167 Gustav Friis on understanding crypto and blockchain related to regenerative agriculture and food

Gustav Friis, who has been working in the field of crypto and blockchain for the last five years, works as a founder on the investing side, as well as on the impact side. Gustav joins the podcast for a conversation about blockchains, cryptocurrencies, DAOs, online communities, community currencies and so much more.
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Transcript

SPEAKER_01: 0:00

The world of crypto and blockchain is exploding. It's attracting an enormous amount of money, talent, resources, and obviously, cowboys, scams, and ponzi schemes. So what should we know in the regeneration world, in the finance world, about this fascinating, scary, and very confusing world? Join me today in an episode where we scratch the surface, but hopefully give you some frameworks, some questions to ask, some metrics to dig into to make sense of this, as I said, very exciting, but also a very confusing world. Enjoy! Welcome to another episode of In March last year, we launched our membership community to make it easy for fans to support our work. And so many of you have joined as a member. We've launched different types of benefits, exclusive content, Q&A webinars with former guests, Ask Me Anything sessions, plus so much more to come in the future. For more information on the different tiers, benefits and how to become a member, check gumroad.com slash investingbridge an egg or find the link below thank you Welcome to another episode. Today, I'm very excited to unpack blockchains, cryptos, online communities, community currencies, and so much more with Gustav, who has been working in the field for the last five years as a founder on the investing side and also on the impact side. So welcome, Gustav.

SPEAKER_00: 1:53

Thank you, Karl.

SPEAKER_01: 1:54

Nice to be here. Can you just explain, first of all, how you got into the crypto world and then also where your interest in like, let's say, a healthy planet or soil comes from? Because you're definitely not a farmer or a soil expert, but you are very interested in this space? I'm interested in both, let's say, journeys. How did you get into the crypto world? And then we'll unpack the other side.

SPEAKER_00: 2:13

Yeah, sure. So I was a student in Copenhagen. I had a very, very bad concussion. We're back in like 2015 and cannot do too much. So I'm really just excited about this new thing I learned about, which is called Ethereum at the time, which was like a new blockchain. And via this, I started going to meet up in Copenhagen and And via this meetup, I was invited to join the first European blockchain summer school, which was also in Copenhagen, where I was living at the time, at the IT University, where we had different kind of case companies and the Danish tax authorities and banks and Maersk, the biggest shipping company in the world. And we did some case studies there. And after this kind of few days, I was sort of lucky enough to get some job offers from different organizations. I took one which was sort of the most nerdy one, which was a German development studio in Germany. And at that time, they had helped sort of as core developers to build Ethereum, which is today the second biggest blockchain. And that's sort of what I find very interesting. I was interested before a bit because I played a lot of computer and all that stuff in like Bitcoin, but I didn't see too much the use case other than this kind of store value, digital money aspect. But what Ethereum was at that time, and still is, is a generalized computer. So basically taking some of the basic ideas around decentralization that Bitcoin has done, but instead of only being a payment network, also sort of utilizing that as sort of a decentralized computer where you can put programs on. And I had studied on my bachelor of political science and on my master a bit more on the business side in business school. And I just saw that, whoa, with these things, you can really address some of the sort of coordination, governance, funding issues that, you know, in various literature has been sort of something that we kind of spent a lot of time on. So, yeah. And then I got into the space. I worked there a few years at that company in Germany. And then eventually moved on to start a company myself with some other guys and developers in America. And, yeah, since then, created other stuff. I created the Community Currency Alliance, which was sort of more in the community, local currency field. And that's because the first project that I sort of led in that space was sort of mixing cryptocurrencies and community currencies. And yeah, since then, just been very active in space, investing. Now I work at what you can call a third generation blockchain. It was called Nia, which is sort of taking the same approach as Ethereum, generalized computer, but trying to make up for some of the shortcomings there around, you know, the energy footprint and the transaction cost and some other stuff around user and developer experience. And yeah, now I'm just working there and engaged in this space in various fields, also in some of the early DAOs. And DAO is kind of a funny word. It means decentralized autonomous organization, which is not really fitting, I think, because it is sort of just, you know, you can imagine like kind of having a Facebook group, but not really controlled by Facebook. It cannot really be shut down. And then having these other things that blockchain offers, like specific voting systems, funding systems, et cetera, et cetera, but basically just operating sort of a Facebook group. So the DAOs sort of choose how they, you know, vote, select specific specific things, et cetera, et cetera. Yeah, so that's more or less it. And another topic, so I mean, as so many other people who have been in this podcast and in this world see what we as a species are doing, humans destroying the planet, destroying sometimes ourselves as well. And I think it was really when I met Bella from Maastricht in Switzerland some years ago, which I know you also know, really sort of got deeper into it on a conscious level and via Bella got engaged with some of the projects that this charity must see the social supporting I think some of them have been on this podcast as well so yeah but I will not in any way say that like the impact region space I'm just learning and I'm probably sort of what I can bring to this podcast is probably more on the crypto side than sort of what some of the other experts in the region social impact can offer

SPEAKER_01: 6:37

yeah thank you so much for that intro. Definitely a shout out to Bella. I will put a link below for anybody that doesn't know Bella Hadfani, his amazing history and the Mastercy Trust that he is running that actually also supported this podcast. And we met actually through them. And there's so much to unpack there, but let's start with, you mentioned a few things, but one I really want to focus on for a second, third generation blockchains that suggests there are two before that. And what's the advantage of, let's say, let's walk us through the first, the second and the third and why the third is so important, especially I think many people will have an immediate reaction to blockchains. Oh, they're so energy pollutant. They're extremely polluting in general. You already mentioned that that's been not taken care of, but being worked on. But why is that third generation so different than, let's say, the one and the second?

SPEAKER_00: 7:25

What happened back in 2008? Of course, there was a financial crisis, but there was also suddenly this weird person appearing or group of people appearing, Satoshi Nakamoto, which sort of put Bitcoin live. And as you can imagine, it's a few years ago, but, you know, this is the first time ever we saw this technology in the world. And this was sort of Bitcoin and the first generation blockchains. I think you can think about that. That's at least how I view it. Some people disagree that, you know, when I talk with Bella, for example, around the first computers he worked in, you know, which was like the size of a farm or it's not a big house, you know, that's how I view Bitcoin, you know. This was the first time the technology came out, the first instance. And This was in itself like a breakthrough technology, which have created this new paradigm we're in, which we can call the Web3, where blockchain is sort of one of those ledger technologies combined with other sort of technologies. But that also means that, you know, I'm sitting at a MacBook right now, right? There's a big difference between sort of the first computers you see at a museum and then a MacBook or let's say an iPhone with an app store in, et cetera, et cetera. So that use case of Bitcoin is really to solve what called the double spending problem, meaning that before on digital currencies that had been sort of before Bitcoin, you would maybe have digital currency systems, but there's always some kind of trust level involved. Basically, what we want to have with this type of payment system is we want to have you know, a guarantee that I'm not sending the same money that I'm sending to you to, you know, your friend as well, because then that undermines the whole money system. So that's kind of what.

SPEAKER_01: 9:02

Yeah. And instead of having a sort of a central database that keeps track of that, aka a central bank, this was fixed with a distributed ledger and all kinds of level of trust without having one person or one organization to trust. Like this was distributed trust, but in a currency.

SPEAKER_00: 10:06

Exactly. Yeah. You can think about it as computers around the world. They're all running some cloud client software. And what that basically does is that they have the same view on some accounting ledger. much more complicated than that, to be honest. And that's sort of that use case that now we know, verified by all these computers and networks, that there's not one line, et cetera. It's also where mining comes into the picture and all this sort of energy war, they're running against each other. So that's basically that. With Ethereum, as I briefly mentioned, and there was sort of, of course, other in between, but to me, that's sort of the milestone for the second generation blockchain And that's the field I've worked in also a couple of years. They basically said, you know, why not turn this power of these computers around the world to create sort of a decentralized computer so that it's not only a simple payment use case, but, you know, you can deploy a sort of an organization on this. You can deploy a decentralized exchange. You can deploy, you know, a carbon credit app as well. And it's maintained by the same sort of security guarantee, censorship resistance, and trustlessness, as you mentioned. So this is sort of a step into Ethereum, and Ethereum today is also super, super successful. What has then happened to Ethereum is that it's sort of got too popular, in a way, so that you have a lot of costs if you are sort of doing unchanged transactions. Sometimes you need to spend several hundred dollars to do a specific type of interactions on Ethereum, and this is just not sustainable, of course. There are only still only kind of limited million number of users today of Ethereum. So for this really to scale large scale, that's maybe not, you know, that is not great enough. So, and there are in the Ethereum space, there are a lot of kind of approaches where you take some of the things off-chain and you use other primitives. That's what we call sort of layer, layer two. Layer one, when we refer to that, it's always kind of the core blockchain. Then you have layer two, which is things that sort of are off-chain, but maybe have, some component on-chain. That's kind of scalability solution for Ethereum. Then you also have what I would sort of call Generation 3 blockchains. And there they have a loop at Ethereum, which right now is also using mining and also is maybe a bit more energy efficient than Bitcoin, but not really a lot. And that's because it still uses this what's called proof of work. And every time we hear proof of work, this is sort of related to the mining.

SPEAKER_01: 12:41

Meaning mining simply meaning many computers run like you have to imagine again like a farm size or more of servers running 24-7 using electricity obviously in places where it's cheap so mining in this case is a lot of computers but go on google if you're interested or youtube and find some videos of this this is our massive massive farms literally farming these these blockchains and that's proof of work and we've been talking a long time about proof of stake for ethereum to go to a more efficient way of doing that is that any way we're near like do would they sort of would an ethereum become also the third generation or would they be stuck in 2.5 what is your view there

SPEAKER_00: 13:21

to me it looks like it's on the way well for becoming what we can call a true third generation blockchain the thing is that imagine if you have a system right now with ethereum and i don't know exact numbers right now but let's say 400 billion dollars maybe it's worth right now it's not something you just migrate

SPEAKER_01: 13:36

yeah just for people to understand like there are hundreds of billions of dollars real money going through the different blockchains of course mostly in the larger ones but this is a space where a lot is happening a lot of money is going around a lot of infrastructure costs are being paid a lot of people are putting serious money into these farms as well and there's a lot of space for let's say for experimentation there's a lot of money around looking for to build new things to develop things to of course risk wise it's enormous because we're in the super super super early stage but definitely from an evolution point of view or experimentation point of view we're in a very interesting phase of the whole evolution And if you're saying Ethereum, like 400 billion, just for people, that's a four with 11 zeros, just to understand.

SPEAKER_00: 14:21

Yeah, and I would say, yes, they are full on the way. And I believe they are sort of three steps defined. So what Ethereum basically is doing is that they are sort of creating a parallel chain, which is called the beacon chain. And they are slowly transitioning everything on Ethereum to that thing. And that thing is running on proof of stake. But it's sort of a step to go there. So there is no mistake made on the way because there are a lot of, you know, hackers or people trying to exploit whatever they can find. to extract this money. So that's why it's probably a bit harder process for Ethereum to migrate because they have a live system. Whereas what other per generation blockchain have done is sort of started this network from the beginning.

SPEAKER_01: 14:59

From zero.

SPEAKER_00: 15:00

Yeah, exactly. And they looked at Ethereum. They maybe wanted, maybe build an app on Ethereum. They found it's not really possible. It's too expensive. It's too slow, et cetera, et cetera. Maybe there are other usability things as well from the developer side or the user side that we can maybe do better and then they have sort of you know did that from scratch from scratch on and yeah so most of those are running different versions then of proof of stake protocols when we say proof of stake in opposed to mining where mining is this as you say like kind of computing game where whatever computer can first like solve a very complicated mathematical problem they get a reward that's sort of how the protocol is structured that's how someone is in the sort of interconnected competing to serve you by processing your transaction. And whoever can do this fastest will get it. And whoever can do it fastest is typically the people with the best hardware. And that's why it started with something you could do on a very bad laptop. And now, as you say, this competition has gone so far that it's now these big data centers. And I mean, I don't know those exact numbers. If we talk about energy consumption of countries or whatever, it's always the but it's definitely a lot of energy that's spent there, which is kind of ridiculous in my opinion. So proof of stake then means that, and there are different variations here, but you could kind of say, okay, Kohn, so you would like to stake here. So maybe you put X amount of tokens, let's say on here, for example, where I work, you put X amount of NIA. If you are behaving well and just running like a normal kind of cloud server, so not all this extra inefficient stuff, then you're going to get a reward. up. However, if we catch you trying to do some malicious transaction or try to game the network, then you're going to lose your stake. This is basically the logic behind this consensus algorithm.

SPEAKER_01: 16:58

So it's only holding my tokens and I don't have to create them or I don't have to mine them with a lot of energy to prove that I have them. I put them in a sort of holding or I put them in an escrow and then I have to behave well. And if I do that, I'm fine. And if I don't, Don't lose my stake.

SPEAKER_00: 17:15

Yeah, exactly. And that's then the, when you look at these networks, there are people sitting and deciding these things and they look at them. So what's your cost? Okay. So you could try to do a malicious attack once. Cool. You lose all your money. You can try again. You lose all your money again. At some point, it's maybe not going to be worth it for you to try to game the system. There are also other protocols where someone can point out that Kone is doing this, then that person maybe get a large amount of the coins that, you know, are slashed from you to an incentivize people call like whistleblowing as well so that's how these sort of incentives in these consensus algorithms are

SPEAKER_01: 17:51

trust is built

SPEAKER_00: 17:53

yeah exactly so that's the basic design principle they're offering this you know to have this distributed network where people don't know or like necessarily trust each other but they follow the same protocol where these incentives are sort of baked in and allegedly then being you know secure you see sometimes blockchains that are not as secure as they thought it would be so you know obviously when we talk about like trustless systems I think you know that's kind of design criteria but I certainly don't understand how most of this stuff work myself right so I have people that I trust that say they you know fully understand it etc etc so I think it's always going to be trust in my opinion I think trust is sort of fundamental for human beings so I'm not in that kind of school where I think like you know no trust at all but the system itself should be minimalized as much as possible and as the software is open source, you could say sort of, well, maybe not everyone in the world can have the ability to go and look at the code and understand it themselves. But knowing that everyone in the world have the option to do that and everything sort of on the table, it's very different than say, I would like now to have a balance in the internet market and see the balance of all banks. This is just not public information. So bringing a lot of this stuff to the public domain and using open source software that everyone can verify, I think that also helps a lot sort of on the trust side to catch errors or to like see, okay, we don't just have to take your word for it. We actually have ways to try to verify ourselves.

SPEAKER_01: 19:56

Yeah, you have skin in the game. And so this sounds extremely interesting, but also relatively, I would say, quote unquote, far away from the physical world. But I know there are a lot of points where it touches the physical world or where you see in the near future it will touch. So let's go over a few of those where let's say you get excited, where it could touch the ways of how to create, let's say, a healthy planet and what you think that the audience, in this case, it might be experts on this or not at all, should really know about what is coming or what is already there. What are some, you mentioned DAOs at the beginning, let's unpack those maybe a bit or some other funding models, like how does it touch the world of farms, soil, trees, et cetera, and what we should know about this?

SPEAKER_00: 20:37

Yeah, so we have these type of different primitives or tools that is increasingly become much more available for everyone in the world. One day is DAO, and when we say DAO, this is just this type of organization. I'm, for example, part of VC Investment Fund. We operate as a DAO. And this means that we have pooled our money together into a smart contract. A smart contract is then a small program we have put, in this case, on the Ethereum blockchain. And then we can collaboratively make decisions.

SPEAKER_01: 21:03

Why did you choose Ethereum in this case? As you say, the transaction fees or the, like you need a lot to do transactions, or was it the easiest option because it's the most widely used smart contract blockchain?

SPEAKER_00: 21:15

Yeah, I would say at that time there was not really third-generation blockchains alive like two years ago. And at the same time, maybe it's okay for us to pay$50 or$100 to make transactions when we do larger investments, whereas it's maybe not okay to have a cup of coffee. So it depends a bit on the specific use case.

SPEAKER_01: 21:33

The use case, of course. And so this is an investment fund. So you pulled money, like many people might know in, let's say, the Silicon Valley way or others, you pulled money from a lot of people. In this case, not necessarily accredited investors. They could be anywhere in the world. They pulled their virtual currencies, obviously, in one smart contract. And then what happened? Like you don't have a fund manager, right? Like one person that sits on, what is it, Mountain View or whatever in Silicon Valley deciding what to do with this? How is this different?

SPEAKER_00: 22:00

In our case, we don't have it. Other investment DAOs might have it. That depends on everything, you know, on the legal setup they have chosen, etc. We are sort of more an investment club, as you may. So what we do is that we issue sort of new shares every quarter. And based on this, we are using different systems to sort of internally assess who have added value this quarter and those people then get higher they get you know more shares and the people who didn't do anything they get diluted basically we see all every time what's in the treasury there is no person who is like the accounting person who we have to trust that takes well care of our finances etc we can everyone can see that then on each investment we are voting on chain with the number of shares we have in the in the thing we and then have the same amount of vote in the investment. If then there are investment decisions that we are, we find it's like very bad and like, I'm not really interested in taking part of this anymore. We could at any time, a rage quit, which means that we can then sort of at the same time, get out what we actually are entitled to in the investment fund and say, okay, this decision is too bad. I want to get out now. That's something typically that, that maybe you don't have the insight or ability to do in traditional investment funds.

SPEAKER_01: 23:12

So the liquidity is instant if you want, and you're very involved, let's say in the day-to-day running of the fund. Like you find investments, you do DD, you do a lot of these things, and all of that is visible. And for all of that, you get, let's say, activity points. So you're very active, and that means that you get more shares over time of the fund, of the investment club, and people that are no longer active or not active basically slowly get diluted. And so it's a constantly evolving almost organism.

SPEAKER_00: 23:43

Yeah, yeah. And in turn, many of the other members, they are sort of representing more traditional VC funds. So it also serves sort of as a network between those members where they can actually then get a new deal lead. They can get that in and then based on the interest and if it happens, then, you know, they also get rewarded extra for that. So that's just like, maybe it's not that interesting for this crowd, but it's just like an example of how, you know, the VC model is being reinvented. But there are funding-wise many types of like these new... tools. Another bar I'm in is taking, you might say, the complete opposite approach. This is a charity and a sort of association. And it's called the Common Stack, which funds public good infrastructure in this space. And there we also apply sort of the same. Of course, we can always choose our own governance. What type of voting do we want, et cetera, et cetera. And there we apply that just for another sort of case and another with people. So this is just to show that this is how organizations can operate very efficiently. There are some DAOs which go the route where it's not really having a legal entity or what we call a legal wrapper, and it's not compliant with general depends on, again, the jurisdiction, etc. And then these two examples I mentioned, they are actually just regular entities. They just use these tools.

SPEAKER_01: 25:14

So they're fully legal, they do these tools just for anybody that say yeah but what about it's our fully legal entities and they use the virtual tools let's say to operate and to make in this case investment decisions or charity decisions i think it's fascinating as well you basically you bring in charities and you operate a much more efficient i mean we all know the issues with the charity industry and the way of decision making there from an office far away we know what's good for you in a small village somewhere i mean the typical model and in this case it's fully decentralized and it's fully accessible and open as well like anybody in there can see exactly what's been happening with every single euro currency or whatever has been used which is in itself that transparency is already revolutionary for many ways

SPEAKER_00: 26:00

yeah and you see of course charities are embracing facebook etc like like rapidly right and that that has already like imagine how many like local groups grassroots groups or etc like local farming groups have set up facebook groups well this is sort of just like a facebook group and the regulators still don't care if use Facebook or not, right, for your communication for the SEC. What they do care about is, like, depending where you are, for example, in Switzerland, where I live, well, the tax authorities want to see, like, an invoice per transaction outgoing, if it's, like, above a certain amount, probably KYC, so you know who you're dealing with, and then we need a valuation to Switzerland, so we can assess the tax impact as well, and if there's any, if it's, like, in Switzerland, VAT. So as long as you can't give them that, you can utilize the power tools, which, suddenly, and of course that depends from charity to charity, organization to organization, but from sort of my small experience in that world, not that many enable, you know, their members to real-time vote and this gets executed like every week if you want to, you know, actually support this project or not and have these other incentives that sort of makes this organization larger than just like top management, et cetera, et cetera. So, yeah, I think that's where this offers a very interesting tool and I think most organizations organizations in the world, within some years, I've gotten to operating like this more or less, because it is just very, very efficient and can scale like a lot. Especially when you, and that's what I'm sort of most engaged in, in these ways, actually operating from an entity. So you don't sort of get into any hiccups afterwards.

SPEAKER_01: 27:37

Yeah, because we've seen examples, obviously, there where, I mean, you need to, as you said, if you want to operate in that way, you need to have somewhere a connection to a physical country, you need to have a good grip on taxes. You need to have a good grip on invoices. You need to have a good grip on know your customer. And of course, because you are dealing with financial assets, which depending on where you are, are heavily regulated or less heavily regulated. But there are definitely ways, I think that's the lesson here, to do it fully transparent and fully legal at the same time, which I think five years ago were impossible because many governments weren't up to speed with many things. And I'm not saying everywhere it is the case, but you can find places where if you want to you can do this fully in the let's say the daylight

SPEAKER_00: 28:19

yeah and yeah and then what i think it can offer is like different funding aspects and different coordination aspects it's not just like a board meeting one time a year or a newsletter that is sent out to the members of a charity for example or cooperative etc no you can actually let people have a say in like decision as they want you can have specific like sub work groups etc etc of course it's not like you know we have not learned something in terms of organizations throughout like human history right they are often reasons why organizations are structured as they are. That's often a mistake in this space, I think, that we try to reinvent everything and many things in social

SPEAKER_01: 29:31

constructions. At the same time, yeah.

SPEAKER_00: 29:33

Yeah, exactly. But still, I think it's very appealing to enable your members or in a cooperative, for example, to be very active and to have good insights in the report, because it also means that now people bring new insights when they actually can see in real time what the treasury is or how much it's costing, et cetera, et cetera, et cetera. So that's what I'm seeing sometimes is that that gives an enormous involvement because it motivates people a lot as well. And you can also put incentives so that if they then are adding extra value and the other members assess that, you choose what type of incentive or tool do I want to use to do that. The same with voting. What type of voting do you want? Is it one vote per person? Is it more like we delegate? Is this more like an illiquid democracy? Are we more sort of in condition voting where I sort of believe so much in something that I sort of state on it myself? So we have all these different... And obviously for all types of organizations, there might be, you know, different combinations of sorts that make sense for that organization.

SPEAKER_01: 30:31

Yeah. I remember this is quite a few years ago. I'll put the link in the show notes as well, but a Brazilian company called Semco that went fully transparent. So everybody in their organization, this is a large company building factories, mostly like cookie factories and things like that. And then distributed into many other things very organically because they took that approach of behaving like an organism. And this was without the I'm pretty sure it would have been built on a blockchain if Ricardo started it now, but it was fully transparent. Like everybody down to the cleaning woman or man knew could look into the books, but it was actually trained to actually read them as well, because otherwise it's very easy to say, oh, the books are here, go and have a look. But if you're not trained in accountancy, you have no clue what to look for. And that unleashed an enormous amount of creativity. Most people were in their different teams also responsible for their own salaries and were fully transparent. on that as well, which unleashed an enormous amount of transparency and innovation there as well. Many people left the company, sort of founded another piece, but then within the same group, many people, whenever there was another crisis in Brazil, managed to find enormous savings everywhere because they knew exactly what everybody else was working on and what they were working on and where their money went to. Nobody ever went traveling. This is one of those funny examples. They didn't need to ask for a corporate credit card. They didn't need to ask for a certain permission. They were completely free to spend whatever they wanted. Because they were trusted that if they were going anywhere on an overseas trip, that they were able to understand what was fair, if they had to buy a first class ticket or not, what kind of hotel, what kind of meal. I mean, there were no protocols for that because they were trusted in actually being a human being and knowing that if they would spend money off the company, that was fine, but they were partly spending their own money. Of course, they didn't take it to the next level of ownership as well, but people really felt ownership or few ownership. And this company has survived ups and downs, enormous growth for, I think, plus 20 plus years. years in a very, let's say, quote unquote, different way. But everybody found, I mean, unleashed an innovation. It wasn't for everybody, let's be clear, but it was for many people the best place to work and the best place to spend almost all their time. Many people overworked even if there were no incentives because it was their home and their family, basically.

SPEAKER_00: 32:41

Yeah, and I think that can motivate a lot of people for a lot of things. It's important for me to say that, of course, many organizations have things that they don't like to be told in the public and maybe rightfully So then, you know, for this stuff to really go mainstream, of course, some organizations will not put everything on the table. And there are also privacy technologies to enable that. But for other things, you can do a lot of interesting stuff for this, especially if it's stuff that you consider in the public domain or something like that, where there is maybe an interest and it's like adding a lot of value for us as a species that those things are open. Again, I can just talk about the interbank market, right? We have very little insight into when there are systemic risks and pressures that would actually impact all of us. If there's another 2008 crisis again, imagine how much that's going to impact, how much money is going to impact investment, right? A lot. So there are things there where we actually maybe have a right to have public insight into what's going on there because that's going to avoid a lot of stuff. But on the other side, of course, the things that, depending on the company type or organization type that, you know, you don't really want to be out in the public for business purposes or for like privacy data purposes. So, so I'm not saying like everything should be an open transparent as well, but having some of these things out there transparent can really add a lot, uh, for, for the, for the earth as a whole, or for, as you talk about employees and, and being more involved and engaged and driving innovation and, and, you know, results from that.

SPEAKER_01: 34:17

And so I have so many questions, but we're not going to get to all of them. We're only going to scratch the surface, which is We'll repeat this at some point, but I know you have some interesting thoughts, like what this could mean for the podcast or our audience. Like I always ask that question of what would you do with a 1 billion investment fund tomorrow morning or now, but this is instance that we have to say now, how would you, not necessarily, how would you, you put that to work, but how would you structure that? What is the mental framework you would apply to this for people just to, to see the possibilities of what is already possible now or very, very near future? Like we're at Everything goes at a breathtaking speed at the moment. So what would you do if you would be an investor with a billion dollars or whatever currency you want, but let's say a lot of money, to put into making this planet a livable planet again?

SPEAKER_00: 35:06

Yeah, so I try to be very honest to you, Cohen, that I'm not really an expert in retail culture, et cetera. That's sort of my starting point.

SPEAKER_01: 35:13

Me neither, but

SPEAKER_00: 35:13

yeah. I have followed the podcast. I know a few projects, et cetera, et cetera. But that would be my starting point to say, Gus, actually, you don't know so much about this stuff here. But I do trust that let's say, if we would look at and we could maybe see, okay, this person and verify that this person, because you have also like podcast platforms that are on blockchain now, and we can see that, you know, it's the same wallet address showing that it's the same kind of person that have listened to similar podcasts 20 times. Then I would say, okay, so everyone who listens to a podcast, at least like 20 podcasts of yours, plus perhaps all the guests that are sort of experts, they would be my signal for sort of the collaborative funding process.

SPEAKER_01: 35:50

Okay. So you would look at like a group of we can verify that they, let's say, know more than the average or more than you. We can have an estimated guess. We're not sure, obviously, if they're good investors, but at least it's a signal that they know quite a bit about the space because we've interviewed them and or they might be the same person, but they listen to quite a few episodes all the way through, not just the first five minutes.

SPEAKER_00: 36:14

Yeah, and then what sort of is working very well in the Ethereum ecosystem is a platform called Hitcoin, and that's using what's called quadratic funding So that basically means that I sometimes donated money, I sometimes received a bit of money, where... I would say, all right, with this money, I would say maybe, okay, let's do this the next 10 years, every quarter. I am going to allocate the according percentage of that money as matching funding. And this is using this principle of quadratic funding.

SPEAKER_01: 36:43

Quadratic funding. I'm going to put it in the notes. People, don't worry. There will be a lot of notes after this interview. So we'll say, okay, we're going to do something every quarter for the next 10 years because we feel it's the next 10 years are going to be crucial and you're going to match things.

SPEAKER_00: 36:55

Yeah, because, you know, this is kind of, which is sometimes okay as well, but I would sort of, you know, sometimes there's this problem that, you know, I will just tell you, ah, you should donate to this project, but I'm not really donating myself. So why do I think you should donate to it if I'm not up for doing it myself? And this is sort of this basic idea of skin in the game. So then this matching would sort of look like, and that depends on the matching algorithm, which is something that, you know, Bitcoin had done this for a long time and it's like the last 12 years and it's evolving all the time too. But basically you would say something along the lines as, okay, so if there is this farm in in Berlin, right? Nearby Berlin that is doing regions of agriculture. They put up like a grant where they describe in a public page what are they seeking, what kind of funding are they seeking, and what are kind of their projects and deliverables. They're kind of free to do that. In other implementations, it's more like standardized, so it's easier maybe to look at. But that looks a bit like a normal crowdfunding sort of site, right? But then you can then tell, well, if someone, and then that's depends on the matching algorithm. If it's like 100 unique people that we can sort of verify are unique and maybe also rank them depending on sort of the expert level, if they put their own money into this project, that probably gives some signal that this is better than, you know, the scam project Gus just put up and he doesn't know anything about retail funding, right? So if for each of these people in this case, if they put in$10 each, then I will match it with$50 each of those people who put in their own money and we can verify that they are sort of, you know, individuals and they are knowledgeable about this space based on some criteria. We cannot never fully, that's always like a thing, we can never fully make that perfect. That's like another big problem in IT, how to fully like show that you're fully unique, et cetera, et cetera. But it works fairly well. And then based on that, I'm actually not making that decision. I'm just trying to let my funding being allocated based on that signal of sort of people who know more about it than me and who put their own money as well. That's sort of just to avoid any sort of obvious spam issues, et cetera, et cetera. So, uh, so I think that's, that's basically how I would go about it, I think. And I would, uh, within the, within the field, I would, I would fund, I would then try to, you know, grade and adjust, uh, this matching algorithm, et cetera, et cetera, based on, you know, the specific topic and what makes sense.

SPEAKER_01: 39:18

And obviously, I mean, you mentioned the grant, but this could be an investment as well. And I think the underlying, the key point here is you're very clearly saying, and I think there's some, many people should say that more often. Like I'm not an expert, but let's find a way to tap into sort of the general knowledge or the distributed knowledge that is in the space. And there are many ways to do that. And one of them you mentioned is to see like public experts or that have clearly shown that they are learning a lot about it because they are listening to certain things or they're reading, et cetera, et cetera. You can verify that in different ways. And that's not enough because it's nice if they say, if they point to this farm in Berlin or close to Berlin saying, oh, that's very interesting. But if they don't put any money on the line, Yeah, there's no skin in the game. So if that's, there are many different ways to do this, but in this case, if they put in X, then you can match it with Y. And if enough of them do it, it actually probably has a strong signal that it's not spam. Like you avoid a lot of the downfalls of a lot of crowdfunding campaigns that don't go anywhere because it's completely invisible. Like who's behind it, who's actually putting money in, who's an expert that knows slightly more about this, et cetera, et cetera. And this is very scalable. I mean, you can repeat it every quarter until let's say the money runs out. runs out or money starts coming back to do that. And this is how many, many projects at the moment in the blockchain world work, right?

SPEAKER_00: 40:36

Yeah, I mean, this niche is particularly suitable for projects which don't have like, when we talk about the grant domain, of course, we can talk about investment too, but the grant domain, projects that don't have like any clear monetization ideas for making their own token, because of course, the other aspect there is, is which I would probably also allocate a part of, if we say$1 billion for would be projects which I see can be enabled as many other projects you know let's look at the i know you had the you know regen network template in here right

SPEAKER_01: 41:05

christian yeah

SPEAKER_00: 41:06

they are sort of launching their own token to launch their own network and right now it looks like they're quite successful on doing that and they are doing that with specific purpose

SPEAKER_01: 41:14

they're on cosmo right they're on a specific blockchain

SPEAKER_00: 41:17

yeah yeah so they're using what's called the tendermint which is like a framework to set up blockchains and then okay that's sort of developed by the guys that also are running what's called cosmos and cosmos is a way to connect different blockchains so if If you do what they're doing, it's sort of getting sort of a quite efficient blockchain that you can set up without having to develop everything yourself. Plus, then following this protocol, you can then sort of be involved with other blockchains. And that's sort of what's happening in this space, too. As you can imagine, first, all these blockchains happen. People make other blockchains. Now some blockchains are better or are geared towards other things than others. And sometimes it makes sense that that blockchain, you know, which is, in their example, sort of optimized, or like X system restoration and like attestation, et cetera, et cetera. And that's maybe connected with another blockchain that have another purpose. So that's what they're doing. But in their case, what I would mean with like my sort of enabler statement would be, well, they are also going to fund a lot of projects. Now they're going to succeed in this space. So sometimes that you really have sort of a multiplicator effect there by enabling those projects as well, which are also going to launch their own tokens, et cetera, et cetera. And these tokens can have very, very different primitives. And then we got sort of in the, what's called kind of token engineering commons direction, which is also like a big community that works on how to design such tokens with incentives or, you know, again, what what you want to do but that's in that case you can you can sort of design specific issuance curves or exchange curves or you can do such as every time this currency is exchanged you know 10% of the fees are donated to you know this restoration project etc etc so just as we have like tokens it's just like very very sort of generic you know it can mean a lot of things so that's like a big topic we can go into but yeah

SPEAKER_01: 43:21

maybe for the next time but i think it's fascinating to just point out that this space is attracting a lot of people a lot of very very smart people and in general again that's a signaling function like if you see very very smart people moving into a space that i see actually in the regeneration space as well from other sectors that leave very good jobs behind or very nice careers etc it means something is happening even though i don't fully understand it maybe nobody does but you see like it's a signaling function if people they skin in the game because they gave up something else. And when you look at something like Regia Network, I remember interviewing them and struggling because I don't really grasp what to even ask. What are metrics? What is a mental framework we listeners to this podcast should use when we're asking questions to these kind of coins, tokens, blockchains that claim everything about regeneration that we possibly want? But of course, there's a lot of noise out there. I'm not saying that Regia Network is noise, but I really struggle with what questions to come up with because Because in, let's say, quote unquote, normal companies, I can do that. But in this case, it's really different.

SPEAKER_00: 44:22

Yeah. So how I view it is a bit the same as investing sort of in different organizations or giving like different group of people in organizations like money or investing into them. There are different stages. And at these different stages, let's say it's just like very conservative, VC, okay. And maybe there's like pre-product stuff like that, very basically early stage. Then there is a product. And then there, if you are sort of a more short-sighted investor you're very looking into like what is the revenue and stuff like that. And then later on, you're looking at like other things, like depending on like maybe now of two years when you have done an A and B round, you want to have, you want to look for like now, great, you have all this, all these users, you have all the turnaround. Now we want you to see a lot of profit, et cetera, et cetera. Right. I think how I think about these kind of blockchain startups, it's kind of a bit the same that you kind of look at different things at different stages, naturally speaking. Right. So when we are creating products, uh, et cetera, et cetera. And like a very early stage, let's say some of the techs we maybe give for like pre-seed money, you know, maybe they raise$100,000, you know, quite low valuation, something like that, just to get that started. You know, at that time, well, I think me personally, it's so much about the people, the team, do you believe in it? Everything they say basically is some kind of vision and that vision can be critical. And it's a story they're telling, like, you know, how most things in society works are just stories or narrative we tell. But if they can somehow convince you that that story a mission that they do and it kind of sounds bland and it makes sense maybe from a technical point of view maybe you decide to give them money because you have that feeling based on those metrics but that's sort of more when you are like that early like kind of pre-seed angel I think it's fair to say there's a lot of gut feeling intuition on that and that's about chemistry with founders and some people you can just you just don't believe that you know what they are saying is possible or that they have the right to might want to do it and some people just do so at that stage I think that's sort of both for traditional companies and startups in the blockchain space that you're looking for. Then in the later stages of the semester, well, if I would look, let's say, I'm just going to like a contrast now to the full other aspect and look at blockchains today. If I want to compare, let's say, Ethereum with like 10 layer, like 10 third generation blockchains, for example, right? Now I'm sort of going in that systems that are already live and they are in this kind of scenario. It's a contrast tool because it's typically not a typical start that runs these blockchains because it's a big network. But then just as you have sort of an annual report you look at for a company, you have also quantitative metrics you can look at for blockchains. So you can look at like how many users do you have, how many active daily users. That's the same as, you know, if you wanted to invest in Snapchat some years ago before they had any revenue. That's how you look at these kind of software startups too. Then what you can look at is also like how much gas is actually paid in fees and of course the percentage growth in this and the user numbers.

SPEAKER_01: 47:16

So gas fees is basically the cost that you were mentioning before, like to do something on the blockchain is called gas fees. And in Ethereum, that's been exploding. And of course, that's a risk. If you want to do a lot of small transactions, you're not going to pay a huge transaction fee or infrastructure fee.

SPEAKER_00: 47:32

But if you are running something like Ethereum and you actually are accumulating like a lot of millions of dollars in transaction fees from like millions of users, that also shows a bit like very new from a startup that shows like, okay, you're on track on something, right? Because you are providing a service that people want to pay actually a lot for. So That's like a quantitative metric too.

SPEAKER_01: 47:49

People are valuing it enough to pay the gas fees. Yeah.

SPEAKER_00: 47:52

And in this example, I'm talking about blockchain so that you could talk about like traditional annual report metrics for companies. And then this is more kind of network metric, you could say. And then you would also look at, you know, the number of startups, how much have they raised? What are they doing? How many users do they have? What's built on top of this? Because blockchain, that's sort of just infrastructure. And it's only as good as, especially the ones which are more generalized computers, what's built on top of it, you know? Is it the new Airbnb that is built on this blockchain? And they have, a billion users, well, then it's probably worth something, right? If they sort of build on this infrastructure and maybe there's, you know, also the next Amazon, maybe there's also the next, et cetera, et cetera. So that's definitely something that's interesting too. And then in these protocols that are, now I say protocols, but it's kind of like apps on top of these blockchains. If that's, for example, a decentralized exchange where you can swap your tokens and there is a specific volume on that, or there is so much, you know, we have the measure called TVL stands for total value locked and this is when you lock up specific things assets in a blockchain maybe for specific purpose like a return or something else then that also shows that people have locked so much up on an app on top of this blockchain so that's sort of the what you can look at if you are sort of more investing into the or looking at the like larger blockchains then there are all these things in between where you are early stage product etc etc and I would just my understanding it's just like going from very like trust intuition or like chemistry in the team base and of course if the team had sold the startup before that's always like a super good thing or if they get a you know it's the best friend from the startup you already invested into and it's very successful that's so it's the same kind of thing in the normal business and then you have these different steps on the way where typically as an investor in this space well if there is equity you want equity but if there's tokens you want that kind of more so you want both if there's both equity and token if it's a token launched from you know a non profit organization, it's fine. You just get tokens. But then it depends a bit on like the tokenomics. Does this token actually add something to the product? Or is it just like something that is like, you know, squeezed in there to like make a lot of money very fast? If it makes the product worse, I would say it's kind of a bad token. If it makes the product or sort of, you know, whatever that startup is doing better and it's like a fundamental thing for making that thing work, then I think it's very interesting. And then if it can somehow accrue value or there's some element to it, then, well, that's, then we are sort of in the, what's called toponomics aspect. And then that's very interesting too. But of course it's just one element like next to, you know, what every startup organization have in terms of like go to market, getting users, customers, you know, partnerships, et cetera, et

SPEAKER_01: 50:39

cetera. Yeah. So very similar in many aspects to what investors might be already used to. I want to be conscious of your time and ask a final question. question, what would you do if you, so you no longer have distributed fund that we talked about before, but what would you do with a magic wand? If you could change one thing, but it could be anything, it doesn't have to be blockchain or regen ag or regeneration related, but you had the power to change one thing overnight, what would you do?

SPEAKER_00: 51:04

One thing overnight. Well, I think what is needed and what Bella taught me is that this is mostly about what's in the head of all of us. We have actually paradise on earth. We have the flourishing path here on earth. So it's more like a thought revolution and working together and collaborating on solving those basic you know problems and serving those basic needs we all have and I'm talking about humans here and making sure that with that realization we are not destroying the planet we are not destroying ourselves animals other life beings so I think like having that awakening and thought revolution and empathy would be the single biggest thing and I think that would actually solve a lot of

SPEAKER_01: 51:43

problems I want to thank you so much Gustav for giving us an insight into the fascinating world of blockchain and everything crypto. And probably not the last time. There's so much happening in that space and obviously in all the spaces that surround it. And I think we're going to see a lot of much more practical applications of these models over the next year slash years. And we'll be coming back to explain them to us and to see how we should put these very, very powerful, let's not underestimate this at all, very powerful tools to work.

SPEAKER_00: 52:14

Sure. Yeah. Thanks a lot. Very happy to be here. Share my knowledge. happy to get in touch answer further questions and also want to thank you for your great work on summoning leading experts in this field around the world and coordinating here because I think that's really leading to a lot of great collaboration and that's a huge impact that maybe can be hard to see just from day to day but I think that's really leading to a lot of very interesting development so thank you too for that

SPEAKER_01: 52:39

thank you so much for those nice words and have a great

SPEAKER_00: 52:41

day

SPEAKER_01: 52:43

if you found the investing in regenerative agriculture and food podcast valuable there are a or in the description below. Thank you so much and see you at the next podcast.