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Bastiaan Don, Managing Director of Token Factory – Interview Series

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Bastiaan Don, Managing Director of Token Factory - Interview Series

Bastiaan Don is the Founder & Managing Director of both Token Factory and blockimmo.

How did you first get involved in the blockchain space?

Early 2011 I read about Bitcoin online at a bulletin board with lots of active and interesting members. Pretty soon I was more interested in the underlying technology and started to read on a daily basis about it at various sources (reddit, bitcointalk, etc.). After Ethereum was introduced in 2013, followed by the pre-sale in 2014 and the launch in 2015, I followed the progress and possibilities closely. After the ICO madness, I decided to become active and combine 2 worlds I understand quite well being Real Estate and Blockchain, with a serious approach towards product development and regulation.

 

You’re currently managing 3 projects, Blockimmo which specializes in tokenizing real estate, STX Swiss which is a decentralized security token exchange, and TokenFactory which is a technology provider for asset digitization. Can you let us know which came first?

Coming from the Real Estate industry I’m rather familiar with the challenges around this illiquid investment class and the high entry barriers. Initially, the company I founded was called “blockimmo”, with the vision to enable anyone to invest in real estate (access) and, in addition, turning this asset into something more liquid. With our 2 fantastic developers (Michael Dietz / Jesse Ngatai) we developed our (primary issuance) platform on the public Ethereum Blockchain, without the introduction of any proprietary standards or useless in-between (utility) tokens. In addition, we conducted several (successful) rulings with the financial regulators of Switzerland and Liechtenstein related to the tokenization of assets. In order to live up to our second promise (liquidity for the secondary market) we initiated STX.SWISS to demonstrate the possibilities of a trustless, peer-to-peer (decentralized) exchange without an operator, for tokenized assets like real estate. Summarized, we built a tokenization solution for both the primary and secondary market. In order to broaden our potential clients and partners we decided to rename the company to Token Factory Switzerland Ltd. The platform (brand) “blockimmo” will naturally still be used for real estate tokenization.

 

Blockimmo tokenizes real estate, currently all the properties are in Switzerland. Will we be seeing more international real estate options?

Yes, definitely. In fact, the Swiss Real Estate market is, thanks to its attractiveness amongst established players (investors) quite tricky to get started. Currently, we have several projects (both existing properties as well as property development projects) in the pipeline which are located outside of Switzerland and will be announced in due course.

 

How do you source and select the real estate portfolio that is offered?

This is a good question, which applies to any real estate investment platform (irrespective if you use blockchain technology). Due to my experience in the real estate market (12+ years) and of course due to the fact that we are one of the few platforms that actually already have tokenized real estate with public available smart-contracts for the security tokens issued and traceable transactions of the investments on the public Ethereum blockchain – we gained a lot of attention and receive a lot of requests for future tokenization cases.

 

Is STX Swiss currently licensed, if not are you in the process of acquiring a license? What jurisdiction will this be licensed in?

STX.SWISS is a decentralized exchange proofing the concept how security tokens can be exchanged on a public Blockchain (Ethereum) without the involvement of any controlling party (operator). This means that no centralized party controls any important element that require a license, for example the wallet (only decentralized access is possible) but also more important elements like the order-book (there is none) or the liquidity providers (only possible through a decentralized process). More information can be found in our blog posts (high-level / more tech focused). We are however in progress of establishing a regulated exchange, with centralized elements (in order to control certain elements which are required by the regulator to be controlled). We do this together with a licensed institute based in Switzerland and hope to announce further details in the near future.

 

What are the requirements to list a security token on STX Swiss?

We require that the security token is under control of the asset owner (issuer) at any point in time. Simple put, this is what makes our tokenization solution unique, as with blockimmo (TokenFactory) we introduce a smart-contract “whitelist” which is attached to the default ERC20 token smart-contract. Inside the “whitelist” there are the address of identified investors (meaning they went through a compliant KYC/AML on-boarding process). Although we call it a “whitelist” it’s actually a mapping mechanism, so with our solution you don’t lose (transaction) speed no matter if there are one thousand or one million address whitelisted.

 

Token Factory offers asset digitization services. Could you elaborate on what the different types of services are?

Yes, currently we offer an important puzzle piece for tokenization; being the technical solution that has been multiple times audited and executed before and is available for any other asset. Another important aspect is that this solution is based on the public Ethereum blockchain, open standards and thus is “future proof” for the upcoming Decentralized Finance ecosystem. In addition, we do not make the asset owner (issuer) depended on us, they are in full control and ownership of the smartcontracts representing the tokenized asset. Of course, based on our experiences, we offer consultancy services mainly around the topic of tokenization and financial market requirements and challenges.

 

What are the white label services that are offered by Token Factory?

There are plenty of niche markets with strong players where tokenization as such brings benefits to the existing solutions. We are open to provide our technical solution as a complete white label service (Software as a Service / SaaS) for those players and are currently actively working on launching such in the near future.

 

You offer investor management; can you elaborate on what these management services are?

A key puzzle piece related to security tokens is, besides our on-chain whitelist, the way how you onboard the investors and how you manage them actively to stay regulatory compliant. We have built a complete paperless on-boarding solution, integrated with strong KYC and AML providers and offer this to our clients who seek a working technical solution.

 

Is there anything else that you would like to share with our audience?

Yes, we’re currently very close to partner with a strong, regulatory compliant partner and will then be able to offer a full “one-stop shop” for tokenization. So not only a strong technical solution, but also provide a solution for the legal, regulatory, compliance, distribution and marketing/PR elements. All from one provider with know-how, quality and speed, really understanding true value proposition (liquidity provider) for both the issuer and investor. We’re still at the beginning of the era of tokenization and there are exciting times ahead of us!

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Antoine Tardif is the founding partner of Securities.io, the CEO of BlockVentures.com, and has invested in over 50 blockchain & AI projects. He is the founder of Unite.AI a news website for AI and Robotics. He is also a member of the Forbes Technology Council.

Digital Securities

Baxter Hines, Author of “Digital Finance: Security Tokens and Unlocking the Blockchain” – Interview Series

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Baxter Hines, Author of "Digital Finance: Security Tokens and Unlocking the Blockchain" - Interview Series

Baxter Hines, CFA, is managing partner with Honeycomb Digital Investments. He co-founded the firm in 2020 to provide income producing solutions for clients. His firm manages portfolios consisting of traditional assets, security tokens and digital assets.

His new book “The Digital Finance Book: Security Tokens and Unlocking the Real Potential of Blockchain“, is currently available to be pre-ordered at all major on-line retailers globally and will be in stores on November 17th, 2020.

What initially attracted you to blockchain and digital assets?

I spent an extensive amount of time looking into cryptocurrencies initially because I was so curious as to what the buzz was all about and after learning as much as I could about Bitcoin and cryptos I sought to gain a deeper understanding of the underlying technology, its capabilities and real world applications.  It was at this point that I came to realize that blockchain is so much more than simply Bitcoin. It became obvious to me that this innovation would impact the transfer and management of assets such as stocks, real estate, bonds, private securities, intellectual property and much more.  Placing real-world assets on the blockchain can lower costs of capital and that feature alone will cause eventual widespread adoption. When that idea sank in, I knew I wanted to learn as much about blockchain and digital assets as I could.

You’re a managing partner with Honeycomb Digital Investments, an investment firm that manages portfolios consisting of traditional assets, security tokens and digital assets. What are the things that you look for when reviewing investment opportunities?

I spent twelve years as a portfolio manager at NFJ Investments (a subsidiary of Allianz Global Investors) focused mainly on stocks with an emphasis on dividends. I bring that mindset to the digital asset space in that I seek out investment opportunities that I believe will capture the benefits of the upcoming growth of blockchain technology and its underlying ecosystem. Specifically, Honeycomb looks to invest in companies that are building the platforms and infrastructure to support the megatrend of blockchain and those cryptocurrencies and projects which will also be a part of the underlying ecosystem.

How would you personally describe what security tokens are?

Simply put, security tokens are a digital representation of real ownership in an asset – in most instances, one token is equivalent to one share in an asset. Security tokens are a digitized title to a financial instrument combined with the agility and speed of blockchain. Security token holders are entitled to certain rights and privileges of an underlying asset just as they would be if they owned the asset outright.

By building on top of the blockchain, security tokens offer capabilities, features and innovations that would never have been possible in a world of paper certificates. We are truly at the dawn of a new digital age in finance! Some of the brightest financial, technological and legal minds of today are working feverishly to develop the potential of this reliable, consistent, safe and consumer-friendly method of doing business. The future potential of these technologies is massive and the growth will occur over many, many years.

One factor that distinguishes security tokens from cryptocurrencies is that they are more regulated instruments. Tokens can only be released after meeting stringent legal and compliance hurdles providing investors with certain protections. Because of the programmable nature of the blockchain, security tokens can include features to automate servicing, embed compliance and enforce contractual obligations.

Not only do security tokens contain regulatory safeguards; but also, they provide investors with two major additional features: cost saving efficiencies and the potential to create enhanced liquidity. Process automation brought about by the blockchain will allow for security tokens to provide greater functionality, lower costs, faster speeds and increased transparency to financial markets. These aspects should ultimately lead security tokens to have lower costs of capital than their traditional paper alternatives.

Security tokens have been a bit slower to take off than most of us expected, in your opinion what are the reasons behind this?

Three major factors are holding security tokens back from wide-spread adoption: regulatory uncertainty, lack of education and first mover hesitation. The benefits of digitization are significant and eventually projects will have to go on the blockchain just to stay competitive. But before a takeoff in demand can occur, these three issues must be resolved.

Regulatory certainty has begun to arrive and technology is matching what is needed for this digital future.  Jurisdictions like Singapore and Switzerland are taking a clear approach to how they want to govern security tokens and their leaders have noted digitization to be the path to a better and safer financial future. It is my opinion that larger economies such as the United States, the European Union and Japan will likely eventually follow and simply refine the earlier established frameworks. Once the financial community sees the incredible benefits digitization has to offer, other countries will be fast to adopt digital-friendly laws so to reap the subsequent rewards.

Second, for security tokens to grow and flourish, the market and all of its constituents need to be further educated. Security token usage will be a growing trend in the market; but to realize the full potential, certain terms, concepts and a better understanding of the functions and benefits of blockchain must be realized by all of the players in the financial services industry including retail

investors, those employed in the financial industry, market regulators, and entrepreneurs trying to issue securities to raise capital. Hopefully my book can help out on this front!

Finally, we need more traditional financial services players and issuers to bring high-quality projects on the blockchain. Asset classes with higher frictions around trading are prime candidates for early adoption. This includes fixed income, real estate and private equity investments. We have already seen several pioneering projects in these spaces gravitate towards the blockchain. Many other projects are sitting on the sidelines today, waiting in anticipation to see how the first movers to blockchain fare. As these initial projects that have already digitized prove themselves to be safe and legally compliant, a new group of followers will jump in. Like the old saying goes “Nobody wants to be first to a party, but nobody wants to be last!”.

Are there any current security tokens (digital securities) which you are bullish on?

Without getting into specifics, I must say that I can say that I am bullish on the benefits of security tokens for the financial services industry as a whole – in particular the benefits this technology will have on the underlying investors and such investors ability to better gain access to liquidity when it comes to certain asset classes.

You recently wrote a book on security tokens and digital securities called “Digital Finance” which is set to be published in November 2020. What inspired you to write this book?

After extensively researching blockchain and its “better, faster, and cheaper” nature, I realized our financial system is on the verge of a massive transformation. Blockchain technology is the solution to spearhead the next generation of financial market infrastructure and blockchain may be the most important innovation since the internet.

While most people are aware of Bitcoin and other cryptocurrencies, few realize the far greater potential of blockchain. Blockchain has already proven itself to be an incredible means of exchanging value and information – but there is so much more to offer! My book examines how this powerful technology can overhaul our current financial infrastructure in a way that will increase efficiency, transparency, and security.

I wanted to publish a non-technical, easy to understand primer on blockchain and security tokens that would be relatable and practical for those in the financial industry. John Wiley & Sons seemed like the perfect publishing partner to assist in realizing my aim of producing a clear and concise framework on how to think about investments in the digital space. My goal with the book is to help readers uncover how blockchain and distributed ledger technology are disrupting the financial industry in an easy to understand and non-technical manner.

In your book you will be discussing case studies, historical perspectives and latest trends. What are some of the case studies that are discussed?

One of the book’s objectives is to make sure the reader can truly connect with the subject matter and as a result, the work contains many case studies, historical perspectives and latest trends to bring key concepts across. “Digital Finance” focuses on three major areas of digital assets: cryptocurrencies, stablecoins (like Central Bank Digital Currencies or other digital representations of money like the US Dollar or Euro) and security tokens. It is important that the reader get accustomed to real-world illustrations from all three of those fields. The book covers cases like Facebook’s Libra project building a global blockchain-based platform for cryptocurrencies and Britain’s Royal Mint creating a digitized way to own gold in its vaults. As security tokens are the main topic of the book, most of the examples focus on how blockchain can affect stocks, bonds, private equity and other alternative asset classes. As a result, examples such as the World Bank’s Bond-i, the Aspen St. Regis’ hotel token, and NBA player Spencer Dinwiddie’s professional athlete investment token (PAInT) are covered in detail. There is also considerable attention placed on projects that large established corporations such as IBM, HSBC, Goldman Sachs and the Singapore Exchange are undertaking to build a new blockchain-based infrastructure that will run our financial markets in the coming years.

The book also contains numerous examples from history that provide a framework on how to think about the upcoming rise of digital solutions. Through my research, I have noticed a striking similarity between the Internet Age of the 1990’s and the adoption of blockchain. By looking at the growth of the Internet from a historical perspective, one can gain a glimpse into what will unfold as blockchain becomes a bigger disruptive force.

What do you believe needs to happen to accelerate the pace of adoption of digital securities?

The move to a blockchain-based financial system will unfold one step at a time albeit in a quick manner with the most basic levels of finance developed first. As a result, payment systems will be at the forefront of digitization in the coming years and digital currencies will be a powerful force that will later aid in the growth of digital securities.  The main reasons for gravitating to digital securities from their paper-based alternatives are largely two-fold: lower costs and enhanced liquidity. Without a digital payment mechanism in place first, security tokens will not be able to fully capture those benefits.

Cryptocurrency and stablecoins representing a national currency like the U.S. dollar have been the typical gateway people use to first experience digital financial products. Today, we are seeing many countries float the idea of a blockchain based national currency; the list includes the world’s largest economies such as China, Brazil, France, Canada and the United States just to name a few. If government entities around the world begin to formulate legislation that will allow for currencies to become digital in a legally compliant manner, this would be huge for digital assets in general. The move would certainly encourage people to further explore utilizing digital financial products and would provide an amazing amount of comfort in doing such.

Not only will national digital currencies facilitate adoption but also, they will clear hurdles for further regulatory reform. After creating a digital currency, government entities will have already had discussions around blockchain, its safety and the infrastructure that is needed to flourish. Leaders will then be more likely to debate further initiatives such as digitizing securities like stocks or bonds.

Liquidity around a digital security or security token is much easier once a digital currency is in place. Whenever a security token is bought or sold, it needs to have a digital currency on the other side of the trade to fully reduce frictions and allow for instant settlement. If the cash systems of today are used in that process, the trading aspects of security tokens will still be much slower than they can be. As a result, government entities will need to first focus on payments and central bank issued digital currencies in order for the pace of adoption of digital securities to really take hold.

Is there anything else that you would like to share regarding your book ‘Digital Finance’?

I think it is important for people to have a perspective as to just how big this wave of tokenization will be.  Digital assets and security tokens are going to be a major factor in the future of capital markets and will represent the first new asset structure in roughly 30 years! The last new product with even remotely the same scale and effect was the ETF. This upcoming blockchain breakthrough will have a profound impact on the way we trade securities, how shares are maintained throughout their life cycle and even influence the ways we invest our money. This innovative process opens up the possibility of unlocking trillions of dollars in assets to new investment!

There are more and more signs that digitization will help to transform the traditional investment business model of today into a modern, fair, transparent and distributed marketplace. This new paradigm will connect investors and the projects they invest in directly with blockchain based platforms. Just recently, the first regulated security tokens have gone to market. We are at a point in time where more regulatory certainty has arrived and technology is being developed to match what is needed for this digital future. Everyone in the financial industry will need to have a broad comprehension of how the technology works, what it can affect and what consequences this could have for business.

The pace of development in this industry is remarkable. Almost every day I see another groundbreaking story that gets me excited. As a result, I’ve started a Twitter account for the book which highlights articles covering the hottest topics of the day. The purpose of this page is to aggregate the most important stories at a given time and put them into a one stop location for people to see the incredible milestones that digitization is hitting! Be sure to follow us on Twitter for the most important news!

Thank you for the fantastic interview, I enjoyed learning about your views on digital securities and the future of the industry.

Readers who are interested in learning more should know that the book is currently available for pre-sale at all major on-line retailers globally and will be in stores on November 17th, 2020.

Book Website

Book on Amazon

Follow the Book on Twitter: @digifinancebook

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Peter Hofmann, the CEO of Custodigit – Interview Series

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Peter Hofmann, the CEO of Custodigit - Interview Series

Peter Hofmann, the CEO of Custodigit, a joint venture between Swisscom and Sygnum offering an investor-grade custody solution targeting regulated financial institutions.

Peter is also a Board observer at Metaco SA and a mentor to London & Partners. He has worked in a different senior position in the financial service industry for companies like Cap Gemini, KPMG, IBM, PostFinance and several startups before.

He has a long-lasting experience in the interception between financial services, technology and innovation in different roles.

Custodigit was founded by Swisscom and Sygnum in 2018. Could you begin by detailing who Swisscom and Sygnum are? 

Swisscom AG is a major telecommunications provider in Switzerland with its headquarters located in Bern. 51% of Swisscom is owned by Swiss government. Swisscom actively supports the fintech space in Switzerland and believes that financial industry will change significantly in the next 10 years due to emergence of disruptive business models in fintech start-ups. Swisscom wholeheartedly believes that in the future financial sector will rely heavily on usage of artificial intelligence in combination with blockchain technology. Swisscom owns 75% of Custodigit.

Sygnum is the world’s first regulated Digital Asset bank headquartered in Switzerland and Singapore and operating globally. Sygnum has received its Swiss banking license in September of 2019 and the bank enables its clients to invest in digital assets in a secure and convenient way with a complete trust. The services provided by Sygnum include institutional-grade custody built by Custodigit, with a fiat-digital asset gateway, brokerage, B2B banking services and lombard loans. On 18th of September 2019, Sygnum’s first customer transactions were publicly recorded on the two most important blockchains, Bitcoin and Ethereum.

You’ve been a Senior Manager at Swisscom since 2009. Why did Swisscom believe that the time was right to enter the custody space and launch Custodigit?

Swisscom has been perusing the digital asset space already for several years. In 2017, we have all witnessed the rising demand in the crypto currency space, the ICO boom and stagnation of the market in the beginning of 2018. Even though, the space was not regulated, it has clearly depicted the capabilities of technology and how it could simplify our daily lives. Swisscom and us, we strongly believe that future lies within the digital asset space and by 2027 digital assets will represent a paramount chunk of global GDP. In addition, we see rising interest from financial institutions such as banks and asset managers who would like to enter the digital asset space. In Germany, BAFIN with its current regulatory initiatives acts as another trigger point for the market as well. As far as we heard more than 55 players expressed their interest in the new Crypto license. If we analyze the current digital asset financial market infrastructure we observed that there is a lack of institutional grade market infrastructure and inefficiency. Custodigit’s vision is to support the set-up of an institutional grade market infrastructure for crypto currencies as well as tokenized assets.

Custodigit provides secure access to and storage of digital assets through an institutional investor-grade custody solution. Why is this important for financial institutions?

Institutional investors continuously express their interest in digital asset space and several banks have started taking steps that would enable them to provide their clients with crypto offering. The custody and trading part has always been a challenge for financial service providers. Custodigit provides an institutional grade ‘Bank in Box’ platform to regulated financial service providers, so that they are able to offer Crypto Currencies as well as Digital Assets to their customers without high up-front investments and a short time to market. For financial institutions it’s important that they have the necessary functionality in order to run their business processes (e.g. Settlement) in an automated way to ensure efficient, secure and compliant business process. In order to reduce their supplier risks, financial institutions need an enterprise ready platform which is audited and provided and operated by a trustworthy and stable organization. This is exactly what Custodigit is providing together with Swisscom who is very experienced in operating highly security sensitive banking infrastructure.

Could you discuss some of the cybersecurity risks that currently exist for digital asset custody solutions?

There are various cybersecurity risks associated with digital assets and two of them are highly imperative to take into account.

  • Storage of private keys: Numerous crypto enthusiasts store their private keys on their laptops. It is easy for hackers to access this information and once the key is stolen, it is impossible to get the funds back. Once you lose your key, you lose your investments permanently.
  • Exchanges being hacked: Currently majority of crypto exchanges are not regulated and due to that they do not have same level of governmental oversight and auditability as traditional regulated institutions. During the past several years, numerous exchanges have made headlines because of security breaches. Coincheck had more than USD 550 million worth of crypto stolen by hackers. Bithub lost around USD 30 million of its clients digital asset holdings. Custodigit is working closely together with security and audit experts in order to provide an institutional grade Digital Asset platform and is using the proven infrastructure of Swisscom.

What are some of the measures that have been taken by Custodigit to protect clients from these cybersecurity risks?

At Custodigit, we take the matters related to security very seriously. Custodigit spared no time and energy to define an end-to-end security framework developing a holistic view on risks and systematically designing redundant countermeasures. Wherever possible, Custodigit adopted the highest security standards and went an extra step to have its procedures and infrastructure audited (ISAE certification). As a company, we are obliged to comply with Swisscom’s strict security framework. The policies we have in place ensure that no individual, team or organization is able to compromise the security of the assets: strict segregation of duties and responsibilities, minimum 4-eyes check for all critical activities, regular controls of personal activities and backgrounds, different cryptographic libraries for addressing risks associated to zero-day attacks.

Each transaction is approved by multiple individuals or groups of individuals.

Could you discuss some of the key core features that are currently available to Custodigit clients?

We would like to emphasise that our target market is regulated financial institutions such as banks, exchanges etc and our platform offers all the required business functionality to provide a digital asset market service offering. Our platform enables the clients to buy, sell, transfer in / out digital assets (end-to-end). It can be integrated with any core banking system. In addition, we support smart order routing to various liquidity providers such as brokers and exchanges. From security perspective, the security system is audited with ISAE 3402 and 3000 and ISO 27001 and 2000 certificates. Currently we support following digital assets – BTC, ETH, XRP, BCH, ERC20. Our platform can be white labeled with adaptable user interface and APIs or available as a SaaS service.

What are some of the clients or banks that you are able to discuss that currently use Custodigit custody solutions?

As you are aware, currently we have bank Sygnum as a client. They are using our full solution including custody and brokerage. We are currently in negotiations with other regulated financial institutions located in Europe. Unfortunately we cannot disclose names yet. We have also signed a deal with one of the biggest reinsurance companies for provision of insurance coverage for digital assets. Our goal is to solidify our base in Switzerland and Germany and expand globally.

Are there any types of restrictions on the type of digital assets that Custodigit offers custody services for? 

Currently we support following digital assets: BTC, ETH, XRP, BCH, LTC, ERC20. We usually select digital assets based on our customer’s request. We do not have specific restrictions; however prior offering a digital asset on our platform, we do our due diligence. If we believe that the digital asset could in any form or shape harm our reputation within the market, we refuse to offer it. Based on our market observations those are relevant digital assets for financial institutions. Currently, Custodigit is expanding is platform in the direction of tokenized assets as well.

Is there anything else that you would like to share about Custodigit?

We are Swiss based company and we strongly adhere to Swiss banking industry practices. We strongly believe in importance of reputation and protection of clients’ funds. Since Swisscom is our major shareholder, we have to take security framework very seriously and ensure that our clients’ funds are stored safely. Safety and regulation are in Custodigit’s DNA.

Thank you for the great interview, readers who wish to learn more should visit Custodigit.

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Eden Dhaliwal, Global Managing Director, Conflux Network – Interview Series

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Eden Dhaliwal, Global Managing Director, Conflux Network - Interview Series

Eden Dhaliwal, is the global managing director at Conflux Network, an open protocol for a new world of DApps, finance, and Web 3.0. As a fast and secure public blockchain, Conflux Network combines Proof of Work and a Tree-Graph structure to power a new generation of decentralized commerce.

With 14 years of experience in emerging tech, Eden is an industry leader in discovering, incubating and investing in the next generation of the internet. Eden holds an MBA from the Rotman School of Management at the University of Toronto, and received a bachelor of science in mathematics from University of Manitoba.

Could you share the genesis story of how Conflux Network originated?

Conflux started out at Tsinghua University, China’s most reputable university, as a research project focused on finding ways to scale up blockchain to make it faster and more secure. Once investors like Sequoia Capital, Huobi Group and Baidu Ventures showed interest and invested, the project turned into a well-funded venture with the aim to launch a global public blockchain network. Dr. Andrew Yao, who is the only Chinese recipient of the Turing Award, and various deans of top blockchain and technology collegiate programs, are among those working to create this next generation of distributed systems. Conflux is now overseen by a diverse global team with the mission to promote cross border collaboration by developing decentralized open source technologies and facilitating open commerce.

What is the mission statement of Conflux Network and how does it differentiate itself from other blockchains?

Conflux Network is seeking to improve security, speed and efficiency across a number of industries and relevant business challenges from finance to government.

A fundamental issue for base layer blockchain protocols is scalability and speed. We’re one of the few layer-1 protocols using a novel PoW-integrated DAG structure providing between 3,000 and 6,000 transactions per second for enterprise applications. That structure, called Tree Graph, is an energy-efficient proof of work mechanism that allows the network to pursue efficiency without sacrificing safety, decentralization, or trustworthiness.

To compare our transaction throughput to the industry standard, Conflux Network’s technology features a reduced confirmation time and increased transaction throughput of 6,400 transactions per second, while Visa handles about 1,000 to 4,000 per second.

In 2020, you signed on with Conflux Network to lead its expansion in North America. What attracted you to working with this company?

I had conversations with Fan Long, one of the founders, over the course of a year about Conflux Network’s breakthrough technology and its unique position in the China market. When I travelled to Beijing to meet the team, it was clear to me that this project was not an ordinary layer 1 blockchain project. From prominent investors like Sequoia Capital to leading mining operators like F2Pool to a fast growing developer community, it was easy to see that Conflux has many brilliant and incredibly ambitious people behind it, determined to make it a success. And when you take into account that Conflux is regulatory compliant and has incredible relationships with enterprise, government and developer communities, I became convinced that Conflux has a clear and unimpeded path to capture market share in China well beyond any other blockchain project. Conflux is a bit of a sleeping giant and the opportunity to introduce it to the world intrigued me.

Conflux is the only state-endorsed public, permissionless blockchain project in China. What’s the current relationship that Conflux Network has with the Chinese government?

The fact that Conflux was born out of academia and conducted a regulatory compliant fundraise, has always allowed us to develop a trusted and productive relationship with the Chinese government. Representatives from our organization sit on the National Blockchain and Distributed Accounting Technology Standardization Technical Committee, a group formed by the Chinese Ministry of Industry and Information Technology, to discuss and set industry standards for distributed ledger technology.

This relationship is beneficial in many ways. It gives us access to China-based communities, marketplaces and business channels through an extensive network of developers, users, investors, and enterprise industry experts, while increasing reliability and risk mitigation through regulatory compliance and advisory from the Shanghai government.

In partnership with The Shanghai Science and Technology Committee, Conflux Network has created the Tree Graph Research Institute to advance education in blockchain development, particularly public, permissionless networks. Additionally, and also supported by the Shanghai government, Conflux plans to establish an Incubation Center to further innovation in emerging technologies.

Conflux recently began the second phase of its mainnet rollout, Oceanus, which will focus on mining initiatives and the PoW algorithm. What’s the most important aspect of this rollout?

Overall we’ll be focusing on an all-around pilot run around our mining algorithm, DApps, Dex, and other DeFi products with our ecosystem partners. The network features and functions will be gradually released to the community in order to increase the level of decentralization while maintaining high-levels of system security and performance throughout the network. This will ensure that the team’s focus and attention will not be affected too much by the secondary market fluctuation.

To break it down a bit more, during the first half of Oceanus we’re organizing several mining campaigns, ranging from mid-scale with hundreds of participants to large-scale with thousands. This will even further verify the stability of our network. Following that, once we’re sure of the network’s security and stability and we have the right amount of network contributors, we’ll migrate onto the official Conflux proof of work mining algorithm.

Could you share your views on the state-backed blockchain infrastructure project BSN (Blockchain-based Service Network) that was recently announced out of China. What are the implications of this to the blockchain landscape in China?

The goal of BSN is to advance the blockchain ecosystem in China. The Chinese government identified blockchain technology as an issue of national importance. The technology improves the efficiency of various business processes and drives the innovation of new financial instruments. BSN infrastructure, along with the burgeoning ecosystem of compliant public chains will play a pivotal role in achieving this transformative vision.

You are also a partner of Outlier Ventures which examines token economies for investment and advisory opportunities. What do you personally look for in potential investment opportunities?

Generally speaking, the investment areas that interest me the most are web3 infrastructure, developer tooling, DeFi and decentralized data economies. Aside from having a solid team, I’m most interested in understanding the intrinsic value and demand side of the product and/or technology. Traction and a roadmap that can demonstrate product-market fit, community engagement and how tokenization will unfold from an economics, governance and regulatory standpoint are pretty fundamental for me.

Another key question for me is how network effects will take shape. I typically like offerings where a consumer can be a creator at the same time, and the product has ‘“Lego-like” components and toy-like appeal that users can play with for further innovation. This adds to the likelihood of value being generated for the product or network.

Is there anything else that you would like to share about Conflux Network?

We’re very excited about the steps being made in the DeFi ecosystem. To help push development forward, we have developed a cross-chain protocol ShuttleFlow. This, among other DeFi use cases, will play a major role for financial inclusivity, stability, and security, especially in post-COVID economies where we are seeing a rapid shift towards digitalization.

We recently launched a 2.4 billion CFX token (approximately $240 million) rolling grants program dedicated to advancing innovations in software development and research for the Conflux Network ecosystem. The multi-year grants program is designed to kick start the creation of essential components of the technology stack and accelerate venture building on Conflux. Another objective of the program is to get closer to the developer community, understand their vision for the network and support them with requirements to drive innovations.

We’re also working closely with governments and enterprises in China on various blockchain projects like storing contracts and certificates of architectural design on blockchain, tracking of parts on blockchain and provenance of suppliers, a public information systems project, a project with a power corporation for traceability of green energy transfer, among others. The Hunan government recently endorsed us, which is the second of its kind for Conflux after Shanghai’s government did so last year.

Thank you for the great interview, readers who wish to learn more should visit Conflux Network.

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