#253: Julie Maupin & David Sønstebø on Enabling the true Internet-of-Things through the Machine Economy

This is episode #7 in the Automation Series. You can learn more about the Automation Series here. You can learn more about IOTA on their website. David Sønstebø and Julie Maupin of the IOTA Foundation join Anthony Pompliano for this special episode of the Automation Series. David, the Co-Founder and Julie, the Director of Social Impact and Regulatory Affairs dive into the intersection of distributed ledger technology. In this conversation, Julie, David, and Anthony discuss the philanthropic mission of the IOTA Foundation, the challenges and benefits of running a non-profit, IOTA Tangle, and how distributed ledger technology will empower the full potential of automation. =============================== ~If you enjoyed this episode and want to stay updated on everything Bitcoin, tech, and finance. Check out my newsletter by visiting pomp.substack.com and join 35,000+ other investors currently subscribed to my daily investor letter.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to Off the Chain, simply the best podcast in crypto. Let's kick this thing off.

• 0:13Anthony Pompliano?

  The following episode is part of the Off the Chain Automation Series, sponsored by IOTA. The goal of this special series is to explore the intersection of distributed ledger technology and automation, specifically around digital currencies, digital wallets, and machine-to-machine transactions. My core belief is that every stock, bond, currency, and commodity will eventually be digitized, and distributed ledger technology will empower the full potential of automation to be realized. IOTA is the sponsor of the Automation Series. Their mission is to support the research and development of new distributed ledger technologies, including IOTA Tangle. The IOTA Foundation encourages the education and adoption of distributed ledger technologies through the creation of ecosystems and the standardization of these new protocols.

• 0:57Anthony Pompliano?

  You can find out more about the Automation Series and IOTA in the show notes. Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only. Alright guys, bang, bang. I've got both David and Julie here. Super excited to have them to close out the Automation Series. And I thought that this would be a really interesting conversation,

• 1:40Anthony Pompliano?

  where we could talk through a whole bunch of things around the balance between kind of regulated nonprofit entities, and then the centralization versus decentralization argument, and how that plays out in real-world applications and situations. So, thank you so much to both of you for joining.

• 1:58Speaker 01

  Yeah, thanks for having us.

• 2:00Speaker 02

  Thanks, it's good to be here.

• 2:01Anthony Pompliano?

  Absolutely. Let's just go real quick, David, maybe start with you, two minutes on your background and kind of your role at Iota, and then Julie, same for you.

• 2:09Speaker 01

  Sure. So, yeah, I'm David, I'm located in Norway. I'm one of the original founders of the Iota project and I've been in the blockchain space since early 2012, so I've kind of been through all the craziness. I'm currently co-chair of the Iota Foundation. And yeah, this has been my life for the past six years, full-time.

• 2:31Speaker 02

  Yeah, and I'm Julie Moppen, and I am working at Iota as the Director of Social Impact and Regulatory Affairs. I've also been in the blockchain space since 2012, albeit at the time I was an academic, teaching international law in the US, and I'm now based in Berlin, where the Iota Foundation is headquartered. Yeah, and my background is in both economics and law, and I came to the crypto space early in its life cycle, but later in my career, after having been through the dot-com boom and bust, and worked in nonprofits, and worked in government, and worked in the private sector.

• 3:11Speaker 02

  So, this has been a great way for me to bring all of my different hats together and use them all together. And I also serve as the Chair of the Board of Directors for INATBA, the International Association for Trusted Blockchain Applications, which Iota helped to cofound last year together with the European Commission.

• 3:31Anthony Pompliano?

  Awesome. So Julie, maybe we could start with you and just help us understand the structure of Iota and kind of the idea behind this regulated nonprofit entity. And then we'll get into, David, maybe talking about some real-world applications and how that's played out.

• 3:46Speaker 02

  Sure, happy to do that. So, you know, one of the things that makes Iota unique and unusual is that from the beginning, the co-founders had the idea... Hey, you know, this is very much a community-driven, bottom-up grassroots project. But we'd also really like to make sure that it's developed in a way that really serves society. And it's difficult to know how to do, how to go about that if you're just sort of hanging out with people in internet chat rooms, building something together. Because you need to make sure that the things that you're doing, that they, that they actually are within the realm of what's legal, then what's, you know, not going to be regulated out of existence.

• 4:27Speaker 02

  And so the, the idea that they had was, hey, let's set up a nonprofit foundation to kind of be the voice of the community towards governments and governing bodies around the world, as well as, you know, serve as an interface point for institutions and corporates and everybody else. And so we embarked on that. I got to know David and Dominic in early 2017, and when they were in the process of trying to get the foundation set up, and, and got involved in that process, you know, thanks to my legal background, here in Germany. And it took a while to get that through, because, you know, when you have a bunch

• 5:07Speaker 02

  of donations that have been made by anonymous people online, to set up a nonprofit foundation, that's not the most traditional model of starting up a foundation. And we had to do a lot of explaining to the, the Foundation Supervisory Authority here in Germany, as well as the, the Financial Supervisory Authorities, as to how that all worked, and why we would still be able to be regulated by them, how we could nevertheless submit financial reports that they could audit, and all that good stuff. And so it was an adventure, wasn't it, David?

• 5:41Speaker 01

  Oh, yeah. And definitely the banks as well. The banks were very eager to help support, not at all.

• 5:49Speaker 02

  Yeah, that's a little bit of dark humor there, which David is famous for, of course.

• 5:55Speaker 02

  But yeah, I mean, even after we did manage to get the foundation set up, which which took about a year and a half altogether from start to finish. So it wasn't easy and ended up being the first nonprofit foundation anywhere in an EU state to be financed by cryptocurrency. But even after we managed to get the go ahead from the authorities, it took another, I think, two and a half months. Is that right, David, to get a bank account?

• 6:20Speaker 01

  Yeah, yeah, it took quite a while and a lot of effort. And we were very proud that we were able to do it in that time because, of course, the blockchain space or the crypto space has evolved immensely since then. But we were definitely pioneers. That's never easy.

• 6:38Speaker 02

  Yeah, so we were really grateful that Deutsche Bank went out on a limb and, you know, which is a big name. And obviously, we didn't expect them to be the ones that would come through as opposed to, you know, some of the Swiss or Luxembourg banks that were starting to bank crypto clients. But but they did. They threw their hat in the ring and said, yeah, we think this is the future, this technology, and and we'd like to be part of it. So so from that point, we were off and running and could officially start hiring people and focusing on really building this as a community project.

• 7:09Anthony Pompliano?

  That's awesome. And David, maybe talk a little bit about kind of some of the recent events that have happened and how the idea of this regulated nonprofit entity, you know, kind of on the scale of centralization and decentralization has actually played out both in the in positive ways and negative ways for for IOTA.

• 7:28Speaker 01

  Yeah, for sure. So if we go back to some of the points that Julie mentioned, the reason we went this kind of hard way instead of the easy way was that we really knew that if a project is going to succeed on a global scale, if we're really going to develop a new protocol that will be kind of a foundational backbone of this autonomous era, we really need to just head the or go head on with the real problems, which will be regulatory, explaining the technology, you need to have the gravitas behind you to actually sell this into the governing environment as well as the corporate environment.

• 8:11Speaker 01

  So ever since the beginning, we chose to do things very differently than most projects. And the motivation for that was the fact that all of us had been in the early, early days of crypto, where everything was just wild, wild west and scams left and right. And it was, it was just crazy. And we wanted to get away from all of that and really get into a much more professional and sane environment, so to speak. And as a consequence, we also chose an orthodox way of securing the network in its early days. And this is now known as the infamous coordinator node in the IOTA network.

• 8:53Speaker 01

  This node is a special node that issues milestones, which kind of gives the transactions something to follow in this directed acyclic, acyclic graph that the tangle is. We cannot, like this coordinator node cannot change balances or do any kind of, it, it, it doesn't really have that much power. It's just there to keep the network going. And of course, in crypto, especially back in the early days, that was sacrilege. It's like, hey, you guys are not 100,000% decentralized. So certainly there has to be, like, this has to just be denounced completely.

• 9:36Speaker 01

  So we faced a lot of resistance early on because of the coordinator. However, if you look at Bitcoin and Ethereum, they had checkpoints, which was centralized, just to get network up and running. You need something and we chose the coordinator for two reasons. One was that it's the most efficient way in our particular architecture. And secondly, it was a safety mechanism, like if should, if something should go wrong, as we're in this exploratory journey and this very alpha beta stage, then we can actually shut down the coordinator, which subsequently kind of freesister networks' value transfers.

• 10:14Speaker 01

  And we just had a unfortunate incident back in February, where a hacker got into Moonpay, which is a company providing a service where you can buy crypto, which we had integrated into our Trinity Wallet. Unfortunately, since their infrastructure got compromised, there was a loophole or a vulnerability in the Trinity Wallet, where the hacker was able to get access to seeds, i.e. private keys. And as soon as we noticed this, we immediately shut down the coordinator

• 10:55Speaker 01

  and we were able to prevent a lot of damage from the hacker. And of course, again, this is a controversial topic in this space because it's kind of this holy thing to claim to be decentralized completely. I would, of course, contest that argument because I genuinely believe that the mining pools and staking pools is an oligopoly, so it's far from decentralized. But anyhow, that's the benefit of having this centralized milestone issuing node. And this goes back to the philosophy that we have. We accept the fact that crypto won't take over the world overnight.

• 11:40Speaker 01

  This is not something that just happens. So just as we chose to set up the IOTA Foundation in Germany, which was a very arduous and long process, we also chose to accept the fact that the technology itself will not be mature enough within the first years. So there is no reason to risk the entire project by insisting on this stupid maximalist decentralized attitude before the network is even adopted or finalized. So these two things go hand in hand, and that is one of the things that really set IOTA apart. And based on the feedback that we have got from pretty much all of our partners and other collaborators.

• 12:22Speaker 01

  They agree with this approach because it's a safe approach and we have been able to prove the benefits of that approach. Of course, we are getting rid of the coordinator in the in the in the future, in a quite near future at this point. But at the same time, it's just a very good incident to showcase why it's good to have some checks and balances in place, some braking mechanism before the network is completely released. And and as you know, you've been in this space for a long time. You remember the parity hack, you remember the DAO, you remember all of these big events that happened. And in those networks that proclaim to be completely decentralized, then you have to

• 13:06Speaker 01

  convince all the miners that, hey, we need to do a rollback, or we need to do a fork, blah, blah, blah, blah, blah. And because IOTA has this coordinator and everyone in the community and our partners and ecosystem is happy about it, we don't have to go through that political process. And instead, we have the ability to take the time to create a truly decentralized network through our research and development efforts that has been going on now for four years nonstop.

• 13:34Speaker 02

  If I could just jump in there to piggyback on this, because I think, David, some of the points that you raised are really interesting, especially as we think about moving forward. Because, you know, one of the things that the Trinity hack showed, as the DAO hack and the parity bug and all of this that you mentioned, many others, is that, you know, a lot of everybody likes the idea of decentralization because it's more secure and, you know, we sort of like the theory of decentralization. On the other hand, when something bad happens, we want to have a way of coming together in collective action to do something about it. And and of course, the difficult thing is to determine what does bad mean?

• 14:16Speaker 02

  I mean, I remember watching the DAO hack where, you know, you had somebody who who was claiming to be the hacker posting in various chat forums. Oh, well, you know, you said the DAO is law and the code is law, and I found a bug in the code, so thank you, everyone, for the $50 million donation. You know, so, um, which, which is, you know, so the idea of decentralization is great until something just doesn't work. And then people need someone to look to, uh, to be able to figure out how do we get out of this mess? And, and that is really the sort of the quintessential dilemma of, of governance in all of these projects. Iota, um, hasn't had to face it in such a severe way in the past because we've had this coordinator in place.

• 15:01Speaker 02

  But it's definitely something that we have to plan for, for the future. Because it's to be expected, of course, that at some point on a fully decentralized version of Iota, something unexpected will happen and we'll need a way to respond. So, you know, the good thing about experiences like this is that it forces people to kind of come together and say, okay, well, given that bugs happen, unexpected situations arise, et cetera. What kind of processes are we going to put in place to allow the users of the system to be empowered to react in a, in a joint way in future? And, and that's something that the Iota Foundation, together with the community,

• 15:40Speaker 02

  um, intends to put a lot more thought into between now and the, the stop point of the, of the removal of the coordinator. Because we definitely need to have, uh, procedures in place for community members to be able to come together and say, hey, let's do this in this situation.

• 15:56Anthony Pompliano?

  Got it. And so I think one of the things that, um, you know, is obviously a hotly debated topic, uh, throughout crypto, but also other decentralized type, um, business models, et cetera, uh, open source software and all kinds of things, is this idea of, do you start on day one fully decentralized? Uh, or do you start out centralized or semi-centralized and then kind of decentralize over time? Right? And, and you see this with, um, you know, plenty of companies, right? So, so not the nonprofits or, uh, kind of protocols, but actually companies in crypto that talk about this. Um, you see this in, in other applications as well.

• 16:33Anthony Pompliano?

  My understanding, and correct me if I'm wrong, is you guys are in kind of the latter camp of you start out semi-centralized and then become decentralized over time. You know, one, is that accurate? And then, two, you know, including all of the recent events, et cetera, like, what does that timeline look like? And has that changed at all, given those events?

• 16:53Speaker 02

  I think one thing, I'll hand over the timeline and everything to David, but I think one thing that's an important clarification. When you look at the various types of players in the space is that most of the actors that have started out centralized and said, we're going to decentralize over time, have done it with a for-profit motive. And that makes it actually much more complicated to decentralize, because often the profit model is tied to the centralization. And, you know, that's something that's unique about us, because that's not the case. For Iota, it's a nonprofit foundation, everything is done sort of for public benefit, open source. And we don't make a profit on the use of our network, mining of our network, or whatever.

• 17:35Speaker 02

  So, you know, that sets up a different set of motives in the beginning to actually be able, and it allows us to have different decision-making processes to move toward true decentralization, because we're not bound by a revenue model that only works in a centralized setup.

• 17:51Speaker 01

  Exactly. And just to elucidate a little bit more on that. If you look at these projects that proclaim to be completely decentralized from go, that's not really the case. I mean, with Bitcoin, with Ethereum, you had checkpointing, but beyond that, you also immediately have miners. And in the very early beginning, when every person with the laptop can fire up a node and be a miner, that is fine, then you can call it decentralized. But then eventually, as the hash rate, this race goes on, you end up with these mining pools, and it just automatically centralizes. So then you are suddenly stuck in an even worse place, because

• 18:32Speaker 01

  First of all, you no longer have this utopian decentralization. But furthermore, you have two different camps in your own network. You have the users and then you have the miners/stakers, which are, essentially, their incentives are diametrically opposed. Because as a user, you just want your transaction to go through with the lowest fee possible. But of course, as a miner, you want the fees to be as high as possible. So, again, this is something you bypass with the strategy that we chose. So we're definitely in the latter camp, as you alluded to. And in terms of our roadmap and timeline,

• 19:13Speaker 01

  we already have a testnet right now with Cordiside. We are introducing all of the different modules of Cordiside over time, testing them out, letting the community test it and vet it. And we have a lot of academics that are involved in this process, of course. So I would say that we are probably looking at Q1 2021, where we really genuinely believe and hope. Of course, deadlines are always scary in software development, especially in DLT. But we truly believe right now, at the stage we're in, that by Q1 2021, IOTA will have gotten rid of the coordinator.

• 19:58Speaker 01

  And that will also mean that not only is IOTA decentralized, as these other projects proclaim to be, it will be much more decentralized. Because we don't have the miners, we don't have the stakers. Every single participant is equal in the network. So that will be true to this decentralization. And from like an ideological point of view, if you're a very strong proponent of decentralization, I don't think it's a hard ask to wait a few years to get everything right and then have it semi-decentralized in that interim period, when the reward is complete decentralization.

• 20:41Speaker 01

  And just one final point on that. I would say that all projects in the crypto space is still in the beta phase. So I just don't understand the insistence on launching with complete decentralization at all. It's just crazy for me.

• 20:57Anthony Pompliano?

  Yeah, and I guess part of decentralization, or one of the things that I talk about all the time is, if you have quote unquote decentralization, but you don't have the time to allow network effects to take place, it's much harder to start out decentralized just because you've got to kind of build that network effect, right? And what I mean by that is like, take a Bitcoin for example. If Bitcoin launched today, when everyone was paying attention to a space, I actually think it would be very, very hard to launch as quote unquote decentralized, right? Because you would just have so much attention on it, so many people, you know, trying to do nefarious things, etc.

• 21:37Anthony Pompliano?

  Part of the beauty of something like that starting, you know, 11 years ago, is that no one was really paying attention, right? And it had time for, you know, three, four, five years before it really started to get attention. I think your point is if you want the security, if you want the stability, if you want certain aspects of something that people can, you know, kind of gain trust, whether it's a company, it's a protocol, it's one of these regulated nonprofits. The idea now when everyone's paying attention is starting out centralized and then trying to decentralize over time. We even see things like, you know, Twitter saying, hey, they may start trying to do this at the protocol level, etc.

• 22:16Anthony Pompliano?

  I think it's becoming a fairly well-accepted kind of approach to building a decentralized network, even though I agree with you that, you know, there's a lot of people who may not agree with it or think that it kind of goes against certain ethos, etc.

• 22:33Speaker 01

  Exactly. I think you hit the nail right on the head there because at the end of the day, what are we trying to do here in DLT or crypto? Like, what's the end goal? It's, of course, to build this and get the protocol adopted worldwide. Otherwise, the impact is just theoretical. It's not practical. It's not realized in the real world. And then the question becomes, should we do it in accordance with best software practices? Should we do it and have patience? Or should we just rush it? Like, in my personal opinion, no paradigm shift ever happens overnight. You just have to be patient. You have to work at it. You have to do the right thing. And in my opinion, the right thing is to start out...

• 23:19Speaker 01

  Of course, you have to have like a component of decentralization, because otherwise you're just asking people to trust you. Like, your theory should definitely be able to be tested right away. But it shouldn't be this holy grail that decentralization has to be there in the beginning. Otherwise, the project can be just ignored or denounced. Because that's just ludicrous. It's religious, in my opinion. It doesn't have any basis in reason. It doesn't have any basis in best practices of development. It's just a random stance people take. So, yeah, if we are serious about bringing this to the real world,

• 24:01Speaker 01

  let's take our time. Let's do it according to the best practices.

• 24:06Anthony Pompliano?

  Got it. That makes sense. Julie, maybe talk to us a little bit. In the kind of regulated world, especially in the regulated nonprofit entity side, how do you see this kind of unfolding as more and more companies or protocols and entities go into what I'll just call the crypto world? And really, what I mean there is kind of a digital, global, decentralized world. Do we have to change rules and regulations? Can we use the ones that currently exist and just operate within them? How do you see that playing out?

• 24:38Speaker 02

  Yeah, I mean, I think it's some of both, for sure. And we've already seen that in the developments that we've seen so far in how policymakers and regulators have adjusted to new technologies being built in the crypto and DLT space.

• 24:53Speaker 02

  It's a bit of a, you can't have one strategy or the other, either. I mean, you have to have both. In some instances, existing rules can just be applied and extended to the new developments that are happening in the blockchain space. In other cases, you really do have to change the rules and/or think of different or more creative ways to apply them. So, you know, to give an example from the recent hack that we experienced of the Trinity Wallet, you know, via this Moonpay integration. You know, one of the things that happened was we had to figure out what are our GDPR reporting obligations here.

• 25:33Speaker 02

  So, you know, we've, we figured out within a certain number of, I can't remember exactly what the timeline was, but within a day or two, we figured out what the problem was, how the hacker had gained access, et cetera. We had a fairly good understanding of what data the hacker had been able to access. But, you know, we have this wallet that people sign up to use without providing any personal information at all to the IOTA Foundation. We designed it that way by, by choice, right? We didn't want to be custodians of people's personal data. And, and then the question is, well, how do we inform them under our GDPR obligations

• 26:18Speaker 02

  that, that their passwords, their seeds may have been hacked? You know, because we actually don't, didn't even know who all the affected wallet users were. We knew that it was limited to people who had opened the Trinity Wallet between two certain dates, when, from when the bug was introduced to when it was fixed, and had used the version that, that had this integration with Moonpay in it. But we didn't know who those people were. And we can't send them an email. We don't have their emails. So how are we supposed to satisfy our obligation to inform people? And, you know, under GDPR that their data may have been, may have been compromised. And the data wasn't really personal data anyway.

• 27:02Speaker 02

  Because we didn't have their names. We didn't have their email addresses. We didn't have any identifying information about them. So, you know, the best that you can do is to sort of second best approximate it by making lots of public announcements and posting stuff on Twitter and writing posts on this and blog. Putting posts on Discord for our community and writing blog posts. And going on podcasts and doing articles for crypto news outlets and mainstream news outlets, et cetera. To kind of try and get the word out. Hey, there was this incident, this hacking incident. And you need to migrate your wallet. Uh, if you, if you happen to, to use this version of Trinity between this and this date. Um, so, you know, that's an example of, of a, a regulation that has, it is written for the world.

• 27:47Speaker 02

  As it used to be. Where there was always a centralized data processor, controller, et cetera. And in this case. Data was being processed, but it wasn't being processed by us. So we, we'd actually don't have a way to inform the users. And we need to figure out new ways to adapt. Those very good policies that are behind GDPR, letting people know when they've been compromised. All of us want to be informed if, if something that matters to us has been compromised. And surely something that has financial value like a crypto token. Is something that we would like to know about if we've been compromised there. Even if we haven't provided our personal name and email address and. And our registered address and date of birth and all of this stuff.

• 28:32Speaker 02

  Um, so we need to figure out how that can be done. And, you know, governments and data protection authorities and all of these entities are just at the beginning. Of trying to wrap their minds around that. And and we're trying to work with them to explain what's possible via the technology and um what we need to find workarounds for.

• 28:52Anthony Pompliano?

  Got it. That makes a lot of sense. David, anything to add on that?

• 28:55Speaker 01

  Yeah, so no, I think Julie explained it perfectly. Like, we are in the middle of this paradigm shift and it won't happen overnight. And so we really need to speak directly with the authorities. We need to speak with the regulators and we need to find common ground. And that is the whole philosophy behind how we set up the IOTA project from day one and the IOTA Foundation from day one. And we are very proud of that because at the end of the day, if you're really going to make changes in this world with new technology, you can't just impose it on people. You have to really tackle the real challenges and do it in iterations. And that's what we we are doing.

• 29:38Speaker 01

  That's why we also, as Julie mentioned, co-founded Inata. Because we really need these entities on board. They need to be up to date. These regulations cannot be written by people that have never touched a smartphone.

• 29:54Anthony Pompliano?

  And and so where do you guys go from here, right? As you look out um for IOTA and and kind of um, you know, thi- this whole idea of providing uh digital assets um and connectivity for machine-to-machine transactions and automation, et cetera. Where where do you guys go from here?

• 30:12Speaker 01

  Yeah, so IOTA is a very thriving uh community and project. We have a lot of partners in the corporate realm, a lot of partners in the academic realm, et cetera, et cetera. And right now, we are working on a project called Chrysalis, which is kind of IOTA uh one point five, which is this step towards Cordiside before Cordiside, which will already improve the transaction output and improve the user experience a lot. That's the next big software update we are currently developing and deploying soon. And of course, Of course, after that comes Cordicide.

• 30:54Speaker 01

  And after that comes sharding and slicing, which is this much higher level, or I shouldn't say higher level, I should say more theoretical approaches of reaching hundreds and millions of transactions per second. All of this is, of course, going to take time and we have a lot of academics working on this right now. In terms of the project overall, we continue to do real projects. Like, for instance, we just did a project with Trademark East Africa in the supply chain, because of course the supply chain sector is very old school, very much paper-based. And the distributor vendors can play a significant role there.

• 31:39Speaker 01

  We continue to work with OEMs in the automobile sector for payments, for data assurance when it comes to over-the-air updates, etc.

• 31:52Speaker 01

  So yeah, there's a lot of things going on in IOTA right now. And we are very, at least personally, as someone who's been in this project since day one, I've never been more excited about the project than right now, because for the first time, and I mean this very genuinely, for the first time, I start to see the finish line. Not the whole finish line, like thirty years down the road when the entire world is completely autonomous, but in terms of delivering the protocol and having a clear path towards standardization. And already a lot of companies and projects lined up that is very much eager to adopt it. That is right around the corner.

• 32:35Speaker 01

  And that is extremely exciting for everyone that has been part of the IOTA project or is interested in DLT in general, in my opinion, at least.

• 32:45Speaker 02

  Yeah, I think that, you know, right alongside with all of those developments, one of the key things that we're focusing on right now and will continue to focus on is figuring out how to get the governance of the code right. You know, because there's so many projects in this space that have lots of different approaches to how they do updates to their code, who manages it, who can do GitHub pull requests and who approves them and... You know, the Ethereum community has these big developer calls where people can propose stuff and discuss it and then it can get sort of through a winnowing process. Different projects have different ways of going about code governance.

• 33:24Speaker 02

  And this is really important because when you're talking about developing a base level protocol that's meant to serve as sort of the backbone of the Internet of Things, on top of which many other things can be built by companies, by governments, by nonprofit organizations, et cetera, all of them need to be able to reliably depend upon the maintenance of the base code in a sound and best practices way. And it's not like there aren't models out there for it, where there are lots of open source software examples that are some better and some less well governed. But in the crypto space, it's really been all over the map.

• 34:09Speaker 02

  And you know, the pace of innovation and the development of the code in our space is so fast that it's been really very much the exception and not the rule to adhere to industry best practices in terms of open source software development. And we're trying to figure out how to make the transition to really get there fully. So that those who are building on Iota and wanting to do things with it can rely on it and can use it, you know, without fearing that there's going to be some breaking change tomorrow after they build their new application on top of Iota that makes the work that they've just put in completely useless or that sets them back, you know, for a couple of weeks or months or whatever.

• 34:54Speaker 02

  So those kinds of things are things that we're working together with our partners at the Eclipse Foundation and OMG and having dialogues with other foundations as well in the open source software management space to really wrap our minds around how to do this well.

• 35:09Anthony Pompliano?

  What do you think is the biggest obstacle kind of as we move towards that world for you guys?

• 35:14Speaker 01

  So. Actually, it's very hard to identify one singular obstacle. For me at least, from my perspective. It's really all about just proving what you're building. Prove that it actually works. Prove that you're solving a problem, not that you're building a solution and looking for a problem. And that's what we are constantly evaluating as we are partnering up with companies, et cetera. We want to develop solutions. Like, that's what all good software should be about. And as Julie just mentioned, especially in open source software, of course, there's a lot of interesting exploration and experiments and things that are created just for fun.

• 35:59Speaker 01

  But we are very focused on developing things that serve a purpose. Improves something. Like, if you could have just used an SQL database, then we are not going to go for that market at all. So for us, it's more about having this constant dialogue with the different industry verticals and seeing where are the problems? What could be solved by just modernizing it and getting more digital? And what requires a DLT? And that is something that is... It's a matter of education, but it's also a matter of exploring together.

• 36:40Speaker 01

  Because if we are doing a project with someone and we realize that just a regular database infrastructure would give them the improvements they're looking for, then there's no reason for us to be involved. Beyond just maybe securing the data via the Tangle, which would be a very small feat.

• 36:59Speaker 01

  So it's really about pinpointing where are the big problems right now? Where are the bottlenecks that DLT can truly solve? And that's what we are focusing on. And just as an example, with smart contracts, for instance, of course, in two thousand and fifteen, sixteen, seventeen, smart contracts and colored coins were all the hype. It was like, oh, yeah, this is going to solve the world and everything will be automated from now on and the code is law, et cetera. Um, but then you suddenly realize that, no, that's not actually how it works. And of course, Julie can speak to this better than me because she's an actual lawyer. Uh, but even if you write the code, even if you write a smart contract,

• 37:40Speaker 01

  um, which compiles and it executes as it's intended, that doesn't mean that it's an actual legally enforceable contract. And that's, that's exactly where we go back into having to have dialogue with the right people to figure out what is it that the software actually needs to solve? And how do we accommodate it in the real world? So when we are developing I O T A smart contracts, right now we are, uh, using WebAssembly or WebAssembly will become kind of the framework around future I O T A smart contracts and colored coins.

• 38:18Speaker 01

  And that's because that's what the industry is, is going towards. It's kind of consolidating around WebAssembly as the future. So, okay, let's do that. But then the big questions become, what does it really enable? Like from a, from a, if you're a company, if you're a, whatever, what does it really enable? And I will let Julie, if, if she has some thoughts on this in terms of like smart contracts and software versus how it's actually working in the real world.

• 38:50Speaker 01

  That, that is what we really need to continue to explore together with the actual like legislation bodies.

• 39:00Speaker 02

  Yeah, that's a good point. And, and I would say not just the, the legislators and regulators, but, but also just at the end of the day, the, the users. Because, you know, having WebAssembly put together some code is all well and good. But at the end of the day, it has to mean something in the human world for those who are subject to this set of instructions that's being carried out. And you know, even in fully analog, regular old boring paper contracts, there are all kinds of problems that arise all the time with execution of contracts. Because lots of unexpected things happen, or people are unclear about what they agreed on, or whatever. And you're often having to find solutions in law to roll certain things back,

• 39:44Speaker 02

  or to plug in hole, fill holes that were left, or gaps in the contract, or correct misinterpretations or misunderstandings, or what do you do with the fulfillment of the contract becomes impossible for some reason? You know, all these kinds of things. Those are, those questions are not going to go away. They have to be somehow digitally accommodated. And there will always have to be a give and take between the digital and version and the fallback legal version of a contract. But, you know, when you ask the question about what do you see as the biggest challenge? I think this, this example of smart contracts is, is a good segue into what came to mind for me, which really is very much user experience.

• 40:26Speaker 02

  The user experience is, is still not great in our space. And, you know, I O D A has made great strides in the last couple of years in terms of cleaning up its libraries and bringing out much more user-friendly software development kits for, for the devs, consolidating, you know, where you can find tools and documentation about I O D A, et cetera. And then, of course, bringing, bringing out the Trinity Wallet, which is much more user-friendly and intuitive than anything that ever came before it. But, but yeah, you know, when you want people to start using the protocol and building stuff on top of it and creating things,

• 41:07Speaker 02

  whether it's smart contracts, or colored coins, or simple, you know, atomic, atomic transactions, you know, energy for tokens, you know, and some of the smart charging use cases and things like that. It needs to be seamless, and it needs to be seamless in the way that, that the internet is to people who know nothing about how it works. And we're really far from that overall in the space. And, you know, and I O D A as well is something that, that we're putting a lot of effort and emphasis on. But I think really working together with partners, both public and private sector, to help everyone understand that this requires Developing with the users and just iterate, iterate, iterate, iterate.

• 41:50Speaker 02

  See what real people do with it when you put it into their hands and then adjust on the basis of that. Because, you know, sometimes we see stuff come out of the community of users where we're like, wow, that's really cool. We never thought of that. We wouldn't have, we wouldn't have built that ourselves. That's the beauty of a distributed permissionless innovation ecosystem. But other times, you know, you see users do things where you just think, you just shake your head and you think, what? I mean, why in the world would you do that? That's the dumbest thing I've ever heard of. And, you know, they, they have, they lose tokens as a result of it, or, you know, something bad happens to them. And because they use the technology in a way that we never would have anticipated.

• 42:31Speaker 02

  So I think that, you know, really the usability and user testing is, is a big challenge in my view.

• 42:37Speaker 01

  I remember in, I think it was late 2013, Timothy Swanson. He was interviewing everyone in the blockchain space and I think he wrote one of the first books on blockchain, which was published, I think, early 2014. And he asked me the same question and that was exactly my answer, that if my grandmother can't use it, then it won't become some global phenomenon. It has to reach that level that you just mentioned. It has to be seamless. It should be completely something you just use without even knowing any intricate details about DLT at all.

• 43:18Speaker 01

  That's, that's when we've reached actual adoption.

• 43:23Anthony Pompliano?

  Yeah, it, it's super interesting too, how I think you guys think through this mentally. Before I let you guys go though, one, one last question for you. What else are you guys excited, um, kind of in the crypto blockchain space outside of IOTA moving forward? Or the other things that you guys are watching where you say, hey, look, this is pretty cool and we're keeping an eye on it?

• 43:43Speaker 01

  Yeah, so at least in, in the theoretical realm, verifiable delay functions are very interesting as an option to proof of work or proof of stake. This is something we are researching very intensively in Cordiside. So that's just from a theoretical point of view. And from my perspective, when it comes to the broader, more high-level perspective, I would say that the feedback that we have, and we've spoken with literally hundreds and hundreds of companies, a lot of governments, a lot of, yeah, different impactful entities,

• 44:25Speaker 01

  is the fact that this technology and decentralization is actually very much in demand. I won't mention names, but I will just say that some of the biggest permission ledgers in the space or people that have collaborated with some of the biggest permission ledgers in this space have actually come to us and said, yeah, it was a nice experiment, but we don't want to commit to anything that isn't a truly open, permissionless, decentralized ledger. And that is something that truly excites me because it shows that we've come so far in the past three to five years that suddenly

• 45:10Speaker 01

  even the decision-makers at these big companies, some of them very old-school, have accepted at least part of the vision behind DLT. And that excites me to no end.

• 45:23Speaker 02

  Yeah, I mean, I would echo that, I think, just from the government side. And one of the things that has been extremely exciting to me for the past couple of years already, but really is just accelerating even more, especially in the current environment, thanks to, you know, COVID-19 crisis worldwide, is that governments are really finding ways to reach across borders and work together much more proactively than in the past. They have grasped that these technologies are, don't stop at the border. They're global technologies. They're, you know, by nature, cross borders and you can't confine them to particular jurisdictions. And therefore, they need to cooperate. And they're actually excited about cooperating.

• 46:08Speaker 02

  At first, you know, in the beginning, they were very scared. Oh, no, we can't control this within our own country. But now they see the positive benefits of being able to to really reach out and do that on a global scale. And the efficiency gains that they can make by being able to work together rather than, you know, everybody having to invent their own independent regulatory regime that simply just doesn't work because the technology and the data and the tokens and everything cross borders and you don't even know where people are sitting who are involved in running the networks, using the networks, etc. So it's really forcing governments and intergovernmental

• 46:48Speaker 02

  organizations to rethink how government works and how do you do digital citizen services? How do you create value for society as governmental bodies? And I've never seen more innovation happening from governments as, you know, just in the last few months. And I think it's going to accelerate tremendously. It already is, you know, thanks to the global pandemic that we're currently all facing. So I think that's really exciting and extremely promising.

• 47:19Anthony Pompliano?

  Absolutely. So where can people go find out more as we kind of close out this automation series? Where would you point them to go learn more about IOTA and the work you guys are doing?

• 47:29Speaker 01

  So definitely iota.org is the main hub. It's the mothership. And for me, just type my name in Google, David Sensenbein. I want Butter to spell it out because it's just, yeah, a Norwegian name, hard to spell it out. But that's how

• 47:51Speaker 02

  David used to give a hard time to all of us if we didn't put the correct O when we were writing on Slack. Or back in the day, even before Slack. But yeah, he's gotten over it now. So

• 48:03Speaker 01

  Yeah, I have those special Os, which you actually pronounce as uh. So yeah. And Julie, your Twitter?

• 48:11Speaker 02

  Yeah, I'm easy to find as well. I'm just at Julie Maupin on Twitter. You can find me under Julie Maupin on LinkedIn as well. Yeah, it's not hard to find either of us if you're looking to reach out. And I want to also mention, just for the developer community, or people who are interested in learning more about specific use cases that you can spin up on Iota pretty quickly. The docs.iota.org website has a lot of great information and blueprints for using Iota for supply chain, how does Iota work in identity, various different use cases. I think there's a mobility one on there, peer-to-peer energy grid blueprint. So that's a good source of information as well.

• 48:55Anthony Pompliano?

  Awesome. I appreciate you guys taking the time to record this and kind of talk through what I think are a lot of hotly debated and nuanced aspects of the space around these regulated nonprofit entities and kind of that spectrum from centralized to decentralized. I think the contribution to the conversation is really important. And then obviously you guys are one of the teams that are kind of living this out day to day. So I just appreciate the time and doing this.

• 49:24Speaker 01

  Yeah, same. We very much appreciate this series and the work you've put in. So yeah, very excited to have had this opportunity.

• 49:35Speaker 02

  Yeah, thanks for the opportunity to chat today.

• 49:38Anthony Pompliano?

  Hey, everyone. Pop here. If you liked this episode of Off the Chain and want to help us take crypto to the top of the Apple, Spotify, and other podcast charts, please do us a favor and rate, review, and subscribe. To review, simply go to the Off the Chain homepage, scroll down until you see the five blank stars. Taking 15 seconds to fill those stars in and leave a quick review goes a long way in helping us take the entire crypto ecosystem to the top of the charts. I appreciate you listening and see you next time on Off the Chain.