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Marcel: [00:00:00] Welcome to another episode of Banking on Air. My name is Marcel and I’m the host at Vacuumlabs, a solution-based tech powerhouse. We believe that the future is in communities when it comes to digital transformation and financial services. If you’re interested in hearing more about FinTech, digital banking or payments, please don’t hesitate to subscribe. So today on the line I have Nicolas from Emurgo .Welcome.
Nic: [00:00:21] Thank you, Marcel. Happy to be here.
Marcel: [00:00:23] Welcome Nicolas. You’re the CTO of Emurgo. Can you tell us a bit more about how Emurgo fits into the crypto and blockchain ecosystem?
Nic: [00:00:31] Yeah, sure. Emurgo is part of a blockchain, well known out there called Cardano. And Cardano is actually not one company, but a group of three different companies and one of them is Emurgo, where I’m the CTO. Emurgo does investments, education, enterprise development among other things and this is how we collaborate with Cardano and so most of my work is related to Cardano. It is like pretty cool to be able to be working in the crypto space.
Marcel: [00:00:57] So from the perspective of your day-to-day job, what does a CTO do at a Emurgo?
Nic: [00:01:01] Basically we have like multiple projects running and I’m like responsible for overseeing most of the projects that we are working on. And also overseeing research for like future projects that we may develop. I need to be everywhere and to get to understand everything pretty well because honestly, people have me there to ask me the task.
Marcel: [00:01:19] So what is blockchain?
Nic: [00:01:20] Blockchain is this technology that allows multiple participants to agree in a specific thing that happened. And this is pretty cool because usually when you have information, you have this person did this, or this happened and more concrete examples. When you have multiple companies collaborating together, you need to have some sort of like trust or a way to be able to group the information together. And this gets to be tricky when you have like multiple databases and synchronization. So this is when blockchain helps. When you have multiple sources creating information, blockchains makes everything like simple and easy to digest. I think it is like a pretty good technology that’s like creating a lot of new possibilities especially in the crypto space, but also we are seeing some other possibilities more of like the enterprise part that doesn’t have the cryptocurrencies part.
Marcel: [00:02:11] Yeah. So when you ask most people and you ask them about blockchain or cryptocurrency, most of them probably mentioned Bitcoin or Ethereum. But the way I see it, you and your ecosystem is almost like a third age of crypto. It sort of started with Bitcoin. It moved on Ethereum and now we’re sort of in the Cardano age of blockchains. Can you tell me a bit more about Cardano, the ecosystem and how it is different from his predecessor?
Nic: [00:02:37] Sure. That’s an interesting concept that you mentioned with like third generation. So first generation cryptocurrencies or something like Bitcoin, that basically you have a token and you can send or receive this token, but it does not have, for example, a smart contract capabilities in terms of Turing complete that you can like create programs on top of this token. And this is something that was possible with Ethereum. You have in Ethereum this base token which is ether, and then you can create like, even other tokens that use like Ethereum as a way to make this network work. But Ethereum was like a great proof of concept of seeing like, Oh, If we have a cryptocurrency will more like coding and programming capabilities, is this something helpful? And we have seen that there is a lot of like innovation going on, but then we started seeing all the problems that you only see when this is like in action. So how we can make this, like, actually not work with only like 15 transactions per second, but actually with hundreds of transactions with second. The protocol is working, but, uh, we need to do more updates. Who is going to pay for this? Usually with cryptocurrencies, when you start the project, you do the distribution, but then if someone is going to be working on this. Now there’s centralized manner who pays this person to update the protocol? This is like a common thing that benefits everyone. Where’s the money coming from? So that’s another one of the issues. . And also something that we have seen is that, there are multiple projects, we like different things going on and sometimes it’s like pretty interesting that you are able to communicate between different solutions. Because maybe there’s not going to be one clear winner. So it’s going to be important for the entire ecosystem, that one blockchain can communicate with the other one and you can send tokens and this could be like similar to banks, or even if you have your money in one bank, you should be able to send it to another bank and they can communicate with them, even if they’re in another country, or even in another continent. These are some of the issues that are part of the secondary generation and that’s why Cardano is important as a third generation to be able to solve like sustainability, scalability, security, and interoperability, which was some of the things that I touched there. So we did this proof of concept for the second generation and now with the third generation, we are going to be ready to tackle real world problems and scale up the blockchain industry.
Marcel: [00:04:54] Wonderful. So you mentioned banks as a potential use case. But I know essentially blockchain or Cardano could have many different use cases. I mean, thinking of supply chain management, healthcare, various sciences. Are there any examples of the ones that you worked on or that you just feel are really cool and that people should know about?
Nic: [00:05:13] Yeah. There’s some really cool use cases and some of them that we have been working on is for example in supply chain with coffee producers. So something that’s going on is that for coffee, you have different qualities of coffee, depending on how you grow your coffee. For example, in a specific region in Indonesia, Sumatra, if you grow the coffee, like three kilometers above the level of the ocean and in a specific latitude, you get like a really, really good type of coffee. But usually what happened with the supply chain is that you need trust in other entities and some companies want to be like, “what can I do for you to trust myself so I can sell you coffee beans?” Because I have like a really good quality of coffee beans and to be able to assure that this is what you’re expecting. So in this case, blockchain is pretty good because we can be able to track different parts of the supply chain. For example, if you are producing a hundred kilos of coffee and you want to be able to duplicate it to 200, so you can be consistent with what you have and also because we’re like tracking how everything works. We can add points of validations for like different parts. So for example, it’s common in the coffee process that also you’re going to have cuppers, which is our like wine taster people that specialize in like trying coffee. So they can tell you for sure that something is in a certain quality and the quality has not been mixed up or downgraded with other type of grains. Blockchain makes all of this easier to implement and I just think that with all the technologies, but it’s for work and at the end, engineering is about like making things more efficient and this is like a great solution for that.
Marcel: [00:06:48] Absolutely. So it’s really a way for manufacturers to really manage the supply chain, right. To have an audit trail, to see what has happened, how the coffee has traveled, where it was produced and have an independent body to all that, process. That’s really cool, so that you can really tell that the data hasn’t been tampered with and that you’re really getting stuff directly from the source from X to Y to Z, it can be proven. It’s almost like you’re a detective, that’s sort of trying to figure out how things happened and that’s, that’s really cool. Is that a fair summary?
Nic: [00:07:20] Yeah, that’s a pretty good summary. And so this having a good impact on every industry that has a trust problem and for some of them they’re like pretty big like in coffee. What I’m expecting is that this is going to be seen in other industries as well. So for example, with soy, with beef, with so many other things that are mostly related to food.
Marcel: [00:07:38] Switching back to where we started. So you mentioned banks, financial services. Do you see a future where blockchain will deeply impact financial services?
Nic: [00:07:46] Blockchain for this could be like quite good, because internet is like this network of data and blockchain could be like this network for like financial assets where everyone is stuck in the same platform. So it could help doing all of this. We have seen that you can have digital dollars in the blockchain, and it’s quite amazing. You can send this so easily and we even invested in a project that’s helping people in need in various countries like Kenya, Vanuatu, receive humanitarian aid. And this done using digitalized dollars, stored in the blockchain, which is quite amazing.
Marcel: [00:08:19] Great. So what do you see as the most serious competition to Cardano right now, Nic?
Nic: [00:08:25] That’s a great question and something that I highly believe in is that if you want to be better than another platform, incremental improvements are not enough. You actually need to be like 10 times better. And usually you only get to be 10 times better, if you do something completely different. I don’t know how well these plans are going to do. Usually Cardano takes most of my time, but I have seen some interesting stuff that they are doing. The first one that is a platform that’s doing something for me, pretty unique is Blockstack. So basically they are piggy backingon top of Bitcoin to be able to create blocks and to incentivize the block creation. They are giving rewards in a Bitcoin in Satoshis , which is like super interesting. So they are like building a smart contract layer on top of Bitcoin. We have heard of multiple platforms too in this like Rootstock, but the best of my knowledge, like Blockstack is the first one that actually was able to ship. We will see how they will evolve. The next one that I found really interesting, but also, I don’t know that much about them, is Solana. So what Solana was able to do is that they’re compromising in decentralization, but what they’re gaining is like they’re able to have a crazy amount of transactions, thousands of transactions per second, and also the price per transactions like a nano cents, something like really cheap. A couple of weeks ago, they hadan issue where the network like halted and they were not creating blocks, but they solved it. So I don’t know some of the trade-offs that they put in place to be able to have this level of transaction at this level price. It’s definitely centralized similar to EOS In comparison with Cardano, I haven’t seen anyone doing something even like close in terms of flexibility, security. We will see in terms of a smart contracts how is like the adoption with Cardano. I think Plutuscould be quite interesting with a bunch of programming language, but this is that we will see.
Marcel: [00:10:21] That’s very interesting. So, Nic, what is your take on decentralized finance? It’s been experiencing unprecedented growth in the past few months. Lots of people talking about it, lots of people involved in it. Is it really sustainable? Do you see decentralized finance as something that will continue to grow or is it something that’s going to fall behind?
Nic: [00:10:37] Oh, interesting. Yeah. So just to mention, what does DeFi stand for, decentralized finance and the name’s a little bit confusing because what is decentralized finance. Right now it’s mostly two concepts like open finance that anyone can have access to and that they are built on top of a decentralized platform. Basically, most of DeFi is the use case right now is like lending and borrowing. For lending is that you can get like really cheap loans and for example, in the traditional world, getting a loan requires like a credit score check, identification, it takes some time and usually they are like above 20% interest rate are like sort of expensive. We have seen now in crypto, that if you collateralize your loans with crypto, you can get something cheaper and you have, so it’s just like, BlockFi where you can get loans for like 12.5%. And then we see decentralized solutions for example, with MakerDAO and Dai where you can get loans for like 3% and they have been as low as 0.5%. There are multiple reasons why someone will ask for a loan, but this is like part of the system. The second part is the people giving liquidity for these lending. And for these the interest is that if you have a crypto, maybe you can get some interest rate on top of it. And this is the interesting part that DeFi getting a lot of that data is not so much about the part of life. Maybe in my opinion to borrow money, but we able to get interest with the money that you have. And we have seen multiple platforms like built on top of this. And usually if you analyze a where’s the money coming from is to be able to answer if this is sustainable, usually they come from two sources. The first one platform usage fees and the second one is about the interest rate, they, by the people asking for loans.
Marcel: [00:12:28] So what would you consider to be the most crucial components of these DeFi systems? Is there something people should really focus on, that’s the most crucial of them all?
Nic: [00:12:37] I think it could be like, having to start a building. You need like really basic stuff for all the different blockchains, but after you have that, you need to start thinking of the next thing. So to put these in like more practical terms – everyone that wants to develop a, like a DeFi ecosystem is going to need Oracles. What are Oracles? It’s basically this platform or it could be like a smart contract or it could be like something that helps you to be able to read prices or read information inside the blockchain in a smart contract information that’s from outside. What does this mean? So for example, you want to tokenize and have an algorithm that’s going to follow the U S dollar and you’re going to be using, for example, the native currency to collateralize this something similar, basically, a stable coin, MakerDAO You will need an Oracle system that’s going to be telling you what is the price between Ethereum and the dollar, so you can like make your algorithm work. So Oracle’s the first thing that we’ll think of. The second one is that usually you would like to have creating some movement around. And for that, usually people, a lot of people trade and what we have is that usually the dollar is like a median of exchange. And when there’s too much volatility in the ecosystem, a lot of people move towards dollars as like a storage of value. So having dollars in the ecosystem, is like quite important. And sometimes we see that for stable coins maybe another time we could talk more about it, but they’re like, there is not a one solution fits all, but it’s something like really required in the system. And some of the stable coin solutions also are able to do the system will be lending and borrowing.
Marcel: [00:14:19] So moving forward to Emurgo. Has Emurgo launch any of its own products, apps, or anything like that?
Nic: [00:14:25] Yeah. For example, we have a crypto wallet, which is called Yoroi. Is available for desktop, like Linux, Mac, Windows, and also for iOS and Android. And right now we are around like a hundred thousand users. And it’s a lot of responsibility and we continue to bring you more updates and more features that we are implementing in Cardano to Yoroi. Unlike all the wallets out there. You want to use because you can take the benefits from Cardano. So for example, Cardano around four months ago launched a proof of stake. So actually we don’t work like Bitcoin or Ethereum, which is with proof of work, but actually we work with proof of stake. So this means that you can delegate your ADA, which is the basic cryptocurrencies of Cardano. So for example, for Ethereum there is Ether, for Bitcoin there is Bitcoin and for Cardano there is Ada .So you can delegate your Ada and get the rewards for participating in this industry, given the network. This is something that involves more technical things and not so many wallets allowed you to do that. So that’s one of the benefits from Yoroi.
Marcel: [00:15:26] Great. So you mentioned Yoroi as the wallet, and that’s really where our journey started as Vacuumlabs and Emurgo. So, as some people might know, we built a wallet called Adalite, which is purely a web based browser based wallet. And this was something that we built internally because our CTO is a big believer in Cardano and ADA. So this was driven from the inside and that really started our journey to get it, right?
Nic: [00:15:49] Yeah. Like a fun fact, like when I heard that someone had like built a wallet for Cardano, I was so curious. And it was like, there is some part of that, how they do it, because there is not like a good documentation for that. And then when I started looking at the code, because he was open-sourced: “Oh my God. They were like reverse engineering. How everything works. Oh yeah, this guy’s really good.” And I really believe in show and don’t tell. So when you guys did this, well, I, need to meet this guy. They are quite good and we are always looking to be able to work with really good engineers. That’s why I met you guys and then right away, like, Oh, we want to develop all these projects we were looking for someone like you. We have even interviewed other companies, but we are always like, eeeh. And so I felt pretty lucky that we crossed and I was curious enough to review your wallet and realize that some of the technical decisions that you have taken were pretty solid. That’s why we started with our first project together, which was like the first version of Yoroi for iOS.
Marcel: [00:16:49] Beautiful. So I’m curious, what is it that made you say no to other vendors and go after us and convinced you that we’re the right people for the job?
Nic: [00:16:57] A lot of people tell you, Oh yeah, no problem. I can understand that, I’m going to study and I’m going to learn this. Everyone says everything the same when someone actually has been through the trenches and has asked seeing all the difficult part and already understand something, it makes a lot of difference. And a lot of people even will say like, Oh yeah, you understand blockchain because I have done this project, but unless you put yourself with something difficult, I’m not sure if you actually capable of that. So that was something that you guys went through and yeah, I was quite surprised that you were able to accomplish everything that even wasn’t documented. So I couldn’t get any better than this. And that’s why I was really interested in being able to work with you because it’s difficult to find people that actually know blockchain right now. If you put blockchain you want to see Linkedln, hundred of people saying blockchain expert, you should run away from those ones, because no expert will ever put expert in their like title. The companies actually understand something in the deeper level, like not that many we have been looking for all over the world. Yeah. I feel pretty happy and that’s why, besides Yoroi, we have been continuing working in more projects and every time that we are like, Oh, we need to do more projects and we are not hiring as fast as we can.
Marcel: [00:18:07] This is great. So is there any specific idea around blockchain that you would really would like to try out that nobody has tried out yet? Is there a right opportunity to start right now? Do you have something like that?
Nic: [00:18:20] I have like an idea that we have been working with the team. I cannot tell all the details because we are still implementing it. But right now there is a really cool concept out there, which is stable coins. And everyone is following the concept of MakerDAO, which basically means that if you want to create a dollar in the blockchain, you need to have a collateral. What this means? You cannot create something from thin air and a collateral on the blockchain could be a crypto asset. So basically means that maybe you can put like X amount of crypto assets, and then if you over collateralized by 150%, you can create a 100% of the dollars. If the price goes down, you need to put more crypto. That way it’s always going to be collateralized. So the dollars are backed by something. Everyone has been following the same concept and right now, what we are aiming is to be able to create something that doesn’t work with liquid agents and is our work our way from like the MakerDAOconcept. We will see how it’s going to work. This is one of the things, but also another thing, like people that I am bank or semi bank crypto could be the solution, because right now it’s so easy to just have an app on your cell phone that could receive dollars and you don’t even need to know that this using blockchain. And this amazing thing that we are just after the stage where everything you need to be technical to be able to use this. And right now you could like, I know, talk to someone in stuff America that doesn’t know that much about computers or anything. They can get an app in the Android device, and then you can, through the blockchain, send them dollars and those dollars could be used to pay for stuff or they could change it for them local currency.
Marcel: [00:20:00] Yes. I guess you’re just basically looking for a button to say, send this to my father who lives four countries away from me with a different regulatory system, everything. I just want to do it very simply at the same time, maintaining all the, I guess, international anti-money laundering laws, all the regulation. You want to keep everything going smoothly and nicely and done through a single button. This is really just an exchange of value between people. Yeah. Yeah, I agree. This is a massive problem. And this really needs a solution to make things really seamless and nice.
Nic: [00:20:33] Yeah. And to be honest, there is a lot of people there, like, years to the crypto space, they’re like, Oh, I don’t want KYC. I don’t want to follow AML. But usually the people that are more for saying something mainstream. For example, my dad, if he needs to download a wallet that ask him like, Oh, you need to take a picture of your ID to validate that this is you. Sure. I always do that with my bank. I do this with so many providers. So I feel like for some people it’s a big issue, but for most of the pro user base that could benefit from this, it wouldn’t be that much of an issue. So I feel like the space is going to start growing pretty quick, because we are not going to be trying to fight against regulation, but we are going to start embracing regulation some bill on top of that with a good UI that people don’t need to be technically savvy for this. And the benefits could be quite straightforward. For example, opening a bank account in Chile for dollars is expensive. It requires so much paperwork, but if you can do it for free in three minutes, it’s amazing. The payments of things are difficult in other countries because if you are not using dollars, sometimes you want to pay for something and in online and it doesn’t accept dollars. So a really big company that was growing really fast in Chile was just a company that was selling besides gift cards in dollars. And everyone was buying them because as you mentioned, people wanted to buy stuff, but they couldn’t buy them. So a lot of times they will just buy the pirate version or trying to do something illegal because they wouldn’t be able to pay for something. But now that the world is more global and we are embracing other solutions, I’ve get to release here and people will have problems with doing some stuff. Sometimes when you want something and you don’t have a way to get at something, is when you start doing illegal stuff.
Marcel: [00:22:12] Yeah. This has been an interesting conversation about where you are, where you’ve been, where you’re going, where the ecosystem is going and where Emurgo is going. If people want to know more about Emurgo where should they go?
Nic: [00:22:24] Uh, yeah. So for Cardano the best website out there it is Cardano.org and this website’s going to have all the information, what are the thesis behind Cardano, If you are a developer, what type of documentation do you want to read. If you are depending on what you’re looking for these websites to be able to route you or around pretty well. And for Emurgo, if you want to check out a little bit more of us, our website is Emurgo.io.
Marcel: [00:22:51] Thank you so much for your time. I feel like technologies like Cardano are really changing the world and rethinking how we exchange value and information. So thank you for joining me today and I wish you all the best.
Nic: [00:23:04] Thank you to you as well. “Muchas gracias.”