Coming to you from the Davos Switzerland during the World Economic Forum 2022 conference, the Edge of NFT team brings you engaging interviews with key players in Web3 and beyond. This episode they chat with Nitin Gaur of State Street Digital, Matthias Ruch of CV VC, and Shyam Nagarajan of IBM Consulting. We cover the important transitions happening in digital finance, market use cases, decentralization, and tokenization of patents, to name a few. The world of crypto is continually evolving at break-neck speed. Tune in and learn more from industry experts about what’s coming and what to look out for next!
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Listen to the podcast here
Edge Of Davos Part 1: Feat. Nitin Gaur (State Street Digital), Shyam Nagarajan (IBM Consulting) & Matthias Ruch (CV VC)
We are here with you in Davos, Switzerland, coming from the World Economic Forum Convention that happens here every year. We are going to bring you some of the sharpest minds and global leaders, telling you what they think about what’s next and how they are making it happen. In this episode, we are going to transition from one interview to the next with a sound effect briefly in between to give you that feeling that you are here with us, transitioning from one engaging conversation to the other. Stay tuned, sit back, relax, and enjoy.
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This is our first interview from Davos. We are excited to be here. It’s very beautiful. It’s such great energy here. Super intelligent people who are also crazy doers did some pre-interview with our guests. When he walks out this door, and we will probably be done more before the end of the day than I have done in ten years. Let’s intro him. His name’s Nitin Gaur, and his name tag still says IBM. He moved from IBM to State Street. Nitin, why don’t you introduce yourself a little bit? Give some context of who you are and where you are coming from, and then we will dive into some questions.
Thanks again for the invitation. I’m Nitin Gaur. I founded the Blockchain Lab at IBM and then realized that we were doing a lot more technical than digital assets. I was fortunate to found a digital asset lab to bring the context of digital assets into the technology realm. It’s been years. I moved to State Street, which is one of the largest custody banks in the world in with an ambition to elevate and modernize the technical infrastructure for financial services, but at the same time, the long-term vision is to be able to understand, adapt, and exploit the newer emerging space that is driven by crypto. I live in Austin, Texas but I’m glad to be here.
Maybe we will see you at Consensus.
One of the biggest events.
You have been to Davos many times, and I would love to get your perspective on how the landscape is involved in terms of the conversation around cryptocurrency and blockchain versus maybe even years ago.
2018, this is by bypassing the gap that we had because of COVID. The first year I was here was super interesting, with a lot of energy. In fact, this is very space occupied by Consensus, which is the boutique, at the time, was a Boutique Crypto Consulting Firm. Now they are morphing into many more things. What was interesting was that you had the establishment of the traditional World Economic Forum with the objective of changing the state of the world as we know it. You have the industrialists and the politicians and bankers. The opposite of that, you had the folks who also had the same intention in terms of having an old agenda in terms of the state of the world, which is blockchain.
It was an interesting moment because you had high-security infrastructure and then the opposite. You had folks in hoodies, jeans, and hoodies talking about how to stop the world, the state of banking, financial services, economic inclusion, and digital identity. It was a surreal moment for me. You begin to realize then that you have the traditional establishment and the old establishment, which is looking into changing the order with technology in the world.
Reimagining finance, identity, and everything with trust and accountability was fantastic. While it wasn’t mentor, which is difficult if you come to that with some mentor because you have slopes and you have to have the right shoes. It was super interesting. There’s amazing energy and innovators, and it then became a tradition. We come here every year just to be able to network at the same time and look into what others are doing. Feed off the energy that’s floating around, which is what we can see here.
The tides are turning in understanding the NFT space. Click To Tweet
Not to ask too much of a leading question, how has the counter-establishment integration intermixing evolved? Has there been more integration over the last years or are we dealing with two different sides of the fence?
There has been a lot more integration every year. In the first year, there was a complete separation. These are blockchain guys and the badges, and everything else. Blockpass badge. Here, every two steps, you find a blockchain entity and blockchain booth. These are entities who are trying to not only establish the technology to be able to build new things but also have amazing new projects.
You find a lot more people with WEF badges who are now hanging up and popping by trying to understand the space. There are a lot more synergy and acceptance. I was in another session here with financial times early on that the fact that you had the presidential working group and the executive order that was released is, to me, saying that we need to understand the space. We have now viewed crypto as an asset class. The tides are turning in understanding this space, which is fantastic from that perspective.
I love to have you back because we can talk to you for a long time. We don’t have a long time with you but you made this transition, as you mentioned, from IBM to State Street. We wanted to go by State Street. Give us a little bit more about what you achieved at IBM because, as we were talking about it before, we started the recording. You achieved a lot. I would love to let people know what you achieved.
It was an interesting journey in 2012, the early days of blockchain. Imagine the time it takes to explain too many executives, including our own, as to why we should invest in the space. It took me a few years with support, and then we founded Blockchain Lab. I have been to twelve different countries. I have traveled to 140 different countries in this context in helping governments, and central banks understand the potential.
I had the first front row seats to be changed and evolution but the early 4 to 5 years were purely education, helping them understand. As a tech company, our role, at the time, I viewed us is helping them transition to understand the tech, providing all the raw materials for them to be able to do the transition.
Besides the labs, then I founded a payment network which is the World-Wire cross-border payment network, which brought the issue of digital assets because then we quickly realized that the tech company, we were getting into the weeds of selling the texts and databases, which is not the intent. The intent was to go back to bringing the notion of digital assets into the ecosystem.
When you say you founded, is that something that’s external to IBM or internal?
Davos: We come here every year just to be able to network in the same time look into what others are doing, and feed off the energy that’s floating around.
It’s inside of IBM. At the end of the day, you found an entity but you need funding and you need to be able to get the teams, hire people, and established an organization and large corporation. We have 90% of the world’s banks. At the time, we are IBM customers. We have the appetite to be able to go and speak to them. It was not only a new business opportunity but also a massive element of transforming using digital transformation.
I have now shifted my vernacular from digital transformation to transforming digital. You are transforming digital itself to serve us, which is why you are here with NFTs and what we began to see in that space. It was a hard decision to leave after ten years but we all need to get away from our comfort zone and grow.
Working for something with amazing leadership at State Street Digital is to be able to understand financial services and elevate the infrastructure to compete, adapt and embrace what’s happening in the crypto space. My long-term goal is to try to find DeFi, which is the ability for you to take your traditional financial assets and move them into the crypto space and vice versa in a regulated and streamlined way with all the productions in place.
I have been hearing about this happening with real estate transactions, where you can collaterized your crypto for a DeFi loan and purchase a home while you are making money on your base crypto through DeFi. Is that something that you are looking at?
I bought a house in Austin using Bitcoin, which was an interesting experiment. I do a lot of these experiments. KYC became a big issue at the time I was worried. I live in the same neighborhood. I have been here for the longest time. Some of those examples that I decided on which is the ability for me to collateralize my crypto or collateralize my real estate to be able to borrow land and engage in financial primitives.
The borrowing lending collateralization. We began to see in small doses at the moment, which is the Real-World Assets or RWAs coming into the crypto space. We should see more of those, which is the ability for you to take your fidelity account, and your ETFs and be able to collateralize and have an interchangeable asset movement as you find an opportunity in a different space.
Is that a bit of a sneak peek of what’s to come at State Street?
I would say that this is my personal journey to what I’m going to go with this space. The financial industry is grappling with it because, at the end of the day, it’s about markets, liquidity, and the expanse of the growth, and everybody wants to tap into that growth. As the crypto industry is growing maniacally and at a certain pace, we would like to understand that growth and tap into the potential in that space.
The vernacular has shifted from digital transformation to transforming digital. Click To Tweet
There’s also a transformation play here. If you are going to tokenize an existing asset class and be able to build the rails. Not only are you achieving transactional efficiency but you are also achieving a certain level of capital efficiency, which has the ability for us to be able to move money on time and look into risks. There is a lot more to unpack at the traditional finance level, which is still very siloed and fragmented, so to speak, if that makes sense.
In terms of what you are doing at State Street, how does that plan come together? Are you working with a team? Are they putting you in charge of what’s going on?
The way this would work is to say that someone in charge of it’s a huge industry. You need various skillsets. There’s amazing leadership at State Street that you want to understand the industry. There’s a whole new team called State Street. Traditional leaders formed in July or June of 2021 with the name to be able to elevate and bring up the old element of digital banking in this space.
We all have different expertise looking into asset organization and digital asset custody, which is a big business for State Street as a custodian bank. Also, looking into figuring out the element of payments and stablecoin and how we build systems that can consume and adopt a CBDCs in the future which is Central Bank Digital Currencies are tokenized SPF.
There are a lot of signs and domain expertise that you need from existing financial services, which is they have. Many of us were joining the entities, are bringing the industry as well as the technical expertise to be able to join hands and figuring out a system that is walking in the regulated terms in terms of what be doing because we there’s a fiduciary element. There’s a potential treatment of assets. At the same time, you are ensuring that we are doing everything by the book and still modernizing and forging ahead in terms of adopting technology to be able to transform and disrupt the industry itself.
Let’s talk about stablecoins and their lack of stability. I have a meeting at a train station in Zurich on the way over to Davos. There’s a particular gentleman that said his team sees more instability in stablecoins and potentially a couple of other fallen soldiers. Do you guys have a position yet on the stablecoin market and any favorites among the pack of stablecoins that you are feeling a little bit more bullish about?
Let me talk to you as an industry professional, being in the industry for such a long time. I have spent in my digital asset labs days literally spend about 6 to 7 years delivering Central Bank Digital Currency projects. I looked into stablecoin closely in terms of business model. I have now started socializing with dumb digital Fiat only because of the last fallout that we have seen with bad governance and bad handling of USD Fiasco that we had with Luna and Terra network.
We begin to now classify collateral back versus reserve back. Collateral back is collateral that can go up and down in value. What is the collateral, and how do you define it versus reserve? Which is if you are pegging or tokenized something with a Fiat, which is hence the term digital Fiat, then it’s tied to a dollar. The dollar may go up and down based on global macro events like inflation and money supplies that we have seen in the last few years. It’s still tied and pegged to the USD. That’s the reserve back model.
Davos: If you are going to tokenize an existing asset class and be able to build the rails, not only are you achieving transactional efficiency, but you are also achieving a certain level of capital efficiency.
There’s still volatility there. I have been to Switzerland. One day, it was a 1 for 1. The next day, it was $0.02 less.
These are the USDT and USDC stablecoins.
I was referring to the normal US dollars to Swiss francs. My point being that the idea of stability, it’s a goal on the horizon. It’s not perfect. Even in the currency markets.
The whole FX market and the arbitrage opportunities that people see in terms of foreign exchange are exactly the same. Do you have a few cents up and down based on the global events that are happening in the world? The reason why stablecoins, you have to go back to why they came into existence. They came into existence because you had all these elements of crypto assets.
They didn’t have a fungible token or fungible asset. Fungible is essentially an exchange mechanism. They had to bring stablecoin, so people who understand dollars and cents could equate the crypto assets, and you need to have duality for the transaction, where if I’m sending you a token, I need something in return. This is not a one-way street at that point. Stablecoin came to solve the problem of fungibility and payments in that ecosystem.
To your point, if you are tying a stablecoin to an asset, then it has to be 1 to 1 mapping. Collateralization what has been the basket of currencies or the basket of assets. It becomes a challenging element because now you have the element of evaluation and data. Where do you extract the data from, and how do you come to a certain value? It becomes a very questionable element and the trust piece of it.
You have a centralized entity keeping an asset. You should have to take your word for it as opposed to a third party guaranteeing a fiat that’s kept into a reserve account, for instance. Some of these things to me is not being bullish or bearish on these asset classes. It’s about the utility of the asset. I’m looking at stablecoin as a pure utility element that it’s a bridging element between ReFi and DeFi.
If you want to participate in the ecosystem and you are not a crypto-native person, you are not mining, you are not dealing with the crypto, and you don’t understand that. The easiest way for you is to convert your dollars into a stablecoin and then begin to participate in that ecosystem. That has a lot of value. It brings in a lot of people from the traditional finance world. Stablecoin is providing utility. It’s bringing a lot of participants from the non-crypto-native world to participate in this, which is what we need at the moment.
Are we going to have more fallen soldiers?
We will have more fallen soldiers, and people will have a short-term memory. We have seen that with traditional markets. I don’t think the element of algorithmic stablecoins are gone. They will resurface when the market is up. To a certain extent, there’s a lot of math behind it. In this case, the fallen soldier element was purely bad governance and bad ill-conceived business models as opposed to the technology itself. I do think that technology itself has a bigger role to play. Eventually, the algorithms and the math behind them should be tested and validated, and they will work well. It’s a matter of time in terms of getting that right.
USDT has gone through a couple of bear market cycles. It survived, and USC did not.
The naming too. USDT and USC led to $9 billion-plus or whatever withdrawal from tether’s ecosystem. I’m always reading about it. It’s ups and downs. I spoke to Jimmy Heller at USDC. They have taken a completely regulated path to say it’s only going to be reserved back. This very small element is going to be commercial paper. Some of those balancing acts are a necessary element, and I also see this as a case study. The next time I’m looking at a stablecoin, I need to look into say, “You should not be doing these four things because we know those four things don’t work.”
I want to bring this back to our earlier conversation around DeFi. We talked about the start of the Davos experience of centralization, decentralization, anti or alt, if you said. We are now at a point where you mentioned USDC in their more conservative approach. There are conservative approaches to NFTs like there’s criticism of what’s happened with other deeds, and there are conservative approaches to DeFi with more centralization. How do you reconcile those two perspectives of centralizing and decentralized assets to create more control and governance in a world where this was supposed to be an alternative re-imagining financial instrument?
The spectrum and I use the word quasi-decentralization all the time that we live in a super centralized world from governments to banks and financial institutions. The next thing you know, you have this super disruptive decentralized technology that knows no balance, which does not. The government structure was built into the protocol itself but there are still humans who are devising these protocols.
Ninety percent of DeFi products are centralized projects. It is leveraging the decentralized networks of Bitcoin and Ether, for example. These are networks that have built-in decentralization protocols. I’m much more bullish on Web3, which is the decentralization of the fundamental primitives. The compute, the interconnect, and the storage which provides the computer infrastructure for it to build upon the layers.
Most DeFi layers are individuals coming up with projects, which have certain pieces in terms of offering those financial primitives that we talked about lending or borrowing, collateralization, and giving you a high return, and that is governed by the basic principles of demand and supply in the ecosystem. I would say that to me. This is a spectrum that you cannot switch from going to a bank and withdrawing money to saying, “I’m switching to Bitcoin tomorrow.” It has to be a journey.
Davos: If you want to participate in the ecosystem and you are not a crypto-native person, you are not mining, you are not dealing with the crypto, and don’t understand that, the easiest way for you is to convert your dollars into a stablecoin, and then begin to participate in that ecosystem.
Where we are now is that spectrum of quasi-decentralization to say, “We need to understand the space but we need to have a model that people understand.” Hence, the element of the wall structures that are emerging, but people don’t understand the wallets to connect to a network and buy and sell and do some of these elements.
That’s why we are here in Davos to see these changes and put things together. Bring the good minds together.
As you are sharing your perspective, I haven’t been to Burning Man. I don’t know if you have been to Burning Man.
I want to go someday.
I think about the conversation we had and the similarities to the conversations of old burners versus new burners. Fully decentralized chaos, and the first few years, it’s got a little centralized. Some of the OGs don’t love it but it’s had to happen. This has evolved, and it’s a constant tension.
The reason why some of us have got into it is we have always had an age, which we coined in 2012, at least inside of IBM. We are working at this as what the internet has done for information. Our kids are on the wall house playing the same games. They have access and information. They may get a little slower because of internet speed but they still have access to the information on what blockchain will do for things of value.
If you look at it now, whether you have Ether in the United States or Vietnam, the rules of engagement are exactly the same. There’s an egalitarian element to this. There’s a level playing field agenda to this, which is very profound and powerful in the long run. The fact that you are tied to a banking account, and we talked about these derails in terms of bridging or bringing a fiat, is an interim impediment that we have to deal with. That’s the quasi element of decentralization.
Axie Infinity showed us that you have alternative asset classes that you can subscribe to and eventually move to Ether. Suddenly now, you can elevate your standard to anybody living in the Western world or who has access to a much more advanced financial system that we have devised over time. It has a very profound value. That’s exactly the Burning Man of the Davos, whatever is your flavor of the event.
We are in the interest of getting to everything we have got to do. We are going to have to wrap up, and we want to make sure we have a chance for you to say where people can find out more about what you are up to and the projects you are building. I know you have your own podcast. I would love to hear about that. Please take a moment to share, so people know where to go.
I’m not a big social media guy. I do follow LinkedIn because of the professional connection. LinkedIn is the best place. I do Twitter a little bit. LinkedIn is a great time to connect with me. I started podcast only because there’s an element of thought leadership that you have to synthesize and digest the information that’s coming from around the world and simplify it for our audiences.
The podcast is Beyond Bitcoin, which again, I have joined State Street Digital and I’m still in the consuming and learning phase because you are out of your comfort zone, which is an amazing growth opportunity is to learn and understand what’s the industry is up to. Stay tuned, and then hopefully, within the next few months, when I get my feet on the ground and begin to socialize the work that the amazing teams are already building, I will become the catalyst for progressing that forward.
We will have to have you on the official show. When you get your feet on the ground, you can tell us a little bit more about what you are up to and what that roadmap looks like. It’s such a pleasure to have you visit us, and I hope you have a very productive Davos experience.
Thanks so much. Thanks for having me around for this great conversation.
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Here we are at Davos once again. Excellent experience. We have been in our inconvenient space here for an extended period. We can’t wait to jump upside, mingle, and mix a little bit more the rest of the remainder now. Our guests now, we are very happy to be sitting with. His name is Mathias Ruch. We will get started by letting you give a little bit of an intro on yourself. A little bit of context before we get the conversation going.
Thanks for having me. It’s exciting to be here.
Davos: When you look at the history of Switzerland after industrialization and everything, and that’s also what led to that growth of the ecosystem. We like to say we have decentralization in our DNA.
Thanks for hosting us as a media partner for this wonderful house.
Thank you so much. It’s a great location, and people pass by and step in. I’m very happy to be here. My name is Mathias. I’m the Founder and CEO of CV VC. That stands for Crypto Valley Venture Capital. It says what we do. We are a venture capital company with a plus. That’s how we like to say that. We invest in startups that are built based on blockchain technology, the picks, and shovels of the space. If you are in a room full of bankers and somebody says crypto, and everybody goes like that. We are the alternative. No danger there.
On the other hand, we have our own ecosystem business called CV Labs, where we build global blockchain startup hubs. We have one in Zurich now, are building one in Africa, and are looking into Southeast Asia and other European countries. I have been a founder in the digital startup space for several years. I started at over a dozen companies myself, including complete failures, a few successful ones that led me into Angel investing, and I stumbled across smart contracts in 2015 that got me into the blockchain.
You are based in Switzerland. You have been coming to Davos for quite a long time. We would love to understand your perspective on how the conversation has shifted. How the dynamic of the old guard and the new guard has intersected and evolved and where we are in that evolution.
I was born and raised in Switzerland. You know about the World Economic Forum. Until 2017, I would never have gotten an invitation to the World Economic Forum. Suddenly, that started, and it was all in the context of blockchain. To understand that, I have to give you some background about Crypto Valley. That term coined for the Swiss blockchain ecosystem that was coined around 2017.
What you have to know probably is that a lot of people in the US don’t know that Switzerland has the largest concentration of blockchain companies in the world. It’s over 1,200 companies that are based out of Switzerland. It’s over 6,000 people working in that sector in Switzerland. The most staggering number is the market cap of the companies based out of Switzerland is over $500 trillion.
There’s the Ethereum foundation in there. The second-largest blockchain. That’s also the reason why we have this growth in Switzerland. In 2013, Vitalik Buterin and his friends were looking for a jurisdiction where they could set up shop basically for Ethereum, and nobody would understand what that was. They were traveling from Singapore to Switzerland initially because of tax reasons. They chose Zug, a tiny small town in Switzerland.
What happened then was that a lot of projects wanted to recreate the success of that very initial crowdfunding event to crypto. Hundreds if not thousands of companies came to Switzerland. They were literally knocking at our doors. We were an investor consultant for the startup space. They are asking, “Is this Crypto Valley?” They wanted to start now.
Switzerland has the largest concentration of blockchain companies in the world. Click To Tweet
Start, set up shop, and conduct ICOs, the Initial Coin Offerings at the time. That was the big thing. Everybody was suddenly talking about Davos because that’s the place where the global elite meets. The blockchain community has to be up there. It started in 2018 if I’m not mistaken. Where if you walked along the main street here in Davos, you would see Microsoft. You would see the big names, maybe Google or Facebook. There was one blockchain hub. It was run by a Ukrainian community.
The energy, all the people, was gathering around so that you could say something. That was the cool kids’ house, and then everybody was hooked up, and in 2019 it was even bigger. You could see more hubs. The stronger the industry grew, the more players you would see, and then the last time it was onsite was 2020 in January was a winter edition. We hosted seven events that week here. That’s like an offsite thing. It’s not the official World Economic Forum. That was pre-pandemic. We even had a professor from Wuhan flying in for our Chinese event. We were probably one of that spreader immense.
You can give us a foundation of how Crypto Valley got started and how it’s become such a powerful force. Tell us a little bit more about the nitty-gritty of the day-to-day of being involved in Crypto Valley. Major players, how people engage and interact, how much is concentrated with Zug like to be there and transition there. Let’s dive a little bit deeper into that.
Zug is the center of it. To understand why this is a successful hub, let me explain what we identified as the four pillars of a successful ecosystem like Silicon Valley. The term is also coined based on Silicon Valley. If you have talent, if you have the founders or pioneers, normally, capital follows. These are the two first pillars. It happened massively with the ICO craze.
Everybody came there and wanted to set up shop, and money followed. Billions went into these ICOs in Switzerland back in the days. You then need infrastructure. With infrastructure, it’s not physical co-working space and stuff like that but you also need service providers. You need academia. You need an ecosystem that can cater to the needs of these startups and that is evolving.
You had the expertise, lawyers that would set up these foundations and everything, and that started growing and what you then need, and that’s very important, are you need the support of the government and the regulatory framework. That’s what brought all these startups to Switzerland. That’s still the case why a lot of these startups come to Switzerland.
Probably the most sustainable framework that we have, it was introduced a few years ago. I can give you an example. It’s basically three main aspects. We have the term token in the Civil Code. When we started years ago, people told us you are not changing the Civil Code. We changed in several years. I said, “Let’s try anyway.” It’s in a very small article in the Civil Code. What that means is in Switzerland, you can have your digital shares on a digital ledger on a blockchain. It’s enough. You don’t have to have a legacy version of the shareholders of your shares.
I find the Swiss culture being here a real appreciation of history and tradition. Respect for powerful, disruptive innovation. Even the public bathrooms are radically different than what we have in the United States.
Davos: The use cases of blockchain much more cater to the needs of countries like the ones in Africa or Southeast Asia, where you not banked, for example. You don’t have access to the financial system.
If you look at Switzerland, it’s a country without any natural resources. You have to be open. It’s so small with eight million people. You have to let people in with great ideas. It’s unlikely that the next Elon Musk is the village next door. You have to have an open-minded attitude when it comes to business. That’s the case also when you look at the history of Switzerland after industrialization and everything, and that’s also what led to that growth of the ecosystem. We like to say we have decentralization in our DNA.
A theme’s like very quiet, rational, and respective as well, which means that if there’s something disruptive or new but it makes sense like people are willing to accept the reasonable argument to implement.
It was a struggle, to be honest. What we did is we founded the Swiss Blockchain Federation, which is a public-private partnership with the government to increase the attractivity and competitiveness of Switzerland as a hub. We were working with the parliamentarian. Back in 2017, we organized these dinners or lunches with the members of the parliament. It would take 30 seconds, and you would talk about tourism financing through Bitcoin. That must be the initial narrative, but that changed over time, and now we can have a fruitful discussion about the potential of the technology.
Let’s talk about that potential more. You made an exciting announcement about a new fund that you’ve created to support innovation in Africa around Web3. To step back even further from that, you are living and breathing this ecosystem. You have been immersed in it. What do you think of the problem that Web3 technology can solve? What are some of the ones that can’t solve, and how are those conversations evolving through this integration of the social-political climate and the technologists? I’m curious about that and your hopes and aspirations for this new find.
I have to be very clear. What’s driving adoption in our space is the speculative part of the blockchain, the cryptocurrencies the investing that everybody can do. I personally find it the boring part but it’s still driving what’s happening out there.
Would you still say it’s a bit of mania at this point?
It’s an absolute mania. That’s my opinion. It’s driving and creating innovation and that’s good. Regulation will kick in anyway. Let’s drive this through innovation. Being born in a first-world country, we don’t have any problems. Everybody has access to finance. Assurance is there. If you buy a house, it’s always yours, all of that.
The use cases of blockchain, they do much more cater to the needs of countries like the ones in Africa or Southeast Asia, where you don’t have these things. Where you not banked, for example. You don’t have access to the financial system, and it’s massive. The amount of people that don’t have access to the financial system, assurance, and land registry. We have a startup that is out of Ghana, South Africa, that’s called where they are putting the land registry on a blockchain.
The structure of Ghana is you also have regions. In Switzerland, we have the Cantons. They have it as well. We have a national registry, you have a communal registry or Canton registry, and then even villages have their own registry. You might end up with three different registries. Maybe at some point, someone says, “That’s the one that’s accurate,” and you might not be in there. They are trying to create one digital lecture-based registry so you can have assurance for your land and own a house.
It’s a principle that I find fascinating. It’s a lot of optimism. It’s this ability to leapfrog. We have seen it with the evolution of cell phones and the internet that developing countries. There has been literature on the fact that they are not developing anymore. The countries that we thought were developing countries several years ago, they are doing pretty good.
You give somebody a cell phone and the internet, and suddenly, they get on a more level playing field. What you are bringing to the equation here is it’s the infrastructure problem. I don’t have a courthouse or a town building with documents and all this. You don’t need anyone. You have a decentralized ledger. We can drop it right into that culture and put everything on it, and you can leapfrog over that antiquated building, and you don’t have to make the transition from the antiquated building and all those documents under the blockchain.
You access it through your smartphone or even first-generation phones. It’s also possible. You cannot tamper with the data. It’s there. It’s immutable. That are the use cases that cater to the needs of Africa. We cannot solve all these problems which are facilitating. That’s why we have this ecosystem of products. You need to bring the people together. You need to get the developers to the corporates that need the solutions. You need to bring technology there. To be honest, not all of Africa has broadband access. That’s also a problem that needs to be solved.
You published a new report on Africa. You shared a couple of those statistics, which I thought were quite powerful. What was one part of that report that even caught you by surprise in terms of the numbers on toll, and it always goes back to the numbers?
Our journey with Africa starting in 2018, where we would go together with the Swiss government on a fact-finding mission to the stock exchange in Johannesburg, which has some symbolic message. You are talking about blockchain at the stock exchange that could potentially disrupt the way people trade. That was pretty interesting. The financial sector was there, and it was a great discussion. The feedback that it resonates so much with people, and you could feel that energy. Throughout the journey, since 2018, we could see and feel that there’s something happening, and it’s growing fast but now seeing the numbers, it was surprising.
What are some of those numbers?
Venture capital has more than doubled. Global spending on venture capital has more than doubled in the past years but it’s even more so within the blockchain sector. We don’t have great data from 2020, so we cannot say. From Q1 2020 to Q1 2021, it’s over a 1,100% increase in funding into the blockchain.
Davos: IBM has always been a technology company that’s focused on enterprises. Enterprises are now starting to embrace the business-to-consumer technologies.
To wrap up, and there are a lot of people you have to meet here. You are hosting, and we don’t want to take you away from that. What’s the name of the new fund this symbolism behind the name?
It’s called Africa Early-Stage Blockchain Fund. Ke nako, you mean. That’s one of the languages spoken in South Africa, and it stands for, “It’s time,” and for us, it’s only the beginning.
How can folks stay in touch with you and learn more about your fund and all the exciting projects that you are working on?
We are approachable. Our CV Labs team is on many events all over the globe, or LinkedIn and our website, CVVC.com, CVLabs.com. Get in touch with us.
Thank you so much for your time.
Thanks for having me.
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We are getting rolling with some incredible interviews with the most fascinating folks in the world. I have to say we only met a few of them but we are good so far on that statement. I want to introduce Shyam Nagarajan on but I’m going to let him tell us a little bit about himself and give some context and say what he’s been up to.
Thank you for the opportunity. I’m thrilled that you consider that I am fascinating. I’m an executive partner at IBM, and I focus on Web3, sustainability, and the metaverse. I have been in the blockchain business for several years now and on day one from IBM. Interesting right so far and very cool to see the market mature, what enterprises are doing as well as how the crypto world is progressing.
You heard previously that this is your first year at Davos.
It is my first year at Davos. I focus a lot of my efforts and time on enterprise blockchain, which is the world of permission ledgers. What’s happening now is very exciting, and the fact that the world is transitioning and embracing more of the open protocols and Davos is the place to be for that.
You were sharing with us a little bit before about a pretty major transition within IBM that you are spearheading. Could you elaborate on that a little bit?
Davos: Non-fungible token can be applied to beyond the gaming world, the art world, or the digital image world. It can be used to solve some of our real problems like applying it to intellectual property copyrights and being able to track and trace the royalties for content that’s created.
IBM has always been a technology company that’s focused on enterprises. They are not a consumer company, although we do have some brands that work with consumers directly, including your weather channel and the app on your phone. What we are seeing is that’s good. Enterprises are now starting to embrace business-to-consumer technologies.
It’s important to help break down what we call as Wild Gardens, where you have all the data and assets that enterprises have to be able to monetize and tokenize in the open world and open protocols. The other angle that I have also learned and found is that building consortiums are hard. Doing business in the ecosystem of a community needs you to embrace different open technologies. This is the path where we are leading the change. That’s the transition that was exciting for us.
I don’t talk about it a lot in the show. I don’t go this far back in my history but I was in management consulting for about a decade and worked on some of those open government initiatives. Housing and urban development and some of those agencies. It’s a process to embark on that journey. When you peel back the layers of privacy and protections in governance and everything, I go there. Why take on such a massive shift like this, and what are your hopes and objectives for doing so?
The reality of the market and the world now is transparency, and trust is key. Blockchain and Web3 as technology allow you to do that. It also makes you embrace things that were uncomfortable before working with the company or being more transparent about who you are doing business with. Also, the shareholders and the markets are demanding that you report your sustainability initiatives and put out your KPIs and metrics.
The fact that organizations are highly motivated to fudge the data is one of the reasons why embracing these kinds of technologies that are going to be very important to assure their shareholders that it’s true in real data. Interesting shifts, ecosystem businesses, and a way of working are starting to take root. Traditional forms of go-to-market aren’t as effective as before.
There are some shifts that you just have to make. You wake up in the morning, you say, “We got to do this.” You mentioned it previously, we haven’t covered it yet but you brought up the sustainability. You talked about being heavily involved in the metaverse. We were fascinated with that world. We have an NFT project which has NFTs that are metaverse ready and augmented reality ready. It’s also integrated with sustainability.
We are planting trees with our NFTs. We would love to hear a little bit like someone who’s heavily focused on the metaverse. Are there some things that maybe people who aren’t in your position aren’t noticing that might be important for us to look out for or you could tell us what you are focused on with the metaverse?
I put on a lens of how does metaverse help and aid enterprises to either build a better and closer relationship with their community and customer base. That’s number one. I also see that as a way to better engage even your own employees and audience to have that. How many of these Zoom calls have we done in the last years that we have gotten tied off.
It doesn’t engage. It’s a screen, and watching the screen has no real engagement of the user. What I’m starting to see is the impact of this enriched technology and engagement applied to education. The fact that you could use the rewards and loyalty to engage and continue to things played on or even moved on concepts. I’m also starting to see the actual onboarding of employees into organizations. These are all places where I absolutely think this technology will make a huge difference.
Now that you mentioned that, I have been struck by some of the articles about companies that celebrations of anniversaries of employment in NFTs. It’s a great use case, and who needs a dusty Chotsky in their house. Maybe that you could do something with IBM in that area, do some NFTs for employee recognition.
It’s not employee recognition. I’m already thinking about that, and we are working on some pilots around that. More like we are talking about certifications, which are there enough that they have been used them as NFTs. They are transferable, more recognizable, and questionable. It’s not just to the employee level. You could think of it as a student, anywhere on the globe, who can have access to that NFT credentials that they can take anywhere else.
You also mentioned that you are interested, and you see it as well-beyond like being able to paint in a virtual world or fly around the metaverse. We are talking about intellectual property, which is a massive industry. I have friends that work at PTO, and I have done some consulting at PTO. There are so many opportunities there. Could you elaborate on what your thoughts are there for IBM and what we have to look forward to in terms of solving that challenge using Web3 technology?
I will tell you about my entry into the NFT world in October or November 2020. That’s when it started getting a little bit of a mature as a usable tech.
Do you have NBA Top Shots?
I do have one but that’s it. I have been following the market and what I quickly realized is that non-fungible token can be applied beyond the gaming world, the art world, or the digital image world. It can be used to solve some of our real problems like applying it to intellectual property copyrights and being able to track and trace the royalties for content that’s created.
We worked with a startup called IPwe. It’s a phenomenal company that applies blockchain and as well as AI technology to be able to analyze and provide provenance on intellectual property patents that are filed. We work with them to convert those patents into NFTs. These patents can be traded, licensed, mortgaged, and essentially transport to other parties as real-world cases. These kinds of transactions take months to execute.
Davos: The real problem with the intellectual property world is that the value is locked inside the enterprise with respect to valuation of that IP or patent. When you tokenize it, now you can expose and monetize it in more ways.
I’m thinking about like the DeFi implications of that. Derivatives on the future potential value of a patent that hasn’t been realized based on other technologies that you might know are also converging.
Now you are getting somewhere. The real problem with the intellectual property world is that the value is locked inside the enterprise with respect to the valuation of that IP or patent. There are some real respects for it from VCs and maybe a little bit from the market. When you tokenize it, now you can expose and monetize it in more ways. You can also take this and make it into a securitized asset and put it out in markets that can be owned by many people, and therefore they get more immediate liquidity as well. The possibilities are enormous.
Let’s go with this metaverse question with your perspective. I have got a ton of different directions I can go but one that would be interesting is we have meta, and meta is metaverse. I don’t know how much you are looking into some of the more B2C metaverses like The Sandbox or Decentraland and things like that. Let’s put two camps. One is metaverse versus these other metaverses, maybe even including your own interior employee metaverse that you’ve created for training purposes and such and so forth. Delineate between those two things. What’s the difference?
The Decentraland and The Sandbox environment is cool for consumers to have an experience. Maybe a little bit of engagement by the big brands. JPMC opened up a bank there, and Walmart is looking at a retail store. Those are cool but they don’t or can control the user engagement as much as in their own brand experience metaverse. I do believe the future is somewhere in between. You do need entry-level community engagement that’s more at the consumer level, and then you need your brand experience to be very well-customized and controlled by the enterprises that provide that experience.
You are making a bit of a case for centralization of the metaverse experience. Maybe even a preference for the meta opportunity because they can decide on the experience and tweak it to this business.
How does that fit in with the openness and the transparency in the interoperability required to ensure people don’t overwhelm from all the different metaverses? “What metaverse do I join?” It’s like having 300 or 3,000 cable channels. You eventually give up, and you go to Netflix.
This is the new world. It is a hybrid. It’s not one or the other. It’s a combination of both, and how do you effectively make the experience seamless is going to be every brand’s challenge. I believe this is where the things are on compliance, copyrights, and transfer of NFT assets going from one metaverse into the other metaverse.
The wallet compatibilities, all of that are going to come back and be very important. For Web3 and metaverse to stick, we need to nail the wallet technologies. The fact that the corporate and the government can have wallets, and they all need to be able to work together, we are not there yet, but that’s the transition we are looking for.
You mentioned how do you make sense of these multiple metaverses? The fact that corporates can control the brand experience that’s what they want but a place like Decentraland and The Sandbox gives a commute experience to the individual is what they also wish. We have to bridge the gap, and it’s going to happen. It’s happening already in some places. That’s the right evolution or transition.
We are going to have to wrap up soon here. We are doing this with a lot of our interviews. It feels like we have to cut them short but there are other folks even for you would want to chat with, I’m sure, outside this door. Last question in a transition into letting people know where to find out about you but anything that you want to share or you think would be useful from your perspective to share about before we wrap, and then also, where can people find out more about you and your projects?
We are going through a massive transition with respect to technology maturity as per market maturity and reception of this technology. In fact, in probably 2 to 3 years, we wouldn’t be talking about blockchain. Now we are starting to focus more on Web3 than blockchain. We are starting to see that. What I have also seen is a transition where organizations that were deeply rooted in brick and mortar ways of going to market shifting to digital form, and these technologies help and aid in that transition. We are committed to that transition and making sure that enterprises can leverage and take advantage of the digitalization of their assets and working with crypto protocols. That’s where I believe our efforts are going to be.
Should people go into any specific place besides IBM.com to find out more about what is in your world?
IBM.com and blockchain are where most of our information is but we do a lot of stuff on LinkedIn as well. Connect with me on LinkedIn and Twitter, and we’ll go from there.
Thanks for joining us.
Thank you, Josh. Thank you, Eathan.
We have been privileged to talk to these world leaders here in Davos, Switzerland. Thanks for joining us on this journey.
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We have reached the outer limit at the Edge of NFTs for now. Thanks, everyone, for exploring with us. We got space for more adventures on this starship. Invite your friends, and recruit some cool strangers that will make this journey all so much better. How? Go to Spotify or iTunes. Rate us and say something awesome. Go to EdgeOfNFT.com to dive further down the rabbit hole. Also, come and participate in EdgeOfNFT.com/discord and get to know the community. You will be in there where the special show was tagged. Be sure to tune in next time for more great NFT content, and thanks for sharing this time with us.
Important Links
- State Street
- World-Wire
- LinkedIn – Nitin Gaur
- Twitter – Nitin Gaur
- Beyond Bitcoin
- InstillVideo.com
- EdgeOfAE.com
- CV VC
- CV Labs
- Swiss Blockchain Federation
- LinkedIn – CV Labs
- Shyam Nagarajan – LinkedIn
- IPwe
- The Sandbox
- Decentraland
- IBM.com
- Twitter – Shyam Nagarajan
- Spotify – Edge of NFT
- iTunes – Edge of NFT
- EdgeOfNFT.com/discord
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