Control without isolation: Connecting Enterprises with Ethereum

Transcript

Good morning everybody. Um I'm Wes Crooks with FP Complete. We are a engineering services firm that's been building in the blockchain space now for almost 10 years. About 110 projects that have been completed. Uh prior to that and continuing through we are also enterprise grade building uh company. So we've built for folks like Amgen, Hewlett-Packard, Microsoft. Folks of that nature. So we have a very uh interested um thought in how the world should be coming together between the enterprises and the blockchain web 3 world, particularly on the Ethereum.

So today we're going to talk about control without isolation. Uh and how the enterprises need to connect and the challenges that these uh enterprises have connecting into a public um environment. Not working. We're having technical difficulties. There we go. All right, we're back together here. Uh the wrong question's been asked for decades, you know, you know, what you know, why should enterprise use a public or private chain? It's really not a question of that, it's how do you bring them together? It's like you'd asking the question back in the day, should you be on an internet or an intranet? The idea is, you know, you need both. You need to

figure out how to take a private controlled system that's enterprise grade and pull it in to a public chain to give access for that. So in this space, um you know, we're seeing a lot of activity. I think everybody here's been talking about stable coins and talking about how the enterprise is coming in. There's a lot of uh talks going on, inside events going on about how we're going to uh grab this liquidity that's out here on Ethereum. You know, so, you know, one of the biggest things in enterprise, and I think everybody who's been around for a while understands this, enterprise always built private systems, very controlled systems within their architecture, within their control, even their cloud technology, even it's on public,

has always been put into private type modes with VPCs and things of that nature. So, at the end of the day, you know, shared infrastructure, you know, fails the enterprise when they're trying to come to Web 3 because you you know, you have all this money, liquidity sitting over in Ethereum and Solana and other places, but you can't be private to go do that. You have to have some kind of connection into the enterprise with the public chains. You know, there's a little you know, and the biggest challenge is if I'm a risk officer, if I'm a CFO coming into this, it's not a technology discussion. It's a risk, compliance, and cost discussion that has to happen.

You know, you have the risk, you have shared execution, things of this nature that are very much all about Web 3 that the Web you know, the Web 2 world the enterprise cloud just don't understand. And they're very reluctant to give up that control because of the amount of money moving through their systems, the security, the various government regulatory, you know, pick a place, you know, GDPR in Europe, you know, the US SEC, places like that. And you have no guarantees that performance will happen. You know, you know, chains go down. Hacks happen, things of that nature.

So, you know, why the isolation will kill them, you know, private chains are solving the wrong problem. Again, like I was saying, the enterprise is very much used to having full control of their systems. They don't like to share. They don't want their data put out there. They don't want to do anything that's going to give them a competitive disadvantage or a material risk to their business. You know, so what's making this change happen is obviously why we're all here, a lot of people here, stablecoins have blown up. Just think about what's happened in the last year, you know, we've had a huge growth in stablecoin. The whole industry has shifted. I mean, it used to be meme coins. Now we're just talking about stablecoins and infrastructure and shared infrastructure and things of that nature, and how we bring enterprise into the web 3 world.

You know, the tokenization of RWAs. Everywhere you go now, people are talking about tokenization of real world assets. We're involved in several projects where we're doing real real world asset tokenization today. You know, so you're seeing it. We're not talking about meme coins and token launches anymore. We're talking about how do we take an asset and tokenize it that has real value and is backed by something. And then you're also, you know, um, seeing institutionals build their own infrastructures. BlackRock's built theirs, JP Morgan's built theirs, Goldman Sachs has one, Bank of America has one. So, all these big institutions are starting to figure out how to get into this game because there's so much liquidity that they want to get a bite at the apple on.

You know, but as a risk officer, and it's and it's really what it's all about. It's all about risk management. It's not the tech, it's not all the hype, the marketing. It really comes down to who controls this. That's the risk officer and the chief financial officer of the organization. You know, they have to have dedicated environments. They have to be able to see who's on their on their networks, who's passing through, how that money's flowing, all the KYC things you see going on with, you know, validating, you know, proper country access, things of that nature.

You know, they have to have their compliance native architecture built. So, it has to come from security, it has to come from compliance in the architecture. It can't be an afterthought. It has to be core to the system. You have to have the controlled activity. You cannot just let some random person come into your network and do whatever they want to do. They need to be vetted. They need to have proper access credentials. They need to do things of that nature. You know, so it's very hard for these risk officers in these large institutions, or even small institutions, to sign off on that. We're working on projects right now where it's really a challenge for uh the compliance officer to get their heads around, you know, "Hey guys, you know, we have to do this." I'll give

you a case a case in point that we were doing the other day. They were sitting there talking about double KYC. We can't have double KYC. Well, guess what, folks? You're going to have it cuz if you're going to ask somebody to go create a wallet and fund it with fiat currency and then flip it over to USDC or USDT, that institution is going to require KYC. You as a um application provider, you're going to do your KYC because you need to make sure you understand what's flowing with your tokens through that system. So, there's no way to get around it. And oh, by the way, because of compliance laws, they're not going to share that data. And depending on the you know, the player that you're dealing with, a MoonPay or whoever, you know, they may have minimums where

you have no KYC. If it's 50 bucks or 100 bucks, they may not do a KYC. But if it's tens of thousands of dollars, there will be KYC happening. So, you have to really much pay attention to what's you know, what's happening out there with these environments that these compliance officers are trying to get their heads around. You know, the um you know, they need to understand that the system's going to be up full-time. There's not going to be any downtime. There's not going to be any security issues popping up because of uh you know, some third party that decided to do something on a chain that, you know, brought it down.

You know, so the patterns are emerging. You know, the enterprise side, you know, they're they're dedicating their execution. They have full governance control. So, they're they're keeping their systems the way they want them. And then, you know, because of Ethereum and because of Solana and all the liquidity that's in these these chains now, you know, you're talking about, you know, 20 225 billion in stable coins growing at 70% a year. We're looking at an RWA market of 30 trillion in 5 to 6 years. That's huge. You know, you're seeing projects out of Dubai with, you know, real estate. You're seeing projects out of the US on gold futures, hard metals, um rare earth metals, things of that nature getting built, carbon credits.

All that's coming together. And you know, we're trying to find a place on how we bring this together, how we meet the compliance responsibilities for the compliance officers, the predictable cost for the chief financial officer because you can't have gas fees that just are random. When you're running a large institution with lots of transactions, you need to have stable predictable cost. So, building those pieces into the system are absolutely mandatory. Then you have to also look at how you meet the needs of the environment of Ethereum and other Web3 technology um ecosystems to be able to tie that together cuz they're not an easy tie together. There's a lot of um differences, asynchronous versus

synchronous, you know, core systems versus non-core systems, databases that are disparate, data um you know, the data being very um not normalized in certain areas. So, you have to be be very, very cautious of what you're doing. But, doing that will unlock the value. So, it's really all about money. That's what it all boils down to. The reason this is, as you I said before, you know, your your 320 billion in stable coin market is going. It's now becoming a payment layer. If I'm American Express, Visa, MasterCard, I'm very nervous cuz a stable coin now I can cross-border pay.

I have very low fees. I'm not making my two, three, four percent on every time a card gets swiped in a in a machine. And all of a sudden, that becomes a total change of a business model. Their revenue model has just now been turned upside down. And if you see and you talk to these guys, they are actively trying to figure out how to become part of this ecosystem to not so much gain new revenue streams, but how to protect their antiquated revenue streams of their 3 to 4% card fee swipes. So, there's a lot of that going on right now. Um and you can't isolate the liquidity in a chain if you're if you're just a closed system. You have to be in the public system to get that liquidity. So, it's a

big dynamic for these enterprise folks to how do I give up control enough but still maintain control to get into these systems. There's also the engineering challenge. This is where we come in. This is what we do as FP uh block is making sure that, you know, there is financial you know, how would the transactions happen? How can you track? How can you audit? How can you maintain consensus on both sides of the of the of the contract when you're going from a private system into a public system and vice versa, providing the full audit trails, making sure everything is doing what it's supposed to do. You can You can solve this by building your architecture with a compliance first and a security first

um methodology, but it has to be thought of in the beginning and then it has to come down. If you look at the, you know, Web3 world, we're becoming more and more of a common infrastructure. You're you know, a lot of conversations are going on around how do we, you know, have a common infrastructure within Web3 when you have all these multiple ecosystems. You know, people are trying to build bridging uh protocols and bridging products and things of that nature, but at the end of the day I think where we're going as an industry here is we're going to go to a common set of infrastructure, just like we have gone through the last four or five paradigm shifts over the last 30 40 years.

So, what I think you'll see over time is Ethereum or Solana or a few chains will be the primary rails. Everybody else will be a non-event. They'll become the EarthLinks and AOLs of the world. Um and I think you're seeing that today with folks like Cardano and Cosmos and things of that nature. Um You know, so the data integrity at the bridge, proof of architecture, has to be built with stated proofs. It has to be built in a way that will provide a consistent architecture for security and compliance.

You have to be able to prove what you did. You have to be able to audit what you did. And you have to be able to do it end to end. There can't be holes there. It can't be a black box. So, those are the things that have to happen. Um you know, security isn't a feature, it's the architecture. And we at FP Complete have been doing that for 13 years. We That's where we started from. We were Haskellers in the early days. And we built everything from a security-first model with a very formal language. We won't We don't build in lazy languages. Java, Python, all that stuff, that's for beginners. We build with formal languages, Haskell, Rust, things of that nature. Cuz you can build the security in.

And this is what we built. We've been doing this for so long that we have built a lot of IP tools over time. We've built a product called Amber, which is a secrets management if you're in AWS. We've built Zuhud, which is a compliance um configurator for credentials in AWS. One of the things we see within the Kolme and within the uh Web3 world is all the things we talked about, gas fee, congestion, all that kind of stuff. So, we built a product or a framework called Kolme. And we're using it. And what Kolme does and the general theory is Kolme is the application is the blockchain. So, you actually have a distributed ledger, you control the validators, you control the triadic security.

You control congestion, you control gas fees, all within your your network. So, you do have a blockchain. You do play with the blockchain rules, but you control the access to that and how it plays. And then we have the bridges, smart contract bridges that will take you to Ethereum Solana Cosmos Near few others at this time that you can tap into that liquidity. And what that does is allow folks the ability to control from a compliance officer standpoint what's going on in their chain, but then also tap into the liquidity.

And what's even nice too with this is you can pass from Ethereum through Colme into Solana. So, you know, when you're dealing with different types of wraps on the various tokens, you can actually move it through Colme and back and forth. So, we built this not because we thought it was something great to build. It was something because we keep building systems for people over and over again because they failed to build it the first time the correctly. We're a rescue squad. We've done 110 projects. Probably 90 of them were rescues from builders that failed because they didn't understand architecture. They didn't understand security.

So, we built this for the sole purpose of making our lives easier and being able to give the customer the ability. I mean, how many people in here have seen a product a an application go from one protocol to the next cuz they're chasing users. You know, everybody was doing um Cosmos or Luna or they were doing um Polygon and now they're all chasing to Solana and Near and other places. From an application development from an enterprise perspective, I can't do that. That's cost a lot of money to rebuild an application to work on a new protocol. I want to build my application one time. I want to harden that application so it meets all the compliance and regulatory environments that I need to play in,

and then I can move between these other ecosystems with a product like Colme with the bridging and smart contracts. And you're seeing a lot of people do that out here today, not just us. It was kind of interesting. I had a long conversation with the folks at Circle about a month and a half ago. We launched Colme in August of last year. They launched Arc uh last year at the same time. Trying to solve the same problem, different angle. We're more B2B, they're more B2C. But at the end the day, everybody's trying to solve this problem. How do we, you know, control what's going on in the within the chains and give people the what they need from an institutional standpoint.

So, and we're not just doing it. These are real live applications that we're doing. NATGOLD, for example, we're getting ready to launch that. That's tokenization of in-ground gold. Um we already have 12 of the top miners in the world signed up. Uh they are wanting to put their uh titles to us. So, basically what we're doing, uh to give you an idea, is in the world of mining, you have uh what they call a title. And that is the piece of land that you're going to dig the gold out or extract from.

And that gives you the right to extract that. There are international agencies that will verify how much gold's in the ground. Uh our first project is in California. It's about 220,000 oz of gold that has been verified and certified. Traditionally in the old days, the finance institutions would take that, loan the money to the to the miners, 10, 15, 20, 50 million, whatever it is, at a discount to the value, so they could start the extraction process. What we're doing here with this project is the title's being handed over to NATGOLD. The miner's getting 72% of the value of the BIV, which is the discounted um uh number that they use in the industry, for the gold. So, their token's going to

tie exactly to BIV, which I think today is about $3,025. So, the miner gets 72% of that. They never have to extract the gold. They never have to take on the cost to extract the gold. And they get that value. Now, where it really plays a big big game, this particular mine is in Los Angeles County California. Nobody in their right mind is going to let you strip mine in Los Angeles County, California, because of the urban population, because of the minerals and the chemicals and everything that they use to strip mine with.

Now this miner has just got 72% of that value into their pocket and never have to touch it. Think of the ESG causes, too. That mean we're saving the land, we're saving the people, things of that nature um for that. So this project's going well. Uh we're launching the public um 25,000 tokens are being launched in about 2 weeks, 3 weeks. We have over 100 million committed for that. So it's going to be a real world project. And then we're also looking how we can take it to other rare earth minerals and commodities like that. So we're using Coal May for that. Single They have to have the institutional controls, but they want to tap and use a tokenization of the asset and use the Ethereum rails for that movement.

The other one is Six Sigma, which is a uh sports book bet. Uh we're also uh adding in a um Polymarket type play with it. We have predictive markets. So we also built that on Coal May. This is a case point perfectly. We have now built on three different platforms for them. They were the kind of the genesis of Coal May cuz we did build on three different platforms when we started. Cosmos, then we went to I forgot who we went to then. And then now we're at Solana. You know, and it's like we we literally painted the bridge three times. They've spent about 8 9 million dollars with me over the last 5 years doing this.

Excuse me. So we wanted to make sure it's like before you go and do it again, let's let's do Coal May. And we show them how to do it. Now they have a product that's bridged to Ethereum, that's bridged to Solana, that's bridged to Cosmos for their old user base. And they don't have to rebuild this application again. Bad for me because I don't get to keep building things over and over again. Good for them cuz they can actually make money and start doing something productive with their product. So we're doing this and we and we have about five or six other projects that we're working on right now that are doing Coal May as well. So, you know, what does this mean for the Ethereum world?

It It's where the next trillion dollars is coming from. The big boys with the big money are coming into the Web3 world. The Goldman Sachs, the BlackRocks, um you know, you pick one. They're coming, and they're going to be here, and they're going to try to maintain and take control of this space. And that's where it's going to come from. We have to keep Ethereum as a public chain. We want to keep Ethereum as a public chain. We want to keep the principles of Web3 intact. But, we want to give the ability of these institutionals the to come in here because they will bring the money that will allow us to build newer, better, bigger systems in this space and not be this outside ecosystem that's kind of a dungeon thing, but become actually part of the infrastructure of the world, just like

Ethernet is, Wi-Fi is, things of that nature. You know, if you think about your phone, when I was a young lad, you know, it was we didn't I didn't have a cell phone till I was out of college. And then the first one I had was in my car. And then, you know, now I have an iPad that does everything. Uh you know, we'll see the same thing here. It's the technology is moving that way. So, you know, what it does is it brings more value to Ethereum. It brings, you know, more liquidity to the market, which is one of the bigger problems we have out there is liquidity, and being able to, you know, complete trades and things of that nature. So, the more money we can get into the business, into the ecosystems, the better off we're going to be as an organization.

So, the bridge is open, you know. It's not a question about public versus private. It's really about how do we give the private sector the ability to leverage the public rails. And that's really what we're all about. And this is what really where the industry's going. If you think about what just since October of last year, the narrative within the Web3 world has changed. I mean, I was in Denver. Totally different vibe than the year before. We're here now. Totally different vibe than the year before. And you're going to see that continue.

We're getting We're moving away from the marketing hype that was to to the real world engineering and product development that it is today. So, I mean, I think you're you know, we were joking in Denver, the people that showed up were the survivors, you know, cuz you know, everybody showed up and it's like, oh, there's you know, it's a third of the size that it was the year before. Like I told my staff, it's like there was more collared shirts than t-shirts walking around the place. Most of my conversations were with private enterprise, trade fi guys, not defi guys. They were wanting to learn. So, it's coming, it's coming very fast. Half the things I'm going to at this event is around institutional, not around meme coins and tokenizations, but

institutional grade access to the systems. So, with that, I mean, I'll wrap it up here and I'll just any questions for anybody in the audience? And if not, we'll just wrap this up and call it a day. Any questions? Guess not. You'll have a great day. Thank you.