UP014: 10XTS // building an enterprise blockchain ecosystem (feat. Anthony “Pomp” Pompliano)

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Michael Hiles: 00:00:00

We’re less concerned about our brand visibility and awareness and people using our software versus working with our consortium partners and enterprise partners almost for a white label basis. When I said we want to kind of be the salesforce of enterprise blockchain, it’s exactly that

Jay Clouse: 00:00:21

The startup investment landscape is changing and world class companies are being built outside of Silicon Valley. We find them talk with them and discuss the upside of investing in them. Welcome to upside.

Eric Hornung: 00:00:49

Hello. Hello. Hello and welcome to the upside podcast, the first podcast finding upside outside of Silicon Valley. I’m Eric Hornung. I’m accompanied by my cohost, Mr. fireworks enthusiast himself, Jay Clouse. Jay. How’s it going, man?

Jay Clouse: 00:01:04

It’s going well. It’s been a week of fireworks, my friend,

Eric Hornung: 00:01:08

and you love fireworks, especially firework pictures.

Jay Clouse: 00:01:11

Oh my gosh. This is a. This is a train I’ve been railing on. Is that the phrase? This is a

Eric Hornung: 00:01:11

no, it’s not the phrase.

Jay Clouse: 00:01:20

This is something I’m very passionate about. The idea that all fireworks photos look the same, and so stop taking photos of fireworks. Just look at the fireworks. They are very fleeting ephemeral things. Just enjoy them with your mind and your brain and your eyes.

Eric Hornung: 00:01:35

They’re going to be outlawed for drones soon since they are harmful to the environment. So we follow China’s path

Jay Clouse: 00:01:41

and you know, I would love to bring a guest on the pod who was in the fireworks innovation space. There is not enough innovation, the fireworks space and I feel like I’ve been seeing the same firework show my entire life.

Eric Hornung: 00:01:51

Well, if anyone out there is in the fireworks innovation space, if you’re doing something crazy with fireworks. Yep. We’re looking for you. You’re on upside

Jay Clouse: 00:02:01

I actually had a very interesting conversation as we’re watching fireworks of how could we innovate in this space? What can we do? And drones was the biggest crux of our idea. Drones in magnetism. I don’t know if that would actually work, but I think it good. I just want to see more tangible shapes and ideas in the fireworks, you know?

Eric Hornung: 00:02:19

Yeah. But then you get this idea of it being too manufactured and this point is becoming to belabored. So let’s move forward to why we’re here. Jay can you talked to the audience about what we’re doing here,

Jay Clouse: 00:02:32

here on upside we’re talking to founders outside of Silicon Valley. Eric and I believe that it’s an amazing time to start a company outside of Silicon Valley. We think time has never been better and so every week we’re here talking to founders who are doing just that, founders who are capital efficient, opportunity seeking, very intelligent and oftentimes more resilient than there are silicon valley counterparts. We would argue. So that’s what we’re doing here on upside. Eric, did I miss anything?

Eric Hornung: 00:02:56

Just that we have a unique here on the episode podcast. It’s a three part structure in which the first part is a discussion between Jay and I touching on some research, some key points, some potential areas of concern heading into part two, which is an interview with the founder about themselves, their company, and the opportunity and finally a deal memo, a verbal deal memo at the end, which we’ll walk through a little bit more in depth in part three.

Jay Clouse: 00:03:27

Actually, that third part of our show is my probably favorite part because that’s where Eric and I spend a lot of times synthesizing our thoughts around the company and talking about where we think the opportunity lies, things that we are excited about, things that maybe give us some pause in that is where we’d like to hear the most input and feedback from you guys, so if you guys have ideas on our show, whether it’s any section we’d love for you to tweet at us @upsidefm or email us hello@upside.fm

Eric Hornung: 00:03:59

and that kind of engagement is invaluable. We are on breaker as well where we get comments about some of the things that we’re seeing, some of the things that we’re saying on the podcast and we engage with everyone who reaches out to us, whether it’s on twitter or on breaker or leaves a review on itunes. We have a way to contact you

Jay Clouse: 00:04:20

shout out to breaker the social podcasting app that Eric and I are both very bullish on. So yeah, we’d love to hear from you. Tweet at us, talked to us on breaker. If you enjoy our show, please leave us a rating or review on itunes. It means a lot. Eric. Today we’re talking to Michael Hiles, the founder and CEO of 10XTS, which is based in Cincinnati , Ohio. 10XTS builds transparent, decentralized secure solutions for industry and governments using public and private blockchain, smart contracts, etherium advanced data architecture, cryptography, artificial intelligence, and predictive analytics. I laugh a little bit because these are big idea words and a lot of them today is going to be a technical episode

Eric Hornung: 00:05:01

and that’s why today we’re bringing in a special guest, Anthony Pompliano Aka Pomp Jay. Do you have a background on pomp?

Jay Clouse: 00:05:11

Super excited for Pomp to be here. He’s the founder and partner of Morgan Creek digital assets, a multi-strategy investment firm focused on providing access to blockchain technology and digital assets for institutional clients and wealthy family offices. Pomp formerly founded full tilt capital, which was acquired by Morgan Creek capital management. Before that, he was a product manager at facebook. He led growth at snapchat and he’s been a sergeant in the US army, so a very accomplished guy and if you follow the crypto and blockchain space at all, I’m sure you’ve come across his name. He’s definitely out in front and leading the pack.

Eric Hornung: 00:05:47

I’m really excited to talk to him. You want to jump in yet?

Jay Clouse: 00:05:49

Let’s do it.

Eric Hornung: 00:05:54

Pomp, Welcome to the podcast.

Anthony Pompliano: 00:05:56

Thank you guys very for having me.

Eric Hornung: 00:05:58

So let’s start with your investment thesis at what was full tilt and is now Morgan Creek. Can you kind of walk us through that?

Anthony Pompliano: 00:06:06

Yeah. Look, I think that Morgan Creek’s a multibillion dollar asset manager. They’ve been around for 15 years, started by mark you SCO who previously ran the UNC endowment in the middle name endowment. And so I think from Full tilt’s perspective, you know, we wanted to invest in the crypto space for our second fund and I think we saw an opportunity to deploy large amounts of capital into the market in a very kind of professional and sophisticated way, but we also realized that we need more firepower. Right? So it was just myself and my partner and I think that we really thought that we were going to have to raise capital from institutions. So we have two options. One was either to go and uh, you know, try to build that ourselves or to go and merge with one and so we mergered with Morgan Creek and the nice thing about Morgan Creek is they’ve got the track record as an institution over a long period of time managing billions of dollars they’ve got on the licensing, sec registration, bd licensed, et Cetera. They’ve got a, a built out sales team and investment team, etc. And so we’re kind of able to come in and hit the ground running day one and as my partner likes to keep saying that’s like going straight from high school to the pros. Right? It’s A pretty, uh, pretty exciting stuff.

Eric Hornung: 00:07:16

Well, hopefully you guys are like lebron there. Then when you say that you guys are investing fund two in crypto, is that the tokenized securities side of crypto? Is that the bitcoins of the world where you kind of putting investor money?
Anthony Pompliano: 00:07:31

You know, I’ve talked kind of broadly here without the individual funds, but I think that, you know, from a philosophical standpoint, we believe that any investment strategy that exists in a non crypto world can be applied to the crypto world and so if you look at it, whether it’s equity or debt real estate, etc. There is a correlated or a similar strategy that can be applied in the crypto space. And so that’s really our focus is how do we take these kind of traditional strategies and apply them. And what that means is, you know, at times will we take price volatility, risk for custody risk and holding individual tokens? Yeah, sure. Right? But other times we won’t, right? Because if you’re buying equity right, or you’re buying real estate example, then you might not have to do that. And so I think that, you know, my big piece of advice I think to a lot of other fund managers is just because it’s crypto doesn’t mean you have to lose your mind, right? If they’re still kind of. a lot of the core investing principles are there for a reason and so following them are usually a, a, a, a pretty good approach to life.

Jay Clouse: 00:08:28

I listen to a podcast with you recently on the venture coyness and you talked to that point, which was the point of if you’re investing into the blockchain or crypto space, that doesn’t necessarily mean you need to change the way that venture capitalist approach evaluating that as a business opportunity and as a returnable opportunity. Can you talk about that a little bit more and the dichotomy you see between how some people approach investing in the blockchain or crypto space versus what you’re saying as not losing your mind?

Anthony Pompliano: 00:08:59

Yeah, So let’s just talk broadly about investing in general, right? Who are the people, what’s the opportunity, right? What’s kind of the, the upside and what’s the downside? What’s the risk, you know, and then that’s obviously overly generalized, but I think that there’s a lot of people who are forgetting that stuff. So think of the people who are investing in a lot of these liquid token projects that aren’t receiving equity. Right? They have no clue who runs the project, they’ve never talked to those people and so you’re betting on an early stage project and so you probably would never invest in a startup without knowing who the founders were in and talking to them. And so people are just kind of losing those core principles. And so I think the same thing goes for risk and measuring it. Right? So I, I think I said a couple times now that crypto investors like to ask how high can it go? Institutional investors ask how low can it go? Right? And so I think that that’s just, you know, at odds with each other from a mindset perspective, it doesn’t mean that either one’s right or wrong, they’re just different. And so I think that there’s just these core principles that come with investing. Then it doesn’t matter what asset class you’re investing in, you still should at least be aware of them, doesn’t mean you have to adhere to every single one of them. But you know, just completely throwing out all traditional investing principles and saying this is different and in every way probably isn’t gonna history is not going to be kind to those people.
Eric Hornung: 00:10:14

So the way I kind of see the space is theRe’s kind of three buckets of crypto assets right now, and this is probably a little oversimplified, but I think it helps kind of frame people. Those are the payment coins, that’s the bitcoins of the world, the platform or utility coins. So that’s the theoryums ios’s of the world. And then tokenized securities, which is I think this developing space in the crypto space, like a subspace I guess. Is that kind of how you see it or is there a different structure for how this kind of space is developing?

Anthony Pompliano: 00:10:47

Yeah, I think that from a high level that’s probably a good framework, right? I think these or whatever came out with that, you know, awhile ago, and I tend to think that they are generally correct now. Will there be things that are kind of hybrids or you know, the edge cases of course. But my guess is that you probably capture a high majority of the market, but by kind of putting them into those three categories,

Eric Hornung: 00:11:09

what are some of the benefits of, let’s say a real estate company that owns one apartment building? What’s the benefits of tokenizing that kind of asset

Anthony Pompliano: 00:11:20

look, there’s a number of advantages that come from tokenizing an asset. I think that it’s almost beating a dead horse at this point when it comes to, you know, access to an investment asset, liquidity, global marketplace, 24 slash seven, you know, all these things that it had just been talked about enough. Our thesis though, we like to say that tokenizing assets compared to traditional public markets is not revolutionary. It is a mere evolution of the technology. And for main use cases it’s not great of an improvement. It is a bigger improvement for the edge cases. Right. So like the stock market’s closed more hours a week, then it’s open. Okay. We have a 24 slash seven marketplace like that is an improvement. Is that a material improvement? Eh, maybe, maybe not. I frankly don’t care. Right. In terms of, you know, is it or is it not? I think that my thesis around the tokenized securities is less to do with the underlying technology. It has everything to do with user activity and psychology. Right? And so the thing that if you asked me what, what do we believe that a lot of other people in this space don’t believe, oh, almost everyone else starts out with the tech. I actually come at it from the other side and I say, well, what are users going to do? Right? How do they think? And and so that is a nuanced way of looking at it. Some would say it’s important. Some would say it’s not. In this case, what that leads you to is if you believe that the digital wallet is the new brokerage account, all of a sudden it doesn’t matter if the underlying tech is actually an improvement or not. It means that in order for, let’s say everyone under the age of 35, they’re now going to buy and sell their assets through digital wallets. And so if you want your asset to be held by that user base, you have to be tokenized. It’s the only way that they can actually hold the asset in that brokerage account or in that digital wallet. And so I think people get caught up on the nuances of 24, seven marketplace better as global liquidity, actually going to be a thing, whatever. And I think they’ve just got to look at, look, coinbase today has 20 plus million users that are buying and selling currencies and commodities, right? That in a digital form. And so would those people liked to also own their real estate investments on that same platform? Would they like to own equity in companies? They’re probably right. And I think the first sign that we’re seeing that is with robin hood, right? They came out and they said, look, you can now trade bitcoin alongside your equities. Right? And always thinking of mass influx of people. And so some of that should have been by the hype of bitcoin, right? in the price appreciation and all that. But I think there’s a lot of validity to this idea of people are used to, you know, these digitally native generation are used to certain interfaces, user experiences, etc. And it’s just not attracted to them to go use the legacy tools and so therefore assets for probably one of the first times ever are going to have to keep up with the user interfaces and modernize themselves if they want to be on those platforms.

Jay Clouse: 00:14:17

So if you as an investment firm or if you Were giving advice to someone who is looking to invest into tokenized securities, where are some of the red flags you would be looking at and evaluating companies or what is something that would be a really good call it green flag in looking at a company?

Anthony Pompliano: 00:14:35

Yeah. So, and this goes back to like don’t lose your mind type comment, right? If it’s not a good asset in the private market is probably not going to be a good asset in the tokenized security market. Right. And vice versa, if it’s a good asset and the private market will be good asset here. And I really, really do think that this is more similar the traditional world then it’s not. I always tell investors, you know, the, the egregious example is you’re not a day trader, don’t day trade, right? If you’re not a real estate investor, then you probably shouldn’t invest in real estate. And so same thing here is if you wouldn’t invest in this in the private market, why are you gonna invest in it and the tokenized market, right? It’s just, it makes no sense. So I think that’s one. The other thing too is Look, there is going to be a period in time where there is a great amount of misinformation or lack of transparency in the market, right? Which will create inefficiencies in the market. And so I Think people just need to be very disciplined with you. Should you overpay 10 percent to the private market valuation or 50 percent? I don’t know. It’s asset dependent, right? But, but at some point people have to realize that there may be some changes or premiums or discounts on assets, but 5,100, 300 percent is unlikely to be sustainable in the entire market. But doesn’t mean a single asset, right? Might not deserve that, but, but I do think that the people who are saying his room at 200 percent price appreciation and you know, all real estate, I’m probably not as supportive of that stance as I will be that, you know, good assets will go up, bad assets, we’ll go down and, and by bringing it to a free market you get a repricing of all assets and just better price discover. Right. That seems more reasonable to me and likely that then kind of everything’s going up into the right forever.

Eric Hornung: 00:16:18

How does someone go about actually tokenizing an asset? What does that look like? Do I have to go to a secure ties and use their platform or how do I do that?

Anthony Pompliano: 00:16:28

I think there’s a couple of pieces here. One is there’s just the legal structure and like regulation component. So it depends on if you’ve got an existing asset or you’re trying to like start a company, for example, in most cases for an existing asset, there’s already some sort of cap table or chair certificate, you know, like, like structure. And so if there’s a cap table, you can simply take that Cap table out of chairs or excel, etc. And put it on a blockchain, right? It could be as simple as that. you could, uh, there’s paper share certificates. You could basically can’t stop the share certificates and issue digital tokens as actual shares. You could recall the paper shares, right? And then issue digital tokens. So I think it really depends on what the current structure and how do you basically digitize the business. Right. And then if you starting something, my general recommendation in the spaces don’t ever go to paper, just start out completely, you know, 100 percent digitized and you don’t have to worry about kind of legacy structure, et cetera. And so once you kind of figured out, okay, here’s the structure we’re going to use from a legal and regulatory standpoint, you can build the tokens yourself, are you going to pick a, a protocol you want to build on? Or you can go use one of the existing serviCe providers. Right. So, you know, secure ties I think has kind of executed the most rent in the space. Obviously harbor is up there with them in terms of name recognition and, and kind of be, uh, the capabilities of the team and funding and then you’ve got coin lists of the world, right? Who are, you know, really drIving large fundraises templem as another one, right. You can kind of go down the whole the whole thing there, there, there’s probably too many to name and then I think that you’ve got to really determine, once you figure out what protocol on what issue are you going to use, then it comes down to the exchanges. Right. I think that’s the biggest question mark right now. Open finances is up and running, but I think that um, you know, templem has done a couple of these smaller transactions kind of in a, in a private market if you will. And then teaser obviously has done one, but I wouldn’t be surprised if, you know, New York stock exchange and nasdaq jump in. We just saw the swiss exchange jumping from six group coinbase a circle. I think they’re all coming right? And, and it’s less to do with like, oh, we’re building security tokens or I keep talking about, I don’t know what a security token is. I do know what a tokenized security is. Right? And so I think that all they’re dealing again is they are just creating interfaces for the users to operate or to transact with and people are going to be forced to digitize their assets or their asset ownership in order to have exposure to that user base. Right. And so, so it’s, it’s frankly kind of boring when you compare it to all the, you know, kind of cool stuff that people are doing and like the hardcore the world, right. Whether it’s, you know, the security stuff and privacy stuff around like ZK snarks or things that people are doing with governance and did you know, smart contracts, all that stuff is so fascinating to me. This compared to that is, is fairly boring.

Jay Clouse: 00:19:18

So some of those companies you named off the securitize, the harbor, if you’re looking at a technology that helps other people tokenize their assets, what is interesting about that opportunity or not interesting about that opportunity to you as an investor? Or are You more interested in the assets themselves or do you have interest in the platforms that help people tokenize?

Anthony Pompliano: 00:19:40

Yeah. So, uh, I don’t know what a legal compliance standpoint I’m allowed to say and what I’m not allowed to say. So I would just say that we are investors in some of those companies and in some ways we are familiar with all of them, but wIth both the teams themselves and then also the projects, I think that it is very much infrastructure and kind of picks and shovels strategy, right? So if you’re an exchange, you really don’t care whether a single token goes up or down in value, right? as long as people are transacting, if you’re an issuance platform, you want to work on the highest quality projects, right? But to some degree you just want a high volume of projects. Right. And so I think that a lot of these infrastructure players in this space, they’re selling the shovels during the gold rush and you know, the people who buy the shovels, whether they find gold or not is less of a worry. I will give credit to a lot of these teams though that they’re being very thoughtful about the projects they work with. Right? So they’re not just kind of blindly saying, hey, we’ll take everything they’re saying no to people, which is I think a good sign, but at the same time, you know, I think that their business model is very much based on the overall industry growing, right. The volume growing, which is a good place to be for this market, I think.

Eric Hornung: 00:20:47

Awesome. Well thank you very much Pomp for coming on the podcast. We really appreciate having you. You giving us a lot of insight and our listeners a lot of insight to frame this interview. We’re going to have in a minute.

Anthony Pompliano: 00:20:59

Alright guys. Thank you guys so much.

Jay Clouse: 00:21:04

Michael. Welcome to the show.

Michael Hiles: 00:21:06

Hey, thanks guys for the opportunity to talk to you this morning.

Eric Hornung: 00:21:09

Yeah, we appreciate you coming onto the show. We would like to start kind of with the background of Michael. Where, where were you at growIng up? Where are you from? What’s the history of Michael?

Michael Hiles: 00:21:21

Well, much like the willy wonka movie. I won the golden ticket. I was a little kid and my dad worked for one of the first independent software vendors in existence and comm systems based in Cincinnati , Ohio. Centcom was the very first company to ever figure out that companies would be interested in buying software from someone other than their hardware vendors. And uh, I started coding, uh, you know, hung around the office and uh, this little kid was interested in computers and I just had no idea that that was not normal. And um, most people hadn’t even seen a computer in that era. So I started coding on a pdp 11, which was a digital equipment corporation, a system, a deck back in 1979. And uh, they let me mount some tapes and run some batches and, uh, I was really interested in logic and actually writing code because I knew that’s the magic. So that gave me a di ball compiler, which was decks version of cobol and um, you know, I started hacking out on a vet to 20 amber monochrome monitors and quickly moved into pcs because that was the era and uh, started to acquire my massive smithsonian collection of former platforms. Everything from zenith heath kit to tandy trs model one with the eight inch floppy and just kept, kept right on cruising from there. Did my first consulting gig, actually got hired by my local radio station. I was friends with the djs and this was back in the days of the old cart systems when they would plug in the commercial carts and they manage everything with a three by five card box. Well the djs would get to jack and around in the studio and knock over the box and spill all the carts and commercials would get missed and not played. So you know, the sales guy in the station manager would come marching into the studio like you guys didn’t play so and so carpet cleaning, commercial, you know, 9:58, you know, like. So I just off the top of my head while you guys need to write a little database to manage this and a, that was my first consulting engagement. I actually was a 15 years old and got paid $6,000 to write a pascal based cart management system for the radio station. So I was pretty hooked, you know, so I came at it from the engineering side, but my dad was in sales so, you know, while I’m looking at the engineering stack and staring at code, I’m listening to he and all of his colleagues actually on the phone selling it and you know, understood how to translate to, you know, the tech into features and benefits and really be that translator. So when I say I got the golden ticket, that’s literally the other part of it is not just tech, but then also the sales and marketing and being able to speak conversantly in a business language for nontechnical people. I started a web development company in 1994, one of the first in the Cincinnati area to uh, get into the web. Uh, I saw the web really ban no, the next major phase of technology and community computing. I’d already been through the transition from mainframe to client server and, you know, moving from token ring to ether net and all the networking protocols. And so when the web started to really rear ted, I knew that that was the next big opportunity. And so I started a little company called soft links interactive and grew the company up, had, you know, almost 20 people, uh, at our peak. Unfortunately the timing wise, uh, I was hitting my peak about the time that I saw the storm clouds brewing for .com 1.0 Oh, and, uh, realize that most of my client base was either venture funded or venture back divisions of bigger companies realizing that these guys are all burning against cash, not making the cut. what am I going to do in nine months when the well runs dry. And so I started talking to a client of mine who’s older, brother owned reach magazine. Uh, so you guys get the coupon magazine in the mailbox and uh, the suggestion was made, hey, this might be an awesome partnership. So I merged soft links interactive with reach publishing, spent a couple years, they’re

Jay Clouse: 00:25:38

mid nineties, late nineties?

Michael Hiles: 00:25:42

this was 99, 2000 2001 and by 2000 2001, you know, the dotcom bust really kicked in gear. But yeah, we were riding high early on. We were selling remnant space and the coupons stuff to earthlink and yahoo and all the major players back then. So connecting you national ad buys because that’s one of the things reached, did a reach, owned very significant portion of the largest valpack markets as a franchise, which is a, you know, cox media, cox digital group, you know, being able to go in and syndicate large block ad buys multiple cities with earthlink and yahoo and all those guys. And that’s really how we were making money at the time.

Eric Hornung: 00:26:21

Speaking of making money, you made $6,000 when you were 15. I know when I was 15, I would not have spent that the greatest way. What did you do with that? Like $6,000 to 15 is a lot of money.

Michael Hiles: 00:26:33

Do you remember when mtv rapper videos had the big giant block cell phones, the brick phones with a whip antenna and uh, I was also, I’m also a musician. I play keyboard and in piano lessons early as a kid and uh, so I would buy like mitie and recording gear and blow all my money on gadgets and you know, I look back on the millions of dollars that I spent on nothing in my lifetime and now I’m old and have kids and it’s like, oh wow, that was stupid.

Eric Hornung: 00:27:04

He still makes it in the basement or what?

Michael Hiles: 00:27:06

No, I haven’t, I’ve been away from that for awhile. But uh, I still love it. I followed the scene, you know, like totally into the digital electronic music and uh, you know, all the recording equipment, you know, but at one time I had like a fully decked out, full blown studio. I produced albums for bands and uh, you know, it was kind of a side hustle gig.

Eric Hornung: 00:27:26

Cool. So you started in Cincinnati ,

Michael Hiles: 00:27:31

i was born in Cincinnati . I was born in Cincinnati , but uh, then I spent a fair amount of my elementary school years in st louis. Then we moved back in the early eighties to eaton, Ohio, which is about 40 miles north of Cincinnati , about 30 miles from dayton, right on the Indiana border. So I’m a country boy, which is really also interesting. GeT my little country twain going on. So, you know, being out in the sticks and vienna digital nerd that’s running current with the rest of the big city populations is kind of an anomaly I guess.

Jay Clouse: 00:28:05

So it sounds like you’ve been kind of at the cutting edge of technology for a long time. At what point did you start turning your attention to the blockchain or crypto space?

Michael Hiles: 00:28:17

Well, I mean I was following it very early know because it’s not new. You know, if you look at blockchain and look at the technologies that underpin blockchain token ring has been around for a long time, right? I mean every computer attached to a token ring network functioned as a node. So you had peer to peer models were around many, many decades ago and then of course we came through the evolution of file sharing, uh, with napster and nutella and you know, all of the lime wire, you know, in that era when people were sharing mp3s across decentralized peer to peer networks. So the collision of all of those technologies in the timeframe that it happened was inevitable really. So, you know, being able to distribute a patch key pair across a decentralized peer to peer network is not necessarily cutting edge. I mean everybody thinks that it is, but when you look at it in terms of prior art and the evolution of the tech, it certainly, you know, the natural progression. So when it came along and I was already clued in and you know, just interested from a, you know, academic, you know, just enthusiasts standpoint, didn’t really get into mining bitcoin until like 2011. I, you know, when you could still mind And on pcs basically I ran some mining software and generated a couple of things that were sold long before the value is really there. So I joke around and I say everybody suffers from a crypto regret in the space.

Jay Clouse: 00:28:17

Crypto fomo

Michael Hiles: 00:29:55

It’ll be, yeah, it’s gonna be like an entry in the dsm at some point is a form of depression. You know, I, I used to have like all these bitcoins or theory, um, and I sold them at, you know, 30 bucks and whoops, another thing. So anyway, that’s how I transitioned into the space. I didn’t really lean in. I’m on the technology because by that time I had a lot of experience and market cycles of tech and it, it, it’s still such a nascent, emerging space even after 10 years. So from a practicality standpoint, it’s not like anybody was rushing to buy blockchain in 2011 and I don’t think people are still rushing dubai blockchain in 2018. It’s merging certainly. But when I’m interviewed by cb insights and gartner and they’re asking me, you know, from a future standpoint, how’s this look? And I’m like, well, you know, you look at gardner’s numbers that only really one percent of ceos across, I don’t know, they have probably 70,000 that they tap. Only one percent actually have anything going on and only nine percent have active plans to do anything in the blockchain space and this is, you know, 10 years after the fact. So there was plenty of time to really foment my plans and put them into place. So I leaned in and started planning based on some financial hypotheses that I had in late 2015, early 2016 in particular around how does blockchain impact equity, early stage equity, equity transactions. The hypotheses that I started working with because I was also exposed to equity and a serial entrepreneur myself. Been through capital raises and a mentor in the startup space and you know, really understanding a lot of those intrinsic saw the opportunity for blockchain when it came to actual real world existing assets as opposed to, you know, just crypto assets that had really no backing other than the economics of belief. But the technology is extremely useful And you can solve a lot of problems with it. and I saw the illiquidity and the alternative asset space and the collision of regulatory compliance and all those issues that were swirling around. When’s the right time to start the discussion? And so a 2016 started identifying team members, putting the hypothesis together, formalize the company in 2017, raised a small round to get our mvp underway and get a couple of our engineers on full time to start building out the foundation of the future of what we’re progressing and working towards. You know, it’s funny because I have the same conversations with crypto folks right now that I had in the early nineties around information and I was like, oh, this platform is going to undo the, you know, the big banks and you know, we’re going to undermine the man and we’re gonna change the world. And I’m like, well, I literally had this exact same conversation 20 years ago. It was just around the internet and information. You had the, you know, the crypto. Well they were cipher punks back then, right? And it was all guys in their basements that were hacking away at web servers and web. And they thought that, you know, hey, this technology is going to democratize things and make a different world. And I’m like, yeah, well you know, you have big companies with trillions of dollars in cash to invest in these things. They’re just on the sidelines waiting to spend the money in an optimal way at the right time. And I don’t care how much money you raised in your ico, you do not have the cash burn and the run rate. I mean it’s very costly to acquire customers. And when you have companies that already have line of business applications and already have customers, my positioning in the market was less of trying to go out and create the front end brand and hype around my dad and my, you know, verticalized application and we’re going to do this and we’re going to do this. And I got a lot of friends that are still pursuing that model. But I saw the opportunity to really follow the enterprise path and say, you know what? There’s going to be a giant segment of the enterprise market that understands blockchain. They’re going to wrestle with the benefit versus the cost. They’re going to arrive at a use case model and then you know, they’re going to discover that the technology is only about 10 percent of the effort when it comes to ledgers, you know, 90 percent of the effort is around building consortium’s and uh, you know, building out the ecosystem with the proper governance, you know, the proper risk mitigation plans, those kinds of things to make the technology really feasible for the enterprise space.

Eric Hornung: 00:34:30

Let’s take a step back and just kind of define what 10XTS is doing in this space. Where are you providing customers?

Michael Hiles: 00:34:39

Well, that’s an interesting question because to date we’ve been fairly nebulous about the direct conversation because we’ve been in stealth mode for the product so people know who we are, they know, we know that we’re in, in the space where they know that we’ve got a kick ass high powered team. This is complicated stuff. And given that we were identifying a traditional enterprise sort of path, I wanted to bring in season players and uh, so we, we put together a killer team, you know, my cofounder and my partner coo, rob slater. Rob was a program manager, air force research laboratory. He was a major in the air force. I wanted to bring on an operating partner from an internal ops standpoint that knew how to deliver on extremely complicated technology. We brought on steve thomas is our chief growth officer. Steve actually, I intentionally wanted a chief growth officer that was formerly a ceo of a software company and uh, steve, he founded a company called path lore, which is actually probably the first learning management system and existence. And, uh, he exited a publicly traded company and I convinced him to come out of retirement and I’m work with 10XTS to run sales. We also brought on, you know, economics guys brought on banking where I’ve got a chief math officer who’s a max planck institute, a post doc senior research fellow. So, uh, what we did was we set out to essentially define a build our own blockchain. We saw the holes in the market when it came to the traditional public space. Uh, in particular I rail a lot on the risks and security associated with building on top of public cryptocurrencies. Like a theory in particular. We’re not a theory, not a fan, which also makes me unpopular in the crypto space and there’s reasons for that. You know, the crypto space is full of a lot of young guys that have never worked at any senior level in enterprise it. They don’t understand things like sarbanes oxley and the efficacy of your data when it comes to compliance with regard to your corporate information and how is a public cryptocurrency blockchain going to play into that from an iso standard standpoint too, you know, how is it governed and we solve the problems and you see, you know, see the issues with even the consensus between the miners and the public cryptocurrency space. A resulting in radical forks of the ledger as the miners, the people responsible for maintaining and governing the ledger. They don’t agree with each other. And now as a higher order application user, I’m designing an application or I’m trying to bake that into my. It stacks somehow in and now I’ve got decisions to make that are based on decisions being made by people other than me. So I don’t really have a strong representative voice in how am I data utility infrastructure is being maintained and managed and if it forks in such a way that you know, the new fork requires me to now spend additional new money to integrate and update in a rip and replace. You know These are all the kinds of things that the traditional crypto space don’t understand when they’re dreaming of mass adoption and and main street enterprise use cases. Just this nuance of having a ledger that is owned by the enterprise community that’s managed by key enterprise communities with all of the risk and compliance and governance and reporting. All of those things maintained from day one. We saw that as really being a rubber meet the road opportunity for us, which is why we started working on building out x dex and our next step is to start to decentralize the actual core ledger itself from a consensus standpoint across a community of self interested actors that would participate in the chain. So we’re, we’re essentially selling nodes at the enterprise level as a turnkey application product stack that we can turn on. But the other difference that, you know, we, we saw the, you know, the ledger as certainly separate technology from the rest of the stack, but at the same time who wants to develop microservices? Right? And so we saw the opportunitY to essentially the ledger and the protocol and a microservices layer to make it easier to develop against and integrate. So building that out as a turnkey type of a development stack for the ecosystem we believe is another major differentiating factor for us because now I’m just consuming as a developer, a endpoints and web hooks as opposed to actually having to write these things and you know, create protocol, communication, translation layer back and forth with the ledger. So that’s kind of wheRe we’re at.

Jay Clouse: 00:39:37

if I were to boil that down, just so I understand this, you guys were looking at an impending need for the enterprise community to have a blockchain style ledger and you looked at the crypto environment or the blockchain environment, decided what was out there wasn’t going to work the way those customers would need. And so that is why you began 10XTS and now XDEX to create that.

Michael Hiles: 00:40:03

Yes, you got it.

Eric Hornung: 00:40:05

And how do your services like XTS core XTS connect and XTS launch, where those temporary services are those consulting type services that you guys offer on the route to XDEX or are those something separate?

Michael Hiles: 00:40:20

Yeah, you nailed it. I mean it is Basically when we started developing, we broke apart and identified all of the key pieces of the puzzle, what it takes to create a blockchain application or integrate a ledger into an existing application. What are all of those components? So that was really our first iteration of productizing the service essentially. So it makes it easy to talk about things in a pieces and parts, lego type model with lesser knowledgeable folks about blockchain if you can relate them to things they already know and understand and you know, really trying to create a manifest of internal development modules basically. So the idea of componentization for us in our pursuit to essentially build a, call it the salesforce of enterprise blockchain or specific verticals, you know, that that’s really represented in that breakdown. And it’s led us into a lot of awesome conversations. No enterprise development conversation is short, you know, the sales cycles are very long, especially at this stage, you know, very laden with education and um, you know, just a lot of time because of where we’re still at in terms of the evolution and development of the market itself and how, how, how do you get out there and start talking about things while still building towards the, you know, the real foundation product, so to speak, which is a combination of those separate pieces. Parts. Basically.

Eric Hornung: 00:41:50

What does the governance structure like on XDEX, because I can imagine as you’re doing sales, that’s got to be a point of contention between, I’m not sure who your potential customers are, but let’s say a regional bank and a national bank, they’re going to have different views of how governance should be handled. What is have you heard?

Michael Hiles: 00:42:11

So I mean oBviously the banks had been exploring, you know, the big banks in particular have been working on their own consortium with our three in Florida is the ledger at this point I would be hesitant to even call quarter and actual blockchain, which is okay, you know, it’s fine. I mean, but from a pure standpoint, they’ve modified that core framework so much. But as long as it meets their use case from a consortium standpoint, awesome. You know, they’re solving their problems and the big banks can afford to do those things. We’re looking at the market as any other market that you’ve got the big players, the major, you know, say top third of the market that’s just going to go do their own thing. Then you’ve really got, you know, say there’s a mid band that may swing either direction, but then you’ve got maybe the lower third of the market that represents the smbs and the mid markets that will not have the expertise and the skill sets and the budget to engage in that high level of a proof of concept and r and d effort as a industry consortium. They’ll still want to capture those opportunities and the return on the investment that’s promised by the technology and my focus is really going to ultimately beyond that smb and midmarket space. But to answer your question about governance, when we were in our r and d mode and we were evaluating different consensus protocols, we realize that proof of stake was number one, have a better technology approach from a performance of the network and throughput of transactions on the network and we realized that, you know, staking provides the voting mechanism to adequately handle and a democratic fashion the support of the chain. You know, the idea of a particular constituent wanting to influence the direction of the, the ledger and the blockchain infrastructure itself is a function of investing in the chain. Right? If you, if you want things to happen in the chain by in deeper and vote your state and providing a path to be able to do that easily because, you know right now in particular proof of work environments, it’s a complicated process to, to vote and it’s basically I have to run a version of the software or you know, pick which version I’m going to support and you know, so trying to get that consensus across the mining community is um, you know, half hazard and ad hoc at best. Whereas designing an intentional democratic governance model, going in layout the framework of what it looks like from a, in an executive committee that essentially votes on all of the parameters of the blockchain, but then you have primary nodes that are voted into place that are able to actually write to the chain as far as active witnesses. And then, uh, you have the non-writing witnesses that essentially aggregate transactions and provide validation to the ledger for the active witnesses themselves. So anytime witnesses nonperforming they can simply be, they can be voted out. The providing that voting mechanism within the actual chain framework really solves a lot of that governance problem.

Jay Clouse: 00:45:37

Can you explain a world to me where this is in place? Let’s fast forward and actually I’d love to hear what your thought on timelines is, but fast forward some number of years and say you are wildly successful. What does that world look like and how does, whether it’s XDEX or something else coming soon, manifest on a day to day level to your clients?

Michael Hiles: 00:46:01

Well, there’s a couple of layers, so that’s a great question. So when you stratify the clients, you have end user clients, right? Just common, ordinary, everyday people going about their everyday lives and business and they’re, you know, conducting transactions and they’re managing their financial portfolios through software platforms that are not necessarily going to be radically different than the ones that they’re using today. It’s numbers on A screen. So from the end user standpoInt, there should be no awareness of the blockchain. There were literally should be no awareness that this is a blockchain or a ledger that’s managing all of this stuff underneath because it’s completely irrelevant, which I know is a shift right now because we crypto enthusiasts or you’re like, hey, I’ll log into my wallet and look at my tokens. Right? But in the end it’s like, well, I’ve already got an investor account at td ameritrade and I can log in and I can look at my portfolio and in, uh, whether that’s blockchain that’s deriving those numbers and presenting them on the chain, or whether that’s, you know, a mongo db and it’s being pulled out of some centralized stack it. None of that technology is apparent to the end user. So the second layer of user is, of course the business user and the business users care about their technology from a cost and efficiency standpoint. That’s very important because as we end up movIng forward into the ledger space, the promise of the efficiency models and elimination of tiers of intermediaries and middlemen and you know, all of the cost of actually maintaining the data itself and the connectivity to the ledger. You know, because if you look at it right now, everything from an enterprise standpoint, you can do with a mongo db and a vpn, right? But it’s when I have a consortium of several hundred cooperative partners inside of a, of a platform ecosystem, if I have to maintain as an it manager, you know, 700 discreet vpn connections and data connections and filter controls against my data stack to provide that common access layer across, multiply that times 700. Right? So you know, you’re doing, that’s an awful lot of just it work that has to be done to maintain the same level of transparency and access to the data across that entire consortium ecosystem. So when you look at like healthcare networks for example, you’ve got hospital groups that work with hundreds of clinicians and clinics, right? All sharing phi and having to maintain those dedicated hard coated pipes of data across all of those organizations becomes incredibly redundant. So blockchain and distributed ledger becomes a better mortar between the bricks essentially. So those guys care, right? They ultimately do care about the cost and the efficiency model of how they’re managing their data. So if I answered, did I answer the question right? I mean I know that wasn’t florist

Jay Clouse: 00:49:08

and so I guess I guess the way you answered the question is if you are successful, it manifests in just a smooth experience of the transactions of information and currency I would suppose without me really realizing it

Michael Hiles: 00:49:24

when we are successful at what we’re doing, ultimately we’re less concerned about our brand visibility and awareness and people using our software versus working with our consortium partners and enterprise partners almost from a white label basis. And when I said you know, we want to kind of be the salesforce of enterprise blockchain, it’s exactly that. They already have, you know, if it’s a financial services firm, they’ve already got an investor portals and investor accounts, why do I need to cash burn for customer acquisition at the end user level to try to onboard individual discrete customers at the cost of hundreds of dollars each, right. To make the cut on a network economics model for sustainability of the, of the framework. When I’ve got, you know, say one small broker dealer may have 20, 30,000 investor accounts. Right? So my approach Is how do I work within the confines of their existing front end retail store front portal and connect our framework to present through their portal to their end users.

Jay Clouse: 00:50:34

So let’s say you’re approaching me, you guys are going into a new capital raise and you’re talking about this opportunity. How do you quantify this opportunity? How big it is?

Michael Hiles: 00:50:46

Oh wow. ThAt’s a big one. That’s a great question. In terms of what the industry evolution looks like for us, and I can go and derive some gartner numbers who’ve indicated a $176 billion.

Jay Clouse: 00:51:00

Okay.

Michael Hiles: 00:51:04

By 2025, 85 percent of banking ceos have indicated interest in blockchain technology. Financial services is by far the most evolved and leads the pack of the rest of the industries that we’re tracking. And so right now, you know, I threw out the one percent number of cios that we’re actively working. It’s actually five percent in financial services. So you’ve got a five x multiple of cios in the space that are actually already working and about just shy of half have plans in the short to medium term. The us is expected to see the greatest adoption globally within the next two years. We’re going, we’re getting ready to experience a huge search now this past couple of years, you know, we kinda got clouded a little bit because of the crypto billionaire conversation and ico and which I believe was an actually a, it’s a double edge sword, right? It helped advance the awareness of the technology, but at the same time it hurt the technology because of the scams and the nonsense that has gone on in the crypto space. and then that translates into risk. You know, every time there’s a risk that gets thrown up on the map for enterprise it, it translates into, you know, let’s stop on the clutch here and go to neutral for a minute and watch and see where this thing goes. In fact, about ernst and young, uh, ran a poll earlier this year about 61 percent of it cios and industry professional salt regulatory complexity is the biggest barrier to widespread adoption. And then the second was integration with legacy technology at 51 percent and just slightly below that, a lack of general understanding of blockchains capabilities as a whole, like 49 percent. So those are your top three significant barriers in the industry space from an enterprise perspective around the adoption and evolution of blockchain. But we’re on the cusp of this hockey stick, right? I think those are going to get sorted out.

Jay Clouse: 00:53:11

I would love to hear, when you say on the cusp, let’s say that financial institutions are the leading enterprise adopter of this technology. What’s the timeframe on that? When do they employ this in a meaningful way

Michael Hiles: 00:53:23

that’s going to be a mad dash probably chicken late this year and I think it’s going to be a mad dash scramble through to 2022, next three years. How does xx capitalize on that?

Eric Hornung: 00:53:38

How does XDEX make money? What’s the business model there?

Michael Hiles: 00:53:41

So we have a combined revenue model for us. Obviously transaction fees inside of the chain itself helps to grow the economic value of through network effect. The more users of the chain. We have a fixed internal token model that is the transaction settlement token inside. We’ve been very careful to map that out. Follow not only the scc regulations around securities which were very intimately aware of but also fencing, right early in the industry there was a lot of discussion on bitcoin to arc and you know, among the mining community in 2013, 2014 around is is bitcoin even legal, right? And fincen put out a series of pronouncements and bulletins and they analyzed ripple. For example, you know, there was a fairly significant dialogue that went on around convertible virtual currencies, money services, business licensing, you know, what does all of that look like and fence and kind of put out some, not very easily defined parameters, but they were very clear in their definitions of what constitutes a convertible virtual currency. how do you generate that? How do you acquire that? And uh, so we followed all of those when designing our ecosystem, so we do have an internal currency token that pays for services on the platform and then there’s higher order applications as well, which is basically metered apis. So you’ve got the blockchaIn from a transactional standpoint, you’ve got api access for higher order functions and there’s an entire product roadmap around that and hopefully we won’t be the only ones designing those applications as well as the ecosystem widens there’ll be other higher order cloud services, application developers that will also start to plug in and realize what we’re doing. But then there’s also the red hat model, right? So you know, I’m, I’m not necessarily a big fan of red hat when it comes to an economic model because I think that they run behind in terms of having the capital to conduct a lot of r and d to keep them relevant in the space when you look at microsoft and google and amazon, but at the same time there’s a significant level of services and consulting that goes along with that. And then 10XTS also has sort of a venture lab component that’s attached to it as well because we’d been approached by so many other companies that are interested in launching projects and being involved in the space and leveraging our expertise is advisors and in technology developers to develop products in conjunction with partners. We actually have six, seven different revenues areas that we’re looking at in terms of potential revenue stream.

Eric Hornung: 00:56:36

You mentioned earlier, one of the revenue models is a 10XTS internal token that will be only available to the enterprises that joined the network or how is that going to be issued? One of the token economics look like on that.

Michael Hiles: 00:56:53

Yeah, so it’s EDEX token that is ultimately a stored value token. I mean it’s a commodity token. One of the things that we’ve done, and we’re getting ready to push the window on this in terms of how we go to market. Our next round, we’re actually getting ready to go through a regulation crowdfunding campaign. We’re going to raise a million in a cf campaign for ultimately nonaccredited investors, which means the average person can legally buy into this opportunity. And the way we’re doing it is we’re actually selling equity into 10XTS. You’re buying traditional shares in the company. Our innovation and this is one of the problems with the space and you know, I talked to regulators and talked to the attorneys and I talked to, uh, you know, I’ve been working with a congressman, warren davidson’s office, worn sits on the house committee for financial services and by the chair of the committee to draft the whatever it’s going to be the ice ceo and blockchain legislation for the house. And so we’ve been really trying to peel the onion here on a bunch of things. But the, the point that I made early on to these guys. Yeah. And talking to. Yeah, like the United States chamber of commerce, you know, they’ve got a c tec group, which is their emerging tech analogies and their capital markets group now working with the us chamber in dc and then working with the house, you know, like we don’t have a taxonomy, there are no law words and the us code that say things like ledger or blockchain or decentralization, all of these are being tossed around by the industry and by even the sec for example, but there’s no notification in us law to even derive the meaning for the taxonomy and we don’t have a common taxonomy. So how are we going to legislate things that don’t have a common language that we all speak and understand across the board. Now, why this is important is we saw this as an opportunity to sort of split hairs here. So you have the internal convertible virtual currency stored value token. That’s a commodity that’s being generated through the blockchain writing blocks to the ledger. And you know, just like, you know, mining for bitcoin for example, are you, you find transactions, you right, um, to the ledger and you get a bitcoin, and I’ve written extensively about how this is very analogous to the early days of even computing where you rented processor time and you paid for it as a service and you marched down your paper tape or your punch cards, your mag tape, and you mounted it on the drive and you ran your program and you got your green bar output report and you’ve got to build that represented processor cycles. How much time and processing did you actually consume on the platform? So that’s a parallel to ultimately when you’re writing transactions to a blockchain ledger, the miners are the witnesses that are writing through. They’re hashing power, their computing power. They are performing a service to maintain that entire blockchain. So the, the token that they are rewarded with represents payment for those services. No one is arguing that the cftc the sec, the treasury department, everyone’s pretty much in line with that, which is why everybody says, well sure, bitcoins, legal right. And from a proof of work standpoint, a theorems legal. The problem was with the way that etherium was funded. Right? So is the theory. I’m actually a security even though it’s being mind, was it a security based on how they actually sold presold the token and the crowd sale because you can make a brick a security, you know, if I say, hey jay, eric by this, by this jelly donut from me for 100 bucks and you’ll be able to resell it next week for 10,000 bucks. Well in that instance, I just threw my language and how I promoted that to you turn to jelly donut into security, which isn’t registered, you know, you’re never going to buy the XDEXtoken in a, a reggae for example, because there’s no assurance that if I sell it in a securities offering that it will ever lose the security status. Even though, uh, you know, bill hymen and you know jay clayton, those guys say, well, there could be a token. It starts, this is gear as a security, but then eventually is not one anymore. Well, show me in federal code what those threshold metrics are, who’s making the decision because it’s still sounds really subjective and I’m not going to put my company and my investors and my stakeholders, my users at risk by rushing in, and then we’ve created a separate token that represents a nano services license. So when you look in term, look at software and computing services in terms of licensing and services models, we already paid for api metered api connections. Now the missing ingredient with a lot of the ico space is they declare themselves to be a utility token, but then they don’t back that up with legal evidence from a contractual standpoint that spells out the terms of the license and what you’re getting for the stoke. So we created a nano services token that cannot be exchanged or traded at all. It can only be purchased and the only thing you can do with that token is converted into our internal currency token in in the future. It’s your discretion and that satisfies the how we test. We believe we’ll we’ll we’ll find out, but we believe it satisfies the howey test because the actual token being sold can never be exchanged or traded or transferred other than converting it into the internal currency token. Therefore, it was not purchased in any way, shape or form with the presumption of profit by just simply eliminating the presumption of profit through the efforts of third party management. That sort of neuters the howie Claim.

Jay Clouse: 01:02:51

What is the howey test?

Michael Hiles: 01:02:52

The howey test is a famous case and I think it was 1946, so the United States versus the wj, how he company where a landowner wanted to get into the citrus orange growing business and sold essentially a participation to people to buy into his operation and he would manage and maintain the the orange grove and then you’d get shares of prophets and the sec said, whoa, whoa nelly. This is a security, therefore we’re taking you to court and that was the case that really defined at the federal level what constitutes security in the United States of America and specifically why it is a security. This is still today, the measuring stick that’s being used by the sec to determine whether an ico or whether anything’s a secure

Jay Clouse: 01:03:44

something from 1946.

Michael Hiles: 01:03:46

Yeah, and, and, and the funny thing is, is when you abstracted away from a behavior and intent standpoint, and don’t even talk about technology, it’s still pretty good. I mean United States has the most stable equity market in the world for a reason. You know, it’s expensive. The launch securities because of all the checks and balances and the assurances that it’s not a scam, right? I mean that’s ultimately what the government is there to do is to protect the investor and ensure that there’s proper registration or exemption from registration under one of the clauses in the code and proper reporting and accountability for information, decision making purposes. I don’t challenge that. I think people are stupid to challenge that.

Jay Clouse: 01:04:29

Mike, one of my last questions here, why are you doing this in Cincinnati , Ohio? Is Cincinnati the best place for this? Is there some natural geographic advantage or is it by happenstance?

Michael Hiles: 01:04:43

its happenstance. I mean, Cincinnati is a cheap place to live. I mean, let’s cut to the chase. Yeah, I can live in a three, two on a half acre for under $500,000 and a really awesome part of town. Five thousand square foot house and um, it, you know, it’s just an inexpensive place to live. It’s happens to be where we’re all from, but you know, even we’ve contemplated what’s rb plants, right? You know, if, if the sec comes along and says, no, you guys approach is wrong. All right, well then we’re off. Sure. Bottom line, I’ve already made that statement to the United States chamber. I’ve made that statement that congressman warren davidson directly to his face and uh, you know, it was interesting because his response to me was, well, if we can’t get this stuff figured out, you’re probably better off going to Switzerland or the caymans and there’s no reason to hold up your development and you know, that’s a sitting congressman now. I love the guy to death. He’s patriotic as it gets he’s a businessman at his core and uh, you know, when he’s very knowledgeable about the space and he’s looking at the playing field and he’s saying to us, and we’re in district, so you know, once again, I got the golden ticket. No drew the lucky card on that. I’m actually his constituent and we’re in his district talking about lucky. Right? So being able to sit down and have these conversations is already taking place and it’s just unfortunate that we’re not moving fast enough in an orderly and an intelligent fashion to not stymie the development. Which is why a group of us as sort of suggested, well maybe, maybe we take a light touch with some minimal registration so that they can keep tabs on the project, but then let’s follow like the 1998, uh, internet sales tax and put a moratorium in place for at least a few years so we can still keep track of projects and you’re going to have some tethered to everybody involved in a project so if there’s a fraudulent activity or something that takes place, we know where to go find you. But then you know, let’s light touch hands off, you know, let’s sandboxes out for a couple of years before we rush in with well meaning intentions to define the law and you know, that can be just as disastrous as going in with a wrecking ball. And you know, laws are not easy to change once they’re on the books. So if it’s a new law, that’s one thing. If it’s changing an existing wall, we don’t, we don’t want to build barriers for ourselves down the road

Eric Hornung: 01:07:06

regardless of where you guys end up, whether it’s staying in Cincinnati or offshore, whatever the regulatory hurdles are. How do you guys define success? What are some of the kpis that you’re looking at in the next six to 18 months to say, okay, we are progressing well with XDEX?

Michael Hiles: 01:07:23

Well, I’m mean as a startup, if I’m still making payroll in 18 months, then that’s a success of its own. right? So let’s get real practical about this. We’re making payroll now and we keep our cash burn light, which is the other benefit of Cincinnati is because of the, you know, the price elasticity of the talent is certainly there, you know? Uh, I would saY that my next major benchmark for success is having a functioning ecosystem of financial services and financial players that have recognized what we’re doing bought in and are participating in the consortium effort.

Eric Hornung: 01:07:23

Like how many?

Michael Hiles: 01:08:08

Well, I don’t want any one financial player to operate more than three nodes. So this gets into our distribution and our governance model. Obviously the executive committee can define how many nodes are necessary. We can run 100,000 transactions a second on 21 discreet nodes writing to the blockchain, which is very important from a technology and a transactional throughput standpoint because you don’t want any of the latency that’s associated with current cryptocurrency models. You know when your crypto kitty’S application is delaying your, your security settlement. That’s a problem. So right now we’re targeting 21 nodes total will still operate probably three of them into the future. So you’ve got some in number mix of financial players that would represent one note each or up to three nodes, each a and that’s my goal through 2019 is to really decentralized the active primary witness operators that are supporting the ledger while also supporting and maintaining external application development projects from, you know, a higher order cloud layer through ecosystem application partners. Basically, whether that’s a startup that’s leveraging our chain, the launch their application, whether that’s a broker dealer wanting to start the integration process to their existing investor portal so that they can enable a blockchain based security trading in the future. Those kinds of things, you know, it’s a target rich environment right now and everybody’s got a lot of ideas, sort of jerry maguire about it and show me the money because in startup land there’s a metric that no one really talks about, much called cost of attention and you know, I only have so many hours in the day and my team only has so many hours in a day collectively to carry on conversations and discussions and I’m really big on cure Kill it fast because I know it’s already a very time laden discussion and we got to zero in on the ones that we think are going to be success versus the tire kicker kangaroos that are out there. Hey, I’ll pick your brain. Can I get coffee? Yeah. 600 bucks an hour, you know, I’ll even buy the coffee. So.

Eric Hornung: 01:10:17

All right, one last question on numbers for me and then I think we can have made a day of anything else. How many people are, are fulltime on your team right now?

Michael Hiles: 01:10:17

eight.

Eric Hornung: 01:10:33

Eight. And they are they mostly developers at this point? Plus the sales guy.

Michael Hiles: 01:10:38

yeah, We’re heavily weighted myself, you know, our chief operations, I’m cto and lead dev and we’ve got some other developers with our chief growth officer. We’re contemplating bringing on a full time services director to manage the enterprise side because one of the things that happens is, you know, you’ve got this conflict between making payroll in cash runway and there’s tons of awesome enterprise services out there that can be pursued, but I don’t want to derail the product team away from their focus. So making that separation and uh, you know, really starting to pull the on some services type stuff without distracting the development of the product itself and keeping the product roadmap and check that’s a big thing for me. Plus my product guys hate enterprise and if I want to like destroy and crush their souls, put them in a cap. Gemini cubicle that startup product for a reason.

Jay Clouse: 01:11:30

Uh, last question from me, do the names 10XTS or XDEX derived from something? Are those abbreviations?

Michael Hiles: 01:11:43

yeah. 10XDTS literally stands for 10X the shit. So no, no, no qualms about it. That was the whole baking in some tongue in cheek. So a 10XTS does actually stand for 10 x the shit and you know, I can come up with some other acronym for polite conversation. Oh yeah, it’s binary external transaction system, whatever you come up with something but XDEX was just basically keeping the x theme with 10XTS along with the decentralized exchange because we have an inside of the protocol, a, a completely decentralized trading engine that will only be turned on in regulatory compliant fashion based on whether it’s through a licensed broker dealer that’s got a ats license portal. So it’s not like a take all comers, you know, hey come trade your crypto kind of a thing, but the power is there and ultimately it will evolve into the future into a full blown decentralized exchange trading platform for all These tokenized assets

Jay Clouse: 01:12:40

after our show, where can listeners learn more about you or 10XTS?

Michael Hiles: 01:12:46

So I’m pretty prolific, easy to find on social. I’m @michaelhiles on Twitter. hit me up on linkedin. I got a lot of followers on linkedin and then of course 10XTS10XTS.com. Keep track of all the latest and greatest, uh, musings and news articles and you will be far more prolific here going into the fall with the reg cf and promoting obviously that opportunity for regulatory compliant fashion. So those announcements will only be made directly through, uh, you know, the regulatory compliant channels for marketing for a securities offering. But uh, yeah, just jump on the mailing list. We don’t bombard people with a bunch of inbox stuff right now, but uh, that’ll pick up in the future, you know, if you sign up, you obviously wanted to hear from us anyway. So I encourage people to, uh, to uh, talk to us, you know, we’re pretty easy to find.

Jay Clouse: 01:13:36

All right michael, thanks for being on the show.

Michael Hiles: 01:13:38

Thanks guys. Appreciate it.

Jay Clouse: 01:13:41

All right eric. so we just spoke with Michael hiles, founder and ceo of 10XTS. Can you share with listeners what we’re about to do in this third segment? My favorite segment of our show.

Eric Hornung: 01:13:55

I think it’s also my favorite segment of the show, but we are going to do our verbal hypothetical deal memo. Imagine that jay and I are running a angel fund or a venture capital fund, and we want to look at and evaluate deals. Well, the deal memo is a way for us to think about what’s the upside, what’s the downside, what are some of the risks associated with the company and communicate that to ourselves and our investors. It gives us a basis to look back in six to 18 months and say, okay, we had this right, we had this wrong and kind of way our own thoughts. One thing that I think is pression here is something that pomp said in our intro, he said that people can’t lose their minds when it comes to crypto, and I think that’s very true in the venture capital space. We need to evaluate this deal, this opportunity in the same way with some nuances that we would. Any deal that comes through the door. Do you agree, jay?

Jay Clouse: 01:14:57

Yeah, I agree. I like that and specifically We’re looking to answer four questions here in this section, whether explicitly or implicitly through our discussion. and those four questions are one, how committed is this founder to what are the founders chances of success in business and in life? This business, I should say three. What does winning look like in terms of revenue? In my return as an investor and for why has this founder of chosen this business? So a pretty founder centric here. And eric, I think that might be a good place for us to start as we often do with Michael hiles.

Eric Hornung: 01:15:34

Yeah. Let’s start with Michael and then I’d like to jump into to look at this a little bit differently into the framework, so let’s just kind of future cast that. But Michael has a really what he called the willy wonka story, this golden ticket. He was born into a family that was technical by nature. He had access to a lot of equipment. He had access to coding. He had. He got lucky. It sounded like. I mean it was a mix of luck and opportunity at the radio station and just a lot of great things that have played out to let him be the overlap between a sales guy and a technical founder. Which is very rare

Jay Clouse: 01:16:13

and I think besides just whether objectively or not, he was lucky. I think a founder with a mindset of gratitude and a feeling of luck is a good sign because generally in my experience, folks who are grateful for what they have and what they’ve accomplished are generally a little bit more resilient and a little bit more prone to success, so I think that looks good for michael. He’s also been heavily involved in the computer science engineering space for a long time. He was thrown out a lot of acronyms from the early days of computing and the internet that I just have not heard of, so cannot confirm or deny whether those are legitimate or not because it just predates my time, but point being he’s been in the space and at the fringes of technology for a very long time. The point he made about token ring not being necessarily new technology and peer to peer being around for awhile I think was pression as it comes to blockchain in this interview,

Eric Hornung: 01:17:18

look at us both using the word pression in the same deal memo.

Jay Clouse: 01:17:21

Yeah, you incepted it. You primed me

Eric Hornung: 01:17:26

uh, yeah, no, I think it’s fascinating because you do hear in the news how revolutionary and game changing it and this is such a great leap forward for the technology space, but Michael kind of put a damper on that and he said, look, this is the natural evolution. It’s a great evolution, but it’s a natural evolution and we’re excited about it and there’s still some runway here. And he saw a lot of comparisons to what he was doing in the nineties working on the web and the internet. So looking at that lens, I’d like to kind of take the listeners back through what we talked about through the feeling of a cryptocurrency in the different types that are out there because this is a very, especially if you’re not familiar with it, confusing space because it is so hypothetical. It is so new and we laid out a framework with early on in the episode which said that there are effectively three buckets of cryptocurrencies or tokens. Those are payment coins, which is the bitcoins of the world platform and utility tokens, which are, in my opinion, a platform token here would be something represented underneath 10XTS and utility tokens, which are, Michael mentioned a startup launching their application on the 10XTS blockchain. That would be something that fits there and then the final bucket is tokenized security, which we spent a lot of time on the intro talking about and I believe that the financial institutions that are going to be clients for 10XTS will be heavily focused and the tokenized security space.

Jay Clouse: 01:19:11

Eric, is it your understanding that this tokenized security spaces, what Michael was ballparking at the $175,000,000,000 range by 2025?

Eric Hornung: 01:19:19

To be honest, I’m not really sure how that number fits in. I understand that it is a very large number and sometimes when numbers get so large it gets a little confusing as to where they come from. I do know that this market in general is massive, so when I think about the number of assets that could come onto a platform like 10XTS, I think that $176 million, to be honest probably seems a little shallow, so that’s maybe not the exact answer you’re looking for, but I think that it is a very large number and the space is very large. When you’re looking specifically at financial institutions that Michael mentioned are in the probably not going to invest in developing their own blockchain space. What was your take on Michael’s Kind of dual structure of customers. He has the businesses on one side and the users on the other.

Jay Clouse: 01:20:22

We spent a lot of time talking about the businesses, which is where I focused most of my personal attention on the opportunity because it seemed to me that his stance for a lot of the interview was. I’m not trying to take a front end branding on my dapp perSpective and focus, like you said, the dapp being a acronym for decentralized app. I’m going to focus on serving these customers from a white label perspective. He used the metaphor salesforce for blue for enterprise blockchain and so to me that speaks to his focus on the smbs to midsize companies being his biggest customers, so we mentioned there are three segments, the top third, which are these larger institutional clients that are going to go and do their own thing and middle third who can kind of go either way in the bottom third that is this smbs that he would lean to more as their customers. I don’t know if $176 billion dollars was the total market size and that divides into thirds with those groups or if he’s saying $176 billion dollars was that bottom third. But to me the opportunity is whether or not he can service that bottom third and some of that middle third with his salesforce for enterprise blockchain white label solution. Something he kept talking about was how it would be difficult for that segment of the customer base to create their own consortium’s and I believe that is sort of this public versus private Blockchain analogy, which you’ve talked to me about a little bit, can you share some of that for the listeners and what you understand to be a consortium, so

Eric Hornung: 01:22:08

looking at public block chains, those are blockchains that are available to anyone in the world. You can download the ledger, you can see how transactions are going through. If I want to right now, I could go download the entire bitcoin blockchain and see how wallets traced from transaction to transaction through the history of blockchain. The blockchain, it’s one of the immutable properties of blockchain or distributed ledger technology. On the private side of things, you have a blockchain which has governed by either one or a few different entities. Consortium is a private blockchain where there are a. I guess it could be a public blockchain as well, but it’s a group of banks or group of just enterprises that are going to be the governing body and have majority votership effectively of the blockchain. What that means is that there’s more control in a consortium based environment. What michael’s proposing is that these small to medium size businesses and financial institutions aren’t going to put up the capital to develop their own blockchain, which is extremely expensive, especially at this point to join or work with a bunch of other smbs to develop some sort of consortium blockchain that works for everyone. It just. It’s almost impractical and infeasible point, but if he brings a product to them that says here’s all the benefits that is getting by their consortium with at our, I think they’re at r three, which is out of london, then that is a huge potential benefit in terms of cost and in terms of being able to utilize this technology to that all the big players are using and being able to utilize that.

Jay Clouse: 01:24:00

This is so hard to talk about in concrete terms. It seems so abstract and I feel like a newb as people would call it, so the benefits of a consortium or a consortium depending on your pronunciation, what are those benefits?

Eric Hornung: 01:24:15

It’s mostly control. It’s mostly control over the blockchain, guaranteeing the transactions and being able to have the voting power. It comes with being one of the consortium members, which means that, and this is the way I understand it, I’m not the most technical person in the world, but it means that you’re probably operating one of the nodes which are the verifiers of transactions on the network, michael, so they’re going to have 21 nodes. They’re going to sell node space to up to 18 different financial institutions. You can see that going further in the future as more nodes are allowed on the blockchain, but his entire opportunity is, like you say, very abstract. It is hard to quantify because it is based on, I think very solid assumptions about the future of this technology in the future of how it is utilized and the regulations and everything is so in flux. It’s a huge problem with a lot of huge issues and not a lot of people who are doing anything in it from a financial institution space. Yet Michael mentioned one percent of cios

Jay Clouse: 01:25:23

that was interesting to me and that it’s a five x multiplier for financial institutions. There at five percent of cios are looking at doing something, something that both Michael stated and pomp said he more alluded to in our interview, but I’ve heard tom say in other interviews, it’s this, this idea that the pendulum seems to be swinging, that players in the blockchain space are thinking more seriously about how do we play with existing regulation and existing law so that we can issue things legally. It seems like the ico trend could be in potentially big trouble and people are saying, whoops, better stay away from that. And Michael alluded to both and ico is as kind of running ahead of things and not understanding as he put it some enterprise and things like sarbanes oxley and that he sees the opportunity in working with regulators to do that. He name dropped a congressman that he’s working with in Cincinnati to write some of that law because there aren’t taxonomies as he said it in us existing law to even say things like ledger and blockchain and decentralized. So it’s hard to regulate. It seems like it’s a risk from our country standpoint of getting some of these things written. So we can lead or even, you know, allow the innovation in this space to exist. So to me, exciting things from 10DTS’s perspective and when I say 10XTS, I’m speaking mostly about XDEX and this product XDEX. 10XTS as a shop that develops Technologies could be a profitable venture I’m sure, but services businesses aren’t generally what you would invest in from an institutional level. So the exciting thing about this to me is that this is a different approach than we hear very often the, the pro regulation work with the powers that be approach seems to de risk a little bit. What is a difficult to understand and risky space.

Eric Hornung: 01:27:26

I agree. I think that if we think about this as a traditional business, let’s think about this as a software business that’s going to sell a platform to a bunch of financial institutions. Some of the similar characteristics that go through that are really long sales cycles. Because imagine getting fifth third bank to agree to putting anything on a piece of software, it’s got to take months if not years. The same thing goes for huntington and all these other banks that are regional,

Jay Clouse: 01:27:59

that sales, and then there’s implementation.

Eric Hornung: 01:28:01

Oh, of course. I mean when you look at some of the big implementation consulting shops, it takes them years to develop softwares. So this is a long view process. This is not, oh, this thing is going to pop in a couple of months. I think it’s interesting that they’re doing a crowdfunding raise coming up here instead of pursuing a larger series, a raise

Jay Clouse: 01:28:25

for ownership in 10XTS. So I’m curious to see what. What does that mean for if I’m trying to support XDEX, I guess 10XTS is the whole owner of XDEX, so one would assume that this kind of concern I’m voicing isn’t really a concern. They’re not two separate businesses.

Eric Hornung: 01:28:45

I think it’s more so it’s equity rather than tokens. They could sell their internal tokens as a regulatory, as a reg cf offering, but they’re not doing that. They are selling equity in 10XTS, which I guess at this point when people are taking such a long view in such a, almost a risk in investing, giving 1.07 million dollars to 10XTS assuming that they are, they raised the full amount that I guess that makes sense it they want more people in 10XTS as an equity vehicle and maybe they’re not comfortable enough with the regulation yet to say we’re going to do a saft or sale agreement for future tokens. Looking at other things that we can kind of pull out of this business. We have a long sale cycle. We have a huge market opportunity. We have an interesting equity raise. We have multiple raises today that I can. I can find. We have what seems like a great leadership team and an experienced leadership team that you’re going to need to go in and pitch to these financial institutions. There’s a lot of the pieces that if we were looking at a traditional business would be great in place. Check the box, move on and let’s ask some of the harder questions.

Jay Clouse: 01:30:04

I’m also going to make the assumption that the customers they seek to serve would become pretty loyal, sticky customers the same way any enterprise software going into a company at that type of level would be.

Eric Hornung: 01:30:16

Yeah. When I worked at osu, we use peoplesoft by oracle. I, it felt like it was implemented in the 19 seventies. So I think that once you get a big institutional customer, the switching costs are just massive.

Jay Clouse: 01:30:28

can you imagine the day when blockchain technology feels like it’s decades old?

Eric Hornung: 01:30:33

Yeah. It’ll be the same day when I’m saying those damn kids. Um, okay. So I think that from a business standpoint, it checks a lot of boxes. What are the risks that you’re worried about, jay?

Jay Clouse: 01:30:48

As new as this is and as unproven as it is? That in itself is a risk to me, like as an investor, you know, we talk about this sometimes. If I’m not feeling comfortable with my knowledge of this, should I be learning as much as I can more and continue considering this as an investment or should I say this is so far outside my wheelhouse, I’m going to not dedicate more mental capacity and time to understand it and instead just talk to 10 more entrepreneurs and pick one of them, you know, that’s something that we come across in the lawn guru interview, the west coast investors who said we don’t have lawns, we don’t get it and passed and we made the joke, well, couldn’t they just call three people in the midwest and talk to him about it? I am now in those shoes. Can I call somebody now and ask them? I mean, that’s basically what we did with pomp and so Pomp looks at this and he said, oh, we’re looking at selling the shovels and the, you know, the tools, the infrastructure or we looking at the coins in XDEX is a, an infrastructure play. Am I correct in saying that?

Eric Hornung: 01:30:48

I would agree with that

Jay Clouse: 01:31:56

Would you, would you like an XDEX to securitize harbor or templem? I don’t know those platforms very well.

Eric Hornung: 01:32:02

I would not. I would liken it to a niche version of an ethereum for to at a very basic level. I know Michael might hate bad comparison, but the idea is that it’s a platform on which you can build and utilize tokens, much like a theory as a platform. They both developed blockchains. They both are serving a specific need. A theoryum is a little bit wide ranging and maybe some of the ways that it was gone about and some of the underlying technicals are different, but from a broad brush stroke, it’s a platform that is serving a specific need that is allowed to be built on. We talked about those three. Let’s go back to that framework. Those three types of tokens, the platform token in the middle. A theoryum is a platform. An ios is built on top of it. 10XTS, XDEX is a platform. It’s to be seen what’s going to be built on top of it

Jay Clouse: 01:33:04

and the things that are built on top of it can issue their own tokenized securities.

Eric Hornung: 01:33:04

Correct.

Jay Clouse: 01:33:10

What I did like about this is probably putting the red hat path aside. There are still multiple streams of revenue that could occur from the XDEX platform and I’m trying to pull up my notes now. I’m obviously the transactions that happen within it, which is would be in my assumption, the biggest opportunity. You know you have transactions flowing through it all the time.

Eric Hornung: 01:33:35

To be honest, the revenue side of things doesn’t really. It’s not. It doesn’t really concern me because the market size is so big that if you can capture the market size, the revenues will follow because of the stickiness of the customers. So once you have someone on your network and they’re utilizing it, the pricing power is going to be there. Your revenues are going, it’s wide. Finance can throw $10,000,000 at 10 different governments because they were one of the first different exchanges to set up and dominate and it’s such a new business at the margins are so large that the cash is just flowing it and I think that it will be very similar to 10XTS if they can get the financial institutions on board because once they’re on the platform, there’s really no easy way off.

Jay Clouse: 01:34:21

Something that’s interesting that Pomp mentioned is when looking at this as a traditional investor, you said you look at what is the upside, what is the downside? He said, crypto investors typically look at things as how high can this get an institutional investors look at things as how low can this get from a venture capitalist point of view or an angel point of view, you’re betting that a lot of your investments go to zero anyway. Right? So you’re. You’re often looking how high can this go? In my opinion, if you’re looking at this opportunity, you know, lowest you go, seems like zero, right? That kind of the lowest anything can go.

Eric Hornung: 01:34:59

Yeah, but I don’t think this goes to zero because they have, they have a blockchain development shop, so worse comes to worse. XDEX fails miserably and they just revert back to developing dapps for other people developing any kind of blockchain. I mean they have what I assume is three to five blockchain developers and they estimate there’s only 5,000 in the world. So you have a pretty high number of blockchain developers. I can tell you that that is a lot for a small shop and

Jay Clouse: 01:35:30

so yeah, what I’m kinda getting to hear the risk, the risks are going to zero or getting close to zero regulatory risk would. It seems like he’s hedging against so and a lot of ways as an investment taking crypto out of it and just looking at it and not losing my head and pomp speak. It seems like there are de-risking a lot of things that come with the blockchain crypto space. So

Eric Hornung: 01:36:02

I think that we’re both midwesterners and we talk about how midwesterners are sometimes scared to take these kind of bigger, scarier. That’s especially midwestern vcs and when you kind of rip apart the crypto aspect of it and you just get down to the basic business, I think the model makes a lot of sense and it’s not as scary and like fang tooth as we were maybe making it out to be the first half of this deal memo

Jay Clouse: 01:36:29

model seems clear. A couple of stats that Michael throughout which I have not fact checked, but let’s, let’s take his word on it. 80 five percent of banking ceos have indicated interest in blockchain. Blockchain technology, but 61 percent saw regulatory complexity as the biggest barrier to implementing 51 percent saw existing enterprise technology as a barrier and those are two things that he’s attacking head on for that segment of the market that can’t afford to necessarily can’t afford and don’t have the skillsets to develop it in house.

Eric Hornung: 01:36:59

So let’s look at six to 18 months from now. Jay, what are you looking at from 10XTS? Is that too short of a timeframe? What would you want to see based on michael’s own timelines?

Jay Clouse: 01:37:12

I’m going to say it’s not too short of a timeframe because he, he estimated a quote mad dash at the end of 2018 through about 2022. So what I’m looking at is how is momentum with XDEX from a couple angles? Are they continuing to put blocks on the chain, which is something there that he talked about lightly, but I’ve seen that’s a press release they release, so it seems to be a focus of theirs as you still working with the congressman from Cincinnati and is that making positive progress? Is The United States as a whole making positive regulatory progress so that it can be a fertile ground to do this. Does he have to move off shore as he still making payroll? You know, this is a pretty legitimate team and I have no data to support that They’re not committed, but such a talented team. Their skills are always in high demand. Their opportunity cost is always high. A six to 18 months from now, is that team still together? Is it even stronger? Is the regulatory environment, which is kind of what they’re piggybacking off of in a strong enough place for them to continue?

Eric Hornung: 01:38:18

Yeah, so I definitely agree with the. With all of those. I would be curious to see how customer discussions have progressed. Have they signed a lot of ndas? Have they brought on some tentative commits, some verbal commit, so they ran a couple of pilots. What’s going on in all of that space? My final thoughts closing thoughts are that we don’t know whether or not there’s going to be one or two major blockchains out there that just dominate everything and everyone uses them and that’s kinda the ethereal model, which is the etherium virtual machine and the bitcoin model, which is we can use everything everywhere or if there’s going to be hundreds of these blockchains, thousands of these blockchains, millions of these blockchains that each serve a very specific purpose and I think that there will be like, this is my personal view, there will be something like 10XTS which is differentiated and it serves a very specific purpose for a lot of different industries and financial institutions will probably be the first one that happens. I’m interested to see if 10XTS is going to come out on top there.

Jay Clouse: 01:39:23

Cool. Well thanks guys. Thanks for listening. This is a complicated one. Thanks again to Pomp for being on the show and Michael, if you guys have any thoughts, we’d love to hear them. I certainly could use some educating myself. please tweet at us @upsidefm or email us. Hello@upside.fm. We’d love to hear from you and hear your thoughts on twitter or on breaker. Breaker is our preferred podcasting app and of course if you enjoyed this episode, please leave a rating or review on itunes. Helps us a ton. Been going well so far, but yeah, we’d love to keep seeing some of that love so we will talk to you guys next week. That’s all for this week. Thanks for listening. We’d love to hear your thoughts on today’s guest, so shoot us an email hello@upside.fm, or find us on twitter @upsidefm. We will be back here next week at the same time talking to another founder and our quest to find upside outside of silicon valley. If you or someone you know would make a good guest for our show, please email us or find us on twitter and let us know and if you love our show, please leave us a review on itunes. That goes a long way in helping us spread the word and continue to help bring high quality guests to the show. Eric and I decided there were a couple of things we wanted to share with you at the end of the podcast, and so here we go. Eric hornung and Jay Clouse are the founding parties of the upside podcast. at the time of this recording, we do not own equity or other financial interest in the companies which appear on this show. All opinions expressed by podcast participants are solely their own opinions and do not reflect the opinions of duff and phelps llc and its affiliates on your collective and its affiliates or any entity which employ us. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. We have not considered your specific financial situation nor provided any investment advice on the show. Thanks for listening and we’ll talk to you next week.

Michael Hiles is the founder and CEO of 10XTS, which builds transparent, decentralized, secure solutions for industry and governments using public and private blockchains, and more.

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10XTS is creating XDEX, a cloud-based blockchain platform that enables enterprises and organization to incorporate the power of a decentralized, immutable ledger system into their information systems and data strategy. The company is based in Cincinnati, OH.

Learn more about 10XTS: https://10xts.com/
Learn more about XDEX: https://xdex.io/

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Anthony “Pomp” Pompliano is the Founder & Partner of Morgan Creek Digital Assets, a multi-strategy investment firm focused on providing access to blockchain technology and digital assets for institutional clients and wealthy family offices.

Follow Pomp on Twitter: https://twitter.com/APompliano
Join Pomp’s Off The Chain newsletter: https://offthechain.substack.com/