Andrew Kessler on integrating data into blockchain transactions

0:21and i've been through a long journey and i'd love to hear a little bit on that and how that led you into blockchain and founding zenoda a very very interesting question i started off in academia i was studying as a biochemist and ultimately a organic chemist as well and so i came from the world of academia it tends to make me more conservative and more skeptical

0:46i think one of the differentiating points about bitcoin is that it didn't come from a university or military lab or a government it really came out of satoshi nakamoto and i myself at the time 2009 remained quite skeptical about bitcoin as a concept and even blockchain i sort of had heard you know that's how drug dealers get paid and that was sort

1:11of the extent of my thinking about the technology i met my co-founder and ceo rilo barry in about 2013 2014 he just come back from switzerland where he'd actually been very much involved in meeting the founders of ethereum and really being inspired about what crypto could mean and coming back from that he encouraged me over a coffee one day to read the ethereum

1:34white paper and i come i come from a very very old comp sci background in that i still had xt's and two and two eight six pieces i programmed in gta basic when it was still a thing and i realized for my chemistry training that there's a lot of chemistry descriptions of how computers work sometimes certain classes of computer are called a state transition system

2:01and when the theory of white paper starts describing the ledger as a state transition system a light bulb went off in my brain and i realized it's actually a path transition system so my chemistry background and understanding sort of very very obscure and arcane terminology and computer science sparked a fascination and an interest i've been working with biometrics and

2:22more in the space of other hardware cryptographic level security protocols i'd even worked a little bit with novel sort of diamond based semiconductor materials so i was more physics hardware gaming and this was really an opportunity to come into a very young and vibrant space and do something quite exciting blockchain so i looked at relo my co-founder and i said to him this is

2:48going to be big do we have to do it right do it slowly and really think about what we do definitely and i really appreciate that you bring up the ethereum white paper i've talked to so many founders that they go back to the early days and they say you know it's all about the bitcoin white paper bitcoin white paper but now ethereum and it you know i've heard a lot of

3:08investors talk about recently how they think ethereum is going to be more exponential growth than bitcoin in the near term because there's so much being built on it and there's just an ecosystem there so that's really interesting to hear now i want to dive right into zonota you founded it with your co-founder it's you've been self-funded for a while now

3:27can you talk about what is the exact focus of xenoda and what are the problems that your team is solving so ashton this is something that i hope we can condense into a relatively short space of time i'm more excited in this discussion to talk about the why of the matter as opposed to how we have a very strong tech focus and i am the cto and i'm told that's the

3:52downfall of the way that i communicate with technology so this is my attempt at a philosophy behind it there's a problem associated with data and that's data doesn't behave the way property does and why is this an issue it means that there's certain things that we used to describing in terms of economic value and thinking to physical property and we don't have

4:19the parallels to apply that to data so for an example if you had a bearer bond issued by a bank and it was worth ten thousand dollars on presentation to the bank and i took my cell phone and i took a photograph of that bearer bot and i presented the photograph to the bank they would not accept it and the reason is because of functions like copy and edit

4:39we cannot apply the legal framework of property to files that's a problem we have a we have a very well understood institutional level framing and understanding of what assets mean in the real world but what is a digital asset and so what we've had to do is we've had to discount the gold standard we had to move back from the notion of property as a basis for

5:02ownership and in law what's very interesting you see that you have intellectual property versus property law and these are two different kinds of classes of thinking about ownership around things and what we did is we created a data formatting technology that can take a pdf or a jpeg and format it into something that is pretty scarce that a singular copy of ownership and

5:26does not require access as the basis for ownership i just want to build that out in two seconds the problem with all of the incumbent's attempts with using hash functions as pointers to assets is that they're taking a fingerprint to show that the asset hasn't changed from state a at time a to state b at time b that there isn't sort of immutability particularly that's

5:51not really the problem if you imagine having that bearer bottle the fact that you've got the jpeg of the bear bond on your phone and it hashes correctly doesn't give you the right to own it so what we did is we realized that we could create identity based ownership not access based published and so what we do is we create a kind of unique binary pen you can think of

6:13having a special pen that writes red binary and i have a special pen that writes green binary and so every file in my system is green and every system every file in your system is red if i rocked up with the mona lisa and i said to you this is my property you know for a fact it isn't access has nothing to do with it and why we so hung up on access is that

6:36networks only work if you give people access to your data and if your model of ownership is based on access does that mean you lose ownership by sharing your data we wanted to create a universe where there wasn't this paradox between how you claim ownership of a file and make it more comparable to traditional property and so that was our first patent that

7:00was our first technology we developed back in 2016. it's a it's a very sort of unique signature scheme but that allows you ashton to own your file copy as independent from my copy so when your browser or your application layer renders out the bearer bot your bearer bond will look an application layer identical to my bearer box but when it's stored on

7:23disk it's written in a different color binding so what you can do is you can take your jpeg there above to the bank and they will recognize it as property and issue your token that's very interesting because it's been such a long-winded discussion about you know owning your own data but it's a matter of there's so many intricacies of surrounding that and how you give

7:48access to others and how you can move it around and you know how you can give data to somebody else but then no longer have access to it and so it does get very complicated now we don't have a lot of time so i want to dive into the zenota digital systems peer-to-peer trading system and just want to touch back does this relate to owning your data in terms of the

8:09transfer of it and you just talk about the trading system and what makes it unique absolutely so action what we did then is we created your double entry on our ledger and so what happens is alice might be the client and bob might be a merchant and so ls can really pay bob in the first line a line entry in the dual double entry and then bob signs his uniquely provable

8:33ownable file as an asset over to alice in the same transaction so what we can do is we can affect an in-game item trade and the payments for that in-game item as a single entry into our legend and so this is really moving away from kind of if you have to look through the coin ledger it seems like almost a ledger of gifting you know alice just gave somebody through bitcoin why did

8:58they do that and the other problem is that if you try and move ownership off chain through a vm or through some other construction it doesn't have the same cryptographic protection from the blockchain we're we're literally giving you the rights to that unique privately scarce file in exchange for the payment and so the distribution of the product and the distribution of the token is

9:22fully distributed that's that's really interesting and yeah i completely agree with you in that when you look at a blockchain right now explorer for the most part you're just seeing this is transferred over there and it's like well where's the actual exchange you really are only getting half the information when you see a transaction you know in this way and out that way but like

9:43well what came back so to have that dual transaction is really interesting and i think as that as you continue to grow out the network that's going to be something that would gain a lot of traction now you mentioned that you've been working on the project for a long time now but there's different iterations and there's a launch of a network upcoming

10:02soon you just talk about where you're at right now and what's with this upcoming launch what we realized is that if we're going to affect transfer of data rights and we understand that this is not always associated with tokens there is value in the universe that isn't necessarily well described by tokenizement so for example a vote or my right to be the author of some model

10:29work it doesn't require the presence of a token fundamentally and so we've tried to capture the value of data both socially legally and economically beyond a sort of a more narrow token understanding of that where we are right now is we realize that this system will not get mainstream market adoption at 14 transactions a second for us scalability is a unique problem

10:54especially with the rates at which data gets transferred and updated and for we had to spend quite a lot of time building a proof of work network we're very strict on old school fundamentals we like utxo thinking we like stack frameworks and we've got a very interesting way to bring material complete languages into the system as a layer above

11:17the fundamental execution environment and that's all going to be very exciting and there's a lot of legal spiritual consequences to that where we are right now is we've been able to develop a proof of work blockchain that hits off at about 800 transactions a second in utah testing and when we go live we expect it to be able to handle up to about 25 000

11:37transactions and that's a full proof of work which a lot of people have claimed it's a very different thing to see it and this is not a trivial amendment this was a this was a big eating basement exercise we actually had to move but the problem was using hashes as linkages between blocks we had to go to ashley's page and we needed to bring in specialized

12:04nodes to handle certain functionalities so right now we've been able to build a proof of work that's blockchain that maintains the security levels of something like bitcoin we really are big fans of the original satoshi insights we're not particularly fond of proof of stake in terms of providing the necessary security level for something as valuable

12:28as data there's a long discussion to be added we will be launching the commercial version of the data formatting technology within the next six months and so people will now be able to not only in the first six months it will be a token heavy network mostly sharing of the payments alternative we really want people to become comfortable with how we've extended proof of work

12:53to understand our consensus mechanism and have a very fundamental discussion next we will be releasing the sonata data protocol and that's all at the base level when it comes to the engagement level for integration into applications there we have a suite of languages which we will be releasing so it's going to be a very very busy time over the course of the next year

13:16yeah it sounds like a lot and i like that you're going back to you know the fundamentals and the proof of work blockchains are based on satoshi's vision now there is a token ecosystem that's built into the blockchain as well can you talk about the xenotoken ecosystem what are the main functionalities of it and how does it create a sustainable ecosystem

13:39very good question we've realized that there are several models that you could use to kind of justify pricing of the coin that is that it's forty thousand dollar mark you start off by looking at kind of the utility of what a token can offer in terms of pens and then you're really looking at roughly the square of the number of users you're kind of using netcod store

14:05to approximate the value of the token so for example a network that has 10 000 wallets is infinitely less valuable than a network that has 100 000 or a million watts so it's really sort of apparent utility driven there's a lot of speculation and volatility associated with traditional crypto prices and this isn't purely based on the naive

14:30belief that it's gambling or that it's that it's it's purely wild speculation and this is in a simple observable in economics that if you have something that's frequently scarce and a finite amount of it the price must be volatile against supply and demand and that's why the dollar doesn't have a static supply they adjust for the supply to move that

14:52upon in order to bring quite stability towards a sort of more typical field currency accounts but the big thing that really helps stabilize the dollar in the long run is that it's backed by a bunch of goods and services it has a sort of associated and that's one of our real strong suits we have a gdp of data so initially the token could be priced at the

15:16the raw production cost the amount of electricity consumed in order to produce one token and then it might be priced according to token supply and speculation but what we have is we kind of have bitcoin and this is not a perfect analogy but it's sort of like the old gold standard type of currency and of course what happened in the i think it was the late 70s

15:39the late 60s or early 70s is the u.s had to move off the gold standard and the reason for it is very straightforward the value of the economy had grown beyond the amount of gold supply so we will get to a point where the value of the smart data assets and goods and services being created on our network outstrip the value of the tokens of life and so we will have to move away from

16:04the gold standard towards having this thing backed by the goods and services under management and that will create a very stabilizing effect so while we expect to see quite a good growth in the price of the token over the first couple of years once it hits a sort of a once the growth of the economy views from exponential growth to more marginal growth we expect the

16:29price of the token not to crash but level off and stabilize out and if you think about trying to short the dollar you have to be a very brave character at taking that kind of risk because of the goods and services backed by it and we will have the same kind of mechanics built into our system yeah it's great andrew i really like that analogy that you've made there and there

16:51is a lot to do with the eco there's a lot of intricacies in the ecosystem there so all the best as you launch the network in the next six months now on the flip side what are some of the challenges and setbacks that you anticipate towards getting mainstream adoption of having the goods and services and you know the double transactions and the growth of the network

17:12for zenoda yes well unlike a one-sided ledger only has to worry about building our token supply we have to worry about building out smart data supplies as well so in the early days a lot of our economic growth strategies and our economic activity stimulation projects will be centered around building up the supply of boat and we have a sort of a tight work to

17:38walk where we do not want the token supply to be increased too rapidly to maintain the token price during the speculative phase of the project and in later stages we have to get and the trick is not to focus on one data asset type but rather building out a topology with the ecosystem where we define different data asset classes so just like a traditional bank

18:06would have different asset classes with different risk profiles we would like to partner up with several banks to help us build out a data asset risk topology and build out assets strongly within each of those classes and so one of the difficulties and setbacks that we are going to have is to be able to form partnerships like all tech companies we're

18:29relatively small startup we're lean we're going fast and that can that can produce challenges when trying to integrate with very very large organizations at scale and so we're going to have to manage that particularly definitely and we're running out of time andrew but what is the best way for the community to follow along with sonota's updates and towards the launch of the network

18:56we have a website that you can go to and you can contact us and register your interests we're looking for not just the usual stakeholders we're looking for a lot of feedback and integration from the development community and we will be posting a lot of media milestones as we roll out as we grow our system so if you can contact us via the website directly

19:23we have we have staff managing that site 25 a day and we will contact people shortly i would i would prefer to see more engagement within the development community and get our fundamentals correct because if our fundamentals are good we'll win london so that's really going to be our focus over the next couple of months sounds great i will leave the

19:45those community links in the description box below all the best with the launch of zenoda andrew thank you so much for taking the time to come and speak with me today and let's follow up in the near future thanks so much