Blockchain of Things: Integrating Systems For Protection with Andre De Castro

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JFS 002 | Blockchain of Things

JFS 002 | Blockchain of Things

Tokens can be considered as key to gates that hold data and energy that are being transferred through a truck system. Unfortunately, not all of these systems come with highly effective protective outfit. Andre De Castro of Blockchain Of Things shares their company’s holistic approach to the productivity of many industries. They are a security company that de-centralizes functioning systems when it is integrated to it, turning it into a platform that creates smart assets at the simplest level. This is also another way to send a lock and unlock flow of information and energy, a system of control and transference on a large geography. Andre explains how their tokens are access tokens to functioning technology that create an intelligent ethereum system.

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Our guest is Andre De Castro, a giant in the blockchain industry. Andre is CEO and Founder of Blockchain of Things, Inc., a company that has the enterprise class chain product, Catenis. Catenis Enterprise offers a web service layer for rapid Bitcoin blockchain integration to simplify and accelerate secure global peer-to-peer edge device messaging, digital asset control and recording of immutable data. Mr. De Castro is a well-versed software engineer, project manager, advisor and consultant on blockchain security, and the Internet of Things sector. As a founding member of the Open Source Financial Developers Association, he advises companies in the fintech space and also runs CryptoCircle, a New York City-based Meetup group where he advises the community about blockchain technology and cryptocurrency concepts. He’s an avid speaker at blockchain and IoT events and has been able to greatly influence related policy.

In 2013, he worked with the Federal Government’s FinCEN Division in creating more clarity on cryptocurrency policies. He is solely credited with the January 13, 2014 administrative ruling on software development and investment activities, opening up greater avenues for well-established corporations and startups to conduct a cryptocurrency business in the USA. Most recently, Andre was a guest on Nasdaq TV, as well as keynote speaker at the Blockchain Summit in Beijing, the Blockchain Conference in Las Vegas, Canaccord Genuity Annual Gross Conference in Boston, 2nd Annual IoT Security Summit, IAB Ad Operations Summit, Quantec Distributed Ledger Technology Conference, and Blockchain World Congress in New York City. After having spoken with Andre at some length, we are certain that you will find this episode interesting and informative. Joseph, let’s get right into questions for Andre.

Listen to the podcast here:

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Blockchain of Things: Integrating Systems For Protection with Andre De Castro

Tell us a little bit about blockchain of everything in the medical industry.

When we look at connectivity, we look at connectivity holistically across many industries. When we look and think about the medical industry, it has some of the same fatigues and problems that’s occurring across all connected systems. We’ll have more connected devices than ever in history. We’re connecting these devices and systems to central hubs. We call them cloud servers. These cloud servers are somebody else’s computer and someone else’s facility. Hackers will go and attack these central systems. When the hackers attack these central cloud servers, all of the connected devices, be it in your office or your hospital or your factory, they go down. We noticed an incident of this earlier this year, about seven months ago, Amazon Web Services went down. It’s the cloud service offering for Amazon. A lot of the regular people said, “We just couldn’t get to websites.” What they don’t realize is that doctors couldn’t get into the emergency rooms with key cards. They couldn’t get into their offices. Security cameras in factories went down. I couldn’t turn on the lights in my living room because I use the Amazon Echo to control all the lights in my place. However, that might not be so important. When we think of a medical device that is sustaining life or systems that are critical for doctors, diagnosis systems and things of that nature, then the story starts to change.

It’s crucial for two reasons. First, Blockchain of Things uses the Bitcoin blockchain protocol to secure communication. All communication or transference of money across this public blockchain has never been hacked. Yet we see devices getting compromised constantly and consistently. That’s very, very dangerous for certain industries. Might not be as dangerous as someone can turn on and off my lights from afar. However, it’s a very, very dangerous when we talk about industries such as oil and gas, pharmaceuticals, medical devices. That’s very, very important to know. That’s the sweet spot of Blockchain of Things. We’re primarily a security company that allows you to integrate your preexisting applications and make them be centralized.

With all of those different industries, your platform would be able to establish things, say in the oil and gas sector, in the energy sector as far as electricity, trading platforms that people could use that as a platform in order to trade different commodities. Is that what you’re saying?

You could. The platform allows you to create what we call smart assets. At its simplest level, it’s the equivalent of tokens that people understand. Those smart assets could be mapped to anything you’d like so you could trade them across our system. You could generate these mapped into something of value. You could also send these to a lock-unlock flow of information, energy or whatever it may be. Let’s say for the energy sector as an example, you may have established ways and transformers and means to deliver energy. You may use this tokening ability to open and close the gates of power that you’re delivering to a consumer or a business customer, for instance. That token becomes not only a negotiable good, but it could be the ability to lock and unlock the flow of energy and data that’s being delivered to either a truck or a system.

I have to emphasize that blockchains are not great systems when we talk about holding data or being incredibly fast. They’re not meant for that. They’re meant as control layers. Transparent control layers that gives you great orbiting of systems at a very large geographical footprint. For other things such as high performance, speed, storage of information, there are databases and systems. When we approach using the blockchain, we approach it realistic. Integrating with the blockchain is going to comprise maybe 1% or 2% of the actual technology stack that’s used across any global system. When we talk about protecting, we talk about protecting high-value items. A high-value item doesn’t mean it’s expensive. You could have a $400 transformer on a power grid that if it went down, it would affect hundreds of millions of dollars’ worth of energy. We’re talking about protecting when it’s critical.

JFS 002 | Blockchain of Things
Blockchains were made for control in transference across a larger geographical area.

Inside of a business electrical flow, how would one use a blockchain? In critical conditions, you may log information to the blockchain because that’s very critical and that’s something that you need to report access and understand when it occurred. You’re not going to use it for every single item of communication. You think that that’s silly, but I think you’re going to use Blockchain of Things to have it there and say, “When a critical condition occurs, I need to log that to the blockchain.” Or “When I need to unlock and flow some information right through a secondary or tertiary system.” You could use the Blockchain of Things APIs to sit on a device. That device accepts a smart asset. That smart asset unlocks the flow of energy. That flow of energy is not going through the blockchain. It’s going through a secondary or tertiary layer that may be going through a power cord into your car, for instance. That doesn’t go through the blockchain. The record of unlocking that, who it came from, and your organization about occur is now recorded and managed through the blockchain.

Those are different concepts. When one reads an article about blockchain, one would think blockchain can cure cancer. “Blockchains can do this and that.” You’re all thinking, “That’s silly.” We have great database systems. We got great technologies to store data to do high-speed performance. Even when I see companies out there saying, “Our blockchain is going to allow X number of transactions per second.” I say, “That’s silly.” No matter what blockchain technology you create, you’re not going to be able to achieve the levels of transactions per second that Oracle Database or SQL Database can handle. Why would you want to? That’s not what blockchains were made for. Blockchains were made for control in transference across a larger geographical area. Not for speed performance of storage.

I don’t know if a smart contract could work with this and I don’t know how much the insurance industry would push against it because people assume when they have insurance that certain things are covered. Once you get your procedure done, afterwards is where the fight usually comes in as deductible, co-insurance, what’s allowed, what’s not allowed. Could a smart contract fix all that?

Smart contracts are misunderstood. What smart contracts can do are ‘if-then’ statements across a general currency. That’s what’s understood. In our system, it’s a little bit different. We call them intelligent contracts because we can not only accept a message, a token, and log information, we can issue tokens right from the same piece of code. The popularized smart contract term was popularized by the Ethereum blockchain. What that is, and people misunderstand, is an ‘if-then’ condition on the receipt and release the Ethereum cryptocurrency in itself. There are other slight things you could do, but we’re at the very start of being able to do something significant. Smart contracts are far from smart. It would be better called ’dumb contracts’ at best and they are extremely limited. It’s a reason why Blockchain of Things differentiates what we do as intelligent contracts or intelligent agents because we can receive a message of any size. We can react to a message of any size. We can issue tokens and smart assets inside of that.

A token or smart asset is basically encoding into one of these crypto currencies, a token or coin. This came from the concept early on Bitcoin that technologists would call ‘coloring a coin’. The idea is if I can send Bitcoin from me to you and you can send it to Susan, then we can track that on an open ledger. How about if we color that coin blue? We said that that coin represented IBM stock. Now, I have a ledger of control of where the stocks that I issued had gone to with immediate settlement. Settlement being the record of auditing that’s on the chain itself. People don’t understand this but there’s no such thing as a Bitcoin. A Bitcoin is a term that actually means 100 million satoshis.

It’s a term no different than a quarter. What’s a quarter mean? It’s $0.25. It’s a quarter of a dollar. A Bitcoin is 100 million units of satoshis. We can now go and encode inside of this tokens or what was originally called colored coins. With one Bitcoin transaction on Blockchain of Things, you can generate 4 trillion tokens. You generate those and now you can transfer them. These transferences are no different than transferences of Bitcoin or cryptocurrency from me to you, from you to someone else. Only, we can programmatically look at the receipt of that token and branch an if-then condition. Do I release this contract? Do I open up the spigot? You could transfer that to someone else. That transference can now represent anything you want it to represent. It could represent a unit of energy. It could represent an insurance certificate. It could represent how many drips in an IV some mechanical part will allow through based on that token itself. That’s how these tokens are used. We can encode, create these tokens and use them intelligently. In our system, back to the intelligent contract, we can generate these tokens, we can release these tokens and transfer them to N number of endpoints. We can react to the receipt of these tokens. Reacting to the receipt of these tokens, we could send a message to N other endpoints. The messages are not limited in size. They could be the release of hundreds of contracts or hundreds of invoices at one time. Then we can log that that occurred on the blockchain for auditing. That is why we call what we do intelligent contracts. In an Ethereum system, you can conditionally receive and release Ethereum tokens. That’s very rudimentary.

Let’s say that I want to buy a house from a friend of mine and we agree on a term. We agree that they will accept a token that I have? Does that work that way?

Yes, if you believe that that token has value. Why are many of these token sales and coin offerings exploding? Because someone believes that it has a value somehow. I don’t believe most of them have value because they don’t have built underlying technology, which is a significant difference between what we’re doing at Blockchain of Things. We have a token sale, but our token sale are access tokens to functioning technology so much so that we’re trying to change the space. How are we trying to change the space? 99.99% of these so-called token offerings or ICOs, they’re pitching you a very fancy white paper on technology that they’re going to build. We had investors in our company that funded the building of our technology. Our token sale, we’ve decided that during the pre-sale, we would give, along with the purchase of the token they’re purchasing, a one year license to our Pilot Development Kit, which is full use of the whole platform in a sandbox for a developer. You can use all the APIs and all of the functionality and everything you need for your company and you can make a decision when you want to use that up to three years.

Why did we do this? Because we were trying to change what’s been happening. You hear a lot about scams and things in reference to these token sales and ICOs. We don’t disagree because most startup companies go on them before they can even produce a problem. We’re trying to come in and say, “We’re doing this differently.” We can be used by tinkerers. We can be used by large companies. We just had a fund come up to us and say, “I want to get into the token sale because I want to use your APIs to control a more democratic way of voting in usage across our fund.” This is a financial fund. We’re going to be releasing a blog article that explains how this fund is using our APIs.

[Tweet “At the end of the day, the technology is what has value. “]

We’re trying to hint and speak to companies that will use our platform. We shy away from those who want to purchase our token just to hold our tokens because they should be used in our system. Because at the end of the day, the technology is what has value. That’s the intrinsic difference. If you believe it has value, then it has value. Why does the US dollar have value? Because people accept it as having values. If a company such as Coca-Cola produced a token, people would perceive that to have value. Coca-Cola could say, “If you hold 100 of these tokens, then any of our retailers will accept it as a free Coke.” No different than you might get a discount coupon on Groupon to have a free drink of that Jack Daniels at a bar. Company will back that free drink at the bar and the bar gets more business. It depends on how it’s being used. Will it have value? Who’s backing it? Is it a large company that has a product that it’s going to deliver that product with true value and that’s the space that Blockchain of Things sits in? Or is it someone who’s saying, “Help me fund something, and in the future we may produce something that’s going to be exciting and we’ll deliver it to you. We promise.”

On that platform, if you had an apartment building and the owners of the apartment wanted to sell it. They were willing to take the coin. Now, the hundred people that live in the apartment project are going to have to pay their rent in their coins. Now you have velocity and people begin to accept that currency.

There are great lines in American law as to what is security or not. Here’s a great example and that maps exactly to what you’re saying. I live in Manhattan, New York. Most people outside of New York may not know this, but I think it’s about 86% of buildings in Manhattan are cooperatives. There’s one corporation and you don’t own your apartment. You own shares on square footages of the building. Your apartment maps directly to shares the square footages in your building. In those shared square footages is what you’re maintenance is. Your costs for the building that everybody together pays monthly to the doorman and cleaning and garbage and all the good things that a building requires. You can now have those tokens and those tokens could be mapped to the square footage. That’s no different than the stock. I could see that happening where you give more flexibility to the owners to be able to sell in more liquidity. One can map those tokens and say, “Do they have value as the real estate or the fundamentals of that building and how that building is managed? How much money does that building have in the bank? Does it have any debt? Has it accrued debt for construction or whatever it needs? You may decide, “This token is undervalued or overvalued.” That’s the world we’re going into. That exists in one of the larger cities in the world. It’s done today through mapping shares and stocks that aren’t as liquid as a token could be.

As far as advertising. I saw one of the videos that you did about advertising and how a token could be utilized in paying for advertising or in paying to several different people through an advertising type platform.

Advertising is riddled with challenges. There’s a tremendous amount of fraud in advertising. I’ve been working very closely with the IAB, Interactive Advertising Bureau, and the Advertising Association of America, speaking to them in reference to how blockchains and tokening systems could reduce a lot of this fraud. What happens is that the fraud is not only rapid. It’s way above $9 billion a year. It’s easy to see the fraud occurring. It’s click fraud where guys will develop little bots to do click-throughs. The ad spent from the advertiser shoots up. It’s just accepted. It’s like, “If you spend $1, $0.60 out of that dollar, it’s going to go to fraud.” That’s that’s unacceptable. Maybe the numbers are 30%. I’m just guessing the numbers. I know that they are truly high. If you add transparency to this, how would one add transparency? One would log all of the players inside of the ad supply chain.

A lot of people don’t know this, but before you get served an ad, you’ll have lots of companies in the middle. You have the hosting of the site or the page. You have the guys who sold the ad container, the space of the ad. You have the guys who did the creative, the art or the ad itself. You have the guys who bring together all of that ad space and then auction them off on sites for large buyers. You have the advertising agency who purchases that and resells that to the ad company. You have the technology companies that are in between each one of these steps helping each one of these players. Today, you don’t know where the fraud is coming from because there’s no transparency. If you’re able to log what occurred on each step and you mapped everyone to an ID, later, you could turn as an advertiser and say, “I spent $5 million on this. We know that this individual in this ad chain is one of the culprits that has a lot to do with the fraud.” Everyone down the supply chain could blackball that. You could have a blackball list and say, “We don’t do business with that guy anymore because he’s funneling ads to Belarus and there’s a server click farm there.” You could significantly reduce that fraud. That fraud is a simple example of a traditional supply chain. That analogy can now be used across diversion of goods and supply chains globally.

Couldn’t you also revenue share with everybody in that chain?

You could. You could map tokens and cryptocurrencies to add revenue shares. That’s a complete different story. I don’t know what the best approaches to mitigating the type of fraud that exists inside the advertising value chain that occurs. That may be controlling the monetary unit itself, as you were alluding to. That may be as simple as bringing transparency to the players within the chain itself. That’s yet to be seen, but there are many approaches to this.

I would think that it would be a way of taking out all the trust as far as an illustrator that draws the picture. They hope they get paid by the orchestrator of the ad, yet in a blockchain, each person could get paid through that contract.

Yes, each person can get paid if you satisfy all conditions. That one condition maybe is transparency. It would take a big player to be able to do that. The sad part is that the biggest players, when we talk about advertising, we talk about Amazon, we talk about Google, we talk about Facebook. Remember, the click fraud that’s happening throughout this is so large that the big players, at the end of the day, make money from it. If you had a magic wand that you were to eliminate all frauds, any value ad chain cycle, Google would probably lose several billion dollars a year in revenue. That is a very discouraging number to have a large company try to fight this head on.

When you run an ad on Facebook, you hope that what has been done is actually being done. There’s no way for you to tell. This whole blockchain is going to change everything. One of the other industries is the transportation industry where they’re trying to bring in AI to be able to drive the large trucks. The trucking industry is wanting to fight it because of all the jobs that are going to go by the wayside. One of the things that was floated out there is, “If we could replace drivers, why couldn’t we replace politicians with a smart contract?”

Sadly, smart contracts aren’t as smart as we think. We’re going to have politicians for quite some time.

If blackballing is possible to get this guy that is committing a fraud out of the system, wouldn’t it be also possible for you to say, “You’re part of the system and I want you to kick back 10% or 15% of whatever you make to stay in the system, because if you don’t, I’m going to blackball you.”

That’s possible, but that’s only possible if you have the central control mitigating authority. The power of Bitcoins protocols was this intermediation or removing the middleman because they have the power to do that. That’s done every day. You need not squint when you walk into Wall Street to understand that 99.99% of every company in Wall Street makes money one way and one way alone, being a middleman. That middle man has a tremendous amount of power. People don’t know this, but if you’re a startup company and you’re wildly successful and you’re going to go public, the bank you choose gives you a choice. They say, “We’re going to take you public. By the way, we’re going to take 30% of your company as a thank you and distribute that and sell that to our friends.”

JFS 002 | Blockchain of Things
99.99% of every company in Wall Street makes money one way and one way alone, being a middleman.

Sometimes it’s more than that, 40% of your company. They’d get a multi-billion dollar company and they’re like, “We’re the middleman. You’re going to do what we say.” That happens every single day. Today, the difference is that if you use cryptocurrency, those guys in power and in charge can no longer do that. In a system with a blockchain, that can be done. We have great examples in society where the picture that you painted is done every single day. Governments, “We print as much money as we want. We’re the big boys. We tell you what the interest rate is. We tell you what LIBOR is. How do we make it? We decide on our own. We may not be right.” Most of the times they aren’t, but they decide. We live under that system today.

The promise of the blockchain is that you no longer need to live under that system because there won’t be any central authority to be able to dictate. That 800-pound gorilla now gets disseminated. The best example of this is when a company goes IPO. Every single founder of every company that has ever IPO-ed can’t believe how much they’ve taken advantage of by large banks. People who don’t know how the system works, when they’re told, they’re all shocked. I see a future where there will be a time where a politician will turn and say, “I need to raise funds to build a bridge and that bridge is going to cost $20 billion.” He will go to Wall Street and he will borrow $20 billion to build a bridge. Let’s say, it’s in New York and his constituency will turn and say, “You mothereffer. You actually went to Wall Street and you gave that bank billions of dollars to issue bonds to be able to cross that bridge when you could’ve went to your constituency, sold tokens and gave us a discount to go over that bridge.” He will never get elected again.

This is not going to happen next year or in three years, but this is ten years down the line. I will live to see this occur. That’s the difference in power of being able to tokenize anything to no longer be at the behest of certain industries and those in power where there is no choice. We talked about that. Close to 90% of advertising in the world today, maybe the figure is less, are three companies, Facebook, Google and Amazon. Then, there’s everybody else. That exists. Those powers that be in financial institution and governments and industries, that exists. The only promise for that to be broken down and disseminated and this craze of token sales and ICOs is a fantastic example of that.

I raised money through my startup, Blockchain of Things, is still a startup very much so, by going to investors. When you go negotiate with investors to raise money, it’s brutal. It’s brutal what you have to sign and give over. When one VCs invest in your company, you’re lucky because he brings in all his friends and they all look to take advantage of you. They know the exact time where they’re going to dismiss you and place in your own CEOS after you’ve killed yourself building the company because that’s how the system runs. These startups who are raising money to build products, not us, we’re a little bit different, we’ve already been through that cycle, the VCs have no power. In one quarter, in three months, startups have raised more money than every dime of every VC in the United States combined. They were able to give those tokens to their friends, their family, their co-workers. If those companies become successful, their friends, their families, their co-workers are going to gain the advantage and not the VC that used to dictate. Who gave you advantage? Him and his other VC friends.

There’s a dissemination of power. It doesn’t mean that VCs aren’t also investing in ICOs and tokens. It doesn’t mean that these ICOs and tokens aren’t good for VCs. They’re actually better. I see this struggle online with these VCs talking about these token sales and ICOs and some of them bad mouthing them. They don’t realize that it’s the best thing that ever happened to them. Why? Take any startup. If you invest in a startup, you’re probably investing in a startup through what’s called the convertible debt note, it’s just a loan. Then, your money is trapped through series A, race B, C, D, E, F. The last startup I was at, we went through a G series round race. You’re fifteen years out before you can see any of your money. If you look at the statistics for VCs, they’re atrocious. Over 90% of the money they invest disappears because startups go under. They’re looking for that one unicorn. Imagine you invested 90% of your money across tokens and you believe that 60% of those companies were doing something wrong after you invested. You watched your CEOs, you didn’t like them. Even if you lost money, you could pull out 30% or 40% or 50% of your money and not lose 100% of your money. What they’re not realizing is that they’re fighting against the best interest. What they should be doing is pooling their money together to lobby the government to say, “You got to make it easier for these companies to use tokens than less regulation,” because if they did, the profits would go through the roof.

It’s like when the Hollywood industry took Sony to court when Sony created the Betamax. Sony won the ability to show movies at home. Had Sony lost, who would have lost was the movie industry because four years later, video sales made 400-fold more money for Hollywood than movie sales did. Taking Sony to court, they were cutting their nose to spite their face and that’s exactly what’s happening in the VC community because the VC community they used to control. They used to have been able to dictate what they want the startups to do. Many startups fail because of that because the founders aren’t given the liberty to do what they want to do. They constraint and the company collapses. The dynamics is significantly going to change with these tokens. Those who are fighting against it aren’t seeing the obvious.

Do you see a lot of the VCs trying to get into the blockchain?

Yes, it’s a hot area. They understand that it’s disruptive technology. The reality is that there’s not many companies in the world that have real working functional products with customers. I only know outside of the counterparty risk space; the counterparty risk being the financial exchanges and money transmission and those things. Outside of that space, there are plenty of mature companies there. You have Coinbase, if you want to deal with companies that are financially regulated. Companies that aren’t financially regulated because they just produce software, there isn’t a tremendous amount there.

All of these companies are trying to build blockchains from the bottom up, which we at Blockchain of Things, don’t believe make sense. People are trying to pitch, “There’s going to be a blockchain for healthcare and the blockchain for toothpaste.” I lived through the dot-com boom. It was the same exact conversation. What was going to be the end-all, kill-all? Intranets. No one was going to use a global public internet. Intranets were going to be the next thing. Why? Banks are never going to use the public internet. I remember Citibank used to make me launch a little client that I would connect to Citibank directly because he wouldn’t use the internet. “No, we’re not using a public infrastructure.” That’s insane. How do we know? AOL, the biggest intranet company at the time, fetched the largest amount of money of any company ever sold in the United States. Why? Because they were a closed intranet. Where are the intranets now? There are intranets that exists for corporations. You can find them, but you can’t compare that to the global internet. Anyone who thinks, “I’m investing money in all of these little blockchains that are going to pop up.” When the core developers are saying, “Build second layer technologies on top of the global Bitcoin blockchain.” Make the blockchain the control layer of intelligence. That’s exactly what Blockchain of Things has done. We’ve been doing this since 2014. They’re singing our prayers and that’s no different than the internet.

[Tweet “It’s not reinventing the wheel and creating an app from scratch, but integrating with existing apps. “]

If you look at our product Catenis Enterprise, we’re just a blanket. We’re a second layer blanket on top of the global Bitcoin blockchain that does away with all of the challenges that the global Bitcoin blockchain does. For instance, you could see it analogous to TCP/IP, which is the communication layer of the internet. It’s the protocol of the internet. But today, we build applications on websites for http. That’s several layers above. If you use Catenis Enterprise, you’re building an application on a layer above where we use the blockchain for its best utility. You can build applications on top by using the Catenis integration APIs. Those APIs use the blockchain for whenever the company needs to either transfer value, do secure communication. It won’t be every single instance of communication, but it will be key instances of communication.

Would this be apps that would sit on top of your platform?

Absolutely. They would be apps. They would be apps that would manifest themselves on iPhones, on iPads, on your computer. Most importantly, and this is the sweet spot, it’s not necessarily reinventing the wheel and creating an app from scratch as people are trying to do, but integrating with existing apps. We have a customer. Name is ISMS out of Maryland. They have a massive concept management system. A concept management system needed to record documents for the industrial military complex for subcontractors. Let’s say Lockheed Martin gets a contract with the government. They have thousands of subcontractors. They needed that these subcontractors adhere to ISO standards, US government standards, of creating documents around the project and ultimately, there’s no control. Later, if subcontractor messes with the documents and says, “This is what we did create when we built that,” when they audited. They wanted an independent auditing system. What did they do? They got their massive stack, which was an already built amazing concept management system and they use our APIs for the last step of their flow to control these documents for the subcontractors.

What does blockchain represent in their already built stack? Maybe 1%, maybe less. Our APIs represent in the already built stack. This idea that we’re going to go and rebuild everything from scratch for blockchain is silly. We have robust systems. We have robust medical systems. We have robust systems for trucking. We have robust systems for global supply chain. What we’re going to do is we’re going to say, “In these instances where I can control diversion, fraud and diversion and I need to integrate the blockchain as a control system, we’re going to go to companies like Blockchain of Things who can get us going inside four or five weeks instead of building it from scratch.”

As far as privacy goes, let’s say that you have a product that you want to share. Somebody like ExxonMobil wants to have an acquisition in a different country and they want to buy a gas field or an oil-type platform, is there a way for them to purchase that under a blockchain scenario with a token with privacy?

Yes, there’s a way to do that. The devil’s always in the details. We need to look at the business case at a more granular level. All I’m saying is people have this idea that, “If I’m going to use the blockchain and I’m building a system to store information, I’m going to need to sort that information on the blockchain.” You may need to control certain aspects of that information on the blockchain. ISMS is a great example. They’re not storing the stuff on the blockchain. They’re fingerprinting critical documents to prove that the document hasn’t changed in the future when the government audits the systems for these subcontractors. They’re more robust technologies. You have to use the blockchain for what it’s meant to do, not what people believe it is. Companies come to me all the time and say, “Andre, you have Blockchain of Things,” but the blockchain is not robust enough to have devices send messages millions of times a second and the transactions costs are going to be too high. I turn to them and I say, “If you did that, they’d be very similar to use this for that.”

You should communicate that through a robust communication layer. When a device updates its firmware, it’s completely vulnerable to hackers. Samsung’s SmartThings Hub in my home, they update the firmware. I get emails every three months and it’s completely vulnerable. At that juncture, you might spend a little more to send the firmware payload through a separate channel controlled through the blockchain very securely to update that device. You’re going to use it at critical junctures when an anomaly occurs in a gas and oil pipeline that is so important for you to not get sued to prove that that part went wrong and that part was from a separate manufacturer, not you. You’re going to use the blockchain. License or APIs would be available the whole time, but you’re not going to use the blockchain for every single piece of communication. You may use a blockchain to send the message to open up a communication channel.

There are different uses that people aren’t considering and that’s the space we’re playing in using the blockchain for its actual purpose. A lot of the things that’s been written in articles and the confusion that smart contracts could do this, that and the other thing. It’s simply a fantastic global control and auditing layer for everyone. When it comes to security, it’s fantastic. Although, it’s a transparent ledger, we encrypt every single message, every single item with what’s called perfect forward secrecy. That means that every single messages encrypted with a brand new public and private key pair on every single thread, so nothing is exposed to the world. You, the owner of the devices, can un-encrypt it and show to the authority what was logged. There’s nothing to be seen on this public ledger and that’s what many people confuse what’s going on, and hopefully to bring in clarity to your audience.

JFS 002 | Blockchain of Things
Blockchain of Things: Being unique and conservative in this approach will show to the community that probably better align with serious corporations.

Could you use this for replacement of Visa on transactions that were $25 or $50? Where I’m thinking of is at a gas pump that a trucking company would sign up that has a couple of hundred drivers. Instead of using a credit card system, they could use a blockchain with an app on a mobile device.

Yes, you could and we’re talking about the cryptocurrency side of it. There are great technologies being released. One of them is called the Lightning Network on top of the global Bitcoin blockchain. It’s going to allow transactions at pennies or fractions of pennies to go across the global Bitcoin blockchain for payments. I believe the release candidate one was deployed to make that the main Bitcoin blockchain. It’s early on and there are speculations on how this technology will evolve, if it will be able to handle the world’s population. Just like every technology, we weren’t able to screen videos like this when the internet first started. People don’t remember, but it’s comical because today people argue about the scaling of the global Bitcoin blockchain, but they quickly forget that they were the same arguments about email. Email didn’t scale. There was no way to communicate across to other people. I don’t know if you remember but back in the day, it was Lotus Notes. Lotus Notes did email through a closed system, like in AOL. You loaded Lotus Notes in your company and you could only communicate with people in your company and that was email. Later, they opened it up to the internet because the internet email couldn’t scale.

We’re still in the early days. When people say, “Will Lightening Network be able to perform that?” I know they’ll be able to do it because Blockchain of Things has been doing it since 2014. We are a second layer technology akin to the Lightning Network that sits on top of the global Bitcoin blockchain. The difference is that it’s much easier to implement what we’ve built because we don’t have the idea of counterparty risk; not knowing the individual that’s sending the message. In our system, the company is communicating to the company. Because of that, we have fine granular control. We can decide that fees for information doesn’t need to be in the blockchain in ten minutes. It can be in the blockchain in days because it doesn’t matter because both endpoints trust each other. There are a lot of things that we can do that the Lightning Network needs to be much more sophisticated to do and things have to be worked out but we’re close to getting there. When I say close were twelve to sixteen months off of having a much better system. It’s in its early days, but we’re getting there.

Can you address a little bit about what has happened with blockchain or Bitcoin as far as their fees go recently in the past 30, 60 days?

There’s been an explosion of interest in Bitcoin itself. Fees aren’t established. Most people don’t understand this, but it’s a fee market. There are competing factions. There’s a faction that believes that we should scale on chain or create blocks that are bigger. That’s understandable and that’s something that Satoshi Nakamoto, the creator of Bitcoin, first touched upon. There are a lot of engineers like myself that realize that no matter how big the blocks get, it won’t support a global currency. We know through good technology and through experience that layering technologies through a layered approach, you can achieve all the wonderful things that we’ve achieved today with the internet. A lot of the core engineers are saying, “We have a lot of technologies that we know that can mitigate a lot of the things that we need before we ever consider increasing the block size.”

That’s painful for businesses. Even our business gets impacted a bit by that. Although we play in a different space, we play at a much broader enterprise product or for enterprise companies. Companies don’t care if they pay $5. I was quoted by a large corporation, which initially used my product, I won’t say the name, turned to me and said, “You’ve got to be kidding me. You’re talking about a $2, $3 or $4 fee? We did an assessment in our company and it costs us $5 to issue an invoice for a $25 box of pencils.” In our system, we can mitigate it or we don’t. “We don’t care about transactions on the blockchain in ten minutes. There’s this level of guarantee this five and a half hours.” There are all sorts of things that we can bring the fees close to zero right in our platform, but our platform is unique.

With the advent of this, the block size that hold the transactions, these blocks are digital envelopes that hold transactions. They’ve gotten flooded and to get your transaction in in a counter party risk or financial transaction, you start to pay more to be able to see it confirm faster. The fee started climbing and climbing and climbing. A lot of the core engineers are saying, “That’s bad on one end, but it’s good on the other end because it’s going to force companies to start using more robust technologies such as a new technology that they released segregated witness.” They’re working on things such as Snort signatures, which are very technically deep cryptographic signatures that will reduce the size of transactions also. They’re working on myriad of other technologies that will optimize the protocol. Once a protocol gets optimized, then let’s consider increasing the block size.

[Tweet “No matter how big the blocks get, it won’t support a global currency. “]

This pain is good to push the companies and the lazy guys to go and retrofit. No one controls the global Bitcoin blockchain. It’s an opt-in. People have to opt in to use these technologies. There’s no way to get them to opt in. They’ll just say, “I’m not going to update.” I’ll tell you to mitigate something. A design flaw that exists in the Bitcoin blockchain called malleability, our company and engineers months to be able to mitigate it. It’s very difficult to do. It’s very costly. If you have a bigger block and you’re a company, why spend the money in engineering? Just shove it into the bigger block. The core engineers were saying, “No, let’s force everybody to optimize and make it better so later we can have a substrate that can actually handle and be robust for smarter contracts, for better execution of systems on second layer technologies.” We believe that because we’ve always been a second layer technology.

Let’s talk a little bit about your token sales. Where are you in that process?

We’ve just started doing pre-sales of tokens. There are large volume purchases of our tokens to select individuals. We’ll accept anyone, because our APIs can be used by the average individual. We’re even close to releasing a platform that will allow tinkerers to build on our platform. We don’t have to talk about futures, so I’m not going to be speaking about futures, but keep your ears peeled. We’re maybe four to six weeks away from a major announcement. We like to look at individuals who can actually use our platform. It’s available for purchase or minimum purchases that that may be high for certain individuals. It starts at $10,000 to do purchase volume discounts of the token. Your utility tokens in the unlocked functionality in our platform itself allows a person to take that. There’s a major advantage.

We were selling Pilot Development Kit, which is the full use of our APIs for $20,000. You could get in and get a one year license for our API by purchasing $10,000 worth of tokens with the one year license of our product. There are larger volume discounts also. We’re taking a very private approach to this. Individuals who are intelligent and know that they want to purchase a token to use this platform either today or in the future because they understand the power of the platform, may take a position in purchasing the tokens. We asked them what is their interest in using the platform. We’re not about saying that these tokens have value outside of our platform. We’re very unique in what we’re doing. Being unique and conservative in this approach will show to the community that probably better align with serious corporations. We’re not a loosely formed project or an open source project and that’s what’s completely different about us.

A lot of people in this community get excited because they can go to a GitHub and see all their code. We’re a product that functions. Just like you go to Oracle or Microsoft and you buy SQL Server. You come to us and we offer a product. If our product didn’t work, we’re a US corporation, you can take us to court if we took your money. In reality, we’re trying to change what’s going on. A lot of these companies are also open source projects. The guys work on it, if they want to work on it. You can’t fire anyone. There’s no board of directors. It’s a loosely formed foundation. A lot of times these foundations are outside the country. Maybe that’s why a lot of people in the crypto community don’t know about us as much. We’re closed sourced product but we’re a product that functions. We’re what I would consider one of the most mature, if not the most mature product outside of financial products in the cryptocurrency space.

Is there anything that we’ve missed that you’d want to put in there?

Blockchain of Things sponsors an event called CyrptoCircle. You could go to Meetup.com and look up CryptoCircle. It’s become the largest Meetup in the country, possibly in the world. We throw it at Jay Z’s 40/40 Club, the second Monday of the month. Last month we had 1,146 people sign up. We take over all of Jay Z’s club the second Monday of the month. It’s some of the best people in the community. They’re represented by great law firms that will answer questions, discounted drinks, free food. It’s become a very popular event here in New York. Let’s be in touch and thank you so much.

Thanks, Andre. It’s very nice to meet you.

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About Andre De Castro

 

JFS 002 | Blockchain of ThingsAndre De Castro is CEO and founder of Blockchains of Things, Inc, a company that has the enterprise-class blockchain product, Catenis™. Catenis Enterprise offers a web services layer for rapid Bitcoin blockchain integration, to simplify and accelerate secure global peer-to-peer edge device messaging, digital asset control, and recording of immutable data. Mr. De Castro is a well-versed software engineer, project manager, advisor and consultant for blockchain, security, and the IoT sector. As a founding member of The Open Source Financial Developers Association (OSFDA), he advises companies in the Fintech space, and also runs Cryptocircles – a New York City based meetup group where he advises the community about blockchain technology and crypto currency concepts. He is an avid speaker at Blockchain and IoT events and has been a policy influencer; in 2013 he worked with the federal government’s FinCEN division in creating more clarity on crypto currency policies. To this day, he is solely credited for the Jan 30th, 2014 administrative ruling on software development and investment activities, opening up greater avenues for well-established corporations and startups to conduct crypto currency business in the USA.
Most recently, Andre was a guest on NASDAQ TV, as well as a keynote speaker at the Blockchain Summit in Beijing, The Blockchain Conference in Las Vegas, Canaccord Genuity’s Annual Growth Conference in Boston, 2nd Annual IoT Security Summit, IAB Ad Operations Summit, Quantech Distributed Ledger Technology Conference, and Blockchain World Congress in NYC.

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