Stephen: This is your host, Stephen Sargeant. D Pen, blockchain infrastructure, this is all the rage as Bitcoin prices keep on going up. But today we have the CEO and co-founder of the Stability Protocol. So we're going to get all into the nitty gritty of blockchain. We have Klay Nichol coming on the podcast. You may recognize that name.

He used to be a professional figure skater and he's going to go deep into what his protocol is doing, how he's staying ahead of his competition and differentiating his protocol from others in the system. This is a really great episode. You want to listen to the end and we do touch a little bit on Klay's figure skating career and what it was like working to that goal early on and then working at a place like JP Morgan, working at Galaxy Digital, some of the biggest blockchain companies in the world.

Hope you enjoyed this podcast, and reach out if you have questions, and rate and review.

Stephen: This is your host Stephen Sargeant, Around The Coin Podcast, and who better to have to talk about stability, but the CEO and co-founder of the Stability Protocol, Klay Nichol. Klay, I'm gonna go jumping, usually I like saying, what's your background, but you're a Canadian figure skater, I love Canada, I'm from I grew up watching, especially like, Tests of Virtue, like those are people that I remember so tell us, you started your journey out in the Canadian community.

Figure skating, you know, circuit, champion. Tell us a bit about that. Cause I that's super interesting.

Klay: Well, Stephen, it's great to be here and thanks for having me. Most of my conversations don't always jump there, but happy to get into some of the background. Yeah. So I, fellow Canadian, like yourself, proud Canadian And I'm actually calling in from Canada right now. I'm, I'm in Manitoba, Canada for, for a semester, usually living in Los Angeles, California is my, my main stay.

But yeah, I grew up here in Canada started as a hockey player, like every other rural Canadian farm boy kid. And at, When I was pretty late, 12, 13, I started figure skating and kind of got things progressed quickly and I left home at 16 to skate on the national figure skating team. And I, I got on the ice, you know, in Kitchener Waterloo Every day with Scott Mori and Tessa Virtue, they're my training mates.

And Scott stayed with me quite a bit. And we had one of the best rinks in, I would say, Canada or the world. And it was an amazing ride. It was an amazing ride. Won a couple of national championships. In ice dance kind of following Scott and Tessa. I'm glad that I retired at the old age of 21, because as you know, Scott and Tess and some of our other training mates that were at that rink as well, kind of dominated global ice dance figure skating for the next decade.

And so very, very privileged to have gotten to train alongside with, with all them. And it was a, it was an amazing experience.

Stephen: I love it. And then you get into corporate kind of America with investment. But I want to see, like, did you notice any like business aspects? I know you were, you know, probably in the amateur. I don't know what the difference between amateur and pro when it comes to, I don't know if there's a pro figure skating,

Klay: Yeah, no, yeah, yeah, just amateur, yeah.

Stephen: What were like, was there any kind of business aspects or even just like aspects, like the amount of time that you had to put in and dedicate to this one thing?

For five years, then you're kind of like, oh, okay, like it's time to move on. What are your thoughts around that?

Klay: Yeah, well, two things, I think grit getting up at, you know, 5. 30 every morning, skating for three hours, going to school, come back as a young person. It's a pretty great, it instills a lot of discipline so that's carried through. But on the business acumen, you know, leaving home at 16 you know, having to really take care of yourself and be smart and thoughtful and how you're approaching your day to day life That, that kind of set the tone, I think, for, for me, but I've always had a business and entrepreneurial spirit but that independence and, and, and having to, you know, really focus and build a a career both first professionally and, and, and, and then as well in, in, in sport you know, really set the stage, I think, for, for where I've gone to in my, in my career professionally.

Stephen: You must like, you know, tap into the winter Olympics every now and then, see who's the up and comer, see if they did the triple axel right. If they were on, you know, on sync every now and then. What do you think about the sport? It doesn't seem like this generation is talking about figure skating as much as they did, but we do see a rise in individual influencers.

Where it's like, oh, you know, Lizzie, Livvy Dunn is like a gymnast and like people are following her, not so much the sport, but her specifically, or they're following football now because of Taylor Swift. How have you seen the sport like maybe evolve maybe not get as much attention, like, what are your thoughts?

Did you even think about branding back then yourself, or is that kind of taken care of for you?

Klay: Yeah, not as much like 2003, 2004 and that timeline, you know, social media was just kind of getting, hitting its stride. So, I think branding, viewership all of those things has changed a lot in the last 20 years. A lot of folks kind of aren't watching all together. Like when you kind of, you grew up in Canada, like Canadian nationals are on, like everyone's watching live at the same time.

And there's like this collective feeling, same with the Olympics. Like you're all like, and now we have, people can kind of watch on their own time and they actually get more focused on individual athletes. I think a big aspect is how much promotion happens. Like, you know, there's breakdancing and we, you know, the Canadian breakdance, right?

So now there's like a ton of focus there. So it feels like, it's a little bit more dispersed and, you know, there's like particular athletes and we don't have that same viewership of all being in sync, funny enough viewers at the watching the same time. And, and that collectivism feeling I think has kind of changed a little bit over the last 20 years.

Stephen: There was that energy though. And that's why I think I was so like, when I saw your background, like there was that energy that you can always remember around that time and the coverage, and now it's kind of like, Oh, we might just watch 13 minutes of the highlights of the four hour, you know, the four hour presentation and all.

We'll just watch like a 12 minute version on YouTube and. Kind of keep it moving. It feels like we don't have that same amount. That's we spend a lot more time watching TV though back then, but then you transition, you, you go to LA, which doesn't seem as much of like a financial hub as like even Toronto for some might say, it seems like more like, you know, business development, more Hollywood.

What was that like? What was the infrastructure like out there for business in LA?

Klay: Yeah. So that, that transition, there's a couple of jumps in there. So I, I I went there because of for, for work, but I was, I was in Toronto to start. And so I started in Toronto. I went to Wilfrid Laurier from a business program. That was an amazing step because they'd had a co op option where you could go get like really great jobs.

So for young people who are, who are thinking about post secondary education or parents thinking about putting their kids. I think a co op option where you can actually go get real world experience at investment banks or consulting firms or tech firms while you're in school. That was a big, a big aspect.

From there we went to the buy side at AGF and did buy side. Then I went as a gold analyst at Credit Suisse. So I went to All around the world, traveling gold mines, looking at underground gold mines, writing the research reports and, and that was right during a time when the market was going from like 900 to 1, 900 in gold price.

And it was a really amazing place to be. From there I went to London, England, and did sales and trading for Credit Suisse. Which was a very fascinating role helping hedge fund managers and portfolio managers pick stocks. And, and then from there I went to LA where I went to J. P. Morgan, did something very different where I was a ultra high net worth private banker, helping some of the most prominent, you know, You know, entrepreneurs in California and family offices manage their, manage their wealth and be a good, their strategic advisor.

So that was an amazing eight year journey working with some of the most amazing people in, in the California sector.

Stephen: I love that. I want to talk more about the gold if we have time, but that seems like a kind of crazy market going into gold mines around the world. Can you let me understand a little bit more about, you know, when you entered the realm of cryptocurrency. Where was it? Was it kind of when you were still at JP Morgan?

You heard about it, like, where's the time you're like, oh, I've been in, you know, I've been in business, I've been in banking, I've handled all these, I've been making gold. When did it like click in? Was it like, oh, like this would be a lot easier if we could do this online versus me having to visit every single gold mine around the world, sometimes in areas that may not be, you know, the safest.

When, what was the like, aha moment where you're like, ah, yeah, crypto makes a lot more sense. Digital assets make a lot more sense.

Klay: Yeah, I was, I was at J. P. Morgan at the time and, It came into my purview largely because I was covering some tech executives and West Coast being a very early adopting thought leadership geography it just, it kind of came into my realm and Bitcoin came into my realm. And so as you can imagine, coming from analog gold and now hearing about digital gold with Bitcoin. There was a real interest to dive in deep and understanding like, hey, what is this new primitive? And so I, I did dive in quite deeply. It did resonate the, the understanding of how money works, the history of money. We can dive into that and, and, you know, Bitcoin being a store of value and being one of the potentially hardest digital assets out there.

All of that resonated for me well, and then, and then from there, it transitioned into. In 2014 you saw, you know, or a couple of years, Ethereum, this like global compute, right? Like this global computer decentralized and that then kind of, and smart contracts, that got me excited. Now, I was at JP Morgan at this time and as you know very well. You know, Jamie was very kind of anti crypto, very, very blatantly anti crypto. And so I, I started going to LA crypto meetups on crypto and they just started going, that's when I met my co-founder way back then in 2017. And I had to be quiet about that, right? That was not something that you advertised at work, that you were going to crypto meetups.

But yeah, I spent, I was very curious, spent a lot of time in, in the space in those early years.

Stephen: Was it the same sentiment externally? Like, hey guys, we don't talk about crypto around here. Or is it more like, hey, I think crypto is a fraud, but we should still have people looking into it. Like, we should still have people, because I'm assuming by the time 2017 hits, customers are starting to kind of ask questions.

Like, hey, where do we buy Bitcoin? Or what is Bitcoin? Did you feel any of that, like, dichotomy of like, hey, we're told we don't care about it. But also like, hey, something must be going on here, if some of the other companies are getting involved in it.

Klay: Yeah, I would actually say in that time period, there wasn't any real retail interest of relevance. And when I mean relevance, I'm talking, you know, sentimillionaires and billionaires saying, I want crypto and I want it on my bank statement, custodied by my bank, right? Right, that wasn't happening at that stage.

Some of my crypto entrepreneurs, or sorry, my tech entrepreneurs who had a bunch of crypto, they're like, hey, can you like, can you lend on this? Right, in 2017? It was like, no chance. Right? That's not happening at JP Morgan. That was barely happening in the retail markets at the time. So, it's, I would say that 20, like my fast forward through that whole journey, I, I left J.

P. Morgan. I was a, you know, very prominent banker in J. P. Morgan's private bank in Los Angeles. And everyone thought it was crazy because I left to go to work with Mike Novogratz at Galaxy Digital. And The reason I did that is I did see an opportunity that there was so many efficiencies that these new banking, that new banking rails, right?

Blockchain banking rails could, could create, right? And you had, I was living the last prior 10 years of this archaic system. That was paper based at the start going back a hundred years ago. And we had all this tech debt that we just kept adding on, right? Like trades used to be like T plus five, right? In the sixties and seventies, they had like a crisis of paper, right?

And because there was so much trading. And so now we've been trying to get near all, almost down to T2, T plus one. As, but we still have this tech debt. Archaic system, right? And then we added in this veneer. I call fintech like a veneer or payment tech, a veneer in front of this archaic system. I got the old archaic banking system.

You put this really beautiful UX in front of this crappy old system. And that was this whole fintech space for a lot of years. Blockchain's this new backend, right, that completely wipes this part out. So fintech firms, as well as banking firms, are all like, Oh goodness, this could completely disrupt me, right?

And that's the part I saw where, you know, global remittances, corporate settlements, all of those things could start being automated and costs being pulled out. And I'm like, okay, if I can get the big corporates involved and we can get institutional adoption that we've all been hoping for. We're going to find product market fit for public blockchain, And I left. People thought I was nuts. And my first task at Galaxy was onboarding. Digital asset funds to the biggest bank platforms. And that's what I did. I onboarded the, helped onboard the first digital assets to Morgan Stanley, Goldman Sachs, PNC, some of the biggest brands in the U S and abroad. And after doing that, I realized that we were no closer to product market fit.

Stephen: And why, why do you think that was it? You see these and remember like at this time too, everyone's like, hey, we need institutional adoption. That's how Bitcoin is going to grow. And then, but now you're seeing it from the back end. Like, hey, institutions are adopting this and getting involved. What do you think was the missing puzzle piece that, that for like More adoption or mass adoption.

Was it simply like, Hey, we need the price to go up. So more people get excited about this, not just these big institutions that can afford to put millions, if not billions of dollars into it.

Klay: Yeah. So there's two things I think we need to, we need to bifurcate the Bitcoin aspect, store of value, like. You know, you know, swapping out analog gold for digital gold. That's one thing, right. From an investment perspective. And then there's the utility of what blockchain is, is the technology. And that's two separate things.

And so I would say the insight that I can share that's unique is that the only reason that the bank said yes to onboarding a crypto fund like a Bitcoin, Ethereum, or an index fund of cryptos. Is because their largest clients demanded it. And therefore the top of the house said, even including JP Morgan, which also onboarded a Bitcoin fund for its customers they, they mandated it because I, as I said, they wanted to buy it, but.

If you're a big JP Morgan or Goldman client, you're not wanting to go to a Robinhood account or something else. You want to see it on your statement and you want your overall asset allocation to consider this investment, right? And so that's where the top of the house, the CEOs, the top, the top. Business folks told the general counsel, legal team, get it done.

Right? And I think that's really how that happened. That is all on an investment side. On the technology side, totally different thing. When we're rebuilding the pipes, that's a different conversation and that has really gone in a private blockchain path versus a public blockchain path.

Stephen: Do you think that, you know, having people like Kevin O'Leary be not against Bitcoin, but like, I remember him telling Pomp, like you're crazy for having all your, you know, your net worth in Bitcoin and then slowly kind of changing his mind, do you think that? Playing out in the public, because it didn't seem like he had a vested interest in the talking bad about Bitcoin, where Jamie almost seems like, hey, they're, they're, they're killing the traditional world.

Of course, they're not going to say the person, the thing that could disrupt them is great, right? Like until they can get their heads around it. Do you think that, you know, the way the meet? Yeah,

Klay: I, I discount, you know, grew up being Canadian, heard a lot of Kevin O'Leary on BNN and all those places, right? So Kevin's gonna, Kevin's a salesman and, and it was interesting to watch him go from being a hard hater to a supporter, right? But he followed the dollars at the end of the day, right?

And so I think the thing to realize though, Jamie and JP Morgan would say no to crypto. Cryptocurrency. Yes to blockchain, right? And not only just say yes, but lead. They are the dominant leader in blockchain technology in traditional finance by order of magnitude. They are today, have trillion dollar plus amounts of value.

On chain, but it's a private chain. It's the Onyx chain, right? And so that,

Stephen: no, I was going to say like, what did you think when they came out with like the digital coin JPM? Were you like, huh? Oh, like, was that an interesting point for you?

Klay: It was natural. It's there's an arms race in traditional finance right now. Everyone sees the opportunity, efficiencies, atomic settlement, all of these benefits, digital trust. That can blockchain can enable. They can't engage with a public blockchain. It's a non starter. These banks are highly regulated and they don't make any decision without the regulators kind of telling them it's okay.

And they're not going to say it's okay on Ethereum or any public network. And we can go through the reasons on why. So they're forced into the private chain space. And so now every bank is in an arms race to digitize or tokenize Every QSIP, which is the basically the identifier of every security, every bond, every equity, starting with treasury bonds all the way to, you know, equities and private, private instruments, that's the arms race that's going on.

But they're all doing it in their own walled garden of their private blockchains because They can't play in the public space. And so that's what we're trying to help them enable, enable to do with stability is enable them to actually play in the public space, which is the future of public blockchain and establishing digital trust for the world.

Stephen: And I want to get into stability because, you know, your friends are looking at you like, Hey, you left LA, you know, big business, high net worth, liquid lunches maybe, you know, fashion promenades. And then you hit another home run with going to Galaxy Digital, so they're probably like, Hey, this guy kind of knows what he's doing.

And then at the, at the top of that, you're like, you know what, let me start my own protocol. What was kind of like the feedback from friends groups around that time? We're probably a little bit more educated about cryptocurrency when you make that leap.

Klay: Oh yeah. When, when so my co-founder Julian Braben and then, and Mike Mathis when we And they've been building in the Web3 space for a long time, right? Five, six years prior to that, that entire time I was at J. P. Morgan and then Galaxy, they were building, they built probably one of the first liquid staking platforms ever, and did this across 11 different blockchains.

Like, so they, and it was a community staking program. Again, very thoughtful approach that they had. And so, which is why I was really you know, stay close with the guys and we reconnected here. So that transition, when we were thinking about building this we went and asked all the smartest, like L1 founders and top thinkers in the space to really Underwrite why hasn't there been a fee less public blockchain with no cryptocurrency dependencies ever been built before?

And we got a lot of different answers and, and, and a lot of them didn't really land. And we realized, wow, there's just actually some mental models here that need to be bent or broken. And the upside here is so great that if we just stay in this small Web3 space, where there's like 5 to 10 million people doing an on chain transaction, we need to get to the billions of people in the Web2 space and help bring them in.

And everyone's been trying to but we haven't been able to bring the enterprises in, and we can barely bring in the retail. And we thought we could do it with speculation and getting token and cryptocurrency, but That means we have a lot of speculators and not a lot of users and we need users, right? And what does user mean?

User means that there's utility there, right? And so the industry has lacked utility and so our mission at Stability is to be the most accessible public blockchain that's optimized for utility. And removes all the barriers from enterprises and as well as retail users from using it, right?

Stephen: I love that. Let me ask you about this. What do you think when you said you heard a lot of different reasons from these L1s? What do you think it is? It's like, Hey, this is a wheel. The wheels round in the wintertime. We can add stubs on top. Like, do you think they were just kind of building off of this?

And nobody said, Hey, should the, should the wheel be round at all? Like, Hey, what if we reinvented the wheel being round? Do you think that was it? Nobody was questioning kind of the foundation and everyone's just kind of adding their own features, but you're kind of going back and saying, Hey, why is the wheel round?

Why aren't we doing it a completely different way?

Klay: That's, that's right. And there was like, okay, we're also looking at the inefficiencies like how much money they were spending on customer acquisition, right? That's what they called it. They, they called a lot of these token airdrops and, and, and the, the, the, the, there's, there's fees burnt. There's a lot of different things here, right?

All to drive value to a cryptocurrency. But even some of the foundations, which have large foundations are spending billions of dollars on airdrops and incentives and all that, and that's all customer acquisition, but when you look at the customer acquisition costs, it's like, For some of them, it's like thousands of dollars per user, which is like equivalent of what you would use to like sell a private jet and you're, you're acquiring, you know, some kid in their basement, you know what I mean?

Like this is, this, this doesn't necessarily make sense. And then are they really staying and are they loyal and all that kind of stuff, right? So we, we looked at, we looked at a lot of those different aspects. We looked at, I think, four. Four key barriers that we saw. And so let's hit those as our takeaway when we, when we kind of finished our summit and that was regulatory risk is what is regulatory compliance and reputational risk.

Right? Is not going to allow a general counsel of any corporate from saying yes to a public blockchain, for the most part, right? So most like 80, 90% of people are weeded out there. Then you have the CTO who looks at their users and integrating it and they're saying this user experience is abysmal, right?

Like absolutely abysmal. Like your grandparents aren't using MetaMask and verifying transactions..

Stephen: I can barely use Bend the Mask on a good day.

Klay: Right? So, so, so that's then, so then the, the CTO throws his flag and it, it's a, there's a, it's dead there. Then it goes to the CFO as the next person. And he's like, well, how much is it going to cost?

Like if I'm going to strap my business to this thing, not only do I have the reputation, I was always saying, but how much is it going to cost? And, and we say, I don't know, actually, it can go exponential. We, we don't know. It just depends on the price of the cryptocurrency is the cost. Right. And so the CFO is like, I can't run a business with no predictability and, and I could bankrupt myself.

Like. And economics totally go out the window. And then once you get past those three, which no one really gets past three, those three, three barriers the last one waiting for you is scale. And these web, web like blockchains, public blockchains don't scale because they're optimized. They have an economic constraint.

And that economic constraint is the token. You keep that blockchain congested 'cause you wanna have more tokens burnt to make it a deflationary supply to drive the price of the token up. Right? Vitalik came out earlier in the year and said, guys, let's increase the block size by 10%, right? Keep the hardware the same.

Just improve the utility of this network. We can do this, guys. Computers have improved a little bit. Server infrastructure has gotten a little faster. Computers got hardware faster. We can do this. And the whole industry said, Vitalik, you're nuts. Right? Why? Because it would drop, it would drive the value of the token lower, right?

And so the, the, the product is The token. And that's great. Let's just focus on that. It's not, no one says Ethereum is global compute anymore, right? They, because it's not, right? Last year, Ethereum did 90 gigabytes of data. That's like a double sided DVD worth of data. And people spend billions upon billions of dollars in gas fees, transacting on that small amount of data, right?

That, that tells you very, very blatantly that it's optimized for. The cryptocurrency not optimized for utility. So that is the kind of the base case is we, we realize that we're not against tokens, we're not against cryptocurrency. They're amazing technology. They're just a standalone tech that is not blockchain.

And blockchain is so much bigger than just a cryptocurrency. And we need to get that into the hands of everyone because blockchain can establish Digital trust at the end of the day that doesn't exist today. It really doesn't exist in 2024. Digital trust does not exist.

Stephen: And when you say that people are like, you know, even critics are like, Hey, we need tokens for governance and voting, right? Like we need it for utility within our platform. What are your thoughts on that? Are people like, we.

Klay: Love that. Love that. I do love that. That's great. And I, I think sometimes it's overused, but there are real use cases for a token and, and we can. Issue those, those organizations can issue those tokens on stability. What we're trying to say is the underlying infrastructure that runs it should not be optimized for a cryptocurrency.

It needs to be optimized for use and utility and it should get cheaper, faster, more performant, more capacity every year. Right? That should, what we should be optimizing that for.

Stephen: And to your point, you think a lot of these projects is like the whole value is in usually the speculation of the token, what the token like versus like what the token can do for the actual users, right? Like, do you feel like the whole blockchain is relevant to the token? Take away that token and they really don't have much of a pillar or foundation to stand on.

Klay: Lots, there is a lot of that in this space. I would, I would break it up in a couple of directions that the, the projects themselves, if they have their own token, and they're trying to select a network to use they, They are having to first be an investor in a layer one. First, they have to be an investor before they can use it.

And that's a problem right there. They shouldn't have to be an investor first into that network. A lot of them choose them because they either get a grant or they believe that there's a large community there that will then use their product. For us, we're not really focused wholeheartedly on trying to play that game, we're going to the large corporates that have millions of and billions of users already and giving them a utility and a toolkit to help them solve real first order problems, right?

Security, trust. You know, all of the things that they want to, all the use cases where blockchain could be utilized. And so that's where we're focused on, on really driving. Adoption, if you will, is helping them do that. And so, that's what we did. we've launched our, We've launched our product.

We've built for almost two years. We, we've, we launched Mainnet five months, March 11th of, of this year. And our first partner was the government of Singapore to digitize trade documents. Because I go, I keep saying digital trust. And that it doesn't exist in 2024. How do we know it doesn't exist? Like, what are you even talking about, Klay, that Digital trust doesn't exist in 2024.

Well, just look at the world's supply chain, which is how all the goods move that you, every one of your books in your background or shoes or clothes, right? This all went through a global supply chain. It runs on paper today. Paper, just like we talked about with equity trading, you know, transitioning from paper to electronic in the 60's. We're still full paper in the world supply chain, and that's because stamps and signatures are the medium of establishing digital trust in 2024.

Stephen: And what is the biggest issue with that? Like, I think supply chain, I think HSBC was doing something with blockchain when it came to supply chain. What is the biggest issue of it being in paper? Is it the fact that you have these stacks of papers? Is it the chance of, like, corruption, illicit actors, you know, forging documents?

Like, what is the big, you think, bottleneck that you are opening up for, you know, something like an entity from the government of Singapore?

Klay: The inefficiencies are almost endless. So let's just hit the direct ones. When you have a shipment of goods, you get handed a piece of paper from Let's say Maersk, this bill of lading. And that is a, like a deed to a house. It's a title document. It's like a bearer bond and you pass this piece. If I hand this piece of paper to you physically, you now own the shipment.

It's yours. That's how it works. It's crazy. That piece of paper has to fly around the world and get stamped by every bank, insurance company, and everyone to be able to transact and trade. That. Just the DHL and FedEx bill is six and a half billion dollars to fly these pieces of paper around the world.

Just, just the, the, the courier bills. Now, when you start thinking about how many times can you buy and sell goods going across the ocean on that two week journey? Well, as fast as you can fly that piece of paper around. Well, you know DeFi. You know DeFi well. So if I can digitize those documents, I could buy and I can strap DeFi onto trade finance.

And you can buy and sell all of those products a thousand times, a million times, the efficiencies go through the roof. There's like two trillion dollars of accounts receivable that could be financialized, right? With trade finance that aren't being Supported by banks, right? All these small businesses around the world, and that could all be unlocked.

Trade finance could grow dramatically. More players can get involved. It's just, I could go on for days about all the efficiencies, if you can just digitize that. And that's just one use case that we're talking about.

Stephen: And we saw during the pandemic, especially in, you know, ports around the world, the supply chain expenses, like, tripled, sometimes even quadrupled. Would this help with that? Is that a reason for those expenses, or is it just Become more expensive to move things around the world.

Klay: Yeah, well, inflation is its own thing. I wouldn't, I wouldn't blame the price of goods just on the inefficiencies because they've been in place forever But I would say That we can improve and definitely help bring some of those costs down. And if you can improve financing and improve you know, improve trade finance and efficiencies for businesses, they can, that can come through to the consumer, right?

Because it's not as costly to, to run the business. So, Yeah, I think we're, we're stability in being able to help the government of Singapore digitize trade documents. And, and when they've integrated us now, they've done a way more transactions on our network then almost any other network that they've integrated with because it doesn't require corporates to onboard cryptocurrency.

And that's, that's That's the point to make that user experience available and accessible.

Stephen: You know, you've been in finance, you've been in sports. Where do you see the biggest use cases? You mentioned supply chains with the government. We're seeing people trying to put real estate, carbon credits, tokenization. Where do you see the, like, Hey, this really makes sense. And this might be a little bit of a stretch.

Like you could do it, but it's kind of like, do you want it? Like blockchain isn't for everything.

Klay: Yeah let's go with where blockchain doesn't make sense as much, right? And I think we just got to break it down to what is a blockchain and it's distributed ledger technology, DLT, right? And it's a database, right? It's a database. And so it's either a private database. or a public database. So in an example where you don't have to share the data with a large group of You know, third parties or even like any kind of sharing, you can keep that in a private centralized database.

For example, we've taught a lot of people have talked about deeds on homes, right? The deed being on chain and that type of thing. Well, the government of Singapore has looked at that and they would say, Blockchain doesn't really need to be used there. A lot of people would say it does, but they're like, we can hold that central registry.

We're comfortable and you can check our central registry on who owns it. Right. And we're not going to allow other people just to like move deeds and check and all that kind of stuff. We're not, we don't, it doesn't need to be public in that sense. Supply chain, where you have a whole bunch of different folks or any other scenario where you have a car manufacturer and they've got 30 different suppliers.

Or you have track and trace of, of food from like farm to fork and everyone wants to be able to check, including you. You want to check where's this lettuce coming from or where's this shirt or what have you. That needs to be a public blockchain. Right? But it needs to be a public blockchain that you can use.

That you don't need a cryptocurrency to read or write to that blockchain, right? And it needs to have the scale where millions and billions of people can all access that database. So hopefully that kind of breaks it down on when to use a public network, and then what is the user experience it needs to have to be able to make it accessible.

Stephen: What are your thoughts when you come to like, Singapore probably have a nice centralized system for that, but when you get into countries like, Hey, like the government isn't acting and, you know, good faith all the time when it comes to registries of property and other things, do you think that, you know, maybe some of the G7 will be like, no, we want that put in place in certain areas.

We want that kind of transparency because we need to monitor, we need to monitor your country.

Klay: yeah,

Stephen: than, let's say, Singapore. Videos

Klay: that's a very good point, Steven. I think what you're referencing there is immutability. And what the beautiful thing that, that blockchain provides is, yes, immutability, but it's, it's a sense of time, right? It, in a web to private database, you can rewrite whatever you want. In a public database, you, you have a, you have time now, and it's forever.

And it's, it's burnt, right? You can timestamp anything and put it there. And so that's, that's, I think, the big, the big difference of, of, of why you might want to use it in that situation. Yeah, in NetNet, we need to be able to authenticate News, right? We need to be able to like fake news, right? Like these are things that we need to be able to.

We need to authenticate data going into large language models. All of these things we've got.

Stephen: like, with deepfakes and AI, you need, like, I think we're, we're getting closer and closer that many of us don't believe everything we see on the internet, whether it's in video form. And I think we're getting closer and closer. There is going to be the need to be a public blockchain, that, hey, we can, is that information valid?

Did this person, celebrity, politician, say exactly what they said? What is, where is the real data to that conversation? Because we're able to manipulate almost anything. And right now we're using it for jokes and memes on the internet and on Instagram. But at some point, we're going to be like, Oh, why did the politician say that?

And, you know, why is there so much funding from the Russian government saying that's what the politician said, or did, or, you know, or campaigned? And I think that we're getting closer and closer to that. We're seeing that every day.

Klay: Yeah, it's happened fast, you know, for folks like us that have been following this story for the last few years. It's, it's crazy how quickly it's happening because the amount of data that's being created is going exponential, right? And it's viewed that in the next few years, like 90 % of content on the internet will be AI generated.

We, I think you go back 5 10 years, we had 2 zettabytes of data. Today we have 124 zettabytes of data. And that's going to go to, you know, 224 in the next couple of years. And so we believe a big difference here at Stability, I think is a unique thought and I anticipate this, this view will grow is that we believe that the value of data is going to decline.

Right now, everyone would say data is everything, right? And data is the new oil, like, and, and we've seen that in every company we speak, you, you see out in the, in the market, right? But when you get a unlimited amount of data, what really gets to become important is the authentication of that data. And so we see a value transfer moving over from the data, moving over to the authentication piece.

And that authentication piece is where blockchain and public blockchain is really going to shine. And. It's really just the user experience that's kind of kept blockchain behind closed doors and not really let it out. And I use this example, if I can, if I can give a quick example.

Stephen: Yeah

Klay: thought experiment, very quick thought experiment for you to think through.

I shared this in Singapore I did an event at the U. S. Embassy with with Google and Amazon and the government of Singapore and a few of these other guys on the panel that I was, that I was hosting. And I, I asked the audience to Who here has used ChatGPT, right? And who knows who OpenAI is, right?

And so they raised their hand both times. I'm like, okay, great. So just want you to consider this thought experiment of Sam Altman is launching ChatGPT for the first time. Okay. But there's a catch. You have to first connect your bank account to ChatGPT and you have to buy OpenAI credits. You have to secure those OpenAI credits yourself.

If you lose those OpenAI credits, that's on you. There's no refunds, absolutely no refunds, right? And the question I would ask is, where would OpenAI be today? I think it's like a hundred and some billion dollar company today. Where would it be today if that was the user experience?

Stephen: right. Great

Klay: It wouldn't have got to a hundred million users in the first week, right? And so the point is, is that's what we've done to public blockchain. That's what we've done and that's, that's why. It's not ubiquitous. It's not accessible.

Stephen: Now, why wouldn't your enterprises that you're onboarding stay on the private? Like, why are you bringing them over to the public? Versus them being like, Hey, is it the kind of use case you provide? Like there needs to be a lot of people that needs access transparently to this information. This is not just a few companies in a private blockchain.

Klay: Exactly. Like you can probably think of a million examples where more than one group needs access to the data and more importantly, they might be opposing groups and they, they can't have, they, we saw this with Maersk and with IBM who created one of the most well funded private blockchain networks called Trade Lens five, six years ago, a hundred million dollars invested. It went defunct last year. They shut it down. Why? Because all the competitors aren't going to say, Oh, Maersk, please invite me into your network, and you got control of all the network, and that's okay with me. You're my competitor. I trust you. Never going to happen.

Stephen: I love this. What about the aspect of like, Hey, I'm a company. I want to participate, but I also don't want to see my competitor. I'm trying to make this big business deal. So like, I'm trying to make this deal with Chainalysis. I need to send them a hundred million dollars and then we're going to announce it.

But if somebody sees like, Hey, I just said a hundred million dollars to maybe the entity is not known, something's up there, something's going to be announced, that's always been, you know, the big thing now with like privacy and, you know, businesses do not want you to see their transactions. What are your thoughts on that aspect of it?

Klay: Oh, completely. And this is a total misnomer on public blockchain because of the word public means that everything is accessible and that's not true. We have encryption, we have all the different types of, of solutions. We've solved this very elegantly at Stability in that we've created something called a private mempool, which most mempools are getting a little bit technical here, but this is where your transaction goes to in a queue before it goes on the network, and we have an enterprise solution that enables a an enterprise to run their own private mempool, which they can permission access to their customers and therefore their IP address and all that information never gets, it's connected just to the bank, let's say JP Morgan and JP Morgan's clients.

Right. And then from there, they can publish the hash of those transactions again, means nothing to anyone. When you see a hash of those transactions, they can publish that to the network. And, and have the composability, authentication, verification ability of that, and then being able to share that optionality, free optionality, share that hash or that information so that another entity outside their bank could verify what that transaction was and confirm it, right?

And so this is how we've created solution. The government of Singapore has a very elegant solution on this as well. There's a lot of different ways. At the end of the day. People need to be able to access and verify data on their own and not be invited and allowed access in with

Stephen: And I think when, you know, you say it's technical, but for a lot of people listening to this call, like the reason why private mempool is important is right now, if you wanted to buy an NFT or at the height of the market. You want to buy an NFT, a miner can see, Hey, this person wants to buy an NFT. And so do 99 other people want to buy this NFT.

Maybe I should buy the NFT. Maybe I should put my transaction ahead of all of these people, and I can get the NFT at a cheaper price because there's so much demand that is going to, there's only a limited supply that's going to pump the, you know, value of this NFT, which is what we call front running MEV.

I think that's where you can like, oh yeah, that makes sense. I don't want people to be able to front run my transactions

Klay: You got it. Minor extracted value is a big issue. MEV which is just simply the ordering of transactions. When you have your own private mempool, you order however you want. As your company and you just need to ensure that you have the block space to do it. That is a huge aspect, right? One funny analogy we like to consider, it's like a public bathroom.

Stephen: heh.

Klay: if you're like a, you know, a private, you know, a private bank client, do you want to go to the public bathroom and get to see, you know, your, your star or whatever, or do you want to have your own private bathroom, right? And, and, and that's the difference. Who's going in, who's going out, how long are they in there?

You know what I mean? I use that just to kind of like, it's funny, but it kind of puts it in perspective, right, of corporates want their own access points.

Stephen: Yeah, like, especially when you're in an arena, you're like, you don't run into a celebrity at the bathroom because they're not using the same bathrooms as you do, nor do they want to use the same bathrooms, and everyone's asking for autographs, so that makes perfect sense. You wrote a blog about, you know, this BlackRock Deny Tokenization Partnership with Hedera, Hashgraph.

And it wasn't so much of like, hey, something went wrong there. But it's almost like you're talking about token washing, similar to what we're seeing about AI washing. People trying to say they're doing certain projects and they have AI to, like, look a little bit more prominent in the space. Can you talk about, like, the main takeaway from that article and what people that are building in this space have to be aware of?

Klay: Yeah, I, I don't want to go too deep into this side, but it's like, there's just a lot of marketing in the space. There's a lot of marketing in any industry, but there's a lot of of trying to associate marketing. I think anytime if you are lacking utility or lacking growth, or you're always trying to seem a little bit bigger than you are, like we, we get ourself into that challenge, right?

And I think. We need to have a little bit more of a mature approach to the space. And that's what we're trying to be, right? We, we're trying to be the adults in the room. And I think I think, I think without getting too deep into it, I think people get a little bit ahead of themselves and, and, you know, Try to make things sound like they're bigger than they are.

And I've seen that my whole time in this space, whether it's, you know, onboarding these to large institutions, a lot of them don't want to talk about it. Right. It's not, it's a rep risk. Like their brand is, is so important to them. Right. And they're, they really want to keep a lot of this stuff, this stuff quiet.

They want to, they don't want to be disrupted. So they want to do the work and the homework, but we often in this space be like, Oh, institutions are coming and it's growing and there's all going to happen. It's like, nah, they're testing. A lot of this stuff dies in proof of concept land, POC land, because for the four reasons I mentioned to you earlier, it can never get outside of that.

And that's why we're trying to help the industry. Remove those barriers, right? And, and, and all those challenges so that they can actually get into like mainnet and real adoption and really driving use in their businesses.

Stephen: I love it. Talk to me a little bit about, you know, what you're doing at Stability. You're a 10 person team, no funding, which, to your point of, like, a lot of these companies are spending a lot of money to acquire users, developers, and developers. How are you, you know, running a 10 person business, a full protocol with, with maybe not like VC capital.

Klay: Yeah, well, we're fortunate in that my two co-founders had, You know, successful exit previously I've had a long traditional finance career, and so we've been able to self fund the business. That's given us a lot of flexibility to focus on driving, just building what's needed to advance the industry and giving us the runway to do so.

We will bring on investment, but we have to be really thoughtful because What is most important in creating a global trust network is that there, you maintain some level of neutrality, right? You can't have one government owning every, right? You need to be able to keep that. And we also, that's one.

And number two, we really need investors who are mission aligned, right? We could have raised a lot of money and we've had a lot of offers if we would launch a token, as you would expect. But, but we know that path. We've gone down that path. We know what, we know what happens there. And so we can't, we need to be, have mission aligned investors that have a long term vision that aren't going to push for a token down the road, right?

That understand. What we're trying to do. And so with those two things, we've been really thoughtful. And, and as we grow, we're, we're, we're generating revenue. Now we're bringing on customers in. Many different verticals. We will, that, that should be relatively easy once you show this brand new paradigm shift, because at the end of the day, we're a brand new business model, which I haven't really hit.

We make money with service and support. A lot of your listeners are like, well, how do these guys make money if they don't have a token?

Stephen: That's not, that was going to be my next question.

Klay: we're akin, you know, a good analogy would be, would be Red Hat. Red Hat is one of the largest open source software companies in the world for server infrastructure.

Every major institution uses Red Hat. It's free to use. It's based software. You want to upgrade support, you pay service and support for that. We're the same. We are the Red Hat of public blockchain. And, you know, our blockchain is free to use. Today, your users can go on our website, get an API key, and, and launch a publish a, a any, any smart contract, EVM, or EVM blockchain, publish that smart contract, free to use.

And then for corporates, as they start scaling until, and they have more needs and they want bulk transactions, private transactions that we talked about, all guaranteed uptimes, master service agreements, SLAs, all the things that a corporate wants from a traditional vendor, we can do that, right? It's, and they want that because when a transaction goes down or something goes down, you know, they can't call Vitalik, like, hey, my, my transaction didn't go through, right?

There's no one to call, right?

Stephen: someone frontrunner, someone frontrunner our business deal. You're not, you're not gonna get anyone on the line any time soon.

Klay: Yeah, exactly. And so we, we we have that model. So that's how we, that's how we make money. It's a very simple and, and somewhat boring model, but we generate revenue, which is a very rare thing in, in Web3.

Stephen: That's the rare part to see your business model, not not having a token. Let me, let me, you know, it's funny, like as we close the conversation, I think it was Jason from Blockworks posted the cost of building a blockchain And my mind blew like it was like five, 10 million.

Yeah. Token issuance. Do you, is there, is your blockchain maybe less expensive to build because you don't have this tokenomics involved in it? Talk to me. Cause I don't think people realize the cost of a blockchain. He said five to 10 million. I didn't see any kind of compliance or regulatory stuff there.

So I'm assuming the cost is probably even higher than they've, they've accounted for. What are your thoughts around something like that?

Klay: I think, yeah, I think the number is going to fluctuate dramatically based on what folks are going to try to build. But also I think the biggest thing is. It's the, the depth of knowledge, right, and architecting it appropriately and what language and and, and, and like how, how, what consensus model and all of those things.

There's like a lot of very important decisions and we brought in a lot of data. Big experts, you know, one of the, one of the lead architects of the JPMorgan Onyx blockchain was early with us and architecting our network to make sure that it was architected correctly. So the upfront cost of build is gonna vary dramatically.

I think the ongoing maintenance of running a blockchain, that's where there's gonna be a big difference. When you have a toc, when you have token ons and you're running the network and there's a lot more complexity that that starts driving. And, and just obviously the incentives on, on how that works, but it's not.

Easy. The cost is, is real in building a public network, maintaining the public network in a decentralized fashion with nodes all over the world to reduce latency and ensure performance and all that there's a lot there. So it's, there's a barrier to entry, I think from a cost perspective, but also from a technical acumen perspective, there's not that many folks that can build a layer one from the ground up.

Stephen: No, nor do they want to venture. I think it's a lot. Would you say it's fair to say it's easier to build an L2 or it just all depends on what the, what they're looking to accomplish.

Klay: Yeah, I would, I would say, yeah, I would say it's easier. Yes.

Stephen: Awesome. What are you looking forward to? You know, you're six months out of launching the main net. What is on the roadmap for stability protocol or what are some of your insights? Like, where do you see the future of. We're seeing that real world tokenization has all the hype behind it right now. What are your thoughts?

Klay: Yeah, so we've we've removed the, the native gas fee. We've got a fee less blockchain, which enables a very seamless Web2 experience, right? But there's a wallet involved that you can still have there. We're now working, we've got a 24 month development roadmap on some very cool things. And our, our next mission is removing the wallet.

And, and that's like, well, how is that possible? And we really just got to think about doing non financial transactions. That's a big difference because all blockchains are financial, public blockchains are financial transactions. But as the fee less blockchain, you can now start doing non financial transactions, and it is, there is way more non financial transactions that happen in the world.

Think of a Facebook like, you could call that a transaction. How much money are you going to pay for that, right? There's so many things that you could start using it when you don't have value to worry about. So being able to remove a wallet from this experience could be really interesting in some use cases.

So that's kind of coming up next. And then from there, it's just, we're laser focused on continuing to remove like increase the speed. We're already a fast blockchain, you know, two second block time, but. You know, we continue to get that like tighter and tighter and thinner and thinner and then capacity, finding new ways to store data and make it so that you can really scale this into a global network that can really be global compute and be a neutral network that can, you know, be the next internet iteration of the internet.

It sounds kind of crazy to say, but like. That's the goal.

Stephen: And as you move through, like, no wallet, or is it now you're not targeting maybe as many financial institutions, you're opening up anything that has, you know, transfer of, not value, but transfer of any kind of data and information. What are some of your target customers, like who would be a target ecosystem or a customer that you're like, hey, this would be interesting as we start to remove our wallet?

Klay: Oh, on that front yeah, that, that is a data, like, it's kind of like data transfer and, and messaging and being able to authenticate your data. So being able to make any document. And publish it to the blockchain with one click. Being able to go create a Word document, go file, save to blockchain, and it's forever known that you created that document and you can prove it mathematically, right?

Like do it on your Google, your Google app, right? Your Googled suite. You can do that today. I can show you that today. And that's a functionality that we have.

Stephen: I think that's great. I think that is where the world is going, and I think more and more people are going to want to authenticate their work, especially as we're going to see more and more lawsuits involving AI usage of other people's data, other people's content. We're going to see more and more people being rushing to that, and even if there is a small fee to pay, or as you say, an upgrade to the service, just like you have with Google Suite, where you need more room and you need to keep more of that on the blockchain.

It doesn't sound that crazy at all. It actually sounds like we're moving more and more quickly to that. And a lot of it will probably play out in the courts over the next three years, why we need this, you know, this blockchain to be able to send data for free,

Klay: Yep, exactly. And yeah, you, you nailed it. I think all the use cases that you just mentioned and that just that seamless use where it's just natural and anytime you create anything, you're just going to do a post a hash of it on, on the chain, right? It's just, just going to be a natural part.

Probably going to do it automatically without you even having to do it.

Stephen: Just like autosave. That makes a lot of sense. I'm interested to see we'll definitely have you back on when you go walletless to see what are some of the use cases that you've grown into. And we'll have you back next year to talk about, you know, You know, one year after Mainnet launch, what were some of the things that you learned, you know, maybe some of the areas where you pivoted or some of this, you know, the past where you're like, Hey, this is a wide open path.

Now that we've gotten this far we can keep on going down. Where's the best place to reach you? It seems like you're a LinkedIn person, but probably spent a lot of time on Twitter as well.

Klay: Yes, that's, that's totally right. I'm. I do a lot of writing on, on LinkedIn and but I'm on both. So feel free to reach out, always interested to you know, meet new and interesting people that are, are focused on, you know, driving adoption and use of, of, of a network. So reach out to the, to myself and the team.

Really appreciate you having, having me on Steven, I love the work that you guys are doing. So thank you.

Stephen: I love, this is a really great conversation. I, you know, I knew what you did, but now like when I hear the metaphors. And I'm hearing about, you know, mempools and, you know, right click and save to blockchain, it makes a lot more sense and very much aligned with the, you know, the vision I see the world going to as well.

It's been a pleasure.

Klay: Thank you.

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