A transcript of the Future of Finance interview with Heslin Kim, chief strategy officer and co-founder of SupraOracles.
Dominic Hobson 0.14: Hello, I’m Dominic Hobson, co-founder of Future of Finance. My guest today is Heslin Kim, chief strategy officer and co-founder of SupraOracles, a business founded on the belief that blockchain cannot fulfil its full potential without making serious technical progress in three areas: Smart Contracts, Oracles, and Security. Heslin, thanks for joining us.
Heslin Kim 0:38: Yeah, thanks so much, Dominic. I love the Future of Finance podcast and have been listening quite avidly to everything that’s been coming out and I’m glad to be here again.
00.48 What were the problems SupraOracles was set up to solve?
Dominic Hobson 00:48: Well, it’s great to have you. I want to begin, again at the risk of repeating what I’ve just said, and ask you to state in your own words, `What were the problems that SupraOracles was set up to solve?’
Heslin Kim 01.02: Right. So, typically, over the last several years, there’s been a disjunct between Web 3.0 environments, blockchain environments, and Web 2.0 in general, specifically traditional finance. Blockchains themselves are isolated eco-systems, so they’re unable to communicate with the outside world. It means that if there are any instances of, let’s say, credit scores, or, you know, something like sports data, or even prices of random derivatives or equities, that kind of information cannot enter a blockchain. And to do so you need an Oracle to actually import that data from any kind of real-world API into a blockchain environment. We call those off-chain situations in the real world and on trade situations into Web 3.0. So what we’re doing at SupraOracles is really trying to solve, you know – we built something that’s more high security, it’s very high throughput, high transaction volume – a very low cost Oracle with strong API connectivity and availability, so that we can do real-time calls in a blockchain Web 3.0 environment that’s porting out to Web 2.0 and bringing that back on-chain.
02.24 What knowledge, experience and especially skills in terms of engineering does SupraOracles bring to the resolution of the problems?
Dominic Hobson 02.24:Now, describing the problem, as you’ve just done, very articulately, is one thing. There’s lots of very smart people working on exactly these same problems. What particular knowledge or particular experience and, above all, what engineering skills did you and your colleagues bring to the resolution of these problems?
Heslin Kim 2.42: So I’m a developer, but just a business developer, so I stick to my strong suit when I’m leaning into the growth and acceleration of the company. But we have a fantastic R&D team – really deep academia, very seminal pieces that they’ve all written that have affected crypto over the last decade or so. So, specifically, we have Dr. Aniket Kate [Chief Research Officer] and Dr. Aniket Kate is famous for two papers. One paper is called Distributed Key Generation in the Wild, [published] circa 2010. That was what the original architecture was based off of, and then another paper in 2012, called Constant Sized Commitments to Polynomials and their Applications. Now those two papers are very interesting, from a legacy perspective, of the growth of blockchain and crypto and mainstream adoption – the reason being is that the polynomial commitments that Dr. Kate had envisioned, had led to the growth of zk-SNARKs [a form of zero-knowledge cryptography],ZK proof systems [Zero Knowledge Proofs] and, just to wrap it up at a high level, privacy transactions. And so Dr. Kate’s work is some of the foundational pieces and elements for privacy transactions moving forward, which are obviously an incredibly useful and necessary function for any kind of adoption from TradFi [Traditional Finance] that would be interested in [inaudible]. Along with that, Dr. Kate’s work also led to scaling techniques and optimisations for Ethereum 2.0. So the ability from Ethereum 2.0 to shift from Proof-of-Work to Proof-of- Stake, and then claim that they’re going to be able to get, you know, currently, they’re sitting around 13, transactions per second – and they’re looking to scale upwards of around 100,000 or so. These techniques that they’re using, are all predicated on Dr. Kate’s work. And so Dr. Kate has originally joined us as an advisor, and he’s now full time as our Chief Research Officer. So the deep academia involved … We’ve got another team of around ten to 11 PhDs who have, you know, long-standing backgrounds in cryptography, sMPC [Secure Multi-Party Computation], which is a type of hot wallet servicing, and many other in-depth, you know, arenas that really helped shape the crypto environment. So, from our perspective, it’s really important that everything’s rooted initially in that research side of things so that, theoretically, the consensus algorithm, the structure of the actual Oracles – and we’re actually doing Bridges as well – and all of these various components is academically rooted to push things forward, to solidify any kind of potential hypotheses or theories about why things could fail, run simulations ad infinitum. We’re pushing out things we’ve done, around 1,500 simulations to date, with quite low specs for computer power and processing, to really drive home what real-world environments would look like. Now engineering takes all of that, and then translates it into an actual product. And so, you know, from an engineering perspective, I think first comes research, then comes engineering, then comes product, and then comes BD [business development] and growth. And I’m not that BD and growth side so, you know, we’re just accelerating things over the past several years. But we’re coming to fruition relatively soon, in the next six months or so.
06.34 What has SupraOracles learned about the quality of Oracle data sources across the various sectors – cryptocurrencies, commodities, securities, money markets, foreign exchange, weather, politics, sport and so on – that the company supports?
Dominic Hobson 06.34: As you’ve been looking at this over the last four years, these off-chain sources, these Oracle sources, not just prices, but all sorts of bits of information, which can feed various – what’s the word? – protocols in DeFi … For example, I can have a sport or politics or weather [application] or anything. What have you actually learned about the quality of those Oracles? And I’m thinking here there must be huge variations in the quality of the data, the reliability of the data. Do you get involved in that? Or is it all just about actually making that process more secure, more private, and faster? Or do you actually start to think about, `What is this data actually worth? How reliable is it?’
Heslin Kim 07.23:Yeah, I mean, from a Big Data perspective, there’s always been this element over the last four or five years of considering what types of data are going to be in mainstream consumption across the Web 3.0 environment in general. So we’ve been open to exploring what sports data could look like being brought on-chain because there’s a very large market out there for sports betting, prediction betting and, you know, some sorts of sports gambling and these types of things. So that market is an interesting market to look at. While in many countries, it’s heavily regulated already, there are areas where it’s an open playing field. And the same goes for things like on-line poker and these types of institutions. But, you know, I think from what we’ve gathered over the last four or five years, there is an open environment, where it’s really a plate, a playground, a sandbox, to see within the Web 3.0 eco-system what’s really going to generate the most interest from developers who are seeing mainstream adoption from users as quickly as possible. And it’s been very low hanging fruit, specifically routed towards cryptocurrency pricing feeds. But also, we’ve got, you know …We sent out a survey to around 200-plus co-founders, CTOs [Chief Technology Officers] and senior developers across the eco-system, and asked them, `What type of data feeds would you require? And what type of data feeds would you, if you had a wish list, ask for?’ And we found that crypto data feeds are obviously number one. But second to that was, interestingly enough, Forex [foreign exchange] prices. Third was commodities. Fourth was equities. And fifth spun off into things like sports data feeds, weather data, NFT [Non-Fungible Tokens] appraisals, things like that. So I think it’s an interesting model to see what the wish-list could be. Because when you dive in, and you start to work on those long-tail assets, it starts to open up the potential development arena that new Web 3.0 participants can start to work on new projects, right? Because what this really is, is the sandbox opportunity. So what kinds of things would they build, if they had access to further Forex data, if they had access to sports data and weather data and equities feeds? You know, what type of products are there [that] are not out now that could be out in the future? And I think a really interesting spin-off of that, and you know, how that could stimulate your mind, Andre Cronje built out a platform called Yearn Finance. And that’s essentially how DeFi or decentralised finance in general really gained mainstream momentum, especially within the Web 3.0 environment first, but now it’s carrying over into TradFi and [into] the Web 2.0 environment as well. You know, it’s amazing that a single developer with an idea and concept for a yield-generating platform in a Web 3.0 environment, using Oracles and using native Layer 1 technology and these smart contracts, could create an environment that generates multi-billion dollars, you know, just off a single platform that him and a few other developers built. And then that’s garnered and led to the momentum and massive wave of adoption of DeFi across many different platforms, many different iterations and clones, and benchmarks of that original design, that have led into things that are now being utilised by major financial institutions. So, for instance, you know, just to give a bit of social proofing on how DeFi is now moving into mainstream, there’s a project in Singapore, led by the Monetary Authority of Singapore [MAS] called Project Guardian, and Project Guardian’s looking at having open, inter-operable, unregulated DeFi networks, allowing for these trust anchors and verifying credentials to have these, you know, counterparties, who are all within the same consortia, and then allow this regulated DeFi environment with these participants. And how can you create a regulated environment that’s also permissionless, that’s also trustless, where the parties themselves can remain hidden and anonymous at any given time? And how does this framework eventually move into something where legislators feel comfortable with it, that is adopted by larger institutions? So it’s a very interesting model to see that Web 3.0 acts in this this sandbox perspective, and then carrying over these smaller ideas that have garnered momentum and to, you know, how can that scale at large for mainstream adoption and utility? So it’s something that, you know, over the scope of the last four or five years for us as a company, we’re always watching the trends. We’re always watching what’s new and up and coming, the emerging markets. Because I think that’s a key indicator of where things are going to head in the future, especially as TradFi starts to dabble across the Web 3.0 and DeFi markets in general.
12.49 How has the re-rating of the crypto-currency, DeFi, NFT and Stablecoin markets since the autumn of 2021 affected the business of Supra?
Dominic Hobson 12.49:I can see from what you’re saying that better, faster, greater variety, more and more data means more products means more innovation means more multi-billion-dollar markets developing in DeFi and DeFi is moving into the mainstream. But this is taking place against a background … Things have picked up a bit of late but, you know, since the autumn of last year, the cryptocurrency, DeFi and NFT markets have all undergone some re-rating, if I might put it that way. I wonder … Your enthusiasm has obviously survived that re-rating. But how has it affected your business?
Heslin Kim 13.31: You know, I think it’s a really interesting position to be in because right when we started to come to market – that was around the time that the Terra Layer 1 platform was really starting to scale, Solana had already, you know, done multi-100x on their valuation, there were iterations of Layer 2s like Polygon that have now got fantastic partnerships from Disney to Stripe, and so on. And these platforms are all coming out and moving, you know, at incredible speeds alongside the peripheral markets as well. Now, I think when the Crash happened, it’s a very interesting thing, in this cycle. I’ve been around for one previous large cycle in the 2017 to 2018 frame. But this cycle itself was an incredible blow-off from the top because we saw valuations rise for some projects, upwards of 1,200 times the original price of early-stage investments. I mean, that’s astronomical. Now, it’s also amazing that these Layer 1s could garner and justify such large valuations themselves, and then collapse almost to zero. So the Terra eco-system completely fell; the bottom fell out of that; that went from around 60-plus billion market cap down to zero. The Solana ecosystem itself has been having incredible liveness failures. They’ve gone down about seven times over the last eight, nine months. And if you’re looking for a Layer 1 backbone that’s essentially … Layer 1, that’s essentially your operating system or your data centre, right? If your data centre goes down eight, nine times for extended periods, but you’re also relying on this data centre to process your transactions, your payments, any type of information like that, your trades, if that’s delayed for five hours, 12 hours, 36 hours, that’s a huge amount of money that can be lost. So, you know, I think the Solana eco-system itself has taken a very large hit. Now, the interesting thing of what that leaves us, from a high-level perspective of a market vantage point, is that there’s a very open door at the moment for other Layer 1 technologies, other operating systems, [for] these databases to come in, and, you know, essentially take a much longer roadmap for growth and potential user adoption. So from our perspective, you know, it’s really kind of encompassed our go-to-market strategy already, which is originally coming to market, as you know, first and foremost, Supra is, really trying to solve the Oracle problem first. And the way you get information today is too slow. It’s too expensive. And there’s incredibly weak security guarantees. So for us to go to market, it’s been quite simple, I think, because we are providing that higher security, the higher throughput and speed at a rate that’s roughly, you know, can be comparable in some instances from ten times faster Oracle look-up requests than other competitors on the market. And from, you know, this being one of our first phases, moving into phase two, which I think ties up this whole picture as a [inaudible] coming into market as an intra-layer, probably in the next month or two. So, information coming out here first, but SupraOracle’s will be dropping the name Oracles; [we] will just be coming to market as Supra, and Supra as an intra- layer. So an intralayer being a layer that sits between Layer 1s, Layer 2s, and also Dapps [Decentralised Applications] within these multiple environments. That would stand for the public and permissionless side. Now we’re also acting as an intralayer for DLT networks. So private permission networks typically used in large consortia. We’re looking to bridge the private, permissioned networks as an intra-layer into the public, permissionless networks. So, you know, with that in mind, in this whole macro-environment, Layer 1s in this last cycle have really fallen off their peaks. There’s a lack of trust; there’s a lack of security guarantees; there’s a lack of reliability. And now we’ve got this great opportunity to act as this central middleware, right, a middleware, neutral player that can partner with all these various Layer 1s, all these various Layer 2 eco-systems, and really try to facilitate better communication, more secure communication, and faster communication between all these relative counterparties, which currently doesn’t exist. So, for this bear market environment, it’s a great opportunity for us to re-position ourselves with our product line to make it more clear about what we’re able to provide. And to find the right partners who are [interested in working with us] – you know, in a bear market, it’s a great time to build and develop – and work directly with partners who are looking to scale into the next bull market. So, you know, we found a fantastic opportunity to kind of slow down the pace of external events and promotions and marketing, and really focus internally on growth, long-term strategy and how we want to align for user acquisition, both from a customer perspective, as well as clients who might be utilising the Oracles, the node operators who run the network, and even the investor groups have already participated, in getting deeper alignment with everyone. So it’s been more busy than the bull market for us, somehow. But I’ll take a bull market any day over a bear market.
19.35 If the Supra business is doing well despite the “crypto winter,” what does that tell us about the state of the market?
Dominic Hobson 19.35: `More busy than in a bull market’ prompts a thought in my mind. Listening to you, you’re obviously adapting your business to the crypto winter, you’re doing well inside this crypto winter. Can I ask you to be a bit more explicit, perhaps, about the point you’re making there about this building – I’m hesitant to use the word `bridge’ or ‘wormhole’ or anything – building these links, if you like, between Layer 1 and Layer 2. What does that tell us? The fact that’s an opportunity for you and is one you can exploit because you’re kind of there already? What does that tell us about what’s going on in the marketplace? What does it tell us about the evolution and the maturity of the marketplace? Is something fundamental changing here, which you’re able to service and to exploit?
Heslin Kim 20:24: Yeah, I think that that’s a great question. If you look at the historicals of how we’ve gotten to this point today, in the overall Web 3.0 environment, it was initially started with the momentum of Bitcoin, right? And Ethereum came out [in] 2016, 2017. And people looked at this as such a great opportunity to become an open canvas, to start trying out new smart contracts, to start trying the sandbox and playground type of opportunity. `I can create anything I want, but what can I build that people might have interest in from a financial perspective?’ And as more people iterated on the original Ethereum design, they realised a lot of the failures and hindrances that that design actually encompasses. So Ethereum itself has quite high transaction costs. It has very low speeds, you know, in the order of magnitude of could be 30 seconds, it could be several minutes, even hours. And you’re also exposed to lack of privacy because all transactions are [inaudible] at any given time. And, you know, with all this in mind, there started to be iterations of, `How can we make things better?’ So that’s where you start to see the growth of other Layer 1 opportunities. So your Solanas, your Terras, your Cardanos, your Polkadots, your Cosmos platforms, and then Layer 2s, because these Layer 1s can’t scale as well. Why does the Layer 2 occur? So if you’ve got a Layer 1 such as Avalanche, for example, they’ve got something called sub-nets, and sub-nets are their Layer 2, so you kind of have this relationship of parent mainnet chain and child-chain or side-chain situations. And that, again, is because those Layer 1s themselves can’t scale enough to handle all the transactions that might occur on their single network. Now, back to your original question, because I wanted to give a vantage point of where the market stands now. Like your original question about how we can facilitate a deeper connection and start to bridge the gap between all these various players. You know, we’ve realised over the last four or five years that there’s always this discussion of inter-operability. And inter-operability, in our terminology, means, `How can you connect these various Layer 1 eco-systems where there’s a huge amount of liquidity and value lots in various ones?’ So, for instance, on the Polygon eco-system, I think their total value across the eco-system is around US$7 billion. In the Avalanche eco-system, it’s sitting around six and a half billion [dollars]. The Ethereum eco-system itself is, you know, upwards of, at some points, was around US$100 billion. Solana as well, around US$60 billion or so. And Terra also. And now, if there was a way that you could start merging these eco-systems together, you can compile a much larger pool of liquidity and access points. And that’s really what we’re trying to do from, from a perspective of where we’re coming with Supra’s business solution. So, you know, step one for us was always to look at, `What’s the business angle and solution that we have here? How can we, you know, solve and become a sole and critical component to helping these emerging activities across these ranges of Layer 1s?’ And so the Oracle is one of the most in-demand and necessary components, because the Layer 1s can’t communicate to themselves either, right? These are isolated, deterministic systems. You have to be able to pull that data from somewhere else to bring it into that Layer 1. That exists for Layer 1s across the entire Web 3.0 environment. Polkadot can’t communicate with Cardano. And Phantom can’t communicate with Casper Labs. You’ve got all this disjunct liquidity everywhere. So from an Oracle side, now we can start to bring data about transaction history, about certain types of smart contracts that have occurred, and port it from one chain to the other, right? Now we’re starting to be able to bridge a bit more communication, which can impact total amount of liquidity and also total amount of user base, right? So from, you know, this step-to-growth perspective, we’re seeing massive growth across all of DeFi, distribution of projects across multiple Layer 1s and, you know, it’s starting to necessitate the ability for cross-chain swaps, and cross-chain data communication. So as Supra we’re trying to act as an intermediary, essentially a multi-lateral clearing and settlement layer, across all these various Layer 1s. We are, you know, very well-positioned for this because of our native Oracles that we’ve already built in; because of native cross-chain bridges that we’ve already built in. And, you know, we’re essentially building something that is vertically integrated as an entire package. Typically, within a Layer 1 eco-system, you launch the Layer 1; there are third-party developers that come and build on top; you’re using other protocols; you’re using other tokens or gas fees; and it starts to become this layered effect where, you know, now you’re paying Ethereum fees, now you’re paying Chainlink fees; now you’re paying cross-chain bridge gas fees to go from Ethereum to Solana. And in our environment, we’re trying to wrap it all up into this vertically integrated package, so we can speak, communicate, transfer with one another in one single environment that really mitigates costs, increases efficiency, increases speed, thanks to our consensus algorithm that’s, you know, backed by these scholars who have put out something that’s essentially, in today’s market, [is a] a breakthrough as far as blockchain and the trilemma [the belief that blockchains can deliver only two of the three of benefits of blockchain – decentralisation, security and scalability – at once] that’s out there as far as security, decentralisation and performance. So we’re trying to solve for that. And I think we have we brought something to the market that really provides cohesiveness across these multiple eco-systems.
27.08 Lack of scalability and slow processing speeds continue to bedevil blockchain. What is Supra doing to overcome these obstacles?
Dominic Hobson 27.08:Can you put some numbers on that performance point? I’m speaking here of speed and scalability, which you’ve touched on a number of times in your remarks. You mentioned Ethereum doing 13 transactions a second, for example – not very fast. You’ve talked about Oracle data speeds and so on. Can you be more explicit in terms of what sort of speeds- and speed and scalability are different facets of the same thing, obviously – but can you put some numbers on it and give people a flavour of where you’ve got to in solving this pretty fundamental performance issue, which still dogs blockchain.
Heslin Kim 27.46:Right. I’ll start off with the blockchain consensus that backs this entire protocol, the fundamental backbone of Supra. And that’s been in research and development since roughly 2017. We’re now in August of 2022. So it’s been a long running time to actually dive into this research and really flesh out every fine point and every critique that could come towards this consensus mechanism; and how to refine it and sharpen it; make sure that it’s speaking towards any kind of security guarantee vulnerability; and overall auditing to make sure it’s spotless. Now, typically, when blockchains get launched, they’d start with a white paper; it takes four years; and then they come to market after that. We’re the opposite approach. Four years of research and then come to market with the product is when we come out of stealth. And so, you know, the question on benchmark and specific numbers. So what we’ve done from a Layer 1 perspective [is] we’ve created something that the TPS [Transactions Per Second] and finality [of settlement] is a breakthrough technology. So on the total transactions per second, we’re pushing out on average around 200,000 transactions per second. In a peak environment, we’ve hit 526,000 transactions per second. Now, those are fantastic numbers. But how did we get there? So we’ve run, as I mentioned, around 1,500 simulations. The engineering team itself has pulled out around 100 different variables that equate to geography, the different types of hardware that’s utilised, the code base, the different types of links between a Cloud service providers and bare metal node operators and data centres. And the list goes on and on. And those 1,500 simulations have tweaked, just minor adjustments across these 100 different variables, kept track of unlimited pages of documentation, and, you know, really fine tweaking and tuning these numbers. I remember when we first started some of the earliest stage Testnet simulations. The goal was, as a benchmark, to surpass Solana’s claim of 60,000 TPS. That was kind of an industry standard at the time for best practices and what can be achieved. We hit that in about a month and a half. And from around that same time, we started to hear word on the street about Diem’s blockchain – Facebook, Diem, Meta – and what they were building. And they had built out a protocol that’s based on something, a consensus [algorithm] called Hot Stuff, and Hot Stuff was achieving numbers around 100-120,000 transactions per second. Now, that’s a 2X jump from what Solana was achieving, which is already a, you know, 20-30,000 jump from what Ethereum had. So major advancements in the scalability of this technology, when we heard about the Aptos [Layer 1 blockchain], and MystenLabs [Web 3.0 infrastructure builders] teams, we really wanted to look into some of the construction and design and they’d pulled off some amazing things. And our R&D [Research and Development] team is very competitive. And they, you know, they want to put out the best-of-the-best and world-class Layer 1 infrastructure. So they dove even deeper into refining all of these points. And now we’ve gotten to a stage where on one fifth of our network – the numbers I told you are only on one fifth of our network deployment off of 500 nodes, 22 globally distributed regions, a 16 core MacBook Pro (essentially 32 gigabytes RAM), one terabyte storage and one gigabyte Internet speed. So it’s relatively low, right? It’s not any kind of major database. It’s not a US$40,000 unit. You know, if you’re using IBM Hyperledger, you might be paying $250,000 for a single database silo. Our network can be run off high-end MacBook Pros. [That] is basically what we’re trying to throttle for. And we’re still achieving these kind of metrics, which are an order of magnitude greater than anything that’s on market now. If I just benchmark even further into CBDCs [Central Bank Digital Currencies], the US proposal for the central bank digital currency market, they’re proposing that the world’s reserve currency could run off of 1.7 million transactions per second. So the Visa network itself, you know, has an average around 25,000 [and] I think they can go up to 50,000 transactions per second. Other credit card companies are around the same. Now, we’re hitting upwards of 200,000 average transactions per second, 526,000 [at] peak on one fifth of our network deployment. There’s a potential that infrastructure and Web 3.0 in a decentralised state could eventually accommodate the necessity for a world’s reserve currency, whatever it may be, US dollar, or … We don’t need to get into that conversation. But, you know, it’s an interesting model to know that, from a trustless perspective, from a decentralised perspective, there could be the possibility that, from a performance angle, you could accommodate something at that scale. And that’s what we’ve done here at Supra. The Layer 1 itself is over 100 times more throughput per second than a Layer 1 like Avalanche. And our finality, which is when a transaction actually settles on the ledger, is around two and a half seconds. The team’s trying to go under two seconds, even potentially under one second by the time we reach mainnet. And from a, you know, from a central understanding of that Layer 1 and the blockchain consensus, that really scales into helping the Oracles, the random number generation, the parallel processing that we have. It’s all fundamentally based in the actual consensus itself. So our Oracle look-up requests are within three to five seconds. Now, that might sound very slow for TradFi, which is doing high frequency trades in Picoseconds [10−12 of a second]. But in the blockchain world, your next best alternative is Chainlink, which is getting, you know, on Binance Smartchain around 30 second refresh rates; on Avalanche around 45 second refresh rates; and on Ethereum it could be several minutes, up to four or five minutes – they only update their feeds on 5 per cent swings in either direction. Now we’re providing constant feeds in three to five seconds, so it’s an order of magnitude greater speed for actual data feeds on chain.
34.59: How attractive does Supra find the tokenised securities, funds and physical assets markets?
Dominic Hobson 34.59:As you say, the trick is going to be maintaining those speeds as you scale. And you’ve talked a little bit about payments markets and FX markets, which have very high transaction volumes, just in domestic markets, let alone across borders as well. But what about the securities markets, the fund markets, bond markets, you know, I forget the transaction volume figures you get [but] these are large markets. The global bond markets are worth US$120 trillion; the global equity markets, even after the recent decline in prices, are probably worth north of US$100 trillion. So these are massive opportunities for this decentralised, Web 3.0 transaction processing technology, if you like. Are these things that you’re looking at now, beyond payments, beyond FX [foreign exchange]?
Heslin Kim 35.47:It’s definitely in the pipeline. Now, if you look at a report that the World Economic Forum put out, they’re quoting that by 2027, they’re estimating there’ll be about US$27 trillion in tokenised digital assets in multiple iterations, both in public blockchain eco-systems and private blockchain eco-systems. That’s a massive number compared to what we have in just crypto Web 3.0 right now, which is sitting around US$2 trillion total market cap. So, long-term, we definitely want to play in the digital security space, [the] tokenised asset space and security token offerings in general. So my previous background was at a company called Polymath, [which is] focused on digital security, security token initiatives for a year and a half, and then over at Tokeny Solutions, working hand-in-hand with Euronext stock exchange group on their DLT [Distributed Ledger Technology] initiatives and exploration of tokenised securities. Now, I think that if anyone in the audience believes that we will move into this space of tokenised assets of both property, intellectual property [IP}, IP patents, tokenised personal data, tokenised bonds, any type of initiatives like this, it will require the fundamental infrastructure that can facilitate these large-scale payments. Now, is a decentralised environment ever going to reach the speeds of a centralised infrastructure in high frequency trading? From a theoretical perspective, of the top minds in the world, they’re saying no, right? I forget what the speed of light is but, going around the planet, it’s still impossible from a decentralised perspective. Now, there is something to say about potentially having nodes that run in space. That I think is a conversation that’s starting to spin up. There is a company called Cryptosat that SpaceX was launching payloads into space for that, and Starlink [the satellite-based Internet service from SpaceX] is starting to come out. And potentially there’s a way to increase the speeds even further. But will it ever reach Picoseconds in a decentralised infrastructure? It’s likely not. But now, you can still increase and benefit multiple markets across the securities industry, overall. So you know, if you’re trading on RFQ [Request for Quotation] desks, any kind of back-end of an exchange, you’re looking at a T+1 [Trade Date plus one day] [for finality]. If you’re in Japan, it’s like a T+2 or T+3. And there’s an opportunity here to bring those transactions down to a T+0 in a blockchain environment. There are several initiatives going on, from institutions like the Australian Securities Exchange, the Swiss Digital Exchange, and even the Hong Kong Exchange, I think has something called Project Diamond [a proposed trading platform for digital assets] that they’re working on, trying to facilitate this. Nasdaq has Project Whitney for tokenisation of assets. And basically, every exchange globally is looking at, `How can we start to shift some of our assets into a tokenised environment, albeit private or permissioned blockchains?’ And when is that actually going to take hold? Well, first of all, we need regulation and legislators to understand what’s going on, have a defined roadmap for everyone that is clear-cut. Because if you’re in crypto, we don’t have that yet. And then, secondly, would be the technology actually having the backbone and infrastructure to move those assets forward in a way that everyone can understand. Education has already been there. And we’ve already got all the documentation and ease-of-use. And then, thirdly, from a user acquisition standpoint, knowing what kind of customer base – are [they] retail or accredited traders or quants? Are these various asset managers and hedge funds – are they comfortable with using Web 3.0 technology or tokenization? And, you know, there’s a massive amount of barriers in place, but they’re all being chipped away at. And I’ve been in this space since 2017. It’s been monumental to see what’s been done over the last five years or so. And there are institutions who are making major headway in that. Groups like Securitize [a digital assets firm] on the security token side. Tokeny Solutions. Tokensoft. Even other players like Fireblocks, who have made massive leaps into helping financial institutions on-board with crypto in a safe and very easy way. And you’re right, they have around 1,200 various partnerships they’ve integrated with. Even Bank of America is using Fireblocks. So, you know, I think from a social proofing perspective, and from an ability to actually on-board these users, we are seeing that there are the right players in the space who are helping ease this transfer into the Web 3.0. Tokenisation and all these things [will come] later. I think it’s going to be several years. Within the next decade, we’ll see.
41.22 What does Supra regard as the most promising or telling use-case for tokenisation?
Dominic Hobson 41.22: Do you have a favourite use case in tokenisation?
Heslin Kim 41.26: You know, I think one thing that’s been most interesting for me to watch is property – tokenisation of property and title deeds. And it differs in jurisdiction and jurisdiction. One platform that … Singapore is great, because it’s very progressive. The regulators are very open-minded, and they want to be at the forefront of these types of technology. So they’ve given quite a bit of licences to projects out there for testing out how this could actually work in a real-world situation. So there’s a company called Shareable Asset. Now, this is not a paid promotion or anything. And Shareable Asset has gone about tokenising commercial properties and offering it out to – and I think this is the one of the most important parts – to non-accredited investors. So they’re allowing moms and pops and grandmas and grandfathers to invest US$25, US$50. I think US$100 was some of the lowest that was invested into US$5-6 million commercial properties. They might have 50-60 units that eventually end up going to local stores, ice cream shops and restaurants and small businesses, SMEs [Small and Medium Sized Enterprises]. And I think it’s an amazing opportunity because it closed I think around 13 to 15 different commercial properties, all self-funded through retail, small cheques. And so now you’re able to give a new type of asset class and opportunity to distribute a portfolio to individuals who typically haven’t had access to that. There’s no way anyone’s going to have access to investing into a US$6-7 million commercial property in the central business district in Singapore if they don’t have that kind of capital, right? So it opens up the door for more financial inclusion. And I think it’s a great initiative to see something like that actually go live, actually have use-cases and close that many deals so far with, I think they had around 25,000 total participants across those 13 to 15 deals. So it’s an incredible endeavour. That one just stuck out as a key one.
How do Supra’s partnerships with cryptocurrency and token exchanges work?
Dominic Hobson 43.53:At Future of Finance, we’ve been very interested to follow the Singapore exchanges’ efforts to bring down that ticket size, not just real estate, but actually funds, private equity funds, and real estate funds as well. Now, in terms of getting your own achievements into the marketplace, you have formed partnerships with a lot of other entities involved in the business, right across the whole crypto world, NFT, DeFi. And of course, the security tokens, cryptocurrency exchanges, all the rest of it, you’ve got relationships with Binance, I think, with Tokeny, which you mentioned, with FTX. Now, how do those partnerships actually work as business propositions?
Heslin Kim 44.39: So those are our integration partners. Some of the exchanges you mentioned are players that have invested into us, and we’re pulling their crypto pricing feeds and streaming them into our data marketplace. We’ve also got some discussions with them for assisting with the growth during the public market auction and helping us scale with [their] user base, so they’ll promote us and their retail users (non-US) will be able to invest into our mainnet sale. And then other players, you know, I think you mentioned … We were also in the MasterCard Start Path programme. And so with a relationship like MasterCard, we’ve been entered into both cohort one and cohort two of the MasterCard start-up programme. They’ve got some incredible initiatives, you know, trying to dive into how they can involve themselves in a few markets in crypto and blockchain and even the Oracle side of things. So, you know, without going into too much detail, because of NDAs [Non-Disclosure Agreements], let’s say for example, there’s an environment where you want to have a regulated DeFi. And you’ve got players like [inaudible], for example, would be a random, boring lending application. Now they’re using another wallet called Iceblock. And imagine that this environment is allowing major institutions to mitigate counterparty risk in this closed-off eco-system. So if user (a) wanted to borrow US$1.5 billion, from [inaudible] at x per cent interest over this amount of time, they would be able to do so all within this closed eco-system. Now, if you started to introduce non-regulated entities, or non-accredited entities, but still verified credentials – let’s say accredited investors across multiple jurisdictions that have smaller cheque sizes, but are still verified – the interesting thing is that you can then embed decentralised identities as well as credit scores. So let’s say there’s a major credit card provider who has access to 300 to 400 million users’ credit score database; they want to take that data [and] embed it into a wallet, and then allow accredited investors to participate with massive institutions to start doing lending and pool type of situations. Let’s say that user (a) wants to borrow US$100 million. There is no counterparty on the other side that has the full US$100 million that they’re [borrowing]. Now you can take from accredited investors, a pool of, you know, 100,000 individuals doing US$1,000 each, and then you can lend that out to that institution. And so now, again, you’re democratising and allowing smaller cheque sizes for these players who are typically not able to get involved in these type of situations, but you’re allowing them the access point to, you know, start interacting with global financial markets. So it doesn’t have to be always institution-to-institution. Now you’re allowing accredited investors across the space to do boring linear applications with major financial institutions across a widespread pool. So, without naming any names, there are these types of scenarios that are going on. And I think it’s a really interesting space to see how they can … Again, it’s playground, sandbox type of arena to really try out these different types of opportunities. So the partnerships in general that we have, are really about Proof of Concepts and moving forward with new ideas. We work heavily with innovation teams, strategy teams and growth teams, product, about, you know, what types of things are those teams looking to move forward with and how can we facilitate that over at Supra? That can be from any one of these boring linear applications to NFTs that might sit and you know, platforms like social media platforms, TikTok or Instagram, things like this. It could range all the way to supply chain dynamics. We worked with Walmart China on supply chain initiatives and publicly listed companies and in Taiwan for IoT [Internet of Things] blockchain. So, I mean, it really stretches across the gamut when you have a Layer 1 backbone consensus, and then you also have native Oracles and crossing bridges. The user demographic and user base, or typical client persona … it’s spread on a massive number of different opportunities.
49.38 Do Supra services work across all the most popular smart contract protocols?
Dominic Hobson 49.38:Just to be clear on a narrow point, your services work across all these smart contract protocols, across Ethereum, Cardano, Solana, Polkadot, all these things. It works across all of them, right?
Heslin Kim 49.51: So, when we go to market initially we will work across all the EVM [Ethereum Virtual Machine, or the network of computers running Ethereum clients] chains, the Ethereum Virtual Machine chains. So that’s Ethereum, Binance Smartchain, Avalanche, Polygon, Arbitrum, Optimism, and several others. And then we’ll also be servicing as a priority, the Aptos and [inaudible] chains, all of the Facebook derivatives. From there, we’ll start scaling into other smaller Layer 1s and Layer 2s. We’ll provide our APIs [Application Programme Interfaces]. And it’s a very simple access point, you know, for any senior developer with one or two years under their belt. They should be able to implement our Oracle pricing data feeds and pull that within about an hour.
Dominic Hobson 50:37: So all the smart contract … all the major smart contract protocols, you can help them.
Heslin Kim 50.41:Yes, definitely.
50.42: What can regulators do to encourage progress in blockchain – would it help, for example, if regulators imposed data standards on the industry?
Dominic Hobson 50.42: Okay. One reason I asked you about partnerships is because I’m kind of interested in ways in which collaboration can increase progress here. And if I made some grand sweeping statement, like we’re in the beginnings of a slow transition from Web 2.0 to Web 3.0 – that is a very sweeping statement. We’ve talked a lot in this conversation, as if everything depends – until we got to partnerships – everything depends upon entrepreneurs, innovators, doing things to make things faster, more scalable. And it prompts me to ask you, is there something you think that – you’re doing partnerships, that’s a form of collaboration – is there something that regulators could do in this area? And I’ll give you an idea … Maybe this is not necessarily regulatory but could be a collaborative project. Would something like data standards, the imposition of data standards that could be agreed among all the players, actually help to solve that Oracle data speed issue? So what can regulators do? What can this industry learn from TradFi about how to make things easier and faster through collaboration [and] through regulatory harmonisation?
Heslin Kim 52.02: I think that’s a great question. It needs to happen. I’m not a full proponent of anarchist crypto, where everyone hides their identities and nothing’s ever exposed. There needs to be some sort of counterparty risk involved with anything. So, you know, that’s why verified credentials and trust anchors are so important. I think from a regulatory perspective, `How do we enable this playbook/playground? How do we enable these opportunities for developers to try this open canvas and still build something that is not breaching security laws? That’s fully inclusive for retail users as well as major institutions, and also helping cross-border relations and regulations for money transfers?’ I think there are certain jurisdictions that are already doing some fantastic things. Singapore, for instance, you know, I’m a proud local resident of Singapore for the past three years, and they’re incredibly progressive. But we also see rising jurisdictions such as Dubai, which are trying to make it more tax-friendly, which are trying to make access to licences a bit easier, but really trying to grow the community out there. And you’ve got other jurisdictions that are heavily involved in the tokenisation of assets, and movement of CBDCs, like Liechtenstein, and Luxembourg, and Monaco, France, Germany is doing quite well. Even the UK, it’s got some pretty sweeping tokenisation … interesting PoCs on tokenisation. And I think the more you see these regulatory sandboxes start to emerge … You know, originally, it started in these offshore jurisdictions, but now you’re seeing mainland regulators starting to get involved. And once those conversations start to happen between these different regulators, you’re seeing [in] them a more open, open-minded environment for them to accept new types of licences that really can contribute back to the eco-system and allow people to work in a defined set of standards, right? So, Singapore, for instance, has created a new licensing for digital payment tokens, right? So any kind of payment that might occur in a cryptocurrency now has its own licence to run through that. They’ve created several structures for cryptocurrency companies to establish themselves in Singapore. And, you know, I think that when we have this overall infrastructure in place, it really opens the door for everyone to start trying things in a regulated way without having these anonymous, ridiculous things happening. It becomes much more social proofing and acceptable. The same thing goes for data standards, right? When institutions like ISO [the International Organisation for Standardisation] and BSI [The British Standards Institution], and these different groups, start composing these different data standards, and having standards like ISO 20022 that’s convertible over and accessible in the Web 3.0 environment. When you take FIX [Financial Information eXchange, a front office financial messaging protocol] APIs, and you allow them to feed into blockchain environments, then you start really opening up the door for, you know, traditional finance to understand what’s happening, what kind of value-add is there going to be, how does that original system work, and, you know, people who are very familiar with those types of channels and communication can easily understand why that’s useful for Web 3.0.
56.00 Chainlink is the principal competitor to Supra. How does Supra differentiate itself from Chainlink?
Dominic Hobson 56.00:And I assume an organisation like yours, which is interested primarily in trying to link up these fragmented pools of liquidity trapped in non-interoperable blockchain protocols would actually welcome some regulatory harmonisation, some kind of agreement on certain common principles, if you like, so that when a digital asset moves across national borders, or something like the Travel Rule [a Financial Action Taskforce (FATF) recommendation being implemented by nation-states that obliges intermediaries to disclose both the originators and the beneficiaries of cross-border payments] is being implemented, you could at least expect some agreement on the basic components of that – like the size of the transaction would be the same in multiple jurisdictions. You just need to nod to that. I’m sure it’s something you agree with. A couple of final questions for you, Heslin. I’m going to ask you about your vision thing in a minute. But first, I’d like to ask about Chainlink. You have mentioned them once or twice. They’re obviously your principal competitor. How do you differentiate yourselves from Chainlink?
Heslin Kim 57.00:You know, I think, first and foremost, we have to give hats off to Chainlink for pioneering this space, because they were the original Oracle for Web 3.0. And before that, there just wasn’t an opportunity to have this type of feature already pre-built that developers can utilise. Before that, if anyone was trying to build an application that needed outside world data, they would be trying to code that themselves. So Chainlink really opened the door for a new type of service that’s very much needed and has catalysed the growth of blockchain environments and crypto into real-world adoption. In 2017, there were a lot of use-cases. There wasn’t much actual adoption or utility. It was largely speculation. And the interesting thing is that, thanks to Oracle networks, we’ve now been able to re-create financial environments in Web 3.0 in a trustless space. And that’s thanks to Chainlink. So,you know, they’ve got great educational content; documentation materials; they’re a force to be reckoned with; and they’ve got their position for a good reason. The good thing about coming in later, though, is that you can see discrepancies and faults and smaller things that might have been missed along the way. When you’re an organisation of that magnitude, you can’t focus on everything. And one benefit that we’ve had over the last four or five years, and watching Chainlink and, you know, putting out multiple market analyses, research reports, and talking to developers talking to co-founders of applications, is that we get to see, you know, what are the things and gaps? What are the holes that Chainlink has left behind in their Chainlink fence, right? And then how can we fill those gaps and what can we provide that’s better? And, you know, just to put it very simply, and I think I’ve got it up over here, we’ve got better security, better speed, better finality. And I think it’s about time that we have that on market. So as I mentioned from some of the benchmark numbers before on [inaudible] chain, our analysts were testing out Chainlink refresh rates – 30 seconds. On Avalanche it was around 45 seconds and on Ethereum it was around a minute [plus] 30 seconds. We were pulling in refresh rates for data feeds at three to five seconds. So, you know, even on our fastest side, and their fastest side, we are still at 10x – three seconds to Binance Markets data feeds at 30 seconds. On the slow side, we’re even more. So, at the same time, you know that would be the speed element. On the security element, we are composed of a set of nodes, almost 500 nodes in our eco-system. When you’re pulling from a Chainlink data feed, it’s directly from the end-user itself. So if Binance’s APIs went out, or someone was able to manipulate that in any way, you’re pulling directly from a stale or tarnished data feed immediately. So bad data in, you know, bad data out, bad data in. That’s how it goes. We try to mitigate that through taking a very large sample size of data sources, and then creating a median value from that, that we can then publish to any of the end-consumers. And we use a huge amount of nodes that are not attackable in the traditional sample. If you’ve ever heard about why blockchain consensus is so secure, and why can’t Bitcoin be infiltrated, or, you know, how can you not add more Bitcoin or how could you not change the transaction amounts? They talked about a 51 per cent attack. And the 51 per cent attack is essentially why blockchains can stand up for their security guarantees. Chainlink is just an API data feed call, and we are blockchain Layer 1 consensus. So our data feed security would necessitate, you know, hundreds of million dollars to actually try to impact the data as it goes out. Whereas on the chaining side, thankfully that hasn’t ever fully collapsed yet, but we are seeing delayed data feeds and minor extracted value and all sorts of manipulation for pricing on that side. So the Oracle piece is fundamental in moving crypto forward. It’s fundamental in helping financial institutions get involved in crypto and also to monetise it, right? So, hopefully, we’re providing those better services that can ease access points [amd] make it more efficient and, you know, from a cost perspective, we’re trying to lower the barrier to entry. We have predictable and budgetable pricing, standard across-the-board, not paid in some volatile super token or anything like that. I mean, it can be – but we’re taking payments in both fiat [currency] and USDC stablecoin. So, you know, really trying to use the access points here.
Dominic Hobson 1:02:25: By the way, have you shown those TPS rates and those security defences to your friends at MasterCard?
Heslin Kim 1:02:31: Ah, we have, yeah. Yeah, there’s some very nice conversations going on there.
1.02.38 What “end-state” do current trends and developments point towards – what will a Web 3.0 universe actually look like?
Dominic Hobson 1:02:38: I thought they would be very interested in those. Look, my last question to you is this. I made a very sweeping statement a little while back about how we’re on this journey from Web 2.0 to Web 3.0. On the assumption we all know what Web 2.0 is, and Web 3.0 is – although we could probably have that discussion the rest of the afternoon. As you look forward, where all the trends that you’re involved with, which you see, and which you’re helping to accelerate, what do you think that end-state is going to look like? What’s that Web 3.0 universe that you’re actually helping to create going to look like? What will be its outstanding characteristics, beyond decentralisation?
Heslin Kim 1:03.27: You know, I think when we look towards, let’s say, the next five, ten,15 years, it becomes a wave. You know, credit cards disintermediated banks. Neo-banking, online, mobile banking disintermediated bricks and mortar. And payment platforms like Revolut and Stripe disintermediated credit card companies, I think that what Web 3.0 is bringing to the table is a way now for individuals, for institutions, to lower the amount of middleman involvement that typically occurs in most markets, right? There’s always value leakage to some degree, because everyone wants a chunk of any kind of transaction or data that’s occurring. And what Web 3.0, you know, in its entirety, is really trying to achieve is autonomy, self-sovereignty, financial freedom, data privacy and financial privacy for individuals, for institutions, for small to medium [sized] businesses, from you know, mega-conglomerates. And, so, I think that, in the next five, ten,15 years, we [will] see the emergence of very simple platforms that, you know, I’ll be able to load on my phone off of a normal App Store or Google Play. And it will be backed by crypto or blockchain, the Layer 1, Layer 2; have some elements of NFTs involved, that are totally hidden to people- they don’t need to know why it works. They don’t need to know what’s going on. They just need to know that it works, right? And hopefully, we can get to the stage where instead of needing to do education about how blockchain is safe, and how it’s increasing speeds and increasing efficiency and decreasing costs and, you know, all these various elements. After it’s been proven that people trust it, it’s reliable, I think we’ll move into the space where it becomes consumer-friendly and consumer-ready for mass market adoption. And then it’s going to be at the back-end of Instagram and the back-end of TikTok or whatever the new platforms are. It’s going to be part of your back-end at Charles Schwab. And if you’re trading on Robin Hood, or if your asset manager, hedge fund managers, something along those lines, that all be run off of tokenised assets, blockchain elements in at the access points, and these kinds of things. And, you know, it’s still early stage. That’s all I can say to people. I thought I was late in 2016 when I came to the crypto environment. And I’m realising now, you know, it’s 2022, I still feel like I’m early after I’ve seen how much growth there is, you know. Jjust talking about, for instance, some of those other traditional markets. If we’re looking at interest rate swaps in the trillions, right, of daily volume. Crypto markets, at the moment, only US$2 trillion [in] total market cap. So there’s a lot of upside for growth. World Economic Forum [predicts] US$27trillion in [tokenised assets] five years from now. And I think that what Web 3.0 is going to become is really an all-inclusive environment for everyone. Hopefully, we can start to dive into even other initiatives like universal basic income. I think the last ten years was predicated on discussions with regulators and with large companies about data privacy. I think in the next ten it’s going to be about financial privacy. What does me putting my money in the bank mean versus me holding my money in self-custody? If that becomes more secure, I’m not put at risk in case there’s a bank run or a default or, you know, anything like that. If I can earn upwards of one and a half percent to ten per cent yield on my own money at home, why wouldn’t I rehypothecate my own funds? No. If it becomes simplified; if it becomes trusted; if it becomes mainstream. That’s the next step towards asset management. So I think there’s many different arenas that that this can turn into. And it’s really about innovation and trying new things. So it’s exciting. I love this space. And I think it is the future of finance.
Dominic Hobson 1:08.21: If I was to summarise what you’re saying, we’ll know we’re in Web 3.0 when the technology is basically invisible; it just works, at speed at scale; and at low cost.
Heslin Kim: 1.08.31 Yup.
Dominic Hobson 1.08.32Heslin Kim, thanks very much for taking the time to talk to Future of Finance.