[00:00:00] Joe Benso: Welcome once again to the Casper Podcast, where we take a deep dive into blockchain technology and speak with those who are building the future of the decentralized web. I'm your host, Joe Benso, and as usual, I'm joined by my colleague Matt Schaffnit from the Casper Association. Thanks again for joining me today, Matt.

[00:00:21] Matt Schaffnit: You're my podcast Sensei, Joe.

[00:00:23] Joe Benso: Today we are speaking with Dr. Martin Hiesboeck, the Head of Research at Uphold. Dr. Hiesboeck has a fascinating background and over 35 years of experience in finance, technology, and blockchain, and chances are, if you've been in the blockchain space for any amount of time, you're familiar with Dr. Hiesboeck.

Martin, thanks so much for joining us on this podcast, and if you can give our listeners just a brief intro of who you are and how you got into the blockchain space.

[00:00:54] Martin Hiesboeck: My name is Martin Hiesboeck. I am the Head of Research at Uphold, more like the institutional side of it, not so much retail, and I have the coolest job in the world, I get paid to think! My journey into blockchain itself started way before Bitcoin. It was actually a coincidence. I sold my first computer at school when I was like 17 years old. It was one of these Macintoshs, remember these tiny boxes? And I found it fascinating that I went to university, bought my first computer, and I took courses.

Then computational mathematics complexity theory, and a large part of that was distributed networks. So, I was familiar with David Charm, who actually started the first blockchain in 1987, way before all this Bitcoin craze started, and then ended up becoming a diplomat. I was put in charge of technology promotion in Asia and in a capacity, I think in 2012, I gave the first talk about the potential of blockchain technology.

There's a funny story. The organizer forgot to give me a speaking fee, and I told him, I'm a diplomat, I can't take a speaking fee, right? So, he gave me a small envelope with a stick. He said, well, there's a few Bitcoin on there, but you better sell them and this is not gonna go anywhere.

[00:02:20] Joe Benso: Did you take his advice?

[00:02:22] Martin Hiesboeck: I never sold it, but I also lost the recovery keys.

[00:02:24] Joe Benso: Oh, wow. Have you ever tried to recover?

[00:02:27] Martin Hiesboeck: Nah, I completely lost it. I moved houses like three or four times, and I didn't even pay attention that much for a while.

[00:02:35] Matt Schaffnit: Hey, Martin, you know, it's been a pleasure getting to know you and collaborating over the last year when we first met each other, one of the main threads and themes of the discussion was professionalism.

One of the core hurdles that we talked about was kind of the maturity curve of the blockchain industry itself. And my hashtag back then was, the professionals are coming, many of them are here. I've certainly continued to see that trend as of scaled up the Casper Association. And I'd be curious, over the last period since we've seen each other, if you've seen that or if you have any thoughts around the professionalization of the sector and what that means for scaling in widespread adoption.

[00:03:14] Martin Hiesboeck: We have behind us now, 10 years of building blockchains without knowing what to do with them. We are still fighting about the consensus model, whereas the real problem is what are you gonna do with it? Does it have usability? Is it useful? Having a blockchain alone isn't enough. You have to actually have utility. And this is also the main focus of my work, of my research, trying to identify those candidates who focus on, as you said, professional applications and usability.

[00:03:49] Matt Schaffnit: Do you think that this has a little bit of kind of like the App Wars that led to the death of Blackberry?

[00:03:55] Martin Hiesboeck: I've got another one because I spent so much time in Taiwan working with Taiwanese computer manufacturers. ASA was the first to have a tablet. They were the first company with a foldable computer, long before there was an iPad. They cared about their product. They didn't look at what you could do with the product, and that was the problem.

And then Apple came in and showed them, Hey, the actual technology consumers don't care about that. The hundreds of millions of people who use phones, they don't care about which processor is in the phone or which circuit boards. This is something for the engineers and geeks. It's very much the same with blockchain.

Exactly like the tech companies who didn't make it because of that, I think many blockchains won't make it because they can't focus, they don't have a focus.

[00:04:41] Joe Benso: So Martin, now with over 10 years of layer ones being built, people trying to solve the problem of scaling blockchains, speeding up blockchains without an actual product.

There's still a lot of excitement in this space and a lot more people, a lot of smart minds coming into this space. What do you see as the killer apps that are eventually going to bring mass adoption? Is it tokenization? Is it ownership rights? Is it financial standards? Is it the creator economy with NFTs? Where do you see the bright spots and what is it gonna take to actually have true mass adoption?

[00:05:20] Martin Hiesboeck: I see two ways that this is going for the most serious use cases, blockchains that need to be very reliable in the aviation industry, in government, in medicine, you're going to have to rely on providers that are completely removed from this crazy crypto space.

I don't think anybody's gonna trust a blockchain that is completely decentralized where you don't even know the names or identities of half or even all of the people behind it. That is not something you can do if you run the blockchain of the healthcare system of California. These are applications where if the shit hits the fan, somebody has to go to jail.

So the idea of decentralization and anonymity, that's all very well for this youth counterculture, but it's not the case for serious adoption. If I'm a government and run a blockchain, I have to be accountable for what happens on the blockchain. I can't have a hack every other week if this is my national blockchain.

I think there is going to be a bifurcation where one part of the industry is going to be a playing field where there's lots of innovation, lots of fraud, lots of cybersecurity risk, and there's going to be a part of this blockchain space that is going to become very serious with a stamp of approval, audited where there are bureaucrats or managers behind it who take the fall if things go wrong.

[00:06:43] Matt Schaffnit: Amen. How's it going at Uphold? What's on the horizon? If you have anything to, do to bring the market up, speed on that. We'd be very curious to hear.

[00:06:52] Martin Hiesboeck: We've changed quite a bit since I joined because the space changes all the time. So a year ago we didn't even have the vision of going before hedge funds and institutional clients, and now we have an actual product. Lots of details I can't tell you yet about, but it's a complete trading platform. So unlike most of our competitors who primarily offer established assets like Bitcoin and Ethereum, we try to offer all kinds of useful, odd coins, as they are called erroneously. We are looking to offer the most sophisticated forward-looking, future-proof assets on a platform to the biggest financial institutions in the world.

[00:07:37] Joe Benso: Martin, this space is always changing and Uphold is changing. It has to change what the times you just mentioned, you know, offering altcoins as they're called and. I'm curious about your thoughts on the value around awareness of crypto, awareness of blockchain through meme coins. You even have someone like Elon Musk who has said that he does see value in Dogecoin and potentially using Dogecoin as a means of crypto payment on potentially even Twitter. And I know that Uphold recently even listed Pepe, the altcoin, or the meme coin. This is the power of community. This is the power of counterculture that ends up being part of the culture within crypto, within the internet. How much is that a force for driving adoption and should it be?

[00:08:29] Martin Hiesboeck: All of this is in a way, opposition to the establishment. It is also exacerbated now because we have, in economic terms, we are maybe running our economic system into the ground by ever-increasing wealth gaps. On the one hand, you have globally accessible social media where billions of people on a daily basis see how the 1% lives.

Now you've got a smartphone, now you've got a simple trading app. Now with a few bucks, you can trade stuff and half the prospect of becoming rich in a very easy way. You know, when I opened my first brokerage account, you know the amount of forms I had to fill, it took ages to open an account to be allowed to buy a stock. Now all I have to do is download an app. So there is an enormous amount of people in the world, especially also in developing countries who see this as a way to get out of poverty. And in the West, it is a way for large groups of disenfranchised people to gain some sense of power. I think that the power of these meme coins is more of a sociological phenomenon.

The problem with these meme coins is, they are so easily exploited. Even if a coin like Pepe or whatever has some sort of longevity, there are hundreds of others which are fraudulent, which are basically only designed to rip off people. What we are witnessing in crypto is the biggest wealth transfer ever, and it is a wealth transfer from billions of clueless people to a small group of very savvy programmers.

[00:10:08] Matt Schaffnit: One thing that popped out to me as you described meme coins and the availability and accessibility to brokerage accounts. This concept of accredited investor that came out of the 1933 and 34 acts in the US has never been reassessed as if like 250k in 1933 is 250k in 2023. But on the other hand, of course, you want to be able to protect people from scams, which are quite prevalent. So, Standards, the needs for them, healthy regulation. What are your thoughts?

[00:10:42] Martin Hiesboeck: I think that part of the success of crypto is not just the average Joe with an iPhone, right? I think it is also the fact that we have, especially in Europe and America, we have boxed-in institutional finance. We have drowned them in regulations that are often contradictory and don't make sense.

Traditional society and the people who are not part of this crypto world, look at it as a Wild West, that they somehow need to fit into their existing system. While what we really need to do is develop a new system. We need standards and regulations that embrace the power of blockchain technology. That's gonna take a while. The wheels of bureaucracy turn very slowly.

[00:11:28] Matt Schaffnit: Well, it's also about the infrastructure being ready there, right? The establishment is not fully recognizing the problems in their old tech stacks that have been kind of accumulated and gathered over the years, and there's like definitely a huge need for an upgrade.

I believe strongly blockchain will be a big part of that. I also believe that it's really the intersection of multiple layers of technological innovations coming together that create the big wow think iPhone look. I really appreciate you shedding light on the markets. It's been great to collaborate. I'm really looking forward to what the future holds.

[00:12:05] Martin Hiesboeck: The genie is out of the bottle. All the governments in the world will have to realize that this technology for the first time in history is not something you can ever keep localized.

[00:12:20] Joe Benso: Martin, thanks so much for your fascinating insights and appreciate the work that you're doing to move this space forward and shed light on a lot of the changes and a lot of the complicated elements within this space. And so really appreciate your feedback and I know our listeners do too. So thanks so much for your time today and hope to have you on again sometime soon.

[00:12:41] Martin Hiesboeck: Thank you for having me. It's been a pleasure. Thank you so much, Matt and Joe.

[00:12:50] Joe Benso: Matt, I thought that was a great conversation with Martin, what are your biggest takeaways?

[00:12:55] Matt Schaffnit: The breadth and depth that Martin brings to the conversation never ceases to astonish me. I think it was also interesting to see Uphold continue to support retail markets, but focus a lot on the institutional level. I think that's where a lot of big opportunity and potential is.

[00:13:17] Joe Benso: As always, Matt, thank you so much for being on these calls, co-hosting with me, and your insights together with Martin's. Always make for great conversation and happy to be continuing to do this with you.

Well, that's it. We're pretty much out of time, but if you'd like to be on the Casper podcast, send us a message.

We'd love to hear what you're building and what you're working on from myself and Matt at the Casper Association. Keep building and we'll see you on the other side.