The Discussion: Identity, Ownership and the new role of Crypto #29

Welcome to The Future of You. This week I'm chatting with Stephen Boiki-Sidley, an expert in crypto-fueled innovation, for what will be the penultimate episode this season. Now, we're planning to come back at the start of 2024 with episodes that follow our usual format— well, for the discussion anyway— of more than one guest per episode, as I continue to explore these identity-related issues that are emergent in the digital virtual worlds. And there are some great ideas and guests planned, so please tune in next year. In the meantime, I'm hoping to pull out some key themes over our past episodes with our 40-something-odd guests and air those in the interim. But for now, we turn to Stephen Wikisidli, Professor of Practice at the University of Johannesburg, a partner in Bridge Capital, an M&A company, and the author of 7 books, including his latest one entitled "It's Mine." And that is all about the emerging crypto space and the ways in which cryptography is going to transform ownership. Now, in this episode, we chat about his previous book, Demystifying DeFi, which is brilliant, by the way, on why he's moved on to this new territory of ownership. And we discuss the sovereign individual and the case or not for anonymity, stablecoins over CBDCs, DAOs, decentralized autonomous organization, the importance of tokenization, and the regulatory headwinds affecting crypto, and a lot, lot more. Not least, of course, the notion of owning yourself, which Stephen refers to in his book as Ground Zero. So without further ado, here is Stephen Boykisidly on identity, cryptography, and ownership. So Stephen, welcome to The Future of You. It's a delight to be able to speak to you. You know, I'm a big fan of your books and also your tweets, but you don't seem to be tweeting that much anymore. Maybe we can talk about that. So welcome.

Thank you very much. And thank you for having me.

Oh no, not at all. I would say that I first encountered you when I was reading your book on DeFi. And until that point, it was all a complete mystery to me because I just, I mean, I knew a bit about it, but I was thinking all this language, I can't really, it's impenetrable. What is it really about? And anyway, I read your book and it was absolutely brilliant. I do believe you have a special talent for making the complex simple, or at least understandable. Why don't you tell me about that book that I read and then how you've got to the new book called It's Mine and what the relationship is between the two?

Sure. So what happened was COVID, essentially. I had sort of fallen down one of the many rabbit holes of blockchain in about 2016 where I was CTO on one of the first blockchain projects in South Africa. And it immediately became apparent to me even at that time that this thing was laced with so much jargon that it seemed an impossible thicket to get your way through, even if you were technically inclined. And I spent a lot of time trying to simplify to myself some of the concepts that underlay it. And like everything else, it's— this is not particle physics. It's, it's esoteric jargon, but conceptually none of the stuff is very difficult. COVID happens about 2020, and we all get locked down. And it would— in the country we're under now, which is South Africa, the lockdown was Brutal. And sitting in the office every day and wondering, you know, am I going to have to sit in this office for, you know, the rest of my life? And I made a call at that stage. I had started seeing what was happening with DeFi. There was this explosion of applications, blockchain-born applications, which were mimicking and improving on what was done in traditional banks. So I called a friend of mine who was a blockchain expert, Simon Dingle, and I said, I think there is something going on here that will be of lasting interest to the world, and it has not been explained anywhere. There are no books on it. There was a bunch of techies who annoy everybody with their maximalism and their big words, and I think there's a chance to explain the stuff in a very sort of logical and simple form. And he said to me, well, I understand it, but I'm not really interested in writing a book. 'cause he is building DeFi projects. And I said, that's perfect. I'll write the book, you check the chapters and make sure that we're on track. And that's the way it went. And so we attacked this fairly wide field of DeFi, which was everything from using smart contracts and blockchains to mimic debt instruments and credit instruments and currency instruments and payments instruments, and try to explain this in a very logical step-by-step form. The book was picked up by a UK publisher. It did quite well worldwide. But as the book was being published, as I finished it in early 2021, and then it came apparent to me that something else was going on. And there were these creatures arising as if from a Cambrian swamp. And the creatures which were getting up and tottering and upsetting established industries were not only DeFi, it was obviously cryptocurrency starting with Bitcoin, but there were people paying absurd amounts of money for small kind of pixels, and that was NFTs. People talking about GameFi and people talking about Web3 and people talking about metaverse, people talking about decentralized autonomous organizations. And I thought to myself, all this stuff going on here, what is this stuff all about? We've just gotten to grips with DeFi and now there's 7 or 8 other creatures which have emerged. And if one were to ask around for people who knew vaguely what was going on, what was the thing that the thread that pulled all of these creatures together? Most people would say the blockchain, and it seems to me that was the incorrect answer. The incorrect answer is while all of these things are built on a foundation of cryptography, what the thread was is it gives humans a new way to own things. What is at the root of all the stuff is property ownership, a different way to own currency, a different way, a way to, to own financial journeys through the banking system. A different way to own your data on the internet, et cetera, et cetera. It was all to do with ownership. And so I thought that there was an opportunity to write a book which had ownership as its lens on top of all those things, which is a more fun and more interesting and less technical and less jargon-less subject. And that was the subject of the new book.

It's interesting 'cause the first guest on this podcast, well, the first two guests really were Dave Birch and Richard Bartle. And Richard Bartle had said for a long time, for many, many, decades ago probably, you know, he said about virtual gaming worlds that it was about people buying things that don't exist from people who don't own them. And that's always been a brilliant quote. And it was true for a long time, I guess, because there wasn't the ownership infrastructure that you're talking about there. So, so what has changed that would make— not Richard wrong at all, because he's never wrong, you know, I think he's never wrong— but, uh, that actually gives us a chance of ownership in these non-physical spaces that are emerging?

Yeah, so there's a little bit of a rewind that happened over here, and it has to do with the mathematics of secret keeping, which is called cryptography. And the mathematics of secret keeping changed in the mid-'70s, in that the only way for us to share a secret prior to that in the real world, if you have a lockbox, is that you keep your secrets in lockbox with your jewelry or your family heirlooms., and if somebody else wants access to the lockbox, they have to have the key, the same key to the lockbox. And what happened in the mid-'70s was a technology arose called private asymmetric cryptography. And the theory to that was the problem that was solved is that you could now share a secret with each person had a different key, and that opened up a whole world of possibilities, which had been impossible prior to that. It was based on a mathematical oddity. And there were a bunch of researchers who looked at this mathematical often and suddenly realized, oh my God, you can now share a secret without sharing a key. It's just a big deal philosophically. And that allowed the creation of a particular kernel thing, which everybody's heard of called digital signature. And it's not the sort of digital signature where you sign your Adobe file with a digital signature and get passed around people. It's an unhackable proof that you are the owner. And not only that, it is also an unhackable means to keep it privacy. But the fact that you are able to prove the owner of something without anybody attesting to it or appointing you or saying you are the owner or taking custody of that document of ownership had never happened before. And I'll give you some beautiful examples of why we think we own things. When we don't really. If you're lucky enough to own a house, the title deed for your house sits at some government authority. And while you have a copy of the title deed, if there is a bad actor in the government authority who changes the title, you will never get that house. And this has been exhibited in the most tragic way in Johannesburg recently, where there was a building that caught fire and 500 people died, and that building's title had been hijacked. And the original owner of the building could not get ownership back and maintenance had gone to hell and the fire broke out and people died. There are 550 buildings in downtown Johannesburg whose titles have been changed at the deeds office. The car, your car, you have a document in the car, equivalent of a document in a car called a car registration certificate that is held by some traffic authority. If somebody steals your car and has a friend in the traffic authority, they can change the name of that. Your computer, which you bought at your local store, you think you own it. But if you've lost the receipt for that thing and that computer gets stolen and your insurance company, you go to your insurance company and say, I want to get paid now, they will say to you, well, how do we know the computer's yours? Please show us the receipt. I didn't keep the receipt for my computers. So you're tethered to ownership in the digital world and in the physical world. Is very, very tenuous. And what crypto tokenization has allowed us to do is to bind ourselves mathematically and irrevocably to something, not only things not in the real world, but things in the world too, wherein nobody, no bad actors, no thieves, no crooks of the bank can change that. The banking is the most obvious one of all. I mean, we've all had circumstances in which we, the bankers made a mistake and fortunately you could phone them up and you get the mistake fixed up, even if you have to be on a call on hold for, you know, the call center for 20 minutes. But there are many, many cases worldwide where there are people within banks, um, who are in collusion with criminals somewhere, and things are changed on a ledger, and you, you can't undo it. And cryptography has taken all of that stuff and just removed it. What that has allowed us to do is create a, a mechanism of ownership where there are no third parties involved. You don't need a lawyer, you don't need a bank, you don't need an insurance company, you don't need a title deed company, you don't need any of that stuff. I say this flippantly because the legacy of title deeds or car registrations are embedded in a civilization or a society, and it takes a lot of undoing to change that. But if you look at Estonia or Singapore or one of those more advanced countries, that's beginning to happen at speed.

Mm-hmm. Now, you, in the book, you make some smart observations about privacy and whether we can own our own secrets. Tell me a bit about the chapter on privacy and the fear anonymity, because I think that's really intriguing.

Ah, it was a fabulous find I made of an iconic, jovial, and deeply knowledgeable mathematician by the name of David Chaum, C-H-A-U-M. For my money, David Chaum is Satoshi. There's absolutely no question. Every single innovation that was in the Bitcoin paper was invented by David Chaum. He's an American. So David Chaum makes the following point. We have known how to encrypt things for a long time. And when you encrypt something via some encryption algorithm, it keeps it private to you because you can unencrypt it because you have the key. But he said that's completely different to anonymity. And he gives this fantastic example of what happened in one of the South American companies. It's in my book. I've forgotten it now. Countries, excuse me, Chile or Argentina or one of the others. In which they were not able to— it was the old telephone system in the '60s— they were not able to hear the conversations, but they could trace by the behavior and patterning of where calls were made, who had made the calls. And in fact, there was a coup as a consequence of that. That is where people were not able to stay anonymous. So anonymity and privacy are two different things. The governments may allow you to keep certain things private to yourself, but they absolutely don't want you to be anonymous because if you were anonymous, they can't trace you, track you, take money from you, tax you, all of that. And what this private-public key pair, which I talked about in asymmetric cryptography, does, it allows you to impose privacy at your discretion and anonymity at your discretion via this digital signature. So they're two separate things. People sort of meld them together. But they are philosophically different. And the one that scares the government is not privacy, it's anonymity.

Because like people like Balaji have been talking about the pseudonymous economy for a long time, haven't they? So obviously that's not anonymity, it's you having more than one or plural pseudonyms. And actually, I guess owning different bits of information in different kinds of spaces under a different name, presumably. But does it all come back to one individual? Because one of the things that is What's worrying people, I think, is that— and it's to this point on anonymity— with things like digital identities and ownership of digital assets in the metaverse or non-physical spaces, whatever you want to call them, is your identity going to be traced all along this? So everything you do in these non-physical spaces, because at the end of the day, it has to all track back to something, like some kind of unique digital identity, and then Does that mean that anonymity is essentially impossible in any of these spaces?

Yeah. So Tracey Follows, when I did research for the book and I wrote a chapter called Owning Yourself: Ground Zero, and it is largely informed by your work, your book, plus some of the work of other people, but yours was the main one. So obviously this is an area that's dear and, you know, close to your heart. One of the things about digital identity and cryptography, it gives you the capability of creating many versions of yourself, which is what identity is. Identity is not your mother and father. It's not your birth certificate. Your identity changes every second of the day. If you had a bad night, if you've got a hangover, your identity is different. What you show to your prospective mother-in-law is different to what you show to somebody who you want to get a job from. Your identity as a human being changes depending on who is the recipient of the identity, and cryptography allows all of this to happen. When you say, is anonymity impossible? I would say under certain circumstances it is very difficult to achieve, but the proof personhood is much more important than anonymity. Proof of being alive and called the different words for it, proof of personhood. And in fact, if you take, for example, what's happening in India with, with ID over there, it's called the Aadhaar program. All you need is a fingerprint, and that means you're alive, and that means you can get an ID book. Now, of course, they do tie it to a person's name and ID number over there. But proof of personhood in the age that we live in now becomes more critical than previously. And because of what? Because of artificial intelligence. We want to know whether the thing that we're corresponding with is a human or has a provenance of humanity or has provenance of AI for many, many reasons, copyrights and arts and all sorts of other things. And so the proof of personhood in my mind is more important than anonymity. Anonymity is dangerous because anonymity allows avoidance of blame, which is what countries are worried about. If you are anonymous and you do something bad, how can we sanction you? Now, we run into philosophical arguments about state control versus individual control over here, and you and I, I think, fall on one particular side of that.

Yeah, we might talk about Chapter 4 of The Sovereign Individual next.

Yes, exactly. Exactly. But I think anonymity is absolutely achievable by the mathematics and appropriate in only some circumstances. Appropriate for a civilization that works together. It's appropriate only in some circumstances. It's not appropriate to be anonymous, or it's not, it's not wise to be anonymous if you are committing crimes. It's wise for you, it's not wise for the victim on the other side. So, so governments tend to be very worried about anonymity.

I mean, the argument that's always made, the counterargument, is about whistleblowers, you know. So whistleblowers need anonymity so that they can actually tell the truth. Back to the points about secrecy, uh, to tell the truth about certain situations without obviously disclosure of who they are. But presumably within the systems you're talking about, that's possible anyway.

Yeah, in fact, I'm, I'm just about to, to launch into a research project at the University of Johannesburg on this very thing. It's a whistleblower project.

Amazing.

Yeah, and, and, and what we're trying to do is have a whistleblower be able to come forward without revealing who they are, but also proving that they are the person who did the whistleblowing without giving without giving their identity, and it has to do with multi-signatures and all that sort of stuff. Unfortunately, once the stuff gets to court, the anonymity disappears because the whistleblower needs to be identified with a person. But while the investigation is happening, you can hold that anonymity because that person has been split into 5 or 6 different pieces and put in a ring, and not one of the investigators know who the person is only if all of them together collaborate to find out who the person is.

Oh, that's really fascinating. That is, that's, um, yeah, that would be groundbreaking, wouldn't it? I haven't seen anybody looking at that before.

Yeah, we have. That's a very local problem over here because we have so much corruption over here and so many good people as well that the whistleblowers who would like to come forward, but it's dangerous under the current circumstances.

Yeah, but the way we're going, that's very scalable, should we say.

Um, yes.

What a scalable proposition. Let's talk about the sovereign individual, actually, because you just hinted at that, and it's kind of the philosophical concept of the sovereign individual. It's quite trendy at the moment to be a bit anti the sovereign individual and say that, well, everything's connected and essentially everything's a collective, and it's difficult for one to sort of demarcate a sovereign individual. And so, is it just illusion? Tell me what your views on that are.

Yeah, so the, there is a chapter in the book called Sovereign Individual, which starts off with a short summary of the famous book in which they wrote about this, this tension that exists between the aspirations of the individual to be autonomous and the aspirations of the state to be collective. And there is, first of all, not only is there no answer to this problem, there is only a line drawing between those two extremes. So at the far extreme, you'll find libertarian anarchism, et cetera, et cetera. On the other side, you find communism and dictatorial and autocracies. And somewhere in the middle where most of us live, at least you and I do, there is a certain amount of ways to stay autonomous and there's a certain amount of ways that you will submit to government's intervention or government surveillance. For instance, you will submit to government surveillance for the government perhaps to have cameras in high crime areas you may think is a good idea. But the sovereign individual, one only has to look at a toddler, and a toddler wants to be at a certain point when they start separating from their mother or their parents, autonomy becomes the most important thing. And that's what the temper tantrums are all about in your twos and threes is to try to break free and be your own person. On the other side of this, I understand the need, if you're going to have a society of of cooperating individuals. You can't all be sovereign because you need to work within a framework and do all one argument. In fact, all of politics is about this. You know, the very small difference between Republicans and Democrats in the United States versus the very wide difference between the communists and right-wingers in Europe, there's all an argument about the same thing. It's how much control does the individual have versus how much control does the state have? And CBDCs, Central bank digital currencies are a horrifying prospect if you're a Chinese citizen, because that has got very little to do with immutability and decentralization and speed of transfer and all those fancy blockchain stuff. It's got everything to do, by the way, with surveillance of a citizen. So when your country or America says, we're going to, we're thinking about instituting a CBDC, we promise we won't spy on you, or we promise we won't restrict what you can buy. We may believe them, but we have absolutely no government. Or maybe this government protects you, but the next government that comes in doesn't. So I'm very, very anti-CBDC, and I hope the whole thing fails terribly and we go the stablecoin route, which is global and uncensored.

Hmm, very interesting. Let's dig into that then. See, Dave Birch, you know, says, yeah, it's, you know, 'cause obviously China are sort of trialing it, aren't they? He says, well, China's always been at the forefront of innovations in money and their experiment, I don't know how long he said, maybe their 1,000-year experiment is over in paper money. And actually this is back to them being very, very innovative. Tell me what it is, I think I know, but tell me what it is about CBDCs then that you think are so terrifying. Is it the programmability?

Yeah, so programmability. In fact, there are already examples out of China China, in which certain citizens are sanctioned for some infraction and are suddenly find that they can't use public transport. Okay, that's the most obvious one. In fact, there's a group of people there, thousands of them who've been banned from using public transport without being told why, by the way. That was done via WeChat because WeChat is the payment instruments which allows you to get on the subways. But it is much easier and much faster to do via CBDCs. And while there is a great deal of innovation that the Chinese have had in this sort of thing, the innovation is in the surveillance part. They're innovating citizen surveillance and citizen oppression, in my view. I don't think they— they're not even, you know, secretive about this. They're completely open about this. They want to know what you're spending money on. And if you're spending money on too many bottles of whiskey, you will no longer be able to use your CBDCs in liquor stores, et cetera, et cetera, et cetera. There is, there is an automatic brake on CBDCs, by the way, which is pleasing, is that CBDCs are not transferable across countries for the same reasons that foreign currencies are not transferable across countries, not without a great deal of difficulty anyway, forex controls, whereas stablecoins are. And stablecoins is a much better solution to the good things that blockchain gives you. T+0 settlements, the immutability and the, the uncounterfeited feasibility and all of that stuff. And so, you know, there's already a backlash in the United States, mainly from the Republican side, thinking that there will never be a CBDC because that gives the government. But there are stablecoins and they, you know, they bring the same advantages that CBDCs did.

So I think in the UK, Rishi Sunak, well, it must have been 2 years ago, he, I think he passed a law or I'd have to look back at it, but he was definitely promoting stablecoins and allowing them to sort of of hoping that they would thrive alongside our fiat currency, I think. How will stablecoins come into the community? Will they be alongside fiat? And yeah, just describe to me what you think the ecosystem will be about how do they enter and then how do they become more popular so that they do become the default option, let's say.

Okay, so one of the tragedies, catastrophes that have happened in many countries is mismanagement in the economy causes the currency to debase. So, you know, if you're in Argentina or Turkey or Venezuela, you've lost 90 or 80 or 90% of your spending power, your global spending power of your fiat currency in the last 5 years. In Nigeria, it's been about 50% in the last 5 years. In South Africa, it's been 50% in the last 10 years. Oh, lots and lots of examples in this room. It's tragic for the citizens of those countries because everything that they buy is now built globally. Cars, washing machines, whatever, get very, very expensive. What the Nigerians have started to do, and by the way, 34% of Nigerians use cryptocurrency now, is they take the Nigerian naira, which they get paid every week, and they take just enough out to buy their bread and milk and their weekly supplies. And whatever's left over goes into US stablecoin. So they buy on the local cryptocurrency markets. It's legal, it's simple, and they are protected against the debasement of currencies. That is one turning out to be one of the single most important uses of stablecoins. If South Africans had moved all their rands over the past 10 years into USDC or Tether or one of the other dollar stablecoins, they would've not had the debasement of currency that they've seen. I'll give you a personal example. I put some money into, it was a stablecoin, it was Bitcoin and Ether back in 2017. And I've just seen myself get wealthier and wealthier not having to do anything at all because the rand has gotten weaker and weaker. And obviously also Bitcoin and Ether have gone in value. So that, that is the one use case for emerging markets. There are a bunch of other use cases. The biggest use case of stablecoins is T+0 settlement. You settle instantaneously, which you cannot do across borders. I'm talking about you cannot do via the banks. It is the safety of it that can't be hacked. There's no middleman, there's no bad actors at banks to steal your money, et cetera, et cetera, all the other things. I wanted to say a word about CBDCs. I wanted to rewind a bit. There will be with absolute certainty a country somewhere in the world which launches a CBDC and it gets hacked by the North Koreans. And when that happened, you'll see everybody pulling back very quickly, whereas stablecoins, particularly Tether and USDC and some of the other ones, have been out there for years and years and years and years. They're all completely hardened. The smart contracts have no holes in them. There are no hackers who are going to punch through that stuff. But somebody who builds a new CBDC under a government's authority, it's going to get hacked somewhere. And then you'll see this thing do a major pause and people say, shit, maybe we should go with something that's been working for the last 10 years.

Do you think there's going to be a group of people who are just so anti all of this, they just kind of end up living kind of off the grid really, and wanting to create their own local currencies or exchanges. Because so many people I'm coming across these days are so frightened by all of this, to the point about hacking, because they don't necessarily discriminate between like a government-run CBDC and other crypto solutions. They just see it all as like digital solutions are vulnerable. And they actually do want to sort of insure themselves against any of that and kind of build almost parallel communities.

Yeah, so I'm going to— you threw out a line a couple of minutes ago, Tracey, where you talked about will these things exist in parallel with fiat? And unquestionably they will. Okay. There is only maximalists, and in my view, only unrealistic maximalists, would see a world in which there is no government-run money.

Okay.

Most people don't care about this stuff. So in my view, the advantages and wondrousness of blockchain currencies and blockchain payments will be a parallel system, just like gold is a parallel system to dollars. Are there going to be a bunch of people who go off-grid? Yes, but I don't rate their lives are going to be any better by doing that. We still have to live in a world, we have to live in a world where there are fractured philosophies, fractured political systems, fractured monetary systems. I happen to think the best of them will be the crypto system, but there is a portal between these two things and there will always be movements from one side to the other at this portal. Hmm.

Okay. Now let's talk about tokens and tokenization. How important are tokens?

Okay, so this is the business I happen to be in now. I'm a consultant to a company in South Africa called Mesh.trade, which is the first real-world asset tokenization company. In the country. If you look at the most recent research reports from Boston Consulting Group, from Citicorp and Galaxy and a couple of others, McKinsey, I think, the projections are that the tokenization of real-world assets will be the biggest innovation of finance for the last couple of thousand years. The reason, the numbers that they give is that it will be, banks will be moving $16 trillion of tokens of value over blockchains by 2030. $16 trillion is 10% of GDP. So these are just massive numbers 'cause it was zero in 2020. It's gonna go to $16 trillion by 2030. It'll be the fastest move of a new financial technology in history. The reasons that, and this by the way for your listeners is these tokens are not cryptocurrencies. They're simply tokens of ownership of some real world thing, a share certificate, a debt instrument, a piece of gold, a piece of art. It's just a token. It's really an NFT by any other name. It is the killer use case of blockchains. Nobody had even seen this happening prior to about 2017, where you take something in the real world and you give a token that secures your ownership rights over that thing, and your ownership rights can never be taken away because of the magic of cryptography. And so you'll find out— I did some research for a competitive report that I wrote for this company. In 2019, there were no global banks doing anything with tokenization. And I looked at the 115 biggest banks in the world. There is nobody who's not doing something in tokenization. It is just an unbelievable tsunami. They can't find people. There are projects going onto blockchains, there are debt projects, there are treasury projects, there are currency projects, there are, um, credit projects, there are real estate projects. All of these people are doing tokenization. The advantages aside from the ones that I've given you is the ability to fractionalize these things. One example for you. Let's say there is a shipping company who needs to ship a bunch of cars from Korea to South America. And the cost of that was $150 million and they need to raise finance to move the cars from Korea to South America. So they go to Goldman Sachs and they say, we've been doing this for, you know, 120 years. We're a shipping company. We need $100 million to move its cargo. Now what happens in the old world is Goldman Sachs says, sure, we'll give you that money. You're creditworthy. You've been doing this for 150 years. They package that $100 million and they sell it out to very sophisticated institutional investors and they offer, say, 10.3% for the next 10 years for this $100 million. 'Cause it's much better than you can give it back. The point about that story, which happens every day, all the time in all the big banks in the world, is that you and I have no access to that deal. We can't get a hold of that 10.3% because that is sold off to big players who are buying 50 million tranches or 100 million tranches. Tokenization lets you buy 100 rands worth of that deal. Tokenization allows those people to fractionalize those huge, high finance, low risk, high interest rate deals down to tiny, tiny pieces and sell it off to tiny investors like us. So that we can also participate in those ivory towers which have been closed to us for so long.

Fascinating. So I've always thought, I mean, you mentioned NFTs there, but I kind of never bought into the NFT craze. I always thought verifiable credentials were more important than NFTs, but maybe in a sense that credentials are just like tokens for the person.

Exactly. They're a title deed of ownership to yourself. And what I just talked about in RWA, W.A., they're all NFTs of a type.

Yeah, yeah, exactly. So the tokenization is a concept. Yeah.

Right. Now, one of the sadder things about the media is that if you ask somebody what an NFT is, they think it's a bunch of pixels. They think it's an ape. But the concept of an NFT is there's an unhackable title deed belonging to you, giving you ownership rights over something.

Yeah, exactly. And so talk about decentralized autonomous organizations a little bit then, because these are tokens But they're slightly different tokens, aren't they? They're governance tokens. And I was with a company a couple of days ago and we were talking about this. And I think people think that these are interesting experiments that are kind of like niche. I don't think people are kind of necessarily foreseeing that it could be transformative for the governance of companies. I think it could be. But it probably needs to wait another generation. I don't know. Because we've got a lot of people at the top who aren't going anywhere at the minute. And they're sort of in charge of the governance of companies. But what's your view and vision around DAOs?

Okay, so I'm gonna give you two answers to this, Tracey. The first one is when one sets up a company today in any way, shape, or form, small or big, there are a series of fictions that we are forced to believe in. And the fictions are we have to have documents for the incorporation, Okay, corporate documents, shareholder agreements, board of directors agreements, and on and on and on. Anybody's tried to set up a company by themselves, it's nightmarish. It got to file them with the state. Doesn't have to be a corporation. If it's a partnership, you've got partnership documents, so they've got to get lawyers to do it and what, what. Those are all fictions, and those are all fictions that have been written by people in order to make it easier to build a community of common purpose in order to do business. These are the rules and here are all the documents and everybody adheres to the rules. When you get down to the lower levels, nobody knows what's in the shareholder agreements. And usually at the top level, few people know what they are. What happened with DAOs is said, we don't need the stuff, these Delaware documents or whatever the equivalent is in the UK. If we write the rules of this community of purpose and everybody buys in, we give, I'm talking about buying in, in principle, not buying in necessarily with money, buying in from the principle that these are the rules of what we're going to do, they can have a token which proves they have a voice in the company without us going through all of that stuff. Those rules may say there will be one token holder who's the boss, but they don't have to say any of that. So the example which illustrates this the best, and it's the one that's used most often, is there are 500 copies of the American Constitution, handwritten copies. And they're in museums and private hands. And last year, I don't know if it was last year, it may have been the year before, one of these comes up for sale and from a private holder and Sotheby's, or I think it was Sotheby's, gets given the right to auction this off. And a bunch of very, very rich, very private people are going to bid on this thing. And there's a floor level of $30 or $40 million, I can't remember what it is. And some young kid takes a look at this crypto guy, digital native, and he says, well, you know what's going to happen? Some rich guy's going to buy this copy of the American Constitution and they're going to put it in their basement or put it in their living room or put it in a warehouse and nobody will ever get to see this and this shouldn't be public property. I think that we should buy it. So when he says we, he says, I'm going to go out on Twitter and I'm going to tell everybody about this and I'm going to collect. By the way, the auction is now 5 days away. Tracey, says, I'm going to tell everybody about this and I'm going to form a DAO and anybody wants to put money in, we'll give them an unhackable token saying how much money they put in and we'll raise money and we will buy the American Constitution and we will put it someplace public. Now, he raised $42 million in 5 days. And the point of the story is there is no way to start a corporation or a partnership and raise that money in any less than months and months and month for month. The DAO gave it the ability to do that. The DAO said what everybody's rights were. The DAO said what they were going to do with the constitution when they got it. They didn't win, by the way. Somebody else outbid them at the end. But the ability to build a community of common purpose instantaneously with completely anonymous people, people who are not known to each other, rather than going through these fictions of corporations and partnerships and limited liability companies represents a fairly transformative change to the way that community efforts are organized. And yes, it's very early days, but it's very powerful stuff.

Yeah, I agree with you. I think sometimes people take the wrong lesson away from that constitution of DAO. Then they think, oh, it failed because it was a DAO. It failed because they, my understanding thinking back is because they publicized what their top what top level was, you know, what their barrier— they weren't going to pay any more than whatever it was. And they unfortunately, in doing this, uh, exposed what that was. So they lost a bit of negotiating power, but it was nothing to do with the structure that you've just outlined.

It was the raising of $42 million in 5 days into an organization. That, that was the thing.

Yeah, amazing. Yeah, yeah, exactly that. Yes, I think businesses are used to having sort of, you know, junior boards and things like that. And again, that's sort of that old permission world, isn't it? You're allowed to play, but only at this level. And it's a little bit patronizing, really. And in a more permissionless world, then anybody can participate. And that is an interesting structure that allows people to participate that might have been blocked out of things like that before. What haven't we talked about that we need to talk about, Stephen, for people to either understand where this is all going, or, you know, why this concept of ownership is so important.

Regulation.

Regulation.

Yeah, that's the big one because at the end of this story that I've told, which is full of sparkles and pixie dust and admittedly early in its maturity curve, notwithstanding the obvious advantages of all these crypto creatures I talked about earlier, there are headwinds. And those headwinds are, let me say, they used to be hurricane force and now they've dropped to gale force. They're not as impossible to, to surmount as they used to be. So the regulations come from two areas. The regulations come from governments and they come from those who rely on government, which is big business. And there are great pillars of power that are threatened by the autonomy that is enabled by crypto. Some of the things one can understand their pushback, which is the ability to cheat on taxes. So they're saying, well, you know, you just put something in your private wallet and then you're not going to pay your taxes and we want to see what money you have, what assets you've got. All of that is true. Of course, it avoids the obvious question is people cheat on their taxes even in the current regime. And if you've got enough money,— you do that very well. We all know what the statistics are of very, very rich people paying no taxes. But put that aside. They are valid concerns that governments have to get rid of the anonymous— anonymity and privacy that's enabled by crypto. And they've pushed back very hard. The SEC in the United States has pushed back the hardest. They're claiming that all of the stuff has to register with the SEC. SEC is an organization which has good intent. They want to protect consumers from being ripped off. They took a look at crypto. They said a lot of people got ripped off. They did get ripped off. And we've seen the FTX announcement this morning. Um, so they've come up hard against the crypto industry, but that has quite recently started to fade. It's the best word I can do it. And it started to fade because people of the caliber of Larry Fink of BlackRock whose company manages 11, 12 trillion in assets. It's almost the size of China's GDP, has said that he thinks that Bitcoin is the future, is a financial innovation, and he is going to invest his customers' money in Bitcoin, amongst other things. So when people like Larry Fink say this is a good thing, then other people say, well, wait a minute, if, if this guy really knows his stuff, he's one of the most senior conservative people in the entire financial industry, he likes this stuff. Maybe we should start thinking again or revisiting the narrative that we presented that this is all rubbish. Some of the anti-crypto sentiments have come from a misreading of, of, of crime. So the statistics, and it only takes 10 seconds on Google to find this out, is somewhere around 0.15% of all crypto transactions are used for illicit purposes. And one can see them because it's a public blockchain. But the FBI says that 5% of traditional money is used for illicit purposes. So the crypto crime is a mere pimple on the bum of, of crime in the real world. However, regulations have hurt this industry, have hobbled it, have caused a throttle in some areas. On the other hand, if I'm honest with myself, I think that Sam Bankman-Fried deserves his punishment. And I think that regulations are necessary in some circumstances, and this will level out eventually. But right now, it is the greatest headwind of all. Some of the other headwinds which existed 2 years ago, like energy usage for proof of work, just fallen away because the energy has become more efficient. People are using green energy. They're putting their minds next to waterfalls and volcanoes and rivers, you know, that stuff was, was never a real hindrance. It's mainly the regulation now.

Is there a particular country that is going to be at the vanguard of this then?

Yeah. So the two that are at the vanguard, there's a spectrum, of course, in various countries, completely banned. Don't touch the stuff, we'll put you in jail. And then on the other side, there is countries are saying free for all, come pay, pay with your cryptocurrency like El Salvador, and it remains to be seen. It seems to be quite successful right now. But the ones that are most progressive, Dubai and Switzerland, uh, and coming up behind them, Portugal, Singapore, England, the Law Commission of Wales. I think it's called the Law Commission of UK and Wales is, is a, on permanent retainer to your parliament to write reports which are in fee to what, what become laws. On all manner of subjects over hundreds of years. So your government said to the North Mission, this crypto stuff, we don't really understand what this is all about and how do we legislate this stuff, and please write us a paper, which they went out and did over a period of 6 to 8 months. And it is a work of art that makes grown men cry like myself because it so beautifully understands why this stuff is important. And so UK will not be far behind because that paper is written, it's now in the hands of government to be turned into law. Now, one of the, I've been through the document, which does one very important thing. They've said in terms of English law, property law, there are only two things called assets at rest and assets in motion. Assets at rest is your car and the asset in motion is like a loan. Okay. There are two different things. There are two different legislative piles of stuff which are applied to the stuff. They said, that's no longer true. There's a third thing, it's called digital asset. It's not the same as an asset address and it's not the same as an asset notion. It's a digital asset. Don't try to put round pegs into square holes. And nobody had ever said that before. The second thing that I did, you're going to love this, is these law reports, these reports which are in feed to policy, are done by very clever people who have read lots of books. And at the end of that, there's usually this long list of research reports and books and things that they consulted with in order to come up with their findings. What did they have at the end of this? Hundreds of tweets. They reference tweets as the deep thinking in this area, which is absolutely true. And it must have taken a lot of courage to do that.

Which brings me on to my final question, Stephen. Why aren't you tweeting anymore? I used to follow you on— well, I still follow you on Twitter. But you haven't said anything on Twitter for a while. Where are you? Are you in sort of like Discord rooms? Where are you?

No, I'm not. I slowed down on the tweets because I got irritated with Elon Musk wanting to do a cage fight with Zuckerberg.

That was ridiculous.

So I'm not tweeting it much because the platform itself has become, you know, I wasn't in the hellhole of politics. On Twitter. I was keeping— I was staying to my lane and doing things that I like to do. But, um, the place had become a little toxic to me with, with, with Musk. I've got an allergy to that guy. I don't know what it is. Maybe because he screams at his employees, notwithstanding his great achievements. There are many of them. Um, so I slowed down on that one. I will, I will pick it up again at—

just because you said they're not there anymore, I promise I'll start tweeting Well, I was wondering, what I was wondering actually, since you say about Musk, is that obviously he's got this ambition, well, we never know, but there is a stated ambition to turn X into this super app. And obviously payments are going to be a big part of that. And we've seen what he's been trying to do with subscriptions, et cetera. But presumably it's going to be crypto, isn't it? So what's your prognosis or prediction for where crypto meets X.

Yeah, so he's not the only one. Apple is the other one. Um, who wants— everybody looks at WeChat and said, geez, you know, that, that would be nice. And I think that's, you know, Shakespeare's wilting ambition. In order to get a Brit or an American to go to one app and give all their power to one organization, I Most people find that a little bit distasteful. I don't believe X will be successful. If it is, crypto will absolutely be a part of it. He said so. So there's going to be a big battle for the super app or the super financial app, you know, one of the two. And crypto is going to be a part of all of this because all of these guys understand where this stuff is heading, especially in 2023.

Well, that's a good line to leave it on, I think. Thank you, Stephen. It's been a pleasure to chat with you. Always follow your work. Book because you are one of the people who goes out and makes the impenetrable understandable. So, I appreciate all of that. As I say, until I picked up the DeFi book, which I know people, you know, should go and get this new book, It's Mine, but they should also get the DeFi book as well because that was a real eye-opener to me. And then what else should they go and read of yours, Steven? You can have the final word on telling people where they need to go.

Well, yes, please read my two books on crypto and I'd love it if somebody would buy one of my fiction books, even though they've aged slightly. I may get back to that one day. I set out about 10 years ago to win the Nobel Prize in Literature. That didn't happen, but the books are quite fun.

Brilliant to speak to you. Thanks very much, and I hope to see you soon.

You too. And congratulations on all your awards and good stuff that's happening with the company.

Thanks, Steve.

Thank you, man. Thanks.

Bye-bye. Thank you for listening to The Future of You hosted by me, Tracey Follows. Check out the show notes for more info about the topics covered in this episode. Do like and subscribe wherever you listen to podcasts. And if you know someone you think will enjoy this episode, please do share it with them. Visit thefutureofyou.co.uk for more on The Future of Identity in a Digital World, and Future Made Doc Consulting for the future of everything else. The Future of You podcast is produced by Big Tent Media.