Dan is the former Chief Innovation Officer at the Defense Intelligence Agency and 2014 Fierce 15 awardee as a top government change agent. He has 20+ years of experience in emerging technology development and finance across government and private sectors. Dan is a software developer and innovator in artificial intelligence, cybersecurity, process automation, dynamic asset pricing and enterprise architecture. Dan holds a B.S. in Systems Engineering & Economics from the U.S. Naval Academy and a M.S. in Nuclear Engineering from MIT.
Security Token Industry is here, and it's still not too late for you to get involved.
Coming up on this episode of Security Token Insight, we'll take you to the Security Token Academy's first meetup in Las Angeles, and look at the latest security token investing news.
Plus, we've got an expert interview with Dan Doney, co-founder and CEO of Securrency. That and much more is coming up on this episode of Security Token Insight.
Hey everybody, I'm Adam Chapnick.
And I'm Amy Wan. Welcome to Security Token Insight, brought to you by The Security Token Academy.
The Security Token Academy is providing insights about this new era for security token enthusiasts, investors, and issuers, and we thank you for coming along on this exciting new journey.
Coming up on today's episode of Security Token Insight, in your security token investing news, a security token sale for a luxury resort gets under way. We've got an expert interview with Dan Doney, the co-founder and CEO of Securrency, plus highlights from the Security Token Academy's first security token meetup, and learn about the Security Token Industry Launch Event set for this October in New York City.
Now it's time for your security token investing news. A legendary Colorado resort is getting involved with security tokens with one of its own. According to CoinList, token trading platform Templum Markets has launched a security token sale for the Saint Regis Aspen Resort. Accredited investors can purchase Aspen Coins, which will represent a share in the resort through a holding company. You can sign up for the sale on Temple's website. In other news, Huobi, one of the world's largest crypto exchanges, has invested in security token platform, OpenFinance Network. The partnership will provide both parties exposure to new markets and allow for collaboration across multiple aspects of token trading. According to a company press release, the CEO of OpenFinance Network, Juan Hernandez, had this to say. Quote, "We believe that security tokens are the future of finance, and that Huobi's investment in our trading platform is reflective of the rising interest around the globe in this emerging financial ecosystem." We'll be speaking to Juan Hernandez in an upcoming show, so be sure to keep it here.
The security token industry is gaining a moment across the US and the world.
Yeah, we caught up with the co-founder and CEO of Securrency, Dan Doney, for a look at what Securrency is doing in the space, his thoughts on regulations, and much more in this expert interview. Take a look.
Okay Dan, thanks for being here.
Okay, so let's talk a little bit about the industry. But first, tell everybody, in short, what is Securrency.
Sure, Securrency is a company ... we're a tech company that set out to layer compliance and security over blockchain networks to be able to tokenize securities. So we provide a one-stop-shop for issuers to walk through their token offering, to build in and bake in the compliance framework, to issue their tokens, to allow them to trade, and then ultimately to do the government reporting required for a securities offering.
Amazing, and it is amazing, and I was saying, check out all you can check out about it on the other interview with Dan, but for now, we're going to talk about your views on the industry. So last year, which was 2017, there was a big frenzy around ICOs. Now how do you see the STO industry, the security token industry as different from that? There's obvious ways, but what's your take?
Oh, yeah well so look, if I'm honest, and I don't mean to cast aspersions-
Here but the ICO industry was largely about avoiding securities laws, and there was a thought, perhaps, that it was a new world and compliance didn't matter. Along with that approach, unfortunately, the laws are there for a reason. Investor protection is a key component of the regulations. You saw a lot of abuse in the system, and the key issues with ICOs, largely across, the board was lack of investor protection and sufficient risk disclosure. So that's an important part of offerings is that folks are required in a securities context to properly disclose risk. There was a lack of common securities standards, so we've ... for example, we've subjected our platform to PCIDSS certification. PSCIDSS is a robust financial services auditing protocol with independent auditors, who come in and verify the security posture of your system. It's rigorous. It takes a long time to get through this. It's required for the credit card industry in order to do it.
The crypto industry has no parallel to this, and so some folks ... they may be very smart ... get into the market without sufficient protections and it's estimated 10% to 20% of value contributed to ICOs gets utterly stolen. So the track record of ICOs, again, because of lack of investor protection, you see many frauds. Now, again, an estimated eight out of ten being either insufficiently vetted, or just altogether bad offerings. The security token model very much is a different framework. It is a model that emphasizes the good things that we know about securities. The regulations are there for a good reason, namely investor protection, fraud prevention, and by embracing those rules, where many folks in the ICO world were looking for ways to avoid them, we embraced them. We ran right towards them, and we figured ways to automate those specific rule sets.
You get an environment that's safe for investors, it's healthy for issuers because they have an easy framework to get to market, that insurers can actually come in and help to de-risk. The models ... we're working with some major insurance companies for the same basis. And ultimately what that means is institutional money can come into this space. If you're a pension fund manager, you can't go into a space where 20% of the value is stolen and 80% of the value is not ready for prime time. So by creating an environment that embraces the rules globally, you create a place where the big money ... the value from institutional investors ... as well as the little money from mom and pop can come into a safe place and invest. Big difference.
Yeah, well that's clear. Okay, so now that's the STO vs the ICO. What about versus the cryptocurrency market. How's STOs differ from that whole world?
We came into the market with an observation, and this remains true. Unfortunately, Bitcoin's price is down significantly. We're hoping for a rebound here shortly, but cryptocurrencies have been quite volatile, and the reason for this is fairly straight-forward. Their value is their utility, and that's somewhat subjective, so you see speculators in and out, and you see prices go up and down. What that means is it's a great way to transmit value, but it's not a good place to put your money at rest. And so the big difference for securities token offerings is traditional investment opportunities can exist in this space. It can give investors who have a growth appetite an opportunity to participate. For folks who have an income appetite who want stable income overtime, it gives them an opportunity to participate in this market. So it's pretty different from the cryptocurrency world. They work together.
So we accept, of course, with the securities ... Bitcoin, Ethereum ... They fit together, and they all ride on blockchain networks, but they're very different in terms of the instruments.
Yeah, no, that was a great explanation. Okay, so you guys have an unusual place in the ecosystem where you actually work with and understand a lot of different blockchains. Can you speak to how some of the major ones that we've all heard about, how they are different? Because most people don't even know that they are different.
Yeah, listen. So early on in as we began building our platform, we recognized that there was going to be considerable evolution in distributed ledger technologies as we saw even in 2015. The core ledgers, Bitcoin's blockchain, was a slow, powerful, very cool, brilliant model, but slow, and that for many transactions it was insufficient. Of course, there's Ethereum and on from here. We saw a need to be ledger agnostic, and that was to build security and compliance over any distributed ledger technology such that we could engage in token offerings on any of those. Now we have opinions, certainly, about which ones are most favorable. We love Ethereum, of course, because of the broad base of wallets. It makes it easy when you issue tokens within the space to get to many users on the Ethereum network, but it is slow and it is expensive. We love GoChain, so GoChain is a much faster version of the very same. We've shown that we have the ability to do token offerings in the GoChain network. We're exploring EOS. We're excited about where that's going and the potential to do some things that aren't easy to do in Solidity in the EOS network.
What's the difference between the EOS blockchain and what it can and can't do versus the Ethereum or the GoChain?
Yeah, so there's a couple key differences. The first is the way it's governed. It allows for more speed, and it allows for a more faster adaptation in the model. And GoChain and EOS are the same in this, but Ethereum being truly, purely decentralized, it's harder for it to adapt, and it's model for consensus is different, and that limits its ability to be fast. They're working on that, but because of the governance model, it's going to take some time for that to be addressed. By the way, there are some really promising things ... we're keen on what Microsoft is doing with Ethereum there as they're moving to Proof-of-Authority. That significantly increases the speed of the Ethereum network, so we're watching that closely, as we think that's an interesting development.
The fundamental difference between GoChain and Ethereum from the EOS network is the way that the smart contracts are developed, which it is more traditional programming language, and with data tables in a more traditional way, so the trouble ... there aren't that many Solidity developers out there, and they're in high demand. They're very expensive. So it's much cheaper to find developers in traditional constructs to build out more substantial DAPPs on networks like EOS, as that of-
DAPPS are Distributed applications. Yeah, just for the people following along at home, yeah.
Thanks, Adam. Appreciate that. No we're real excited ... and by the way, we love Stellar, so now this is a very different kind of network from the Ethereum network. It's not smart contracts based, but it has the ability to build in ledger controls directly into the behavior of the ledgers themselves. That allows for a very decentralized model for us to enforce very complex securities laws on those ledgers. They're noted ... both Ripple and Stellar are known for their speed as we can get transactions in less than 10 seconds to clear. That has real value in terms of the transaction and trades you that can perform on the network. So that's beginning on which camp you're in. We use both of these. I don't know if I got to this, but we're really keen on Hashgraph.
We think that is a tremendous new model for ... it can decentralize even further with the DAPP model, and that will allow for far greater speed in the long run, and the ability for us to port some of our logic into that network is something that's coming soon.
Now, I want to finish on this, and this isn't meant to be an advertising, but it's just a word of advice to folks. Don't bet the farm on any ledger. Things continue to evolve, and as we see quantum computers come online, you're going to see continued evolution, or need for evolution, in ledgers. Stay agnostic. Don't be a purist on this. It's funny, as I say one ledger or another, all the haters come out. We like them all. We're going to show the ability cross ledger issuances here in just a few months. We're going to do token issuances that actually span ledgers that allow users to actually transfer their tokens across these ledgers, and that allows you to get the best of both worlds. Just imagine issuances on Stellar and Ethereum. When I want the speed of Stellar, I can get it. When I want to reach a broad set of wallets on Ethereum, I can get the same things together. That framework allows you to not have to choose.
Incredible. Incredible. So as far as ... I'm not sure if this will belie my caveman-ness again as I'm wont to do, but as far as smart contracts themselves, are they the future, or is that just a component of one ledger that's just going to a quaint thing we remember?
To hear Dan's answer to that question, be sure to check out our full interview. Just go to our website, securitytokenacademy.com, and click on the Interviews page.
The Security Token Academy is on the leading edge of the security token movement. We've been to security token meetups and conferences from coast to coast, and we just held our first security token meetup in Southern California. Security token enthusiasts turned out to the Sonoma Wine Garden in Santa Monica for the meetup. It was a great night full of networking and discussions on the security token industry. The evening also featured a panel discussion led by Andrew Jewett, founder of Aperture Real Estate on the tokenization of real estate. Here's some highlights.
Could the security token industry be useful for politicians or their constituents at all?
Well certainly for the constituents. I think we need some additional regulation to make it where the tokens can be efficiently offered and traded. Many entrepreneurs have a number of great ideas today on how to securitize different types of assets. I met many people here tonight. Great ideas. Problem is we don't really have an efficient regulatory framework to get them in place. So therefore, it's too expensive. I'm looking forward to the day when everybody can invest in different asset classes through a securitized token without too much bureaucracy in a cost effective way. That's where government can really help.
Let's talk about predictions. Where is the tokenized real estate industry going to be in 12 months?
I think tokenization is a little far off just because of all the technical difficulties in working with the counties, but I definitely can see purchases made with crypto and a lot of tools being upgraded that we use today in the real estate industry that are going to use blockchain technology, whether that be security or documentation, there's countless tools that I see already on their way to establishing new protocols, and I think that tools for sure will be ... in 12 months, we'll be using them, and maybe not even knowing that it's blockchain.
Yeah, it's a good question. Whenever you talk about predictions in a completely new asset class that has not actually gone through an economic cycle yet, right? So when we talk about making that prediction ... I'll go out and answer it anyways. I think we're going to be in a slightly better position that we are today because tools will exist. I don't think there's going to be many companies around that are providing tokenized assets. It's a very, very, difficult, time consuming process. And I think that we're going to start to see the emergence of, like Lauren said, some tools that are really going to make the process more efficient and faster.
I think Paul's right. I think until we get some clarity on institutional investors, on regulatory regime ... the SEC's been pretty clear on what's going on in the market, but I think there's still a lot of uncertainty from investors about what they're going to do with what happened in 2017. There was craziness in 2017, and there's a lot of dust that's got to settle on that front. So I think in 12 months time, we're going to start to see, hopefully, property going, and, hopefully, Slice will be successful, or really starting to get some traction. I think you'll start to see some other ... probably more focused on commercial real estate coming to market, but until such time as we get the institutional investors involved, I think we're on a slow roll towards really sparking this thing off in 12 to 18 months. I think this is really the timeline when we'll start to see some real traction.
Let's talk for a second about securities laws and regulations and tokenization. Do you think we have enough regulation, not enough? Or what needs to change in order for this industry to move forward in a responsible fashion?
I think one of the things that needs to happen is that we need new regulations that are blockchain company-specific. So one of the things that I'm really interested in and I think is a good idea is there's a virtual ... digital currency act, and that is a proposal by the common laws that society ... and it has basically the same organization that proposed the UCC ... and the states adopted ... has now basically proposed this law, and the ABA is on board now, and it will standardize money transmission licensing rules across the states, so that companies that are in the blockchain space don't have to comply with 50 different laws, but we'll only have one law that they need to comply with, and it's specific to them, so that there are exemptions for blockchain companies, so that they are not unnecessarily covered for purposes of licensing. Because as it is right now, they may be subject to licensing even if they're just researchers that are transmitting coins.
To learn about future meetups, be sure to visit our website and click on the events page. Also, don't forget to check out Security Token Academy's meetup page.
As you know, The Security Token Academy hosted the first ever Security Token Summit in New York City in June. It was the first conference to focus on the emergence of security token trading organizations.
This ground-breaking, sold-out event brought together the key players in the industry. The best and the brightest spoke at our summit, and we captured it all on video. There were keynote addresses from David Weild, former vice chairman of NASDAQ, and Bruce Fenton, CEO of Chainstone Labs, plus panel discussion, interviews, and much more.
You can get an inside view to what the top experts had to say about the future of the security token industry, and where security token exchanges and trading platforms are going this year and beyond. You can purchase all of the videos from the event for just $99. As a bonus, you'll also receive, free, a one-year membership to The Security Token Academy.
We want to let you know that our next event is the Security Token Launch in New York City, set for October 4th and 5th. Come together with security token leaders, experts, and enthusiasts to celebrate the opening bell of the Security Token Industry.
Our event will feature industry experts including ERC20 creator, Fabian Vogelsteller, and David Weild, former vice chairman of NASDAQ. Highlights include a cruise on the Hudson River on the Spirit of New York yacht during our special networking event to be held Thursday, October 4th.
On Friday, October 5th, you'll hear from leaders in the security token industry during our conference at the Conrad New York City as we dive into the core foundations of the security token industry. Tickets are on sale right now. Just visit our website and click on the Events page to learn more about October's Security Token Industry Launch Event. We hope to see you there.
All right, that's it for today's episode of Security Token Insight. Be sure to follow us on Twitter, Facebook, Telegram, and Medium, and don't forget to subscribe to our YouTube page so you don't miss out on any of our videos and expert interviews. I'm Amy Wan.
And I'm Adam Chapnick. For everyone here at Security Token Academy, thanks for watching.
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