Crypto Valley Exclusive: Distribution, Lower Costs And Reconciliation With Blockchain

Detroit-based Benzinga, a media and data provider bridging the gap between retail and institutional investors, sent its team to Switzerland June 2-3, for Crypto Valley.

During that time, Benzinga sought to recognize the innovation in digital assets, speaking with founders, investors, and beyond.

The following is a conversation with Frederik Gregaard, the CEO of the Cardano Foundation, an independent non-profit that’s concerned with advancing Cardano ADA/USD.

The following text was edited for clarity and concision.

Q: Hi Frederik, nice to meet you. Care to start off with an introduction?

Frederik Gregaard: I’m what you call an infrastructure or digital banker.

Over the last 10 or 15 years, I’ve been building in high-frequency trading (HFT), robo advice, connectivity between asset managers, exchanges, banking and capital markets, and so on.

For a long time, my focus was on the democratization of trading. There are classes of people who have access to certain instruments or market knowledge that the rest do not have.

I thought that was a little unfair.

Ultimately, I was the first to build a model around robo advice in Switzerland, API trading, and those kinds of things. That, eventually, led to my interest in blockchain.

What’s your focus, now, as CEO at the Cardano Foundation?

We’re concerned with the adoption of third-generation blockchains such as Cardano.

Crypto is great and is a part of the value capture, as it really shows that we can transact value on the internet without having an intermediary. It, also, represents the cash flow modeling of Wall Street, but it’s not what the blockchain is built to do.

The third generation is built to have multiple different kinds of identities, governance models, and values. Not just financial values.

When you open that scope up, then utility, on-chain, becomes, really, how we interact and behave in social systems. That goes from how we store intellectual property, to how we ensure that insulin vials in Sub-Saharan Africa contain the right content.

Tell me about blockchains and their importance.

Blockchains increase distribution, lower cost and give much better reconciliation.

Take banks, for example. Through blockchain, banks could service billions more, all the while fostering better engagement and optimizing toward users.

Here’s how.

If we could get to a place where we move the bank's infrastructure – the core banking system – to a block explorer, that would increase transparency.

If you went onto the block explorer and saw your bank has nearly $4 billion in exposure, to one single counterparty, you would ask questions, as well as incentivize auditing and the removal of errors, promoting alignment between the bank and the communities they serve.

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A lot of this probably addresses existing issues with respect to transparency in structured products and derivatives that are traded over the counter, right?

Take the International Swaps and Derivatives Association (ISDA) agreement. The second part is called the Schedule, which pertains to anything related to counterparty relationships.

This goes back to 2008. You had all this information on paper, but how do you interpret it? If we could get a deterministic interpretation of that, by putting it into code, we wouldn’t have to wait 10 or more years to figure out where the money should go.

To note, that doesn’t necessarily need to live on a blockchain. It really matters when you have counterparties who don’t necessarily trust each other.

Tell me what you’re proud of the Cardano Foundation for accomplishing.

We planted a million trees in Kenya and put every single one on the blockchain.

Normally, crypto communities are optimizing towards yield but, we’re proving that if you can verify the inclusive accountability that the money goes there and the cost of transparency is right, then the crypto community is very engaged.

We put all the regulatory information into the actual blockchain, instead of a centralized database, proving a different way of doing the supply chain. So, it’s basically a supply chain solution, working on a blockchain with a million unique products.

We’re showing companies that they can capture more profit, get more client stickiness, and serve the clients, better, or lower their costs by using these decentralized distributed databases.

Tell me more about use cases.

There are people, in the back office, getting paid good salaries to move information from one spreadsheet to another.

We have something that works really well for that, and this is called a blockchain consensus algorithm with automatic oracles. With that, you can have the same amount of employees, but more are focused on servicing the customers.

Another use case is around identity and credit. Passports and credit scoring systems give you access to a very privileged club.

However, I’d argue that your eBay Inc EBAY account gives off a better indication of your creditworthiness than your credit scoring in Germany or Switzerland because we don’t have an official credit scoring system as you have in the U.S.

If you can verify that I had like 100 transactions, and all were paid and settled on time, I’d trade with that person.

When you’re building up a transaction record, you add that with a digital identifier, and it gives a lot of value outside of just having photo identification on the blockchain.

What are your thoughts on central bank digital currencies (CBDCs)?

Nearly all of the international banking settlement networks are able to settle in T+0. You have to ask yourself, what is the value proposition of a CBDC, then.

Notwithstanding, imagine a situation in which we actually increased what that money could do.

You can redefine monetary and fiscal policy using blockchain.

You can actually give the politicians and central bankers more tools to do effective monetary and fiscal policy, specifically in a crisis or an inflationary market.

What are you most focused on in the coming year or so?

Education as well as regulatory clarity. We’re trying to prove those use cases outside crypto, and in crypto, which really speaks to the utility of a public permissionless blockchain.

Using the public as a testbed. That’s a concern we probably share regarding some participants in the market, right?

If you start putting children’s patient data on the blockchain and, then, that blockchain is not available and people die, that’s not securities law anymore. It’s something different.

When you think about merging real estate and title registries on the blockchain, then it’s not just an appreciation or depreciation of a token. We’re talking about how land is distributed.

This has to work, and you cannot launch something, and then it doesn’t hold. You’ll create more mayhem and loss of trust.