SPEAKER_01: 0:00

Hey, hey, hey, welcome to this week's episode of Blockheads Blockcast. I'm your host, Takatoshi Shibayama. I'm also the head of APAC for Ledger. I aim to uncover the creative, intelligent, and radical minds who are shaping the crypto industry today. I'm as crypto curious as anybody that's tuning into this show. We're doing this together, guys. Let's go. Welcome back to another episode of License to Shield, the offshoot of the BlockCast Normal series, where we discuss the weekly recaps of what is happening in the ever-changing landscape of crypto, the markets, and anything else that comes to our minds. Before we start, everything we say here is not investment advice, business, relationship, or friendship advice. I'm Takatoshi Shibayama, the intergalactic host of crypto, and I have here today with me Lisa J.Y. Tan, CEO of Economics Design. How are you doing?

SPEAKER_00: 0:55

Great. Great to be back.

SPEAKER_01: 0:56

Love it. Hello, hello. Nice to be back. Nice to

SPEAKER_03: 1:03

see everyone.

SPEAKER_01: 1:05

Absolutely. And today we have a special guest, Jonathan Liu from Blockhead. He's a journalist working for Blockhead. Welcome to the show.

SPEAKER_02: 1:13

Happy to be here. Thanks.

SPEAKER_01: 1:15

Yeah. So I think this last month, the crypto Asian conference circuit has kicked off. I've already been in so many countries. I kind of forget. Jonathan, you were with me. in bali for the coin fest you're a newbie there i'm a bit jaded so i'm gonna refrain from any comments on the festival but um tell us your experience of coin fest and your takeaways

SPEAKER_02: 1:38

it was amazing i actually had quite a few conversations with the locals i found them super friendly super welcoming the overall festival i had very good vibes from the festival it was my first moderating my first panel so overall it was an amazing experience and hopefully it won't be the It's

SPEAKER_01: 1:57

the second year that they did it in Nuanu City, which is like north of Canggu. And originally, apparently the founder of that Nuanu City is one of the, I guess, co-founders also of Burning Man. So he actually made the whole set, the whole area a little bit, how is it, Burning Man-ish. So you got this like big, you know, man statue or human statue in the middle. And there's like a whole area where you could play music and all that kind of stuff. So it's a really cool place. Last year, they did it at that main area right by the ocean but they extended it this year so they have a whole different section in the back where they took all the booths and everything indoors so that people are not like in the scorching heat and they're rather indoors in the AC so I think that was a nice touch to it and then it also turned it more into like a festival where you have like you know food areas the music areas and all that kind of stuff it was really well done I really liked it as well yeah Jonathan tell us what kind of conversations do you have there

SPEAKER_02: 2:54

so the panel that I moderated was on what makes the ideal blockchain is it so there's the blockchain trilemma three critical aspects of any blockchain tech is decentralization security and scalability so the conversation I had with the three panelists were around for their individual blockchains what was the one thing that made their blockchain tick so we had Sean Tabrizi from Polkadot we had Moody Gipto from Polygon Labs and we had Mario from Bithnet so the Overall conversation, the shared consensus was shared security was the thing that all these blockchains focused on in order to do what they do best.

SPEAKER_01: 3:34

And what does that mean by shared security?

SPEAKER_02: 3:37

Shared security, everyone agreed that we will be living in a multi-chain world. So when you have multi-chain, you have different applications and each of these applications are sitting on different blockchains. And because security is a big concern, especially when you're dealing with millions and billions of dollars inside these smart contracts. Security becomes a concern when you're talking about transacting between different applications on different blockchains. So social security is a layer, is the ability to transact securely from one application on one blockchain to another application on another blockchain. And there's a whole bunch of different technologies that you can put together that allows, enables this shared security architecture.

SPEAKER_01: 4:21

So when you're saying that, let's say you're transacting between blockchains, so you're going through a bridge. and what they're trying to address there is that that bridge needs to be secure or are they talking about like the blockchain itself needs to be secure or at least at the same level of security so that you know people don't have to kind of think about okay if i'm cross bridging onto this chain it's less secure so i'd rather not do it and i'll just go somewhere else is that how they're thinking about it

SPEAKER_02: 4:50

actually it's both it's both of what you said so there's the individual blockchain security applications that run within the blockchain need to be audited and secured. But whenever you do any transactions across different blockchains, there's also that, as you mentioned, bridge security as well. So for bridges, they also have their individual smart contracts as well, and those need to be secured. So it's always talking about making sure that whenever you deploy your smart contracts on any chain, make sure you go through the rigorous smart contract auditing process and just make sure that your contracts are as secure as it possibly can be. It can never be 100% because you don't know what you don't know. So some of these blockchains, they do test and prod. So there's different philosophies around this whole thing. But at the end of the day, the more security, the more rigorous checks that you do, whether it be through smart contract auditing, whether it be through different contests and competitions. I can't remember that company that does it, but there are different ways to make sure that your smart contract is secure. So yeah, as much as

SPEAKER_01: 5:52

possible. Most of the time when I actually look at websites of different different foundations, they always talk about how fast they are. It seems like that's the common kind of thread across a lot of the chains that we can do it faster. And I never seen, at least for me, I've never really seen anybody say we bet on security. And that to me kind of speaks pretty well because I'm in the security business, right? But I always thought that security never sells. It's really just a given. And we have to make sure that even though people don't really want to buy security, we make sure we wrap it in a way that it's already there. And then we give them the features that they want. Lisa, I mean, you advise a lot of foundations and projects. I mean, what do you think about this shared security? I mean, is that more important compared to like interoperability or scalability?

SPEAKER_00: 6:37

Yeah, so I think it depends on who we're asking. Right now, I'm working a lot with enterprises and these guys, they transact significant amounts every period. And the key thing to care about is security. That's the only thing. I mean, if you think about it, cybersecurity is a dedicated department within any company any serious company, just focusing on security, cybersecurity. So, cybersecurity and the different aspects of crypto can be a different department within cybersecurity. There's something of utmost importance. And if you think about it, cybersecurity really came up when the web transformed and started transacting financially. Not just transacting information, but transacting in financial terms. Once there's financial terms involved, security becomes very important. It's more important than speed, it's more important than interoperability and these companies especially when we talk about stable coins or we talk about huge amount of tokens that represent cash or represent money being transacted around security is the most important thing and once you have that done everything else can be solved easily bridges are a big concern not that they are a problem but there is one of the places where it's a bottleneck or potential bottleneck in security because everything within one system can be to a certain degree audited but once you your digital assets leave an ecosystem to move towards another ecosystem, there can be little gaps and holes where security can be a bit of a danger.

SPEAKER_01: 8:06

Yeah, I mean, I think bridge has always been like the weakest point for a lot of the technologies that's been built out. I mean, there's always hacks there. Obviously, you have smart contracts as well that, you know, potentially get hacked and we've seen those things over and over again. You know, there's a lot of like holes that we probably need to fill in to make sure that, you know, enterprises, especially when you're talking about them, they're not really too concerned about like scalability at this point, right? I mean, I think what they want to make sure is that the money doesn't go missing and into some limbo state, especially because it's blockchain, you can't reverse it, right? So that's another thing that I think a lot of enterprises kind of have a little bit difficulties jumping over to this side is that, you know, once you do the transaction, how do you bring it back? I've seen different chains trying to solve that issue. And also the other point I actually saw was these days is privacy. So it's not your Z cash Monero type of privacy. But, you know, for institutions, they don't want to see the whole chain out in public and seeing billions of dollars going across different service providers. Nikhil, I mean, you've been working on a lot of these RWA stuff and obviously you're backed by Cardano. I mean, what is your kind of house view on what blockchain should be most focused on?

SPEAKER_03: 9:17

I think I've got a similar viewpoint to Lisa on this. I think it's about the particular use case, right? If you're looking at payments from one part of the world to the other in a visa type a format, then clearly you need speed. But it doesn't come with security being compromised. If you're wanting to send$10 from the US to the Philippines, you want to make sure the$10 is going to get there, not that$0 arrive in nanoseconds. So I think people will point to speed, and typically, you know, Visa-like transactions per second is thrown out there, but it depends on the use case. If you're using blockchain for database records, right, for medical reasons, for example, are these the types of transactions transactions that are going to be flying around at the rate of thousands or tens of thousands per second, maybe not. But you're nevertheless very much concerned that your own medical records don't get leaked out there and suddenly someone finds out why you went to the doctor this morning. So I don't think that there's one answer for all. It's about the use case for why blockchain has been utilized in that particular scenario. On the privacy point you made, also, we have the partner chain of Cardano, Midnight, which is being built specifically for this reason, to provide that privacy layer so that enterprise, institutions, regulators can have comfort that certain aspects of information that's on the chain will always be protected. And only with the requisite level of authority can you access that sensitive information. And that is going to become louder and louder and louder, I think, in certainly organizations or institutional minds in how they're thinking about blockchain. The idea of it's public and transparent and therefore that's the best way. We've definitely moved on from that. There isn't really a commercial universe where everything needs or wants to be transparent.

SPEAKER_01: 11:09

Compared to like your Monero's, obviously Monero, it confiscates the actual transaction itself. So like you don't know actually where it's going. That's my understanding of it. I mean, how does Midnight compare to that? What is private about Midnight?

SPEAKER_03: 11:21

The fact that it has a component, a privacy layer, right? So that you can choose, okay, I'm going to send something to Tucker. Jonathan's allowed to see, but Lisa is not allowed to see what I have just shared with Tucker. That's essentially the, you know, in layman's language, how it works. And so that gives you a lot more dexterity and flexibility around what information you're willing to share to anyone who's not part of that bilateral transaction.

SPEAKER_01: 11:49

No, it makes sense. And decentralization was also a topic that I think it was discussed. Obviously, we've been talking about decentralization for a very long time it doesn't seem like it resonates too much into the enterprise space obviously but you know it is part of security right i mean you don't want 51 attacks decentralization to me is security the more decentralized it is like ethereum you know it's it's a lot safer to transact on so you know is this not really talked about anymore is it is it true that nobody really cares about decentralization

SPEAKER_03: 12:21

i'll have a crack actually i'm going to borrow what lisa said last time we talked about this which is No one cares until they need to care, right? So decentralization, so sorry, I have to copyright patented Lisa right now. I'm stealing your expression of this, but decentralization is important because it means there isn't a sole point of attack, right? And now if everything works fine, no one should have to care. But the moment that something happens, everyone will care. It's just the same as insurance. You pay your insurance premium because you hope that nothing will happen, right? and you kind of begrudge the fact that you're having to pay that insurance premium but the point at which something happens you're really glad that you had that insurance premium paid and that you're covered and so i think that's the analogous treatment or way of thinking in my mind

SPEAKER_00: 13:09

i think there are two points to decentralization as well the first one is where will they care they will care when regulation becomes a thing we talked about regulations like two episodes ago and as part of the i think it's the digital assets act that it's going to be discussed this month one of the criteria, one of these points is that for decentralization to occur, there will not be one entity owning 25%. And that potentially defines decentralization in this space, and it could change as time goes on. But the other concern is that what about civil attacks? Yes, we can define decentralization in the very first layer terms. Okay, how many wallets and how much are these wallets holding? But behind the scenes, it could be the same person holding all the wallets. And that's actually a really easy thing to do. So I think if we're going to take decentralization more seriously, we have to go to a technical level to define that. Until that matters, I don't think anyone cares about it. In fact, if you think about it, it also makes from an objective, practical term. You also can't have decentralization too early because the founding team has the best understanding of what decisions should be made. I get that decentralization makes sense, but there are a lot of nuances in how that gets implemented. I'm very pro-decentralization, but I'm a bit cautious about the implementation of actual decentralization. I don't think we've seen anything successful anytime at all. Yeah, I'm curious to see how this turns out. It'll be a lot easier to organize in the digital world because decentralization just means a bigger challenge in organizing. But organization can be a lot easier in the digital world than in a physical world because you don't have people queuing up to make decisions. So until that becomes a problem, I don't think that's a big thing to solve right now. And there will be a lot of new tools and I think with the advent of AI that can help us to potentially make better systems to organize decentralization better. But I don't think we're at that phase

SPEAKER_01: 15:05

right now. And John, has that been discussed during the panel? It seems like a very interesting topic to dive into. I actually wasn't at your panel, so I don't know exactly what you were discussing. It's just an article that you wrote on Blockhead.

SPEAKER_02: 15:18

The 30 minutes went by a lot faster than I expected, so we did not get a chance to dive deep into this topic. But the Shared security consensus with the panel. Underneath that, you need decentralization in order for that to happen. So I would not be able to explain it as eloquently as Lisa did because I'm a builder turned journalist. So from a builder point of view, decentralization opens up a lot of interesting technical challenges. And these technical challenges are the very challenges that builders, developers want to try to solve. And you can't have shared security without decentralization. Those two kind of come in hand in hand. So going back to the blockchain trilemma, you can have two, but not three. So in order to have decentralization, you need security. And in order for security, you need to have decentralization. Got

SPEAKER_01: 16:07

it. Got it. Okay. Well, thank you for the recap. I actually went to Tokyo right after Bali. It was my first time to go to a Japanese crypto conference. It's called WebEx. It's hosted by CoinPost. It was actually really eye-opening. I've seen so many people queuing up to get in. It was absolutely mosh pit inside. So kudos to them to getting all that people in. I did see a few aunties and uncles just grabbing swags everywhere. But aside from those, I think there was a lot of buzz around it. And I've had the honor to be a panel for a couple of sessions. And a lot of them were around stablecoins. So this year, Japan has already issued the first stablecoin called JPYC. It's a company in itself. It's been funded by Circle and a few other companies. And And a lot of discussion was, what are we going to do with JPYC? A lot of people talk about cross-border payments and trading. I mean, those are the two main use cases of today. Obviously, there's a lot of people talking about it, and it was pretty boring because we've been hearing forever. I think what we need to see, especially for JPYC, Japanese yen is not the standard currency. It's always going to be U.S. dollars. So I don't see JPYC used for cross-border payments. But if you look at more of the domestic use cases. Nobody's just going to pay JPYC because, you know, as you all know, like, you know, fintech has quite evolved and you can do payments with QR codes and all these other things. In Japan, they have this thing called PayPay where you can pay on the spot, you know, it's linked to your credit card or your bank account. You don't really need the JPYC. But, you know, what I discussed was, you know, let's look further beyond cross-border payments and trading. You know, I think what the whole premises of like crypto was initially was trying to get a of things on-chain, whether it be consumer applications such as your Amazons of the world. If there is such a kind of on-chain Amazon, you know, you can pay there with JPYC because it's on-chain. You know, right now you can't do it on WebTube, or you can do it on WebTube, but there's no real significance for it. Just another side note that I've been working on more of the ID layer chains. So basically, if you go to an age-gated platform or some gated platform where you have to do a KYC and there your identity, your age, et cetera, you can use the chain to kind of get inside that platform and then you could do payments. So let's say using the Amazon example, again, if there's more applications such as that, where you can use your crypto wallet to verify your ID, get in and then do payments there, it totally makes sense. That's the actual use case that I actually think about. What do you guys think in terms of like, you know, there's going to be a lot more, you know, localized currencies that are going to be a stable coin going for or we already see in Hong Kong is doing it, Europe is doing it. How do you see the direction of this?

SPEAKER_00: 19:00

I think in the end of the day, it comes back to who's demanding it, right? USD became a stable coin, not because it should be the stable coin to come about, but because international trade is predominantly still done in USD. So there is a demand for it, hence you supply with crypto USD. With the other stable coins coming up, take Singapore, for example, right? We have the ex-SGD that has been around for five years. But there hasn't been really an uptake in its utility. And I'm quite surprised by it because there are quite a lot of people holding crypto in Singapore. A lot of people are trading crypto in Singapore. The amount of wallets per capita in Singapore is actually pretty high for a small nation. But just XSGD just has no take up. So whatever currency it is, it's not about the ability to tokenize it. I mean, that's great on the regulation part of things, but who is using it? If anything, potentially Chinese yen will be very interesting because Chinese yen is actually used quite a lot in the Belt Road Initiative across Asia, I think Latin America, and also parts of Africa. So it's a very mobile-first economies in the southern hemisphere of the world. So it potentially makes sense that people simply have mobile wallets and they're comfortable with trading digital assets or just tokenized assets. However, at least when I spoke to people, they're not very interested in using that because they're very worried that data is just completely tracked. So that's the downside. Now, I don't think we're likely to see a digital RMB coming up anytime soon because it competes with the government's CNY. So I don't think that's coming up anytime soon. If anything, there is the digital euros coming up and there has been quite a lot of companies issuing that. I think Banking Super issued that just beginning of this year or towards end of last year. It's having some upticks, but it's not really being talked a lot about anytime soon. There have been said another interesting conversation that's happening now is central asia the asia corridor so your kazakhstan your kyrgyzstan your georgia these countries the central banks are looking at stable coins as well they're looking and thinking about how can they use stable coins because they're actually quite interesting nations sandwiched between growing growing populations and people are looking to trade more since u.s is kind of cutting itself out of the world that means the rest of the world comes together to trade a little bit more and if you You can trade with digital assets that will be a lot easier, more convenient. If central banks can support these initiatives, then there can be a lot of FX trade going on on a much higher level as well. So that's quite interesting. And I just don't know if people are interested to use that. I don't know about the demand side. But it's interesting to see central banks being very supportive of this.

SPEAKER_01: 21:45

I wonder if there's a lot of trade going on between the staun countries. I do see this world going into a more multipolar world. It's not just going to be the US dollar to be the standardized currency for settlements. And there's going to be various currencies coming up. And then I could see the use case for those winning currencies and being used as stable coins for settlements. But with these smaller countries where I would assume a lot of people save not only in their currencies, but in other currencies as well, including gold and et cetera. And the use case for their stable coin, I wonder what is that going to look like? In a way, it kind of like dilutes the strength they're own currency, right? I mean, if I had to guess, I know that in Argentina, Uruguay, those countries, they often save in US dollars. They don't want peso because it's just falling like rocks. So basically, everything from real estate, anything expensive, real estate, cars, anything that's expensive is priced in USD. So people have to have USD in order to pay it. So it further weakens their currency just because of this habit of saving in US dollars. And especially, I guess, for, I don't know, the economic situations of Central Asia. But, you know, to me, it feels like if you're going to issue a stable coin amongst these countries, I mean, maybe there is a economic, not a zone, but like a collaboration between those Central Asian countries to create something of their own where they can, you know, cross trade with each other. And then the stable coin actually makes sense. Nikhil, you got anything on this? I mean, you go around the world talking about these things as well.

SPEAKER_03: 23:19

I mean, I think there's a question of relativity here. So people in Argentina probably do choose to or would prefer to hold U.S. dollars over the local currency. But if you look at the rate of debasement in the U.S. dollar, at some point you're going to be looking for another currency as a store of value. I think while it remains the main trading currency of the globe, then there is an incentive and an appetite for stablecoins to mainly be U.S. dollar backed. But to the earlier point, I think a Chinese currency that may well overtake the U.S. dollar as the main trading currency of the or indeed regional ones, I think are really interesting construct. We've seen discussion around BRICS, right, having their own version of a stable coin. Will they actually get there? Because clearly there's a lot of discussion and politicking, I'm sure, that happens, right, to get that over the line. But I think it raises some interesting questions about what do we mean by stable when we say stable coin? Because I've, you know, certainly in recent months, there's been all sorts of things referred to as a stable coin. And I would question whether or not it's actually stable or not. But by extension of that, maybe some of these more algorithmic stable coins that we see in more crypto native world are something that should be given more weight on. Now, I don't think they'll take off anytime soon because it's just too much of a gap for people to wrap their heads around, right? How does that work? But I think that becomes a very interesting scenario to think through when you're looking at the archetypal US dollar-backed stablecoin becoming worth less and less and less. Compound that with tariffs and whatnot that are happening now. And where is the demand going to come from for US dollars going forward?

SPEAKER_01: 25:06

I mean, also, I can add to that, that the three major rating companies have downgraded the US government bonds down to AA status. And that, I think, is a huge wakening call for a lot of people to re-evaluate whether US dollars should be the main currency of the world. Because As you know, including Japan as well, we all have a debt problem that we cannot solve. And I think this is going to continue to heavily burden the country going forward. And if I put on my crypto native hat on, that is the reason why crypto was created, wasn't it? I mean, it was supposed to avoid governmental failures, monetary failures, so that you have an alternative currency that you can store your money. And I think it comes around full circle to think about what stability This is a very interesting scenario that we're living

SPEAKER_00: 26:06

in now because back in the 1900s, or actually back in the 1800s, there wasn't a US dollar. Each region has its own currency. It's only one day a bunch of people came together and decided, you know what, we're going to have our own currency and then the entire country is going to use them. So that's one situation that you see a lot of new currencies being created. Like Nicole said, it just represents a different form of stability because it's pegged to something and everyone's just creating their own currency, which seems to be a natural part of the process. The other thing is that at some point, countries were all pegged to each other. At one point, all countries were pegged to gold and then they realized, oh, there's only X amount of gold, so only US dollars pegged to gold and we are all pegged to US dollar. And then they realized at some point, this doesn't work anymore and every currency has their own floating valuation. And so it just seems like we're repeating this entire process in the crypto sphere with new technology. And I think the only thing that's going to be different this time is that we're going to shorten this learning curve. And I wonder if we actually learned anything. But there might be a natural process in evolution as we're finding a tool, an asset for coordination, which is currency, to help us trade and interact better with each other. And yeah, I'm excited to where this is going because it just seems like a mess right now. And more stablecoins are going to be created. More digital currencies are going to be created. And at some point, there will be too many. And at some point, it makes no sense to create a stablecoin anymore. So it potentially makes sense if you're something like a Roblox. You have a group of users and they are already doing a lot of microtransactions and it's cheaper to use your currency that's pegged to a standard currency to allow for trade and ease of transaction. Then you don't have to pay master all these little microtransactions. Potentially makes sense there. But I don't see any other than games. I don't see any community with large enough critical mass that has so many transactions toward a brand new stable coin to be created. So yeah, it seems like a cycle that we're repeating over again and waiting to see who wins at the end of this round.

SPEAKER_01: 28:15

It's more like the evolution of Homo sapiens in my view. I mean, we try to scale ourselves by creating cities, countries, you know, and then globalize ourselves But in the end, I mean, I think Homo sapiens are supposed to be a little bit more tribal. And I think that we've already see that the world always expands and then shrinks again and expands and shrinks again. And we're always repeating the same cycle over and over again, which is quite funny to kind of discussing this in this time where protectionism is talked about a lot. And for me, like, you know, if even if you think about like democracy or even communism and all these like political ideologies, they don't scale in size. None of it does, you know. they're meant to be in a small community and then you then socialism works communism works democracy works and then i think this is the same with currencies as well i think we're going into the world where we're going to have like multiple different currencies not just fiat currencies but cryptocurrencies where it's more community-based as opposed to a scalable society where you know there's only going to be one currency that rules everything and that's kind of like what i think about what when i look at crypto communities it isn't a community in itself it's global but it's a small community

SPEAKER_03: 29:26

yeah i think the money in and of itself isn't a thing right it's only fluid it's a thing that allows you to do the thing that you want to do you want a guitar you want a beer you want to buy a laptop whatever right you need money to get that thing that you need and so at least at that conceptual level there is no need for lots of different currencies we should just be able to transact in one way now of course if you go back to bartering times, then that's the other end of the scale where I'll trade you my camel for your two Ferraris or whatever it might be. Where are we on that scale and where should we be? I think the idea of currency is really just a function, or fiat currencies at least, is a function of artificial boundaries that have been created, artificial geographic boundaries, which none of these existed. We're in Singapore, this particular boundary did not exist 61 years ago. So the fact that there are lots of different currencies is just a function of geopolitics. At a much more individual level, we should just want to be able to transact in one thing. We should not have to care. So should I today have to think about USDT versus USDC versus something else? No, I just want it to happen. Now, maybe we'll get to a point on this where there'll just be an overall abstraction, right? Where the fee required or the cryptocurrency required to get fees, right? And the chain that you're transacting on gets abstracted away, which is the way it should be. And so then there may well be hundreds of stable coins, right? For example, do we need all of them? I don't really care. The other question would be, do all those hundreds of issuers of stable coins, are they making money? Because there's now hundreds, if not thousands of stable coins. That's for them to care about, right? Me as an individual, I just need things to happen. Money needs to be the lubricant for me to get to my cup of coffee. That's all I care

SPEAKER_01: 31:28

about. It's a wonderful discussion around everything that went from Bali to Japan to stable coins and then the fundamentals of humanity. Well, thank you very much for your time. And Jonathan, it was lovely having you on our show. Thanks very much. Thanks for listening. If you like what you hear, give BlockCast a like and subscribe on Spotify and Apple Podcasts. And for your juicy Web3 news, keep updated on Blockhead.co. Catch you all in the next episode.