Episode 2 – Nick Ayton

Guest: Self-confessed libertarian, founder and CEO of Chainstarter (a token primary issuance platform), Family Office Advisor and committed cypherpunk – Nick joined us to give us the lowdown on a variety of topics: what it means to him to be a libertarian, why we should continue to believe in crypto, what the good guys in crypto are getting up to, how it was to be invited to advise the Korean government on Blockchain and DLT, why despite his love of London he feels the City is falling short, and what his predictions are for the future of technology. Fair to say we covered a lot and we hope you find it both as educational and entertaining as we did.

Requested drink: Belgian beer

Full script:

M4: Welcome to the Mad4Digital Emerging Tech Talks. This podcast is fast and furious. Join us in explorative conversation with people from the world of emerging tech. Today I have the pleasure of sharing the microphone with Nick Ayton, Founder of Chainstarter, Wealth Family Office Advisor, author, husband, father and self-confessed Libertarian.  Hello Nick.

NA: Hi Donavan how you doing.

M4: Nick, I’ve known you for a couple of years now and I know you’re known for being a libertarian – but what does being a libertarian mean to you?

NA: Well that’s a great question, Donavan and there’s lots of people who claim to be libertarians and what that generally means is that you end up with a liberal agenda and you actually don’t do much about anything. You end up saying a lot and delivering very little. But libertarianism for me is: I have a fundamental problem with the way the system works, so that’s from a banking system, from the systems of government, whether it’s online banking or the current voting system. And all of the current systems are not delivering for people. They’re just not. And if you think about what, you know, we’ve got Trump in the Whitehouse, we’ve got Brexit going on – so what is that about? That’s a demonstration by the people that are not happy, that the centre ground and government are converging to a very vanilla, boring rhetoric which still isn’t delivering for the people. That’s the basic premise. So what does the libertarian agenda mean? Well it actually means that in the context of where we operate in blockchain and in decentralised technology, what this means is an about-face, returning power back to the people that matter, the hardworking people – and what does that manifest? Data sovereignty. So let’s look at that: people’s birthright to control their identity. So, at the moment we have a centralised system, so everything you do, every transaction you do, everything about your life has to go through a central authority, and invariably the data, the information about you, about who you are about your financial status is centrally controlled by somebody else. Now that’s changing because GDPR gives you the right to decide about who owns your data, who uses your data, but ultimately that’s all very well but the supporting systems of commerce and industry are not supporting that agenda. Technically GDPR is a very libertarian piece of legislation because it’s pushing power back to the people.  So libertarianism is about the democratisation of the things that matter: identity, financial systems, voting. So my definition of libertarianism is somewhat different to the traditional liberal agenda.

M4: I’m sure you’re aware of some of the facts surrounding the technology that is driving some of the financial change in terms of the traditional financial systems – in 2017 for instance, ICOs that raised over £50 million in market capitalisation, 78% of those were scams. I’m getting to this because I know you have very, very strong views about the financial system. According to a cryptocurrency anti-money laundering report over a billion dollars was stolen from exchanges, so just to get back to the point because I suppose there’s a lot of negative reviews because what’s happened is the financial system seems to be the first port of call when it comes to this new technology – so my question to you then is, why should people keep faith in this, why should they continue to believe that this is going to be any better than the world you’ve just described?

NA: Well, there’s a lot in there Donavan and I think, generally speaking, here’s some thoughts for you… So if you think about where we came from and the birth of crypto – 2008, so people have short memories – so if you look back to 1971 where Nixon destroyed or withdrew from the Bretton Woods Agreement where currency was pegged to the Gold Standard, you roll that forward to ’91 where you have Bill Clinton withdrawing the Glass-Steagall Act and what was the significance of that? It allowed banks to create enormous balance sheets where they could leverage up and become too big to fail. Why? Because they knew it was a strategy that the taxpayer would ultimately have to bail them out of. So it was a strategy. The emergence of crypto in 2008/ 2009, with the emergence of Bitcoin, came about because quite frankly the system doesn’t work – as demonstrated by 2008. That’s also built on the fact you’ve got a mistaken economic ideology around John Maynard Keynes that the way to stimulate an economy is to money. What happened over 600 years of history of fiat currency is they all go to zero. Why? It’s because governments cannot control fiscal policy because they aim at getting into power [for] the next four years, [and] the next four years – so there’s no long-term view. So that was the backdrop in terms of a different system that could be beyond the manipulation of a central authority. Now, inevitably when you start a new market, what happens? First of all it’s the retail crowd normally jump in – a new financial product, a new something to buy  – it’s always the retail crowd. You also have to remember that against the backdrop, the banks weren’t lending, venture capital, cost of capital and the pound of flesh they demand from the founder is too great. So it’s inevitable that this new crypto, on the back of Ethereum primarily, would manifest as a means of raising capital (democratisation of capital, raising capital if you like) outside the system. And that’s where it really started and that’s also where it started going bad of course because in every market you have good actors and bad actors, in every market you have people who are looking to game the system and use the system for bad things. The most criminal currency in the world is still the US dollar. You can take $500 out of a cashpoint machine, buy a gun and shoot somebody. So everyone decried this world of crypto as bad business but ultimately the ICO market came about because the existing system for entrepreneurs wasn’t there. Unfortunately the system with no rules, regulation, what-have-you, allowed all actors to come in and, as you say, 78% were potentially either idiots, naïve, [or] founders maybe with the best intentions but what they put together ended up being bad for business, bad for people.

M4: Sure and that is changing as legislation becomes more prominent across the globe in different jurisdictions, Malta, Gibraltar, Singapore, the UK, have just put out their framework so that is going to change…

NA: Well, look, Donavan you’re right because ultimately it’s about when the retail crowd get hurt. When you have enough complaints and people are saying, well I’ve been ripped off by x,y and z, ultimately the regulator has to do something. But in response to Gibraltar, Isle of Man, Malta… what I would see as the small principalities, they saw this as an opportunity to use it as inward investment and to drive change for their small island because most of them don’t have natural resources – like Malta – and they saw it as an opportunity to bring in more business and get behind a new wave to galvanise their local economy. So they got in first.

M4: There’s absolutely no question at all [that] the general consensus is [that] this Distributed Ledger Technology [DLT] has the ability to change the world in many different ways and other than just the financial and monetary systems that we have in place and we all know it’s a great opportunity as we’ve already talked about for those people who want to benefit in some way whether they’re developing technology that is good, or whether it’s something, there is a huge opportunity… but what I want to understand and what I think some of the listeners want to hear is what about those philanthropic and humanitarian projects that are using DLT to improve the lives of people? Whether it’s in Africa or wherever it is, can you share some of those with us, just because I really think there is a lot of positive that’s going on that’s not really being talked about.

NA: That’s quite a timely question… because if you think about charity, if you think about the nature of giving or actually making sure you can give help to somebody both financially and in terms of manpower – what’s the thing that holds most people back? It’s the trust. It’s knowing that your contribution is actually going to give benefit to that person at the point of need. And the problem with centralised systems – we’ve seen the bad press around Oxfam with the hooker situation in Haiti for example – you know, it’s inevitable when humans get involved in managing cash, that is typically physical cash not written down anywhere, you know it’s going to go astray. An what also happens is the individuals that are giving to charity are becoming less and less confident that it  goes to source. Now, the story is that I met my business partner Dimitri at a hackathon and we designed a sort of consensus, if you like, that was going to feed the charitable NGO organisation – so it was actually a proof that your funds were actually going to go the bucket in the village or what have you – and what you’re finding is that there’s lots of amazing fantastic projects that use decentralised technology. Whether it’s the provenance of coffee for the coffee growers in South America, or whether it’s introducing like when they introduced a means of small villages and small economies having a cryptocurrency to create and exchange value between different villages and different communities. There is a lot of traction happening, whether it’s ‘field to fork’ whether it’s the provenance of investments going into green energy and renewable energy projects, whether it’s actually land registry – which is a common thing which is happening in lots of countries… But land registry and the concept of ownership of land is a thing that underpins a capitalist system and it’s widely used on distributed ledger in terms of people’s rights to say that I own this piece of land and that I can use it to collateralise loans and other means of raising capital to start a business. So what happened in Haiti, for example, is that after the earthquake and after the humanitarian disaster, nothing was written down, the records were all manual, it went up in a puff of smoke and then there was this civil war and land grab – so, you know, it happens, we know the use case. But in actual fact you find that land registry, collection of taxes, collection of charitable donations, the provenance of food, the stopping of counterfeit products, that’s all going on and there’s loads of DLT solutions out there where it’s working, it’s doing well, they’re on the ground, they’re making a difference but this is not reported upon which is a shame because the mainstream media thrives on fake news and you know my views on that – the big media channels, CNN and Fox and BBC – they have a political agenda to try and dumb this technology down so a lot of it is not getting reported.

M4: I absolutely agree with that. You recently visited Korea to advise the Korean government on Blockchain and DLT. Can you share a little bit with us about what was the general perception in Korea. Are they crypto-crazy? What do they think? Are they into the technology or is it, you know, let’s just jump on the bandwagon? And what advice did you give them by the way?

NA: Well, it’s very interesting. I went to a place called Pyeongchang, not Pyeongyang which is in North Korea of course, I was invited by the governor of the region. Pyeongchang is where they held the Winter Olympics last year. So the governor there, a very delightful man, was actually part of the party that negotiated bringing Kim Jong-Un to the table to negotiate the peace. Now, you get a lot of news don’t you out of Korea that STOs are banned and exchanges are being kicked out and this that and the other. But here’s some of the facts about Korea which is interesting: about 15% to 20% of all trading activity is Korean, a lot of the bigger exchanges are Korean, rumour has it that they are one of the largest owners of Ethereum out there. So the headlines of ‘SEOs are banned’ and what have you… so what happened out there? I attended this summit which was sponsored by the government. During the second day they did ICO pitches and the amazing thing was they used the Airdrop, reverse Airdrop, so as people were pitching you could invest, realtime live! Now that doesn’t sound to me like ICOs are banned. Was there any form of checking, was there any form of validation of the projects? None that I could see. So that was the backdrop. I’d say Korea very much in the Blockchain space. But here’s the thing, I’ve never seen or been to a conference where government, heads of large companies and the technology evangelists – including the blockchain community – got on stage and in various forms had a sensible debate about how to deploy this technology… I’ve never seen that before.  So what we discussed at that event was the impact of blockchain on government, on voting – when you consider Korea’s position as a fairly firm hand. We looked at public services, we looked at healthcare (which is what I spoke about) and we looked at other things, the impact of Blockchain. Now, what you may not realise is that this province have their own currency. So you have the Korean ‘won’ but they printed their own currency for the Winter Olympics – so, separate currency. Now what they’ve asked me is ‘where do we go from here, what do we do with this currency? Is there an opportunity to move into the digital currency world?’ And of course the answer is yes! So, they’re a very progressive society, they’re delightful people, but they have a very fierce agenda that they see that this technology is a way of reinventing some of their industries – I mean healthcare: Korea is always rolled out as the number 2 or number 5 healthcare in the world. But in actual fact they have a problem in Korea because it’s about funding. So the Korean model follows the Japanese model and you’ve got 51% of people still smoking, you’ve got high levels of alcoholism and you’ve got an aging population, but their model in terms of who pays – does the insurance pay, does the patient pay, does the government pay – and they have this issue around prevention versus cure: if you can focus more on prevention then it’s economically more beneficial. And they’re technology- enabled, you’ve got Samsung, you’ve got all these guys – so they see technology as the enabler to fundamentally shift the dynamics of some of their core sectors and industries. Are they open for business? Yes, definitely.

M4: That’s good to hear because more often than not we’re just simply hearing about the monetary side of it – how much are people going to earn, what tokens are going to be… etc. etc., so that’s absolutely great to hear. An interesting fact I found out the other day is that London only accounts for 1% of the daily crypto trading, so £200 million a day is trading in London – apparently that’s 1% of trading in the global cryptocurrency. Now, what I wanted to ask you was, you’re travelling all over the world, you’re speaking and advising companies, governments, investors etc., do you feel a responsibility to promote London as a market for cryptocurrency and DLT technology?

NA: That’s a bit of a thorny issue for me because I’ve long been an advocate of  the city of London, if you look at financial services in London – there’s the better part of 2.5 million jobs here dependent on financial services… and we’ve been prodding, whether it’s the regulator here, the FCA, whether it’s the Central Bank, we’ve been prodding this community, government to show some leadership to this capital. You could say that there’s no manufacturing base here, we’re very much financial services led as a capital. And for me the thing that’s holding back the growth of crypto in this capital is… I mean you know the paper that came out in January, the FCA paper, there was quite a bit of stuff in there but it was a big step forward from the diatribe we read last year, which was their first effort. Nevertheless it falls way short of providing a proper framework and a proper direction to the City in terms of  ‘how is the City going to embrace cryptocurrencies, how is the City going to use this technology to defend jobs in the capital?’ and I just think it’s a bit weak and a bit late. When you consider what some of the smaller countries are doing and their regulators are way ahead.

M4: Could that be because there is less risk involved for those smaller countries?

NA: Well I think there is – somebody made the point to me that if you think about where the regulators attention is right now it’s probably on Brexit and they only have a finite resource. And I sort of buy that – but even before Brexit came in 2016/ 2017, we were poking the Bank of England to say at least give us a statement to say that you’re looking at cryptocurrencies – and, typically British, we got a lot of blank. And they sent people to events who couldn’t answer some of the basic questions, so it was a bit frustrating. So, is London important? Of course it’s important. Is Blockchain and crypto important to London? Massively so. But I don’t think those people in power understand how important it is. And they need to pull their socks up and do something.

M4: My last question I wanted to ask you is, what’s your technology prediction for 2019? If you could pick one piece of tech or it might even be a company that you know that’s doing something great. What are you going to predict for 2019 that is something you think we should keep an eye on and something that is going to make a difference?

NA: Well, in the context… let me frame the answer a little bit. I think it’s fairly clear that all the economic indicators are pointing towards a global recession approaching. It’s not ‘if’ it’s definitely ‘when’. So last year all the major financial platforms closed at a lower rate than the Great Depression of 1929-193, so something really bad is about to happen. The indicators for liquid assets around land, around property – and there’s been a slide to gold already, so gold is pumped a little bit. So you consider that all the economic indicators are there – so what are we going to do? You know, things are about to get a bit messy. My hope of course is that the next financial crisis…if you look at… there’s a famous economist called Nikolai Kondratiev and he talks about seasons and we’ve just come out of a deflationary season we’re into an inflationary season and we’re now starting to see what that means. So we’re starting to see central banks starting to raise interest rates. We’re starting to see other economic levers apply. So, what do I think? I’m hoping that this recession will drive a much faster, greater adoption of this cryptocurrency and blockchain world as people look for safe havens. Look for somewhere to put their capital. Now, we’re working with a lot of family wealth at the moment, a lot of private capital and we’ve been talking to them about where do they invest next. Obviously gold, they have land and property but it’s generally liquid and they’re looking for flexibility. So we’ve been trying to convince this community that the world of crypto the world of blockchain is going to deliver new asset classes across the board, across industries, that are inherently investable. And these are new tokenizations creating new asset classes, which enable people to get… So I think really the answer is, I think the technology is already here around blockchain and cryptocurrencies, I think that it is a financial technology – if you think about blockchain it’s basically a ledger and an accounting system, just like fiat currency, fiat currency is just to pay your taxes it’s an accounting system. So I think this technology will come of age because there’s going to be an economic shift, an economic hardship that will force people to look at this technology in more detail and hopefully they’ll adopt it. And if we get greater adoption then we can come up with an alternative financial system which is beyond tampering, beyond the centralisation issues that we have today. But you know there are lots of technologies out there, AI, Machine Learning what-have-you but I think blockchain and crypto is a financial technology if you apply it correctly and I think it could stay the course, I think that’s the important technology for me.

M4: Great stuff. Nick, it’s always an absolute pleasure, thank you very much – always exciting talking to you, I really appreciate you coming to share the mike with us. I bought you a cold beer – one of the traditions of the Mad4 podcast is that we share your favourite tipple which I can tell everyone… it’s maybe not your favourite but I know you love Belgian beer. So anyone who listens to this and is going to be entertaining Nick or talking to him and is going to have that opportunity you should try and get him a Belgian beer. Thank you very much.

For those of you who want to listen to our podcast you can go to mad4digital.com, we’ve got some great guests coming on over the next couple of weeks – we’ve got Shane Kehoe  co-founder of SVK, we’ve got a representative from IBM who’s going to come on to talk about Quantum Computing and bringing that down to a level to understand what that’s going to mean to the individual consumer on the street. Thanks, Nick.