it on these open marketplaces like open sea and a Comey and you know all these other marketplaces that have been stood up for most of those built on a standard called you know it’s aetherium standard called ERC 721 which is a unique deed of trust that you can associate and tie to any digital, physical, or what we call hybrid products so you’ve got a lot of things that are going on right now that are creating new types of businesses and new types of digital assets that weren’t possible before because because the requirement of a third party to manage authenticity managed chain of custody and and now with especially collectibles industry we’re able to do that with certainty now and open on the public on a blockchain that anyone can track and monitor and see it’s its current ownership and its whole history of every transaction that has taken place so who all owned it in the past very fast and that you thing in the world of trading in the world.

Kim: It’s fascinating, it’s makes me laugh because I remember several years ago you watch The Big Bang Theory at all there was that episode where like Sheldon’s weapons or something getting like stolen and he goes to get them back oh so that’s now becoming like a real like a monetized element.

KScottim: Absolutely and and the interesting thing is you know right now you know all these billions of dollars being spent on these games like clash of clans and clash royale and but as soon as that publisher turns that game off all of your investment is gone my son actually played a game launched by Disney called toontown and thousands hundreds of thousands of kids all over the world played this game called toontown it was a safe environment for people of play simultaneously with characters and become a cartoon very very famous title, well Disney shut it off in day and started to refocus their investments on Club Penguin and shut down toontown well there’s a huge uproar and all these kids that invest at this time and money and built their characters and their worlds out all that went away my son was a big player in that game so he called me one day and said hey Dad CNN just called and they wanted to interview me and I need my parent’s permission because they want to talk about the impact of this game shutting down by Disney and what happened was a group of a group of people got together and De-compiled and rebuilt the code from scratch and relaunched it as toontown rewritten there’s still thousands of kids playing it and Disney is is sort of quietly allowing it to happen as long as it falls within the guidelines that they developed and and you know he’s become a twitch partner to Discord partner and you know he’s doing some cool things with it all around the gaming world that became possible and and they’re not using blockchain but that was that was the reason why you know all this time and effort and discord and all these other games that are you know being launched right now if you invest all this money and they shut it down you’ve lost your entire investment so now if you can take that forward or bring a sword from one game into the next game and a future upgrade or a new new title or you can just own this as a collectible it’s it’s a fascinating, fascinating new entire ecosystem around digital access.

Tullio: Hey Scott, I have a question I’m actually really curious you mentioned a few projects you’re working on some amazing companies I like the emergency responder technology why would I want to raise capital through a the currency versus the traditional method what’s the up what’s the pros of doing that you know and one of the challenges around that what are you seeing.

Scott: There’s a couple of things so early on the ICO world was you know, I don’t have to deal with the SEC I mean quite frankly getting a listed product going through an IPO process very expensive lots of regulations lots of ways you can mess up so essentially it was crowdfunding on steroids right so anybody could buy coins at any level that previously weren’t accessible so you’re opening up your business to new markets you’re opening up your business to new investors then maybe you wouldn’t qualify or weren’t savvy enough or aren’t you know certified investors so so you know that vehicle allowed you avoid a lot of the red tape now the SEC is ruled in other countries and they’re shutting down businesses that went that way that did these security offerings during ICO that didn’t follow the rules and so a lot of those companies have been shut down so you’ve seen the ICO market sort of peek 24 months ago maybe 18 months ago and now almost completely shut down because now there’s regulations they have to comply with and when they go through those processes in some cases it’s almost less taxing right now to to do that offering than to then to go back to the traditional way so what we’re seeing unfortunately in the US market place is that other countries like Malta and [INAUDIBLE] and you know these Estonia like are standing up government friendly environments and allow you to launch your ICO or your security token offering with a set of regulations that are better to find so you can stay out of trouble but then in both cases of the ones I’m advising right now they’re not coming into the u.s. a lot US investors to invest in them because the SEC requirements are so daunting and so they’re opening them up in these other locations and came in for one and then [INAUDIBLE] for another and then offering them to the global communities for investments which gets them access to to investors and money that they wouldn’t otherwise have and it’s a very elegant way to track ownership of the securities on a blockchain because it’s completely visible and transparent and you can guarantee they’re not double spending or double selling those particular securities and and everybody can see it all the time anytime they want to and so there’s a lot of really benefits to using that technology the regulators just haven’t caught up to it in a lot of cases and and I think we’ll see that change over time and until then the the countries that get ahead of it and get clear regulations like Malta and [INAUDIBLE] are getting business that they never would have gotten a foreign becoming global centers of [INAUDIBLE] by being, by being smart around the regulations.

Tullio: Do you think thought that that impact of things like the ability to do OPO’s now where you don’t have to be an institutional investor to to do a crowd some for a crowdsourcing funding campaign you think they have an impact on on some of that regulation or or is that just a way to combat this issue through this.

Scott: Most, yeah I think a lot of those went through traditional you know private placement memorandum is right for initial funding angel funding Series A and then did you go to large and larger raises of funding then there’s different different restrictions on how you sell and market your securities and there’s different regulations as far as accredited investors and things that need to come into those investment pools and you know crowdfunding is a great option it’s it’s been around for micro financing for a long time and just moving up to bigger and bigger pools and so there’s regulations around those two there’s thresholds as far as what you can raise on a crowdfunding before you have to then registered as securities and the security Exchange Commission so I don’t think they’re really necessary I think they’re independent movements and they’re regulated separately but I do think the you know participation in markets as a lower economic tier than just you know the rich getting richer right rapid things how how can how can the common person participate in higher return investments right especially from a risk rated return perspective in right now only the high wealth can get into some of those deals because of the risk profiles and so this does open some of those up unfortunately it also opens up the bad actors we’ve seen right in fact there’s an article today on MSNBC and talking about that you know a lot of the coin offerings and even a lot of the exchanges are fake coin offerings and fake exchanges a lot of people set up fake mining pools and you know it’s sort of investor beware because any time there’s new money coming in to any new investment instrument you’re going to get people pretending to have those instruments and take their money and run either setting up ponzi schemes or just completely taking pictures of somebody else’s mining farm or their assets and setting up a pretty website and you put your money in and it goes into a black hole and they put it in their bank and they disappear so you know there’s you really need to do your due diligence on those space and that’s really where the government’s are having and the SEC has so much heartburn is that there’s so many bad actors you know they’re trying to protect nobody protecting it’s requires regulation and barriers and so it’s this balance that we have in our free society between you know freedom and protection.

Tullio: [INAUDIBLE] passive active with some of the audience question but I have one more question you earlier mentioned how some cryptocurrency your coins are actually being backed by natural resources minerals etc they used to be money used to be backed by gold and silver it’s like back in the day right is that is that one of the trends on how they can legitimize coins is that something that you’re seeing as a possible trend long-term where there’s a backing that’s actually tied to some natural resource that has value or is that just something that they’re doing it’s unique.

Scott: Yeah, well, the u.s. monetary system used to be backed on the gold standard right but if you look at the total subscription of gold instruments in the world it’s multiple times the actual goal that there is in the world so there’s really not a true gold standard anymore so it’s still perceived value based on some relative notion of backed value if you think about some of these new offerings is they’re actually backed right by either you know natural resources on the ground oil gas in the ground or in some cases it’s it’s those products and transit right so they’re essentially able to in fact there’s an interesting one so in Wyoming a recent hackathon resulted in a business model being developed to tie tokens to cattle right and so one of the challenges with cattle is that you can grow these these you know these high-end Angus beef and other and the farmer doesn’t actually they can’t monetize that investment until it’s not only been you know grown and then taken and butchered and then sold in the marketplace and then eventually it comes back to you know to into that whole time they have to fund that investment so they don’t have liquid assets there their business is very challenged and sometimes they have to take on a lot of debt my parents were both farmers grew up on farms in Iowa and you know the farming business was really really hard because there wasn’t liquidity to fund you know the whole growth process they weren’t paid on and so the futures market really came in so farmers today have to be futures market experts and they have to invest in hedge on futures or else you know bad crop whether it be plague or let it Lotus or you know a dry spell comes in farms farmers get wiped out my grandfather got wiped out a couple of times from different things that came in and so he didn’t want my mom to be you know in the farming industry until my dad learned another trade before he could come back and work the family farm so you know this allows us in fact last night I’m just talking about to some friends about really rare artifacts like guitars or art pieces there’s company here in Dallas called for part working on over a billion dollar portfolio of art where you know it’s great that you have it but you can’t monetize it and banks don’t lend against art because of the appraisal process and the risk factor I’ve got another colleague that has a ghost 1926 rolls-royce and to get to lick to get liquid assets you know against that value you you know you have to almost sell it but you don’t want to sell it but you have a an asset that you want to be able to use and to leverage into other business transactions without tying up 1.6 million dollars right in a car or in an art piece or in you know in cattle in the case of Wyoming it allows you to free up and get access and use that by selling fractional shares of whatever that is.

Tullio: It’s interesting, I think we have some audience questions.

Carlos: Yeah, absolutely, yeah exactly, Scott we have a question from actually one of our guys here at Nearsoft, one of our developers, his name is Jorge Reyes, Jorge asks, I’m just gonna cuote him, it’s really easy to fall into the trap the neil shiny thing how can I know if my business will truly benefit if I migrated to blockchain technology rather than stick to well-known technologies.

Scott: Yeah, I think there’s a lot of really really bad decisions being made and watching right now because they don’t have a good business case so you know people are just sort of slapping blockchain on some project that they couldn’t get funded before and now it’s blockchain so they can get funding for it you know but you know you have to blockchain is only valuable if you’re trying to secure data or you’re trying to transact business with multiple parties right so you know and and then the third one is really what we talked about on the NFT s were you trying to attach digital tokens to physical or digital items so that you can create liquidity and things of that nature around it so so the short answer is is that you know if you’re not trying to work like in supply chain with multiple vendors and you need to create a trusted environment we can transact business through smart contracts and you’re you’re not trying to I mean if startups all the time right now in fact I just about with three more this week and next week is Dallas startup week and I’ll meet with another 50 and you know I was asking two questions one is what is this solution saving money so what money today is being spent that’s going to go away if they invest in your blockchain solution and then second one is if you’re not going to save money then how are you going to drive new revenue that’s going to increase profitability for the business if you can’t answer those questions then it’s a bad use case or a bad start up because you know a good friend of mine who’s been in a doing business for a long long time always says who’s writing the check right and where’s that budget coming from is if their operating budget is their growth budget is their business development budget there has to be funds available for any business idea technology for technology stake way before blockchain has always been a bad idea.

Carlos: Thank you, thank you so much, thank you so much Scott for you answer we have one more from the audience from another one of our guys another Jorge we have many Jorges here in the company, Jorge Tobias, and Jorge is asking, what are your opinions on the reported high energy consumption to maintain and blockchain infrastructure especially if it’s a big one like Bitcoin.

Scott: Yeah, so Bitcoin mining is a fascinating topic so you know right now some estimates say it’s about 30 nuclear reactors worth of energy powering Bitcoin alone right now right and so proof of work which is the consensus mechanism that Bitcoin and aetherium currently are still focused on do require you know miners to do you know an s9 a six machine right now that’s 14 trillion transactions a second right so it’s trying to solve a math problem that is increased in complexity to these so that each 10 minutes it’s salt right so that requires an enormous amount of energy and I think the long-term future of Bitcoin depends on whether or not proof of work is required to secure blockchains so many other the all currencies are using alternative methods to proof of work like proof of stake or notary type of solution so there’s several ways that they’re securing their blockchains that don’t require massive consumptions of energy the other thing that’s happening is that this technology around Asics is rapidly advancing so you know the early machines could only do you know million transactions or a few hundred million transactions a second and now we’re at fourteen trillion transactions a second you know the next version is a third Samsung is entering this market place right now and using their engineers right, to build specialized chips that are able to do computations at two or three times as fast and for a third of the energy so you got this typical race of technology advancement and energy consumption but it’s always going to be an equation so we’re looking in South America it’s standing up a massive mining colocation facility and the reason why we chose Paraguay because it’s Alijah largest hydrant hydroelectric dam in the world 14 gigawatts produce annually and it’s a bi-national dam between Brazil and Paraguay well Paraguay is 6.8 million people and they have seven gigawatts of energy coming out of the dam they can’t consume all that they consume between one and a half to two and a half gigawatts depending on the season and they have an excess of 5 gigawatts of energy they’re the largest exporter of energy in the world but why this 25 year treaty with Brazil they have to sell it back to Brazil for a low low cost and so they didn’t renegotiate every time or a few years but it’s coming up on the 25 year end of the treaty and so they’re about to enter a massive negotiation of who gets what energy so we’re looking at potentially like other high energy companies like caterpillar for there and I’m you know their consumption of their their liquid you know metallurgy that they do to form their tractors for instance in the in the scoops and and the teeth to go on the scoops now they need massive amounts of energy in fact a company here in Dallas called Hinsley as part of Komatsu and they’re like the third largest consumer of energy and the entire city of Dallas and they have a fairly small footprint of 10 acres or so but because they’re using these arc welders so it’s it’s long long winded answer and but it’s the point is that you know there aren’t spots like Canada that has access to geo energy and Iceland has emerged this huge you know cryptocurrency mining location because they have geothermal energy hundred megawatts being produced there which the whole country the whole island only used 80 megawatts to begin with so it’s it’s it’s really it’s really transforming and turning energy that’s available in certain parts of the world that couldn’t get to other parts of the world and it’s converting energy into coins that can now be transferred anywhere in the world so it’s becoming the sort of fascinating monetization of energy and places that was really expensive to to transfer from to areas that have low energy now they can turn it into Bitcoin or other cryptocurrency transfer it and then essentially turn it back into energy through investments in you know manufacturing and and other energy sources so it’s creating this hole of liquidity around energy in the world as it turns out but it really depends on what what consensus mechanism ends wins in the end right whether it’s got to be proof of work or weather proof of stake or some of these other solutions proved out over the long-term as being just as secure then Bitcoin loses out but I still think right now bitcoin is is going to be the dominant player for the short term.

Carlos: So it’s here to stay.

Scott: Cryptocurrencies here forever it’s going to become the government currency you saw JPM coin recently get announced by JP Morgan Chase for their internal payment systems that will continue.

Carlos: Next one, thank you so much well Scott I think that we’re approaching we’re about to we’re coming up in time so yeah what I before I pass it on to Kim for wrap up what I’d like to mention is simply just a quick announcement about next week or you and the audience as well of course next week we’re gonna be having we’re gonna be chatting with let’s see with Jade Brandais the CEO of Renge this is a travel tech company I believe right Tullio? Is that my correct?

Tullio: No, it’s a some, social business networking, I’m actually interviewing him in person, we’re going to be at the expert Dojo which is incubator in Santa Monica, it should be a lot of fun, a lot of fun.

Carlos: Exactly, [INAUDIBLE]fencenetworking.com that what it’s called.

Tullio: And also I’ve worked on on my LinkedIn live stream I couldn’t get it working today yeah we have that we have that activated so we’ll hopefully we’ll be both here and live on LinkedIn too so.

Carlos: We’ll look forward to that Tullio, so that’s next week so stay tuned folks for next week same day same hour same time and with that being said the only thing left to me to do Scott is thank you so much and I’ll pass on Kim for wrap up, see you next time.

Kim: Yeah, thank you so much Scott once and Scott Mairs CEO of blockchain business solutions Scott I think you have a talent for taking what could be a very complex issue and making it something that’s actually very well explained and easy to understand so I appreciate that congratulations and before we sign off I just wanted to say is there any final words of wisdom that you might have for our audience today.

Scott: I’d say you know, like you said what I’ve changed here to stay it’s really important to think about what what the real business cases and really look at it you know when you’re saving money with a solution which billions and trillions actually will be saved over the next you know 10 years with the implementation of blockchain and but make sure it makes sense it’s going to save you money or it’s going to drive incremental revenue or else you know it’s it’s it’s probably not a good decision and really work with partners that know what they’re doing because there’s you know like any new technology there are a lot of ways that the things can go wrong especially when you’re talking about payment systems and wallets and exchanges you know there’s lots of exposure there if you don’t if you’re not working with the right partners.

Kim: Excellent, thank you, words of wisdom, and if the listeners and viewers want to reach out to you Scott or no more how can they get ahold of you.

Scott: I’m on LinkedIn, Scott Mairs, you can also just email me it scott@blockchainbusinesssolutions.io and welcome any conversations and hopefully I’ll see some of you startup week next week and [INAUDIBLE]

Kim: Perfect, and that’s Mairs, M-A-I-R-S not mayor as a governmental figure of a city right.

Tullio: We hire your contact info and your landing page on DojoLive too.

Carlos: Yeah, it’s all gonna be here, the worry not, yeah exactly I was gonna say for the audience.

Scott: Thanks for having me, it’s a great show and honored to be part of your panels and discussion.

Kim: Thank you, have a good rest of the day everyone.

Scott: Thanks, bye bye.

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