The State of Enterprise Blockchain and Decentralized Finance

The State of Enterprise Blockchain and Decentralized Finance: Headshot, name, and title of Peter Wokwicz, senior IT consultant, executive, and blockchain expert

The views expressed in this podcast are those of the guest alone and do not reflect the opinions of Business Talent Group. This information is not legal, financial, or tax advice and is being provided for educational purposes only. Investments mentioned in this program may not be suitable for you or your organization. You should make your own independent decision regarding them or talk to a licensed accountant, lawyer, or financial advisor to see what’s right for you.

Peter Wokwicz is a senior IT consultant and executive who helps companies overcome complex challenges and stay ahead of industry trends. As an independent BTG consultant and executive, Peter has led client's IT departments and their technology planning, has led enterprise blockchain implementations, and helps organizations create robust blockchain, eCommerce, POS, CRM, and organizational strategies.

Peter has been involved with blockchain since its inception, including several evolutions of blockchain tech. He also writes and speaks extensively on the topic.

In this episode of BTG Insights on Demand, Peter joins BTG CMO Jennifer Napier to discuss a few of the biggest trends shaping the market right now, including blockchain, cryptocurrency, and decentralized finance. Listen to the episode or read our lightly edited transcript of the chat below.

Jennifer Napier

Hi Peter. It's great to have you on the podcast today.

Peter Wokwicz

Thanks Jennifer, it's really great being here with Business Talent Group and discussing a topic I'm so passionate about right now—but also realistic—and something that is essentially changing the world as we speak.

Jennifer Napier

Absolutely. Well, we're all hearing a lot about blockchain right now. For those of us who are new to blockchain technology, can you describe what it is?

Peter Wokwicz

Yes. Today blockchain encompasses a lot of different areas and has really expanded into thousands of different use cases or business cases. Some are incredibly complex, and any of these topics can often be a lifelong career choice or a lifelong focus or spend 50 hours a week on—so we're not going to try to digest the whole concept of blockchain here. But on the surface, blockchain's been around since 2008, that's when it really came to inception, the modern incarnation of what blockchain is. And it's been more commonplace and more in the common nomenclature for, I would say the last few years, but it's already impacted many industries and technologies out there.

The first time I understood the concept of blockchain, I thought it was beautiful. There's no better word to describe it. I think beauty is the word that comes to mind. I have a background in physics, and I remember back when I was much younger in college, and I remember the first time I fully understood Einstein's general theory of relativity. And I thought the same thing, beautiful, it just goes together so perfectly. It was the same thing I thought of when I really understood blockchain is just how it's beautiful, how it works together. It's a perfect system of trust and records and checks and it just—everything comes together. And that's why you're seeing the popularity in blockchain right now, is because it does have that beauty behind it where things just seem to work perfectly within it.

But to get into describing a little bit, what blockchain is, at its base it's all about the blockchain. A blockchain is simply a digital record of transactions. It's not that much different from a database, but it's not a database. It's all decentralized, meaning the records exist on many different systems, and any transaction added to the record needs to be validated by the majority of the nodes to get consensus. You'll hear that word consensus a lot, and that essentially means that the ledger providers need to come together and say, "Yeah, that's a valid block and, yes, we give our stamp of approval to it." And the ledger, which is a historical record of transactions, that's where all that information is stored. The key point there is that it's very hard and often impossible to go back and change that ledger once it's already written. That's one of the great things about blockchain is it's a very good historical record of assets and transactions involving assets. Transaction is the key word here. So, you need a transaction of some sort to have a blockchain. If you keep that in mind, it's kind of relatively easy to understand blockchain. It's keeping track of transactions, that's what it does so well.

There's probably three or four key words that really describe blockchain and what makes it unique and I think consensus, which I already mentioned, is one of them. And that's just everybody has agreement on that blockchain to the same rules—we all understand what the rules are of that blockchain. Another one is provenance. Provenance is really that the history of that asset on that blockchain is traceable. You can go back and see the history of that asset, whatever the asset is. And when I say asset, it could be crypto, it could be a building, could be tokens, could be digital art, could be anything. Asset can really almost be anything on a blockchain.

Immutability is another one, and what essentially that really means is once a record is on a ledger, it can't change. It's permanent. And that's a great thing about security. A great thing about the history of assets on a blockchain is that it's permanent. The last thing is probably finality, which is what I call it. We don't have people breaking off and saying, "Hey, we want a different ledger, we don't want to follow that ledger that you guys are following." So, it's one ledger for the entire network and that's very important.

There's a lot of different areas around blockchain, and I think the top three that are most forefront today are enterprise blockchain—which I used to call it blockchain for business—it goes by both names. And that's really how businesses are using blockchain to enable their transactions. We're seeing a lot of that already. Any major business either has a plan for blockchain or is already using blockchain. A lot of organizations out there use blockchain for a lot of things, and that's really the whole world of blockchain for business or enterprise blockchain.

Then there's cryptocurrencies, which I think everybody's familiar with. Everybody knows what cryptocurrency is today. There's Bitcoin, there's Ethereum—however, one important note, it's important to separate blockchain from crypto. You can have and use a blockchain without crypto. Hyperledger, for example, is a heavily used blockchain that does not have a cryptocurrency attached to it. So, even though crypto is one of the great uses of blockchain, you can have blockchain without crypto.

The last area that is probably one of the hottest areas in the last, I would say, 12 months or even less, is decentralized finance—and this is really banking without a bank. It's lending, borrowing, earning interest via blockchain solutions, and that's one I'm just incredibly excited about. It's something that's talked about, and it's growing so fast, it's changing every day.

Then some lesser known but just as important areas out there around blockchain such as smart contracts—you may have heard the term smart contracts. This is really what Ethereum is known for. So, now you have smart contracts that can fulfill transactions in the future based off external events, and that's all in blockchain. It's all secure. It can't be disputed in the future. So, smart contracts is a very important concept within blockchain.

There's ICO, initial coin offerings, and I won't go in depth on that, but it's really initial public offering (IPOs), but a much simpler, faster, and better way of doing it. Decentralized apps is another one—also called dapps—and I guarantee many people listening right now have already used dapps that are running on blockchains and haven't even realized it. That is technology where it's really applications that sit on top of blockchains and that's something that, again, you run into them every day and every once in a while I'm surprised that some of the applications out there do run on blockchain.

We have decentralized exchanges, often called DEX. Essentially, imagine the New York Stock Exchange with no central authority, open 24/7, very low transaction costs. Again, something newer that I’m very excited about.

Stablecoins... just to touch on a couple other things very briefly here. Stablecoins are essentially crypto that is tied to a stable asset, like a U.S. dollar, like gold, something that doesn't move a lot. So, you have something like Tether, or U.S. Coin, that it's roughly paid to the U.S. dollar, so it always has a one-to-one relationship and there are mechanisms to keep it that way behind the scenes. But what this gives you is that if you want to transfer money from a U.S. bank account to a German bank account, right now you have to go down to the bank, fill out some paperwork, pay some fees, get not the best exchange rate, it may take a few days. Well, with stablecoins it takes a few seconds, costs cents for as much money as you want to transfer, and it's a better way of just moving money around.

Staking is another one. So, staking is a concept around blockchain that, if you own cryptocurrency, you can give up access to that cryptocurrency for a little bit to actually earn more of that cryptocurrency. It's based on the whole mining concept, but again, if you do own cryptocurrency you should look into whether it’s a cryptocurrency you can stake—and then you can actually make more of that cryptocurrency back, and that's just another little feature.

Last one here is really a tokenization of assets—another benefit of the blockchain—and that allows you to take assets, break them up, and sell them or distribute them, and they have ties back to it within the blockchain. So, if you own an apartment building and you wanted to sell equity in that apartment building, you can tokenize it and just sell it to investors. And they always have a trail back to that asset. And that also relates to non-fungible tokens, NFTs, which you've seen—jeez, even in the last couple of weeks I think I saw an NFT go for over $1 million, and I think it was some digital art. So, if you manage in digital art, if you're an artist and you typically would do it physically on canvas and you'd sell that, you know that's a work of art, it's done by you, you can prove that. Well, what if you do digital art? What if you do art online or do an image? How do you prove that it's yours? How do you have it have value? And that's where non-fungible tokens come in. You can attach it to a digital asset to prove that that digital art is there and it's on the blockchain. And I think that's something we've been seeing in the last couple weeks, just some high values there for some digital assets.

So, those are the major areas, Jennifer, and I just wanted to get that all out at the beginning and just specify that that's all the areas of blockchain. It gets so complex that when I talk to high school kids and college kids today, and they're interested in economics, they're interested in finance, they're interested in technology, they're interested in math, you've got to know blockchain. It's going to part of your career, or may even be your career. And I think that's very important to get that out there, that that's what happening. It's changing, it's coming quick, and it is a lot of the future here. I'm a realist around blockchain and I still say that. It does have problems, does have issues, but I think that's where the future is taking us.

Jennifer Napier

Thank you, Peter, that was a fantastic setup. I love that you started off by talking about it's all about beauty. You mentioned a couple words I wrote down here, trust, consensus, transactions, permanence, finality, and all of those together make me think about security and trust. So how secure are blockchain networks?

Peter Wokwicz

Yeah, that's really good question that is top of mind for many businesses, especially if they want to actually use some of the blockchain technology out there. But first off, I think one thing we have to realize: no major blockchain has ever been hacked. A lot of these have been around for 10 years and there's billions and billions of dollars incentive to hack these. So, it's proven to be one of the most secure technologies ever. However, there are crypto exchanges, there are smart contracts that are layered on top of these blockchains, there are decentralized apps that are sitting on top of blockchains that have been hacked—and they can be hacked. And that just follows the policy of any application you develop, it can be hacked, just because the flaw is in the application. A blockchain is really not an application, it sits below an application.

So, those things can be hacked, but even when you get down to the essential blockchain, there are some potential issues, which fall in the world of security. There's something called “51% attacks,” where you can have occlusion or have a miner have control over the transaction—have greater than 51% control in a transaction ledger—and then going about and duplicating transactions or changing historical transactions because now they have control of the integrity of that ledger. And we did see that happen. We saw it with a cryptocurrency called ETC. And I think that was maybe six months ago or so. It did happen. Again, a small cryptocurrency, not that big of a deal. We won't see Bitcoin or anything like that be subject to 51% attacks anytime soon, but it is something out there for the smaller cryptocurrencies and the smaller blockchains where that can happen.

We've seen what's called double spend, and that can occur when you have—I won't get into forks here—but when you have a blockchain fork, either soft fork or hard fork, it is possible to have a window in there where you can have double spend, which means I can spend the same cryptocurrency twice. It shouldn't happen in a blockchain, but it has happened and there has been people that have done that in the past with some cryptocurrency forks. I mean those are things that happen on the blockchain level. Everything else is really at the traditional security level, at the higher side.

Maybe the only other thing to bring up on the blockchain side is quantum computing. The great thing about quantum computing is you can take cryptography and you can solve it very quickly. So, what would normally take a regular computer a million years, a quantum computer could potentially do in hours, and at the heart of blockchain is this kind of hashing that could be broken by a quantum computer. But we have to keep in mind, the internet runs on the same type of hashing and if a quantum computer's going to break a blockchain, it can also just break the internet and shut down the internet. So, we have a bigger thing there. And one great thing we have about cryptocurrencies and blockchains in general, is we can update those. We can update the logic behind them. So, we've already seen even some blockchains actually already put in some triggers against quantum computing type of hacks. And so, again, look at the big ones—Bitcoin, Ethereum, things like that—those aren't going to come under quantum computing hacks because those have active developer networks, active people behind them that'll actually make sure that won't happen. But some strange esoteric blockchain out there that nobodies actually heard of, that doesn't have any development support, yeah, I mean it could be broken by quantum computing in the future.

So, I think those are probably the top areas of security to worry about right now. But it's not to say that somebody won't have other ones in the future to worry about.

Jennifer Napier

So, I shouldn't be worried about security, or I should be worried about security with blockchain?

Peter Wokwicz

So you shouldn't be worried about blockchain security.

Jennifer Napier

Okay.

Peter Wokwicz

The actual blockchain, don't worry about that. That's fine, don't worry about it. You should be worried about anything you do on top of the blockchain.

Jennifer Napier

Okay.

Peter Wokwicz

So, again, I compare it to when you're using an Oracle database. You can trust Oracle that they do a good job with their database, that the security around that database is pretty good. But you can do an application on top of that—you can develop an application on top of that database—and that application can be hacked to get in that database. So, it's the same with blockchain. There's only risk there in what you put on top of it, but that risk is no greater than what you typically do when you develop an application.

Jennifer Napier

Okay, and I want to make a note that double spending, that's also something I do. I believe I double spent the money I saved by not taking spring break last year because of pandemic. But that's for another topic. Okay, so let's turn to, you mentioned, enterprise blockchain, or how businesses use blockchain. How are companies using blockchain right now? Can you walk us through some examples?

Peter Wokwicz

Sure. Yeah, so I actually help companies implement enterprise blockchain solutions, so I'm very familiar with this. Most of what I've done there has been around supply chain. And supply chain, already—just to talk about how deep it already is, when you see those big crates being shipped, over half of those are already tracked on a blockchain when they're shipped around the world. So, you're already having things like that happen, and it's going to be up to 80% soon, I think even by the end of this year.

So, supply chain, tracking goods or even parts from manufacturing all the way through purchase, all the way even through warranty, we're already seeing that used. Hyperledger is one of the technologies used there, and that's actually one of the blockchains without a crypto attached and it's a private blockchain. We're seeing that used very much with supply chains. So, that's a big area.

Healthcare. So, there's more than 15 well notable companies that are implementing blockchain in healthcare. Mostly the use case right now is storing patient data and records and protecting access to those records. So, we're going to see a lot more in healthcare. I think the innovation around blockchain is still coming there. It's a little bit behind just because of the monster shift within healthcare to actually get anything implemented and getting a change done. But it's coming. It's coming quick. Factom is one that I've seen around that is doing a lot in that space already in healthcare.

And then we have some more obvious ones, which are just obvious business use cases: e.g. banking and payments. We've seen Ripple already started to disrupt payments and banking transactions a little bit. And there's a lot of other ways to do that. Even PayPal and Visa are talking about disrupting payments, but the real benefit in the last few years has been international payments. It's been moving money quickly and cheaply across borders. I think that's been one of the big benefits for business, that a lot of times, they don't realize it, but if they're paying an invoice from overseas, their institution, or their service they use, is likely already using blockchain to make that payment.

So, it's already being done in that space. We already talked about smart contracts a little bit. And really in businesses, any transaction you have can be put into a smart contract. So think of all the agreements that you have as a business, now imagine those being put on a blockchain with smart contracts. We're already seeing that happen a lot, we're seeing even attorneys and lawyers getting involved in that space to put things on smart contracts. And I've actually even utilized contracts already on smart contracts for businesses. Asset tokenization, I touched on briefly, but that's just really if a business does have an asset and they want to distribute that asset safely and securely and have a record back, they can really tokenize those assets. And that asset, again, can be anything you could imagine.

Another big impact that I think we'll see more of in the future, is really the person-to-person type of services that blockchain offers. Right now, I always say where does this lead us to go, some of these P2P services? How are they disrupting business and how businesses are getting involved? I use the term Uber without Uber. So, in a blockchain world, you no longer need Uber to get a ride to be a customer or be a driver. You can take Uber out of the equation and the money they take you can use that as savings. We're seeing that in other areas, where that trust is needed, but I think that’s a good example.

Getting back a little bit—and this also goes into healthcare a little bit—the whole concept of digital identity, having your identity on a blockchain and having you having control over that identity. So, we're already seeing some, like Civic, we're already seeing platforms out there where if you're a business, you can actually utilize these platforms for identity and identity resolutions.

Content and ads—if you're in marketing—that’s already happening. For example, Brave is a browser that's a blockchain browser. It's the fastest growing internet browser in the world. And it allows—if you create content—it allows you to get paid for that content through the browser technology. And if I'm using the Brave browser, the great thing I can do is that I can choose whether I want to see ads or not. If I don't want to see ads, that's fine, I don't have to see ads. If I want to see ads, I can get paid for viewing those ads, even have them pop up in a window or watch an ad video before I hit a website. I can get paid for those. And likewise, I can pay websites. I can pay content providers through Brave, even automatically if I want to. If I enjoy their content, every time I go out and read an article from X company, I'm going to send them their BAT token, which is Brave's token.

So, we’re seeing great things there. There are other content providers, there are authoring tokens out there—essentially whole networks around content and ads that you can provide content and get paid for, so it's great being a content provider in the blockchain space. There are ways to monetize your content much easier now.

A couple more here, so capital raising—we already talked about ICOs a little bit, but as businesses are looking to raise capital or looking to tokenize assets, it's really how do you do that in the blockchain world. We're seeing changes there very quickly. We're already seeing companies that are, from a stock perspective, having it all blockchain based. We're already seeing that happening.

So where is this all headed? I think enterprise blockchain, it's going to be seen as the primary business technology for business transactions. And again, I use the word transactions there. It's not going to replace a big database, it's not going to replace a large-dscale ERP system or any type of large system you use, but it will be at the heart of all transactions. I think of blockchain on the enterprise world as more of a platform. It's a platform to build off of, it's a platform to utilize. And it's taking long steps there and, again, it's accelerating into businesses as we speak.

Jennifer Napier

So, what I'm hearing is it's really across all industries and sectors, blockchain as a platform, for business transactions. Is that correct?

Peter Wokwicz

Yeah, I'll tell you the truth, every once in a while I think of a vertical or an industry where I don't think blockchain will apply there and then it does. So, I can't think of an industry that doesn't apply to, there's not a use case for. And a good use case for—not even a made up one—just a use case that will probably be used at some point. So, I haven't seen it yet, which surprises me actually.

Jennifer Napier

Do you have a super unique use case that you've seen so far?

Peter Wokwicz

Yeah. This is one super unique use case that's on the business side that if I go back to 2009, 2010, when I kind of understood Bitcoin, I thought, "Wow, this is perfect for self-auditing. Why doesn't a company or somebody, or a government, or a charity, use Bitcoin, record all the transactions on the Bitcoin ledger?" And then you know where all the money came from, you know where it all went, you have the self-auditing, you can do all of the analytics on those transactions. That whole self-auditing mindset. And I'm really surprised that hasn't caught on yet. I would imagine by now, if you would have asked me back 10 years ago, I would have expected all local governments to be using Bitcoin and be self-auditing, so anybody can go in there and see where the money came from, where it went. Or even businesses doing self-auditing and actually having this ledger to help their professional auditors or accounting actually figure out where things came and went.

So that's one area I think that really hasn't come to light yet, but it will. It will very quickly.

There are a couple other use cases there. Jen, if you want me to…

Jennifer Napier

Please, yeah…

Peter Wokwicz

... get into one or two others, I can jump into those. As I think about it here, the other one that maybe hasn't come to light—that's a unique use that maybe isn't popular yet as I expected it to be—is the whole concept of distributed storage and computing. To summarize this, everybody knows what a super computer is, and it's these big, central boxes that are huge, that can do–I don't know, I don't even know what the number is anymore—500,000 teraflops per second. Well, with blockchain technology, you don't need that centralized computer right now. If people have spare processing cycles, they can essentially put those cycles out there to be utilized, get paid for people utilizing those cycles. And if I'm a person and I need a super computer—I need it for, let's say, the next couple hours—I can pay to use that distributor processing. I can pay whatever crypto that is and I pay the people that are giving up those CPU cycles. And if you have idle CPU cycles out there, why not put them to use? It's more environmental, it works well, and it's a better system.

And the same concept goes with distributed storage. If you have extra storage to store data, why not have that utilized? And why not have both sides? I need storage, well, I want to pay you for distributed storage, and if somebody has storage, I'll be paid for it. That's probably another unique use case that I think we'll see in the future—it's just not quite here yet.

And there's one last one, because I think it’s relevant—and this gets out the business watching world a little bit but at the same time businesses are doing this, and if you're in this space, you're doing it—is the whole concept of voting. If blockchain is used in the whole voting process, you can keep secrecy, you can track—I can track my own vote to make sure it was counted, and it just makes a much better process. There are companies working on that, that are working on the whole voting concept with blockchain. I'll tell you, the stuff they're coming up with is much better than the current systems. And I think within the next couple years, we're going to see a smaller country or two out there actually go fully blockchain for their voting. There are some great companies working on it, even some companies that actually even make voting systems working on blockchain solutions, and I think that will be superior. Those are probably the top three that I think are a little bit more unique, Jen.

Jennifer Napier

Interesting. All three of those are quite fascinating. I want to go back to what you said earlier about how in the future, you see blockchain becoming the primary business technology for business transactions. We've already talked about security and you said not to worry, the platform itself is secure. Are there any other hesitations with enterprise blockchain technology?

Peter Wokwicz

Yeah. I think a lot of the hesitation there is because it's something new. It's something maybe unknown. And the bigger thing is that finding the people that know blockchain, who know how to build on blockchain, there aren’t not many out there. If I focus on the U.S. here, there are probably only a couple hundred people in the U.S. that actually fully get blockchain and actually can do an enterprise scale implementation on blockchain. It's not that many. And those resources are hard to get, and they're expensive. So, I think it's a resource deficit right now that is hindering it, and that is one of the hesitations a lot of people have when they see how much it's going to cost—and that you have to get on a timeline here that you're not even going to have the resources for three, four months down the road to even do what you want to do.

So, I think that's a big area of hesitation almost more than anything else right now. And that's the hindrance. I mean, other than that, there's not that much hindrance to businesses adopting it.

Jennifer Napier

All right, let me shift focus a little bit. You mentioned dapps, or decentralized applications, a term that's new to me. Can you tell me what these are?

Peter Wokwicz

Sure, yeah, dapps are pretty simple. Quite honestly, they don't look much different on the surface compared to a normal app you use every day, from a normal app you download or use online. But underneath that front layer, dapps are unique, because they record transactions on that chain, on that ledger, and many times they’ll use smart contracts to hold those details of transactions on how a future transaction will be completed. Many times they'll use the chain's crypto asset too, the currency, to pay for the transaction to settle payments.

If you really think of dapps, they are really frontpends built on top of blockchains. And it's almost a better platform from that perspective, because you have that integrity to the blockchain behind that application. And this is a little bit dated example, just because I participate in it a lot, going back a few years. A good example is the Augur network. So, it's a network for transaction kind of contracts among individuals. And it has a front end that's actually—it looks pretty normal, looks like a little trading platform. But it entirely resides on the Augur blockchain, that entire decentralized application. And it looks like a normal app from the front-end but behind the scenes it's recording and fulfilling everything on the Augur blockchain. There's no central, local database where everything is stored, and the transactions are essentially P2P, they're person-to-person. There's no central authority within that transaction, because you are using a blockchain.

And I think that's just one example that shows what dapps are. Again, going back here to something like CryptoKitties, which was on a blockchain dapp that was gamifying a blockchain, essentially. So, the list goes on and on, but if we just think of dapps as really applications where instead of having a traditional database on the back-end, they have a blockchain that is honestly—for a lot of applications where there's transactions on those applications—is a better platform than a traditional database.

Jennifer Napier

Okay. Did you say CryptoKitties?

Peter Wokwicz

Yeah, CryptoKitties, that goes back a little bit, but that was the first dapp that really got a lot of traction. That was maybe four or five years ago, but it was essentially you could buy a digital kitty.

Jennifer Napier

Like a cat?

Peter Wokwicz

Yeah, they kind of look like cats but they were essentially digital representations of cats. And you could breed them and everything else, and you could... It was gamified. But it was just kind of funny that the first big use of dapps was from a little cheesy game, for lack of a better term. But some of those crypto kitties were going for a lot of money, I can tell you that.

Jennifer Napier

Okay, understood. So, let's pivot from CryptoKitties to cryptocurrency. Blockchain technology is linked with Bitcoin and the broader concept of cryptocurrency. What are some of the uses of crypto right now?

Peter Wokwicz

Yeah, just to jump back briefly, I think I said earlier on, but crypto needs blockchain, but blockchain doesn't really need crypto. But crypto's one of the great uses of blockchain and to have a coin attached to a blockchain for payments, for smart contracts, and to reward miners and users and providers, is really a great advantageous evolution of the technology of blockchain. And when blockchain was put forth it was considered as that method. But you have to keep them kind of separate here. But we've seen an explosion of uses in the last couple years, as crypto's become more mainstream, everybody knows was cryptocurrency now is, everybody knows what Bitcoin is. It's no longer hidden, it's no longer something that only tech people know about. And we're already seeing major retailers, financial institutions, PayPal now, you can do crypto on PayPal. Visa just came out and said they're going to start accepting crypto through their network. So, it's becoming mainstream so quickly here, especially in the last six months, and at this point there's no turning back.

Outside of major regulation from governments and things like that it's moving forward quickly and that kind of initial dream that Satoshi had with Bitcoin of it becoming a currency is starting to happen, we're starting to see that. And so, that's the great evolution of cryptocurrency here. And as far as keeping up to date on all the cryptocurrencies out there, all the alt currencies, it's impossible today. There's a new one being released every day that has its own use case. It's a full-time job just to keep up with them and you can't. There are 4,000 traded cryptocurrencies right now. I could probably name maybe 100 or 200, and that's about it. I couldn't name the other 3,000 - 4,000, that would be impossible, and even what their business cases are. So, it's huge, huge ecosystem out there. There are a lot of great ones if you dig in, a lot of great ones out there that are just doing some really innovative stuff.

Jennifer Napier

Over the past several months, we've seen a run up in prices and valuation for Bitcoin and these other cryptocurrencies. Is there real value here?

Peter Wokwicz

Yeah. This is one area where I've always seen the value, and the value is real. Almost all the major cryptocurrencies, any of the top ones out there, do have that intrinsic value. Not to get negative here, but it frustrates me when I hear people like Warren Buffet, or Janet Yellen, or Jamie Dimon, and even most politicians, and many others saying “crypto's are worthless, it's a Ponzi scheme,” and all of these other negative terms they use. It's just totally incorrect. They're flat out wrong. And I think either they don't understand it, or they have a special interest against it.

So, most crypto platforms out there do have the intrinsic value, and they have more than the U.S. dollar, more than gold, more than diamonds, and the list goes on and on. Ethereum is the second largest by market cap blockchain out there, and it's the most built-on-top-of-crypto type blockchain out there. And to use Ethereum for almost anything, for dapps, for smart contracts, you have to spend Ether, the crypto that the Ethereum blockchain uses. The more the chain is used, the more demand, and the higher the price of Ether. And just like Bitcoin, Ether has an associated development group and needs to innovate and needs to move forward quickly. Ethereum 2 was just released, which is really an advent for rapid innovation in Ethereum in the future.

And the other thing which is a little bit different than fiat currency, Bitcoin, Ethereum, most of the cryptocurrencies out there do have limitations, or they have a set release of the crypto coin ongoing for miners. So, when you have supplies that are capped, any increased use of that, and any increase in the valuation, makes sense. When you have the U.S. dollar—I'll use as an example here—the supply can vary. It can vary at whims of the federal government, of stimulus packages, of inflation—many times destroying the value of anyone holding cash. So, there are all these cryptos out there, and again, hundreds have just intrinsic value that is just... it's incredible. I mean, it's there, it has value, and if you understand the model, they definitely have value. And it's intrinsic and we see the use of certain crypto going up and we see the value going up at the same time, so there is a relationship there.

I think a lot of it is just, people don't understand it because it's more abstract, the value that something like Bitcoin has. But Bitcoin has a value as an investor, it has value as a blockchain, has value as a hedge, has just tons of value that's out there. I've been saying it for 10 years, if you don't own some crypto in your portfolio, in your investment portfolio, for the long term, for lack of a better term, you're an idiot. You should be investing in blockchain, some of the crypto out there.

So, I probably would take the time to understand some of the newer crypto and their use cases, and their management team behind them, the development team behind them, and see what makes sense to add. It's a great hedge, it works very well, it's here to stay, it's not going anywhere. Yeah, it's going to be very volatile, of course, as any new asset coming on the market would be, but long term, it's a good investment. Plus it's a hedge. It's a hedge if something happens to the U.S. dollar, it's a hedge against negative worldwide events. You have a hedge because now you have this crypto that you can literally take with you anywhere. You can use it if you're overseas, you can use it in the U.S., you can use it if something happens. You can spend it. You can spend it like money if you need to. So, you can use its utility. So, it does have value. What I'm getting at is it does have value, and it really frustrates me when I hear people say that crypto does not have value. Because the value's there, and I could spend an hour on any one of these and go through exactly where all the value is in one of the big cryptos out there. It's just one of my things that I don't like to hear.

Jennifer Napier

Point taken. And I won't take offense to the fact that you said that you're an idiot if you don't have it, because I don't have any.

Peter Wokwicz

Yeah, I say that kind of jokingly but, you know, I'm going to say that just because I've been telling people that for a long time. But you have to do your research. Because it is highly unregulated, you have to do your research there. Because there are people that are releasing crypto and putting crypto out there just to make money and run off with it. So, you have to do your due diligence, but that's on you, I think. Nobody's going to protect you from that mistake.

Jennifer Napier

Absolutely. So, how hard is it to purchase and trade cryptocurrencies? And what are some of the dominant platforms?

Peter Wokwicz

Sure, yeah. So, it's gotten a lot easier in the last few years and I think that's one of the good things. There are great exchanges out there, like Coinbase is probably the most popular one in the U.S., which they just announced that they're doing their IPO and going public probably sometime in the next few months. That's really the first big crypto exchange to go public. You also have Gemini, Kraken, which are the big ones in the U.S. They make it very easy to buy and sell crypto with U.S. dollars—well, I guess, relatively easy. The hard parts that remain there are really with U.S. regulations about these being money transmitters or have to follow some banking regulations. So, the signups are very complicated with “Know Your Customer” rules. There are dollar limits, there are banking transfer limitations, there's reporting that you have to worry about. And it makes it much harder than it should be to use.

If you're outside the U.S. though, you can take exchanges like Binance—there's a lot of other exchanges out there—outside the U.S. where you don't have those difficulties in the sign-up process. Literally you could be trading crypto in—I would say—30 seconds. You can do it that quick. Going from no crypto to trading crypto could take you about 30 seconds with some of the platforms outside the U.S.

So, again, the regulation is different there, but it's gotten very, very, easy to do. Coinbase is the one I recommend, just because it's easy and meant for the average consumer. But at the same time, they're going to take the highest fees when you do anything there. They're going to take their own fee plus there are other fees involved in crypto, but they're going to take a fee. But that's the obvious one.

So, I guess another point I'll get into now, since I already talked about it at the open, was decentralized exchanges. Where a lot of this is heading are to these DEX, which these are crypto exchanges that are fully blockchain based, so there's no central authority, they're open 24/7, there's no very little special interest involved, there's low cost transactions, and it's all there to trade crypto. So, these are where all the exchanges are headed, including the traditional stock exchanges that we know so well.

One little thing that still amazes me, is that in this day and age, if I think of stocks that we trade, equities that we trade, we can't do it 24/7, and if we want to trade a stock at 11:00 PM on a Saturday, we can't. You can, but in general, it's very hard for a retail trader to trade stock on a Saturday night. But these decentralized exchanges, you can trade any time you want, 24/7. And you know, traditional exchanges you're often paying a high transaction fee, you have many middlemen all taking a percentage off that transaction, especially taking advantage of retail investors. We have brokerages out there that are pre-selling their trades so people can jump ahead of you. And we have certain trades being shut down by platforms because they may have a special interest in not wanting to trade that security.

So, decentralized exchanges, that's one of the big innovations. UniSwap is probably the biggest one out there, and they've only been around, jeez, I think a year. Maybe a little bit longer. But again, it's all P2P, it's a decentralized exchange, you can exchange from crypto to crypto, it's amazing how it works, how fast it is, how little transaction fees there are. And that's the wave of the future for all these type of exchanges.

Kind of going back to NASDAQ and decentralized exchanges, I think something that's very relevant is the whole GameStop scenario which we've run into. Where you had a Reddit group called r/wallstreetbets that really drove up the price of GameStop under the cause of having a lot of big investments and institutions cover their short positions. First off, my little personal opinion here, I don't think it was really a strike against the big institutional investments out there. I don't think was their main goal. Their main goal was for some people on that board to make money. Because I can tell you, being involved in that business, the large traders out there are making tons of money off the volatility from GameStop. I mean they love that. So, it's not a big strike against institutions, we only saw one suffer from some of the short covering there.

But as this was occurring we saw many stock trading platforms that prevented customers from buying GameStop stock and many other stocks that they thought the same thing was happening in. And that's an issue. I think it's come to light that that maybe wasn't the best idea, and they kind of came back and allowed some limited trading and things like that, and there were financial requirements that they had to meet that maybe arguably they had to stop some trades. But with that decentralized exchange, it gets rid of that. The big guy, little guy, does not have an unfair advantage in a decentralized exchange world.

So, I think the pattern is, as we find out again and again in blockchain, is that technology creates more open and fair transactions and applications. It's better than the traditional way of doing it. And I think this is really where things are headed. And I think one thing—it's hard to disagree on this, that openness, direct transactions, are better than heavily centralized, everybody-taking-a-piece type of transactions. And I think that's one of the concepts of blockchain, and I think most people agree that that's actually a better way to do things.

So, I think as I talk about crypto and exchanges, maybe one last note here—one of the things that you can do with crypto which is another unique concept that if you're going to invest in it—is that your crypto exists on that blockchain. It doesn't exist on an exchange. So, you can't always trust every exchange out there. If an exchange wants to run away with your money, they can, because if they have your private keys, they're going to run away with your money. And that has happened in the past. Mt. Gox in Japan, there's an Australian one that somebody essentially—they had an issue or somebody ran away with the crypto that people had on those exchanges. So, again, with Coinbase, Gemini, Kraken, you have very little risk there, but when you get to exchanges that are maybe a little bit less trustworthy, you do have that threat there. But the great thing about blockchain is you do not have to have your crypto on an exchange.

There are great hardware wallets out there like Ledger or Trezor that you can get, that you can literally have that store your private keys. So, your crypto will only exist on the blockchain and you can decipher that blockchain with your Ledger or Trezor and you don't have to use an exchange at all. So, a great concept and just something that people never thought of. It's like a bank account without having a bank. And that's something you can do. So, you have control of your money. So, I always recommend never leave your crypto on the exchange too long. Great for putting money in and out, but you should really look into more of the hardware wallets and kind of owning your own private keys if you're a longer term investor in crypto.

Jennifer Napier

Are there any potential issues with crypto or that crypto is facing right now?

Peter Wokwicz

Yeah, the big threat is surprisingly regulation. And you're already seeing regulation happening—and some special interests around this—regulations that are really hampering some of the crypto innovations. I think that is really the only threat at this point is regulation. And we're seeing regulation among different countries. We see a lot of crypto-type innovations moving outside of the U.S. right now, which is sad to see because the regulation environment in the U.S. is kind of maybe not the best and maybe doesn't have much direction.

I think one thing we hear about, and we especially heard it more recently with the rise of the price of Bitcoin, is we've heard a lot of people come out and say, "Bitcoin is used for money laundering. It's used by bad actors." And I'm sure there's some of that, but you have to realize that the vast majority of crypto transactions are not by bad actors, they're not from money laundering. And even the highest estimates of money laundering in crypto is just a minuscule percentage of the total transaction volume. It's such a small percentage. Now, sure there's some in there, but you have to realize that the biggest money laundering platform is USD and through U.S. banks. I mean, look at some of the settlements recently out there with the U.S. banks, and you'll see hundreds of millions of dollars, billions of dollars, going through U.S. banks using USD and money laundering. And U.S. dollars cash is another one of the biggest things used for money laundering throughout the world.

So, one misconception about crypto is that it's not traceable and it's hidden, and that is the exact opposite of what crypto is. So, one offset of a blockchain is that every transaction is trackable. You can't hide a transaction on a blockchain. You just can't do it. So, you can track these transactions. Companies make great analytics tools to run through transaction ledgers and actually make sense of them. You can track the flow of illicit funds. Sometimes you can actually follow up and get identities of where those listed funds originated and who they originated from. But once you have a pool of funds identified as illicit, you can track that forever. And you already see that happening in some of these blockchains where they know there's maybe some tokens on a blockchain that were obtained illicitly and they won't allow those tokens to come in their exchange, for example.

So, it's even easier, I can track cryptocurrency much better than I can track U.S. dollars. Even with all the regulation we have around U.S. dollars, I can still track cryptocurrency much better. So, I don't really believe the money laundering argument and I think that's often a scapegoat that many organizations use, and politicians use, to paint it in a bad picture.

The other big problem in the U.S. right now is around the confusion in regulation around the whole blockchain and crypto world. We have the IRS that has made a decision that crypto's an asset. So, what does that mean? It means that if you go into Starbucks and you want to buy a coffee with Bitcoin... which you can do, you can go into any Starbucks in the U.S. and buy coffee with Bitcoin. However, based on that transaction, because you spent Bitcoin, according to the IRS, that's a capital gain, and that transaction you've got to go back and you got to figure out what that capital gain was on that $3.00 and pay taxes on it and declare it on your taxes. And that's the primary reason, really, that crypto is not used for transactions, especially in the U.S. right now. Because of that requirement, because the IRS sees it as an asset. So, everybody's still waiting for better directions from the IRS on some cryptocurrencies, how to handle it from an asset perspective.

But the funny thing is, when you look at other parts of the government, other regulations, you'll see exactly the opposite. They'll say, "Well, crypto is a currency and not an asset. And needs to be regulated as such. It needs to be regulated as a money transmitter. It needs to be regulated as a bank if you want to use it." So, you hear both sides of it, and it's just so confusing. And there's no direction from the U.S. government on that. And any way you go, you lose.

So, one negative side effect of this, and we've already seen this, there have been people—like there's one case in Florida, not that long ago, where people have been put in jail just for simply exchanging U.S. dollars for cryptocurrency over a dinner table. Because they weren't registered as money transmitters. So, it's very frustrating to actually see what's happening. Again, laws and politicians, we know where a lot of money comes from and it comes from big banks, it comes from big financial entities and it's not a bad thing, but there's an emphasis to slow up the adoption of blockchain and crypto because of that. And once these entities, these large entities, once the exchanges catch up, once the banking catches up, once financial institute catches up, then you're going to see these regulations be more defined.

So, as that race happens, unfortunately the U.S. is falling behind in a lot of that, and losing a lot of momentum here. The biggest technology revolution over the last 30 years, and the U.S. isn't leading it, which is scary. Because they could be and they should be.

Jennifer Napier

At the top of the podcast you mentioned the term DeFi, or decentralized finance, and identified it as one of the hottest areas in blockchain right now. Can you tell us what DeFi is and who the big players are?

Peter Wokwicz

Sure. So, DeFi, I mean jeez, I don't think I even knew the term if I go back a year. So, you want to talk about something that's taken the world by storm? It’s something I'm incredibly excited about and this is something you'll be hearing about non-stop in the near future. I mean, if you don't already hear about decentralized finance, or DeFi, you will. I mean, this year, you're going to hear so much about it as it goes mainstream.

The best way I can summarize it is, DeFi is essentially all the functions of a traditional bank, which we know, without a bank. This includes lending, it includes borrowing, it includes earning interest, but with additional benefits of the blockchain. So, some of the biggest players out there are BlockFi, Celsius, Nexo, and there are more honestly coming online every day. The innovation there is just incredible.

If you have cash in your bank account, or even a business that has a lot of cash in your bank account, and you're earning that... If you've got a savings account at your bank and you're earning a fraction or a percent of interest, as the devaluation of the dollar, you're actually losing money. With DeFi, honestly, right now you could be earning 10% on that money. And if you're outside the U.S., just to get back on that topic again, you can earn 14% or even higher—and relatively safely, if you know how to balance your risk. And if you want to take even more risk into account, you could look into yield farming and some of the auto-balancing tools out there, and you're talking about, some of those are paying out hundreds of percent of interest a year on those. So, it's a little bit more complex, a little bit more risk there, but this is real. And when I say that 10%, that 10% isn't going away tomorrow. It's not just a temporary high percentage point. Nexo's been paying out 10% for the last six months.

So, DeFi is the biggest disruptor. And it's disrupting traditional banking and more. And I think I really see it as a system where everyone wins. Again, there's so much innovation there, it's every day a new one comes out. It'd be a full-time job to even keep track of all the things out there, all the innovations coming out. All the brilliant minds behind it too. Some of the transactions that are done behind the scenes for the balancing for the pools, for the crypto pools out there, for the way it's loaned and borrowed, it's just mind boggling. You would honestly need a chart as big as a wall just to show where everything moves and how it's done. It's understandable, it's just very complex to actually get these percentages paid out. And at the end of the day, as a business or a consumer, you get paid that percentage, and that's a game changer.

Jennifer Napier

And where do you think DeFi is headed in the next year?

Peter Wokwicz

So, I think we'll soon be in the odd scenario where if you don't have some of your money in DeFi or using it for either side of a DeFi transaction, it would be very odd. And I think as we see DeFi become more institutionalized—some of the financial world, even the banks getting into it—being more commonplace, I think you're going to see a lot of banks, a lot of financial institutions set up a DeFi option that they'll have in parallel to their existing banking system. And even this past year, surprisingly, I've seen companies with some of their cash balances on their balance sheet, move some of that money into DeFi. Instead of buying a CD, which was traditionally done, or putting it in treasury bills and making almost no interest, they put a portion into DeFi solutions and why would you not, if you can earn that interest?

So, where is it headed? I think as a person, we're really not that far off from having your home mortgage through a DeFi platform in which your house has been tokenized. We're really not that far off. And I'm sure somebody's working on that right now and is probably going to release it in a week. And so, I think that the innovation there is just incredible, and again, I can't stress how much that if you spend some time learning about DeFi, it can benefit you personally. But it's also important to know where this is headed because it's taking over the financial world. And anywhere a transaction's done in the financial world, decentralized finance is there. And it's just moving so quick, a lot of innovators... I'm always seeing the mad rush behind-the-scenes of the big institutions, the big bankers, getting behind it and trying to adopt it before they're disrupted. And so, we're seeing that. As you can see Jen, I'm very excited about DeFi and that's probably one of the areas that I just love.

Jennifer Napier

It sounds like it. And you said disruption, so I want to get to regulation. Where do you see regulation headed with DeFi?

Peter Wokwicz

Yeah, so I think that's a little bit unknown. Right now, if I just... because I'm familiar with U.S. regulation, I can go on some of these platforms, Celsius or Nexo, and I can earn that 10% as a U.S. citizen. But if I'm not a U.S. citizen, I can earn 12 - 16%, because they don't have the restrictions that we have in the U.S. So, right there, there's a disadvantage to being a U.S. person. That's a lot of wealth lost to a U.S. consumer or U.S. business already because of the restrictions. So, the regulation is having an impact already and that's where you're starting to see some of these biggest solutions out there. They're not based in the U.S. Some are. Some are based in the U.S., but we're seeing more of the big ones, more of the up-and-coming ones, outside the U.S., because they can do more without having the U.S. regulation over them.

So, one thing we are seeing too, we're seeing hundreds of entities trying to get bank charters as essentially crypto banks to meet the U.S. banking requirements. Wyoming is already doing a lot about that, they've opened up their banking charter system to what we call crypto banks. And we even saw recently a crypto exchange that I already mentioned, Kraken, had their banking charter approved. And this is a game changer. As you now have a decentralized finance working within the bounds of the U.S. regulatory banking system. But there are still barriers that even Kraken is going through. Getting other states, getting a federal charter, that's still a long ways off. But in Wyoming, Kraken is a crypto bank and they can do everything a bank can do, but they do it with crypto.

So, great innovations, we're seeing a change here. It's a bit of a race right now. It's a race between the regulators, a race between decentralized finance and somewhere there'll be a balance point in there, but I just don't know how far that is off, and I don't know how much the U.S. will lose until that balance is reached.

Jennifer Napier

Okay. This is really fascinating, Peter. I'm going to ask you one final question and I think I know the answer, but I'm going to ask it anyway. A lot has been stated that blockchain is on the level of the industrial revolution and the invention of the internet in terms of it's potential to change the world, do you agree or disagree, and why?

Peter Wokwicz

So, changing the world, what does that mean? I see blockchain tech of being the next innovation on top of the internet. I think we had the internet revolution and now we're having the blockchain revolution, and ironically, when I compare the two, there are some great blockchain solutions out there right now that are trying to improve or create their own internet already. So, we're already seeing that, and it's kind of funny that now we have blockchain trying to even disrupt the internet.

It's a big change. And I think the exponential acceleration and the adoption of blockchain, and the use cases of blockchain in the last couple years is just so rapid, and it really is exponential. It's increasing very quickly. So I almost consider it the next phase of the internet, and I think it's like—if you go back 20 or 30 years—just like the internet, you need to either adopt it, use it, or fall behind. And I think with blockchain it's the same way.

I also put my realist hat on in saying that there was a little bit too much hype in blockchain if I go back five, six, seven years when blockchain was just coming out. I was even the person saying, “We still have to see some good use cases here. We have to still see some implemented before we can actually get behind this.” And that has happened. So, again, being a realist, it's a huge opportunity you should know about it, you should have to know about the platform. But at the same time, it's a disruptor. I just don't know how fast it's going to happen. And it's going to happen in different ways than we think of.

I would never have thought of decentralized finance being such the rapid mover that it's been in the last year and I'm sure there will be other things that come up like that that will move just as fast. So, I'm very excited to see what the next year brings. I say next year, but I also mean next week. What's coming next week? What's going to happen next week in the blockchain world? I don't know.

Jennifer Napier

All right. Thank you so much for your time today, Peter. It was really great speaking with you, and I must admit I have learned a ton over the last hour. -

Peter Wokwicz

Great. Well, yeah Jen, this was great, and thank you much for your time and the great work that Business Talent Group does, and I look forward to doing this again, when we see how blockchain advances in the short-term here.

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