Transcript:
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Mark Eckerle:
Hello, listeners, welcome to this episode of Cryptonomix. Before we jump into today’s discussion, please keep in mind this recording is for general education and is not intended to constitute investment advice. Any opinions expressed are those of the participants and do not necessarily represent those of Withum. Hello everyone. Welcome to the inaugural episode of Cryptonomix, brought to you by Withum. I am your host, Mark Eckerle, and today’s guest is a really good friend of mine, Dr. Sean Stein Smith, who is well -versed in crypto, blockchain tech, all things under the Web3 umbrella nowadays. So, so how’s it going today, Sean?
Dr. Sean Stein Smith:
Awesome. Mark, thank you for having me on the podcast, and I’m honored to actually be your first guest also.
Mark Eckerle:
Yeah, we’re, we’re kicking things off. We’re going to get into a couple different things: a general economy or market overview, talk about current regulatory status of US policy as well as on a global scale. Then, touch on NFTs towards the end. Just to give some background on who you are, and if I miss anything, please let me know. day-to-day job, you are an assistant professor at Layman College in New York where you basically developed and taught the first digital currency and blockchain technology course, which is awesome. Educating the young minds. Also, an advisory board member to the Wall Street Blockchain Alliance, as well as the company Gilded. And where you really come in with your, your well-versed knowledge is you’ve given countless presentations, numerous articles on a basically weekly cadence. You’re a contributor to Forbes’ crypto content on a regular basis is awesome. So, with all that knowledge, let’s jump right into it. Can you give us a general market overview just of the industry as a whole? Right. Can you provide us with an update on the current state of economy as it relates to crypto?
Dr. Sean Stein Smith:
Yeah, sure. So, uh, how much time do we have Mark, but just overall, right. Some sort of big picture, big sort of picture trends out there is that one, you know, blockchain and crypto assets have honestly moved right out of the, uh, fringe and into the mainstream in a major way, right? That 2020, 2021 and 2022 have all been sort of annual periods where every major financial institution, most payment processors, credit card companies, and now even actual countries are, are fully invested into blockchain and crypto or actually developing their own external products, services, all the rest. And so on the one hand, the whole idea and concept has moved off the dark web idea into everyday mainstream conversations, including podcasts hosted by county firms. And so, on the opposite hand though, right as that’s happened, right?
Dr. Sean Stein Smith:
The ambiguity and policy murkiness has only become more amplified, right? During 20 20, 21 and 22, on a strictly gap side, there was no crypto focused guidance yet, the IRS has kind of updated their FAQs and all the rest, but they’ve introduced to more questions as opposed to answering them. And then overall, right in, in terms of the products and opportunities out there, right? There’s DeFi NFTs, both of which by themselves are multi-billion dollar asset classes who only entered into the marketplace during 2020. And so overall, it’s, it has been a period of, I think, maturation. But that, but that as the ecosystem has grown, developed, and become more integrated into everyday life, both on the corporate side and on the individual side, any of those open items that, that had been sort of a minor irritant in 2017 are now major problems going forward.
Mark Eckerle:
Yeah, it’s, it’s really nice to hear you say that we’re kind of out of that dark web area, right? That we, crypto started as a really bad reputation in the early years. We’ve kind of really shifted away from that. And it, while some people still have that negative connotation with it, I think we’ve put that behind us as an industry as a whole and, and we’re really becoming adopted by some of the larger organizations, financial institutions in this space and taking that next step and to just becoming adopted as a whole. Which, which does lead me to my next, kind of my segue around, one of the things I was most excited for back in February around the Super Bowl was obviously all the crypto ads, right? I think there was four, five, or six or so different ads. And, and Coinbase really may have stolen the spotlight with just having <laugh> what you think of as like, as a screensaver just bouncing around the screen, 30 seconds, which probably was the simplest form of advertising that caught a lot of people’s attention because they were just confused, <laugh>.
Mark Eckerle:
But I, I’m curious what you, what you think the impact of these companies will have on just the, the ordinary users, right? Because there’s a lot of people that still just don’t understand the space. So, I think reaching greater audiences with, whether it’s just commercials or advertising or what do you think is a, the next step in getting greater adoption? Because I think everyone has heard of the terms now where it’s we’re beyond those buzzwords of blockchain tech or Bitcoin, it’s how do we get people to actually, whether they invest in it or just use it to understand like, what do you think the next steps are here?
Dr. Sean Stein Smith:
Yeah, so, so in, in terms of sort of that next to wrong on that ladder one is education, education, education, right? Both for individuals, both for entrepreneurs, firm owners, and at the policymaker level, right? Because absolutely everyone’s heard of blockchain, heard of Bitcoin, and kind of have an understanding as to how they work, awesome stuff. But there is sort of, I think, a underlying danger that there are people out there who are becoming complacent and that, and that actually think that having that sort of base level knowledge is actually good going forward, or it’s, or it’s all, having that base level knowledge isn’t going to have to be updated, right? And obviously the whole asset class has developed and evolved quite quickly after 2019, 2020, 21, 22. And so the overall thing is education. And so, education obviously is a very broad umbrella and for the everyday person, right?
Dr. Sean Stein Smith:
That non-expert, individual sort of building on that point. The other area, the other area that I’d really highlight as sort of that next rung is to, is to make it easier to understand, right? And, and to make it clear to everybody who is involved in these transactions, what actually is happening, right? I’m a CPA by expertise, and so I always try to understand, and I always try to give this piece of advice to any external clients, like, okay, fine, I can have the buzziest, hottest new application out there, but actually what’s happening on an economics level, right? Who is owning it? Who is buying it, and how are we actually valuing that individual transaction? If we can get that, uh, or to add to that level of understanding through education, then it becomes a lot easier to have everybody understand what exactly is happening.
Dr. Sean Stein Smith:
And all of that, I think is critical because as we have apps like RobinHood, CashApp, Coinbase, are all able to be traded on your tablet, on your phone. There are going to be individuals, entrepreneurs, companies who are almost on accident getting involved in this area who don’t quite understand the implications of that. So education one and two, trying to make sure on a transparency point of view, that everybody understands what exactly is happening. If I, if I mint an NFT or, am part of an airdrop or I buy some coins in an online game that I’m playing, you know, okay, fine. So, I understand the action, but I also have to understand in a clear, transparent way, the economic impact of that action on me.
Mark Eckerle:
Yeah. Yeah. I think you really hit the nail on the head around those two things is education, right? Every time I’m researching a new token or a new NFT, you, you always come across with the possible scams, right? The ones that didn’t work out and were kind of, it was the bad use cases. Um, so education and just doing your own research to make sure that you as an individual are comfortable with that risk exposure and things like that is, is critical. Um, and then two is like user interfaces, just because a lot of people, especially in the early days of crypto, it was just confusing on how to get Bitcoin with cash. It wasn’t as straightforward. So now there’s a lot of fee out on ramps, and the user interfaces are much cleaner. And like you said: purchasing crypto right on your phone or your tablet with a lot of those, uh, well-known applications makes things a lot easier to just first to get more people into this space from an onset, Right? Whether it’s $10 or $50, whatever the amount is — getting that exposure because I, I personally believe the best way to learn is to just dip your feet in, right? Like someone could explain it to you but if you, if you don’t execute a transaction yourself and see it hit the blockchain and what is actually happening, like you said, it’s, it’s not as easy to understand.
Dr. Sean Stein Smith:
Absolutely. Right? The best way to learn is to actually do.
Mark Eckerle:
Yeah. So, so to help provide more clarity just for the regular retail investors on the economy, I kind of want it to shifted shift this to the US side, right? Understanding regulatory policy. You kind of mentioned there’s, there’s the, the guidance currently out there, it’s murky. We get it every couple years, maybe we get some updates. Um, but where do we stand from a US policy standpoint? And the reason I want to segue to this is because recently President Biden came out with his executive order. So I was wondering if you can kind of give us an overview of what that was and how it impacts the current crypto economy.
Dr. Sean Stein Smith:
Yes, sure thing. So, on the one hand that order, it was basically just an order, right? In, in terms of direct policy action or policy steps, which is not great. But on the other hand, right, by issuing that order by itself, the White House and the team at the White House who’s in charge of these things, basically tried to communicate one that, that crypto assets aren’t, aren’t going to be banned or be exiled, right? Cuz uh, there are certain policymakers here in the US who have been actively campaigning to, to ban crypto or to ban certain types of crypto. So okay, fine, as a result of this, EO bands, or shadow bands, are off the radar. And then two, by basically telling all of these agencies to cooperate and to play nice, right? The SEC, CFTC, OCC, the whole alphabet soup gang by ordering them to, to coordinate and to play nice.
Dr. Sean Stein Smith:
That will hopefully create a more consistent and comprehensive policy framework going forward. I don’t know know when, hopefully soon, but having that sort of order at that top down level to have the agencies coordinate as opposed to all of them going out there on their own is, I think, helpful. And then overall, the overall 0.3 is that basically by, by putting crypto on the front burner and by bringing in items like the, uh, competition linked to crypto, both here in the US and driven by other countries internationally, it has been, I would say, elevated up to a top burner issue for policymakers and agencies here in the US. And so on the one hand, there aren’t any direct policy actions outlined in this bill, but on the other hand, at the very least, now finally, there is a comprehensive framework to help those agencies actually write those policies to hopefully do so in a way that is coordinated and that is actually market, uh, friendly.
Mark Eckerle:
Yeah. From, what I recall it, there wasn’t anything substantial, but it was all about trying to drive innovation and keeping it here rather than just putting your hard foot down and saying, "No we’re not, we’re not moving forward at this new asset class and we’re not going to accept it." And I’m curious if there’s any update currently in the United States on what that, or what our version would be of a C B D C, right? Centrally bank-backed digital currency, um, because I know there’s other countries around the world that have already issued some of those, or on the verge of issuing, and the community as a whole, I think is still against it, right? Because I think this what a CBDC will offer is just <laugh> more government purview into our transaction. So it’s, it kind of, it’s not with the crypto ethos, um, and maintaining your own assets, which is against it. But I’m, I’m just curious for our listeners is to where we stand, because that could also be another way to just get the ordinary investor into this space, right? Just a new, another means of an on-ramp.
Dr. Sean Stein Smith:
Mm-hmm. <affirmative>. And so I’d been out there, as you outline earlier. I’ve been doing articles, presentations, corporate trainings, consultations on this, on this area since about 2016, 2017 and our team actually outlining that ultimately, you know, countries are going to issue their own crypto, right? 100%. Absolutely. And on the one hand, I totally understand that, that it’s the opposite of the ethos of Bitcoin. I totally get that. But on the other hand, you know, from a policy point of view, monetary policy, fiscal policy, no country is ultimately going to want to outsource their control over all of those tools to some decentralized online asset ultimately just is not going to pan out and so on the sort of headway made here in the US I would say Jerome Powell has been asked, uh, about that topic during every hearing. He has gone to, I would say since about 2019 and so and so, yes, it is a topic being, being, uh, actively researched right now.
Dr. Sean Stein Smith:
I believe that the, that the collaboration between the Boston Fed and MIT just actually published or actually demoed their own version of a blockchain that could handle dollar-based transactions and it could process about 2 million transactions every single second. And so, yes, it is an issue being talked about and actively researched right now here in the US but, it is not a top priority I would say right now and, probably I would say is ultimately a issue that’s going to be on the back burner until at least 2023. Because we have price inflation, we have all kinds of other things on the, on the top burner now at the Fed, I would say personally that it’s in the interest of advocates of crypto and the US dollar, right? To have to progress, to have this project make progress going forward, right? Because ultimately, right, to have the average individual non-expert, non-crypto expert use crypto, it is going to have to come either issued out of the government or have that government backed up. Right? Just for the everyday entrepreneur, it is going to have to have components of that. And it is going to ultimately happen. I don’t know, when.
Mark Eckerle:
Shifting really quickly to one of the hottest topics over the last 12 to 18 months now: NFTs. This has been on everyone’s mind. Everyone’s seeing it everywhere. It’s all over television now. All over the internet. Anytime you go on social media: NFTs, NFTs, NFTs, tokens. These have been around since the beginning of crypto. They just weren’t a thing 18 months ago. So I’m curious if you can quickly give us a deep-dive. Now, obviously can’t go too deep. We can spend an hour on just NFTs alone, but I just want to give our listeners an understanding of what an NFT is, past just a Google image, right? Cause that’s, when I think of it as an NFT, right? I’m going to go pay a thousand dollars for something that I could just Google and save it as a photo on my phone. I think that’s where a lot of people come into this space. Like it just doesn’t make sense and like you said, it is a trillion-dollar market right now. Can you tell us why?
Dr. Sean Stein Smith:
Sure. I can try, right? Because NFTs are this umbrella term that can mean a whole host of actual things. But the best parallel, and I was just having this actual conversation yesterday, um, that probably the, the, uh, best parallel that I can draw and the most obvious one is yes artwork, right? That I can tokenize, I can min the artwork fine, great. Absolutely. But, but a other parallel to draw is actually collectibles like wine or baseball cards, right? And that the NFT isn’t the image itself or you aren’t paying for the image, right? The actual value in that NFT in that token is that that token represents a traceable, transparent, unhackable record of ownership and custody over assets both in the virtual world and more and more in the physical tangible world. And so that’s what you’re paying for in a NFT, it’s basically a, an updated way of tracking who owns either what, what asset in a lot in a collection or who owns what percentage of some bigger asset and to do so on an underlying blockchain and to then try to ultimately, I think, monetize that value of that asset or of that collection that would otherwise be dormant.
Dr. Sean Stein Smith:
And so that’s the best way that I think that you aren’t paying for the image or the board ape the actual true value of NFTs is that tokenized ownership of either virtual assets or tangible assets.
Mark Eckerle:
Yeah, I, I agree. And I always like to give the example where I think an NFT could come into play, right? I I use it in the real estate space with like the deed to my house, right? You have a digital footprint, a digital ownership showing the record, and that on the day I go and sell my house, I transfer that deed and you could publish it and see it on the blockchain. And you see now that whoever I sold it to is now the owner, right? Because when I bought my house a couple years ago was, I think it took four months before the deed actually got filed with the town just for some paper processing reason. So it’s, it was the perfect use case in my eyes for one of the areas where I think at NFT could come into play.
Dr. Sean Stein Smith:
Absolutely. A hundred percent.
Mark Eckerle:
So just to wrap up the episode, I just want to get your thoughts on what are you personally most excited for in 2022, right? We’re, we’re about three months through the year. What do you see kind of popping up if it hasn’t already in the year? Or what are you most excited for, whether it’s an application being built, just kind of the next step in this space that you think is going to really pop or, or have some real-life feasibility in this space?
Dr. Sean Stein Smith:
Sure. So, while I normally don’t ever talk about, uh, projects or individual applications, probably the, the top three areas that I’m most interested in is one NFTs, right? As they move out of the virtual space into the real world, right? I was, I was just on a panel within the last week or so talking about blockchain and NFTs for home ownership, right? Deeds, titles, all the rest. So I see NFTs almost grow up in the eyes of the everyday individual. And then two really sort of the main use case to get people into the blockchain crypto-asset space via stable coin payments, right? To have that actually work because, right, because that’s a idea and concept that, that anybody can understand, can, can sort of map in their head how it works, right?
Dr. Sean Stein Smith:
That I have this, this token or this cryptocurrency, but it’s worth the, uh, exact same thing as one US dollar. And it’s cheaper, faster, easier to make payments and to get paid. So, great. And then, and then a other area, um, that I’m personally quite interested in is, is an idea of how to use blockchain to give individuals control over their online id, right? Self-sovereign id. So, so it is not technically a finance term or an accounting term, but ultimately, right? All of us are a collection of our education expertise in person connections and more and more our online presence. And so, um, and also for individuals, but for entrepreneurs and corporations, right? Uh, how to cultivate, how to safeguard and then how to best monetize our online persona and presence, I think is a really great opportunity for blockchain based applications, right? Not any one coin or token, but that, uh, uh, blockchain layer to help individuals in corporations’ control and then monetize their online personas. So, I would say that all three areas are, are areas that I’m interested in, and then I’m hoping, uh, to pan out well during the year.
Mark Eckerle:
Yeah. And, and to that last point, really not just owning your identity, your digital identity, but also owning your, your data, right? Like our data, we give it away for free now. So just having that and whether you want to sell it, market it, what it, you should be rewarded for that. Um, whereas now, like a lot of the big tech companies are the ones being rewarded for selling our own data. Um, yes. So I agree. I really agree. Great! I think this is a fantastic episode. Thank you for joining us today, and I think that wraps up the first episode of Cryptonomix. All views expressed in this podcast by Mark Eckerle or his guests are solely their opinions and do not reflect the opinion of Withum. This podcast is for informational purposes only.
