#861 Why Crypto Cold Storage Is Needed NOW w/ Adam Lowe

Adam Lowe is the Chief Innovation Officer Of CompoSecure and The Founder of Arculus. In this conversation, we discuss cold storage for your Crypto and how Arculus is pushing the industry forward through their self-custody product suite. We also discuss the importance of self-sovereignty and regulation for the Crypto industry. ======================= Fundrise is the largest direct-to-investor real estate investment platform out there, giving you the opportunity to achieve upside of an asset class previously reserved for institutions and high net worth individuals. That’s right, Fundrise is making high-end private market real estate investing accessible to everyone via an easy-to-use, automated platform. See for yourself how over 190,000 investors have built a better portfolio with private real estate. It takes just a few minutes to get started with as little as $10. Go to http://Fundrise.com/Pomp today and, for a limited time, get $10 when you place your first investment. That’s Fundrise.com/Pomp ======================= The Pod Pro Cover by Eight Sleep is the most advanced solution on the market for thermoregulation. It pairs dynamic cooling and heating with biometric tracking. Go to https://www.eightsleep.com/Pomp to check out the Pod Pro Cover and save $150 at checkout. Eight Sleep currently ships within the USA, Canada, and the UK. ======================= Since 2018 Copper has been at the forefront of institutional digital asset development. From award winning custody solutions, to creating the first truly off-exchange settlement function, Copper pioneers technology, products, and services, in lock-step with a rapidly changing world. No other infrastructure provider covers as many assets, across as many exchanges, with the speed and security that Copper can offer. To learn how Copper helps the world’s largest institutional investors secure their digital assets, head over to copper.co Copper - the unfair advantage. =======================

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

• 0:02Anthony Pompliano?

  What's up everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Adam Lowe is the Chief Innovation Officer of CompuSecure and he is the creator of Arculus, a brand new custody solution that I think is very interesting. In this conversation, we talk about Bitcoin, cryptocurrencies, regulation, custody, and all of the institutional adoption that's currently occurring. Before we get into this episode, I want to quickly talk about our sponsors. Today's episode is brought to you by Fundrise. You all know I believe that the best investors both understand and seek out extreme asymmetry. Fundrise is here to help you do just that. It's the largest direct-to-investor real estate investment platform out there, giving you the opportunity to achieve upside of an asset class previously

• 0:47Anthony Pompliano?

  reserved for institutions and high net worth individuals. That's right. Fundrise is making high-end, private market, real estate investing accessible to everyone via an easy-to-use automated platform. Its 1 million users already know that the investment with Fundrise is capable of producing strong appreciation returns and income generation while helping to stabilize a diversified portfolio. That's more important now than ever in our inflationary environment. See for yourself how over 190,000 other investors have built a better portfolio with private real estate. It takes just a few minutes to get started with as little as $10. Go to fundrise.com/pomp today and for a limited time, you'll get $10 when you place your first investment. Again, that's fundrise.com/pomp. Go check it out and when you make your first

• 1:31Anthony Pompliano?

  investment, they'll give you $10 on top of it. Fundrise.com/pomp. This episode is brought to you by Eight Sleep. Eight Sleep is the single best product that I have purchased over the last three years. It completely changed my life. I'm not joking. Pay attention. The Pod Pro Cover, which goes over your mattress by Eight Sleep, is the most advanced solution on the market for thermal regulation. It pairs dynamic cooling and heating with biometric tracking. You can go to eightsleep.com/pomp to check out the Pod Pro Cover and you save $150 at checkout. They currently ship within the United States, Canada, and the UK. And I told you, it changed my life. It helps me sleep deeper, helps me sleep longer. I feel much more refreshed and I have better energy. You want to know how I have relentless

• 2:14Anthony Pompliano?

  energy every single day? Because I sleep on an 8-sleep. Seriously. Go check it out. 8sleep.com/pomp today. Today's episode is brought to you by Copper. Since 2018, Copper has been at the forefront of institutional digital asset development. From award-winning custody solutions to creating the first truly off-exchange settlement function, Copper pioneers technology, products, and services in lockstep with a rapidly changing world. No other infrastructure provider covers as many assets across as many exchanges with the speed and security that Copper can offer. To learn how Copper helps the world's largest institutional investors secure their digital assets, head over to copper.co. Again, Copper, the unfair advantage. Check them out at copper.co today.

• 2:59Anthony Pompliano?

  All right, let's get in this episode. I hope you guys enjoy this one.

• 3:02Speaker 01

  Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only.

• 3:25Anthony Pompliano?

  I have a lot of questions for you. Hopefully, you're ready for some rapid fire. I thought maybe we could start out with this idea of sovereignty and kind of how you think about the importance of sovereignty, given a whole bunch of stuff going on in the world. Some of it is kind of politics or geopolitics, some of it is simply just cybersecurity, etc. But like, how do you guys think about the importance of sovereignty of financial assets for the everyday individual?

• 3:51Speaker 02

  Absolutely. So I think, you know, the importance of sovereignty really gives you freedom of choice and, you know, the root of you should be in your control, right? The root of you should not be in some third-party clout. So, you know, when we think of digital sovereignty and digital self-right, it's you should affirm your you. Obviously, you're going to have government-issued documents, or you're going to have other affirmative identities that you've created with different parties. But really, in the end of the day, like, the root of trust. Should come from you. And that to me is what what digital sovereignty means.

• 4:23Anthony Pompliano?

  Yeah, I think it's it's really interesting. And how do you guys evaluate what that kind of translates into in the crypto world? Right? So obviously, there's plenty of people who go on to centralized exchanges, they go, they buy assets and they just leave them there. And there's a whole bunch of reasons why, you know, not your not your keys, not your coins. But what is the importance of the sovereignty when it comes to bearer assets like Bitcoin or other cryptocurrencies?

• 4:45Speaker 02

  Sure. Well, I mean, kind of the root of truth, the root of trust and what everybody goes to are your private keys. Right? So I think a lot of people don't understand that exactly that not your keys, not your crypto. You know, there were over 10 billion, as you know, in hacks last year. And, you know, without your private keys, your crypto is not moving anywhere. So if you want to have absolute control of your crypto, you need to have absolute control of your keys. You know, you see Fed sees this asset, Fed sees that asset. You see accounts getting turned off and assets being moved. And that can't happen at the end of the day if you control your keys, because you can ultimately control where your crypto goes. So, you know, that ultimate control and ultimate identity of who is who with those private keys

• 5:28Speaker 02

  is why it's so critical to ultimately control your crypto.

• 5:33Anthony Pompliano?

  Got it. And so when we think about Arculus, obviously, you guys are very interesting because you've already had this great kind of time period where you've built a ton of security technologies before crypto. So maybe explain a little bit at CompuSecure and kind of the other work that you all do to help people understand like where a lot of this robustness, experience and kind of security expertise comes from.

• 5:56Speaker 02

  Sure. So CompuSecure has been around about 20 years. So if you can think of a metal card in the market, for the most part, NFC enabled tap and go metal card, we make them. So every kind of large bank in the US that has metal payment cards, we've produced those cards and produced the tech behind it. So we handle, you know, the private keys for a variety of large financial institutions. We're trusted to do that. We've made IDs for various federal governments, including the US federal government. And so we have this pretty deep background of financial technology and security. So we took that background. We decided to create Arculus. So Arculus isn't just crypto. It's a digital asset, digital identity platform. So whether you are using the consumer product that's behind me to control your own crypto keys,

• 6:41Speaker 02

  or whether it's one of our B2B partners, where we're using Arculus to use digital keys to passwordlessly sign in and protect digital identities. And that's what we've created with Arculus is this platform to help businesses and individuals keep their platforms and self-identity safe.

• 6:59Anthony Pompliano?

  Got it. And so when you start to think about why you guys got into crypto, or kind of what the advantages are in crypto, explain that because it's interesting that, given the historical advantages that you had and experienced there, coming into crypto, it seems almost like, I was explaining to somebody, like you have like overkill, right? Like you guys are so good at doing this in the legacy world, that coming into crypto, it almost feels like this is a walk in the park. Maybe it's a little bit of an exaggeration, but talk a little bit about kind of coming into this brand new market and how that experience helps.

• 7:28Speaker 02

  Yeah, I mean, part of the reason we entered is a personal passion of mine and interest in the space. And I'll freely admit that. But we really feel that the smart card and the secure element in the smart card gives you a lot of advantages, right? And we're really at a great nexus point with the product where we can help consumers on the individual card, if it's a payment brand, right? We can take the smart card, we can put traditional payment applets on it, you know, standard open networks, as well as crypto keys, as well as digital authentication. So we thought it was a really interesting space for us to enter because it's a really great point where it's a familiar form factor for users, super easy to use. And we can combine that with traditional payment platforms.

• 8:10Speaker 02

  So it's a great ramp for people to enter the crypto space because it gives incremental utility to an instrument they're already familiar with. And it's a form factor people can actually use. You know, there's other hardware wallets out there for consumers that are secure, pretty secure, but are nearly impossible for the average person to use. You know, I handed Arculus to my mom and she was able to use it the first time with no prompting, which I was pretty proud of. So the idea is it's the ease of a hot wallet, you know, the ease of centralized exchange with the security of self-custody cold wallet.

• 8:43Anthony Pompliano?

  Got it. Joe, John, what questions do you guys have?

• 8:46Speaker 03

  Yeah. So can you guys just talk about where you guys are looking at moving forward? Like, what are your guys' plans in the future months and in 2022?

• 8:54Speaker 02

  So as everybody knows, NFTs are blown up and everybody also knows there's massive kind of fraud and theft in the space. So we are also adding NFT support to Arculus. So here, in the upcoming months, Arculus, you know, it's squarely on our roadmap, will be adding NFT support. We're looking at adding support for the DeFi space so people can take their crypto assets and go apply them and use them where they want in the DeFi space. And as always, we're, you know, adding more currencies to the platform. You know, we get messages every day from our user base. Can you add X? Can you add Y? You know, we support just under 80% of the market cap currently, but there are a few key currencies we are looking to add to the platform.

• 9:38Speaker 02

  So those are the three things on the roadmap we're adding to further build out the utility of Arculus.

• 9:43Speaker 03

  Joe, what do you got?

• 9:44Anthony Pompliano?

  Hey, Adam. So my question would just be around what you've seen and heard from like the average retail users when it comes to cold storage. Like, how has that conversation changed over time?

• 9:53Speaker 02

  Yeah, you know, people are really excited when they get it. I think a lot of people move to cold storage when they either have a hacking event or they know somebody with a hacking event where they they realize kind of what we talked about in the beginning of, you know, if I don't control my keys, I don't really control my crypto. So when we talked to the average retail user, you know, we were at CES, we got really positive feedback from people who who touch the platform and use the platform. They want two things. They want security. They don't necessarily want to understand, you know, address derivation and all the details. They just want to trust and know that it works. They want to know that it's easy to use. So, you know, all of those were core design principles when we built the product. And so it was really positive

• 10:37Speaker 02

  to get that feedback from the community. And then the feedback we got was essentially the things we're looking to add. Hey, I love my NFTs. Can I see my NFTs with Arculus? Hey, I'd love a few more coins. And how do I get access to some of the DeFi space? So we heard that feedback from the community and those are the, you know, direct things we're adding to the platform.

• 10:56Anthony Pompliano?

  And so Adam, when you start to think about kind of how we get more people to understand these ideas of sovereignty, etc., like, how do you think about education? And how much of this is like you can tell someone versus you have to actually get them to just try it? And actually, you know, kind of build education via experience? How do you all think about the difference there?

• 11:13Speaker 02

  Yeah, I think you you have to give people real world examples as well as the ability to try it. So, you know, if we take passwordless login as an example and kind of building an identity, right? There's a there's a pretty good public use case out there that's eBay. You know, there's a variety of white papers on it where, you know, they had people were in kind of the username password world. And then eBay implemented passwordless login with digital keys where, you know, people have a security key. They generate a digital key to prove that they're them and login that way. Many less abandoned carts, massive drop in password reset requests. You know, massively increased user satisfaction, big reduction for eBay on support.

• 11:57Speaker 02

  So it was a win on both sides of the equation and people could trust that they know their login is safe. So, you know, there's a real world example you can point people to where it's been very successful, kind of in a commercial environment.

• 12:11Speaker 02

  And I think, you know, you have to give people real examples like that. You know, I had to explain to my 75 year old dad why Bitcoin is important, right? I had to relate it back to inflation. I had to relate it back to security and remittance. So, you know, until you can give people real examples that are, you know, distinct and easy to understand, I think they're not gonna get it.

• 12:33Anthony Pompliano?

  Got it. That that makes sense. And then I guess like what happens when this goes wrong? Like, talk to me about the risks of self sovereignty and kind of what happens in the downside case? And what do you guys do to, whether it's somebody who is older, somebody who's less experienced, somebody who this their first time? Like, how do you all think about building that into the product and ensuring that either you can mitigate those risks? Or like, what are the things that they can do if they make a mistake? Or there's some sort of loss of funds or something like that?

• 13:00Speaker 02

  Sure. So, you know, the big part of that is education and like clear warnings. You know, you are the ultimate. Control of your funds. So when we set it up, we use the standard bit 39 recovery phrase. So for the, for everybody out there, you get 12 words in plain English that essentially represent your private key. So if you lose your card, break your card, you can get a new one, enter in these 12 words and regenerate your key. So we make it abundantly clear that these are kind of the keys to the kingdom and you should not lose this. And if you do lose this and you were to lose your card, you would no longer have access to your funds. So highlighting that several times is very critical and there's, there's messaging within the app and in the packaging and videos

• 13:43Speaker 02

  and FAQs to make sure that's abundantly clear for, for our platform and other platforms where you maintain your own keys. You know, the, what's the old message? Tell somebody, tell them again and tell them a third time and they might remember. So we, we kind of go by that mantra of making it abundantly clear that these, this is your recovery seed. Do not share it. Do not lose it.

• 14:02Anthony Pompliano?

  And so when you start to think about a kind of consumer behaviors you've seen right now, like are there any trends or any behaviors from the customers already that you can identify and say like, hey, this either surprised us or this is something that's like really interesting that people may not know?

• 14:17Speaker 02

  Yeah, I think one behavior that we've seen that's really interesting that I was a little surprised about, and I guess I shouldn't have been, is just the, the massive desire to seek yield. So if I had to guess what ratios that we would have seen people purchasing, I would have thought it would have been a lot more kind of classic layer ones. I would have thought we would have seen a lot more Bitcoin purchase, a lot more Ethereum purchase. And, you know, we do see a good amount of that, but I was pleasantly surprised in a way, the amount of stable coins we see people purchasing, I think so that they can go put them somewhere and farm yield.

• 14:53Anthony Pompliano?

  Yeah, it's, um, it's fascinating to see how quickly people have kind of pushed further and further out on the risk curve of a lot of these assets. And I'm assuming, right, that a lot of this is due to kind of monetary fiscal policy stuff and just people looking for greater returns or yield or whatever it ends up being. What about in terms of institutions versus retail? Have you seen anything there in terms of? Whether it's using your product or other things in the market that are worth noting?

• 15:20Speaker 02

  Yeah, on the business side, we've seen massive increase in interest in this. You know, every fintech that we talk to on the traditional side of the business or, you know, talking to us about Arculus are figuring out how to get in crypto. People are asking, should we custody? Should we have our users custody? And really are looking to get into this space. You know, when we started the project a while ago, no institutions, for the most part, were interested in that. You know, there's the Bitcoin ETF and a few innovators in the space, but anybody, what I would call in traditional banking, even the fintechs, really weren't looking at this. And now every fintech we talk to has crypto on their roadmap, has alternative assets on the roadmap, digital assets.

• 16:04Speaker 02

  And it's really interesting, even retail. So we have a ton of different opportunities that are talking about, how do we create NFTs? How do we better monetize our brand in the digital space? And people are just thinking much more holistically about how users can manage digital assets relative to their brand. So, you know, adoption isn't coming, adoption is here. And for any brand that's kind of not on the bandwagon, they need to start getting on the bandwagon.

• 16:30Anthony Pompliano?

  Yeah, it's, um, it's also, I think, a piece where we're getting a bifurcated market. Retail really understands the ideas of sovereignty. Institutions, just given their kind of risk mitigation, their mandates, their kind of investment criteria. I don't see, you know, name your favorite hedge fund, walking around with a secure, you know, piece of hardware or some sort of sovereignty of their fund assets on their phone or in some sort of device, right? And so it feels like the sovereignty is really, really important at the individual level. The institutions obviously have interest in these assets, but they much more look at them as from an investment standpoint than some of the other benefits in terms of censorship resistance,

• 17:14Anthony Pompliano?

  seizure sovereignty, or whatever, right?

• 17:17Speaker 02

  Yeah, absolutely. It's kind of a classic AUM model for them. It's just another asset in the book. But they do, they do, and have a couple have talked to us about, you know, using this from a security perspective. Yeah, absolutely. You know, they They really don't look at it as a immutable asset versus this versus that. And part of that's just compliance driven. You know, they absolutely have to comply with all the rules, US and internationally. So, you know, they're, they're used to certain frameworks that they have to live in. And, um, you know, I think that for them, that's why it's just another asset on the book, rather than worrying about who sovereignty and who ultimately possesses it. They're also looking at asset classes that are probably some of the original L1s,

• 17:59Speaker 02

  rather than some of kind of the interesting tokenized assets that maybe retail space is looking at.

• 18:04Anthony Pompliano?

  Yeah. What's next for you guys? Like, as you look forward in terms of what else you can build, is it continue to just double down on the products you have? Are there new things that you guys are thinking about or working on? How do we think about Arculus? And maybe even the larger kind of compute secure, uh, you know, ecosystem as you guys continue to build this out?

• 18:20Speaker 02

  Sure. So I think what you're going to see us grow is really the conglomeration of all the different spaces with our B2B portfolio. So, you know, from the smart card that we can develop, you know, we're working on kind of putting everything on a single platform, which is what some of our B2B partners have asked for. So imagine a single smart card that is your payment card. So it's over your standard payment networks. It holds your private keys for your crypto. And it also holds your keys for passwordless digital sign in. So I have a single smart card. I can go to my favorite coffee shop, buy coffee with, you know, standard credit or debit. I then walk down the road, realize I owe my friend some Ethereum, send it out of my wallet, sign it with my digital keys.

• 19:06Speaker 02

  Oh, I have to log into, you know, my favorite platform of choice. I tap my card and I digitally sign and login passwordlessly. So all that on a single smart card is really valuable because it's something the consumer already carries. You know, platforms have figured out that you would almost have to pay consumers to carry another widget. But if you give them incremental utility on a form factor that they're already carrying, that's really valuable. You are literally providing more utility and value to the customer on a beautiful piece of hardware that is branded. With their brand. So they get a literal touch point with that brand that brings them utility every day. And that's what we're working on.

• 19:46Anthony Pompliano?

  I love it. It's such a such a strong pitch. Where can we send people to find you on the internet or or find out more about Arculus and potentially buy one if you're interested?

• 19:54Speaker 02

  You can go to get Arculus.com and you can find us on all social at this is Arculus.

• 20:02Anthony Pompliano?

  Amazing. I appreciate you coming on. This is it's one of the cooler, more beautiful experiences that I've seen when it comes to any sort of cold storage. So highly recommend to folks that they go check it out. If my my only piece of advice around any sort of storage, security, etc. In crypto is always to newcomers. Take $5 of your favorite crypto asset and go figure out how do you buy it on an exchange, put it into cold storage, then move it on to a hardware device, move it into a software wallet, move it back into cold storage. Like get familiar with how to use these technologies and these products and do it with a very small amount of money. If literally it's, you know, five bucks, that's okay. Because if you make a mistake, then you know, you obviously don't want to lose $5. But but it's okay if you if you lost $5. It's an education fee, right? A

• 20:47Anthony Pompliano?

  little little kind of novice tax, if you will. So I highly suggest to folks, go check it out. And I appreciate coming on with that again in the future.

• 20:57Speaker 02

  Thank you very much.

• 20:58Anthony Pompliano?

  All right, buddy. See you later.

• 20:59Speaker 02

  Cheers.

• 20:59Anthony Pompliano?

  Thanks so much for listening to today's episode. I really hope you guys enjoyed this one. Make sure you subscribe on Apple, Spotify, or your favorite podcast player. And if you're looking to try to transition to get a new job in the Bitcoin or crypto industry, we've got you covered. Head over to pompscryptocourse.com. We've developed a curriculum with the top teams across the industry. It's a three week intensive training program with over 50 events packed into that three week time period. Go to pompscryptocourse.com to learn more, and I'll meet you guys for the next episode.