Transcript: Voice of Blockchain 2018 Recap: Part 2

the potential and promise with regards to blockchain and cryptocurrencies, regards to state regulation specifically, and also federal and global regulation. One of the things that I really like about this space is that the idea of trust and displacing trusted intermediaries is something that's really very attractive to lots of different disciplines and lots of different industries. I think it's one of the reasons why this space is so interdisciplinary and there's so many people from different backgrounds. It's kind of diverse in every sense of the word. This is certainly one of those technologies that has the potential to disrupt all the business lines in a state from the basic service provider to the highest regulation that we have.

But I think it takes a lot of effort, a lot of players to reach out, educate, and bring forward the benefits of this technology. So I used to say education. I have a new response, which is bureaucracy. My personal experience, I've talked to a fair amount of national regulators and rarely is there not a champion or a group of champions or people who get it. There's always people internally who get it, but they always express this feeling of being handcuffed, not being able to necessarily move forward.

And so I think that there's a lot of opportunity for the public sector to be self-aware of that and to try to allow for green spaces for their own deployment of this technology. And I also think one of the other great antidotes to this is competition. And whether it's at the state level or the national level, the Gulf is a great example of this. Bahrain and UAE and Saudi all pushing each other to be the real innovator in the space. Those things drive change.

And so I think it's great that Illinois is aggressively looking to be an actor in the space and I hope we see more of that. Totalitarian government is an awesome place to break through into technology because they say do it and it gets done and there's no discourse. So not bad. But the problem is the double-edged sword. And this is the warning.

We created a blockchain protocol for the identification of labor so that we could actually then tie that into materials and goods so that we have a chain of custody. But what it did was that we then identified people too well. And because we're in a special economic zone, the government owns the data. The same thing goes for the Kingdom of Saudi Arabia. We have a human capital now list of people that are being used right now for a brand new system that was just implemented this past June that every citizen in China now has a scorecard on how good of a citizen they are.

Did anyone see that black mirror episode where they had that social media thing? They're doing it for real. And guess what they're using? My trusted, authenticated human capital data that I'm using for the good, but it can get hijacked. Having trusted authenticated data is great.

Having trusted, authenticated data sometimes can be used in the right spirit, because I understand what they're trying to do, which is to help people for safety and security. Hello and welcome to the Constructor Podcast, The Best Way to Build It, Episode Number 93. I'm your host, Brittany Campbell-Turner, and this podcast is dedicated to helping property owners have certainty in their decisions about their construction projects. We talk about fostering trusting relationships, help you to understand how to lower risk, be under budget and on schedule, and most importantly, exceed your end user's desires.

In the last episode, we started our recap on the Voice of Blockchain Conference, where I hosted and moderated a presentation about why construction is an industry that's ripe for blockchain, talking about specific use cases. I and my fellow panelists, Kimono Numa, Michael Bordoneiro, Rob Salvador, spoke about how we're transitioning into an industry where we produce lots of data that can help us build more trusting relationships. I also had the panel that included the Voice of Blockchain organizer and the founder of the Chicago Blockchain Project, Joe Hernandez, also with the Chicago Blockchain Project, Patrick Kijek, Kimono Numa with BEMStorm, Michael Bordoneiro with Asset Leadership Network, and James Salmon with Collaborative Construction LLC.

They talked about building information modeling, blockchain, and legal contracts, selling next year's exhibitor locations. So if you haven't listened to that episode, check it out at constructor.com slash EP 92. In today's episode, you'll hear from a past podcast guest, Lexi Progirmos, executive director at the Chicago Blockchain Center. She spoke also on a panel moderating it that covered the topic of interfacing of technology and local government. Also included on her panel are Sunil Thomas Cluster, CIO, and the State of Illinois Department of Innovation and Technology, Christopher Cutter of Mountain Ethos, and Lisa Nestor Partnerships at Stellar.

The panel had a great discussion about how blockchain is able to support different government-led market initiatives based upon the needs of that community. I'll let Lexi further introduce the panel here. We're going to be talking about the potential and promise with regards to blockchain and cryptocurrencies, with regards to state regulation specifically, and also federal and global regulation. Before we get started, my name is Alexandra Prodromos, but you can call me Lexi. I'm the executive director of the Chicago Blockchain Center.

We're a publicly and privately supported nonprofit that was started last year. We were founded by Matthew Rozak, who is also the co-founder of Block, one of the sponsors here today. I'm also a business development manager for Block. Through the Chicago Blockchain Center, we have a partnership with the state of Illinois, the Illinois Blockchain Initiative. But first, I'd love to give the panelists the opportunity to introduce themselves, and then maybe once we get through introductions, we'll go through and talk about how you guys got into the space.

My name is Sunil Thomas, CIO for business and workforce with the State of Illinois. I'm also the part of the Smart State Initiative lead for blockchain in the State of Illinois. I've been looking into blockchain and adopting blockchain at the state for the last two years. I'm Chris Cutter. I'm a co-founder of the Crypto Fam, one of the sponsors.

I've been a startup entrepreneur since 2011, and for the last four or five years, I've been working with the state of Ohio and legislators there to pass laws to further innovation. I got into blockchain about two and a half years ago, as most of the startups I work on are only in disruptive tech, and so it took me down that road. My name is Lisa Nestor. I'm the director of partnerships for the Stellar Development Foundation. In that role, I focus on ecosystem development, particularly for the businesses that are deploying or integrating onto the Stellar platform, as well as a few other programmatic things that we're launching and overseeing at the foundation.

As you guys can tell, we have a lot of varying voices on this panel. We've got the startup foundation perspective, from the government perspective. One of the things that I really like about this space is that the idea of trust and displacing trusted intermediaries is something that's really very attractive to lots of different disciplines and lots of different industries. I think it's one of the reasons why this space is so interdisciplinary. There's so many people from different backgrounds.

It's kind of diverse in every sense of the word. So in that vein, maybe let's listen to how you guys first got into this space. What was your first experience with cryptocurrency? What was your blockchain aha moment? Maybe Sunil can start us off.

Well, that involves you, Lexi. We got started, I think Lexi was just out of college and reached out to the state and wanted to see if we were interested in some of the emerging technology and blockchain being one of it. Some of the conversations we have had in early 2016 led us to create the working group within the state and move forward. We were one of the first states to request publicly information on blockchain application in the state in 2017. We got a number of responses from all the major players in the blockchain space at that time.

From there, I think we were excited about what the impact of blockchain on public service could be. We followed that with the five key pilots that we wanted to do. Now, early 2018, we were successful in releasing what we think is a key cornerstone report for the state on use of blockchain in the public sector. That was a joint task force report with representation from the General Assembly, the technology and the business. I think that's key.

And we are starting to look at use case and move forward from there. Yeah, for me, it was, I ignored a lot of smarter people than me early on, like in 2011 and 2012. They were like, Hey, this is the next thing. One of them sitting right there. As he told me, I was like, Oh, I get it.

But the aha moment was when I started to realize what the trustlessness actually meant to change value structures globally. And as a developer starting to take more and more of that role on, I fell in love with the technology side of things way before the currency. And now I look at tokenomics as a way to enable all of those changes. My background is in financial inclusion. I was a Peace Corps volunteer in Mauritania, West Africa, where I was focused on economic development, but essentially ended up setting up a 30 member savings and lending association in my village, which was a super inspiring experience for me to see the power of infrastructure and the importance of financial services in communities.

After that, I was a researcher in India for three years, specifically evaluating different financial inclusion schemes that were being considered from credit to savings to insurance. And then I went and got my MBA, had a real job for about a year and got pretty bored and was then introduced to Jed McCaleb, the co-founder of Stellar through a mutual advisor, sat down and talked to Jed and pretty immediately was able to kind of map what Stellar was trying to do with my own experiences and what I had witnessed in terms of the power of infrastructure to empower communities and the importance of financial access as something to lift up people globally.

So connected the two and went from there. That's fantastic. And I love kind of where Stellar has come from since, you know, they've been thrust more into the mainstream now, obviously with a lot of the token projects that gained more visibility in the latter part of 2017, but you guys have been around, you know, since 2014, much longer than that. Yeah, 2014. So that's fantastic.

So when we talk about blockchain in the public sector, so blockchain use cases, there's lots that have been explored. What do you guys think are some of the most intuitive use cases of blockchain technology in the public sector? I think, as you know, public sector is required to manage key PII data. Our challenge is protecting the data and the cost of cyber protection of the state has gone up three times since the last two years. So the cost keeps going up as there are more attacks on the data that we store.

So I think that's one of the areas where how do we take the application and storage of this data and decentralize it. So that then focuses on the traditional businesses, the state does issuance of license certificate. You know, those are prime use cases to move into blockchain. But through our pilot, I think as we analyze the pilots that the state did, we are starting to focus more on enabling a decentralized identity for the citizen. So we kind of think that as our digital passport for Illinois citizens.

So that's the path we want to do. Again, we, we being the state and the public sector, we believe that we could enable those services, work with partners, both private, public and nonprofit, and then expand it. I think once that identity is set, we believe the application of all the other businesses could be done on top of that. Yeah, just quickly, I think the two that I could see the most one voting, I really hope to see that continue to transform. And one that's in my own backyard was here, Vodum.

Pete was great guy, and just seeing what they're doing in the space is exciting, especially since it's so close to home. And then secondly, a lot of the times I see inefficiencies working with state is usually due to like the lack of records and how quickly we can access and share information. And I feel like there's a lot of waste both in time and assets, just by those not being on a chain. I really hope to see like the auditors records and parcel data and the ability to implement some of these more innovative projects to happen on a much quicker timeline, just by digitizing those and getting away from antiquated systems.

So I certainly think that identity and registry makes a lot of sense. We're a bit more focused on the financial world and stellar. So I'll speak to one or two examples that we see there. So first, a really exciting project, and I hope a new set of projects is municipal bonds. So there's a very cool company called neighborly.

I don't know if anyone's heard of them. I recommend you check them out. That's been working in the kind of digital bond space and municipal bond space for quite some time. We have some partnerships working with them. And I think that there's a ton of opportunity in this space.

And the real idea here is to lower the barrier to entry for citizen participation and municipal bonds. We certainly believe that when these things are deployed on stellar, the ticket size for participation can be dramatically smaller. And then a secondary benefit is because seller has a built in distributed exchange, it makes it very easy to have secondary markets. If people want to then kind of liquidate or trade those bonds. Now this is all fitting into like regulatory frameworks, but I think there's a lot of opportunity there.

And then the second is just direct financial transfers, whether that's, you know, distributing state based aid to families, or collection of payments from citizens. This doesn't mean suddenly doing this with lumens, or, you know, using crypto. Stellar integrates directly as well into financial institutions, such as banks, and can be deployed to essentially make free transactions that are highly traceable and that are settled in, you know, a matter of seconds. So I would love to see governments reaping the benefits of this technology and just being able to deliver funds or collect from fund their citizens in a more efficient way.

And that I think kind of peer to peer financial inclusion, that the cryptocurrency enables, I think, was one of the reasons why one of the faster and more intuitive use cases for cryptocurrencies that a lot of people started exploring early on was remittances, is kind of like what you're talking about. So it kind of in that vein, but what are some of the problems that you kind of run into when you're trying to use this global peer to peer cryptocurrency, but you're crossing into different jurisdictions.

And there's kind of this lack of standardization worldwide with regards to how this stuff should be regulated. So maybe Lisa, you can kind of touch on that and just your thoughts. Sure, definitely. So there's been issues in global payments with or without blockchain for quite some time. You have different requirements in different jurisdictions and kind of sometimes see it seems like the US just demands and the rest of the world says, okay.

But, you know, it's just kind of compounded in some ways when you're doing this type of stuff for remittance payments or any type of token based project. But what it comes down to is that Stellar is a roadway. It's a way that you can exchange value on a peer to peer basis, whether that's individuals or institutions. And it doesn't change the regulatory requirements that any given individual or institution needs to abide by. And so, you know, first of all, it's just kind of educating regulators around the world about what we're actually talking about when we talk about payments on the blockchain.

And then, you know, kind of getting rid of the myths that there's not going to be any know your customer kind of work done, but that, you know, their local companies will work with them. And they're just using this different set of rails to do that. But I guess one thing outside of the payments is that we in the last year or two have just seen this explosion and tokenization, right? And there's tokens of all shapes and sizes right now. And it's, you know, a train moving 200 miles an hour into the world.

And I feel like governments and regulators are doing everything they can to keep up. It concerns me that there's not enough understanding about the different types of tokens and the different types of responsibilities that should then be managed by those token issuers, right? A gaming token is different than a stable coin, which is different than, you know, a real estate security, which is different from a municipal bond. And so making sure that bad players aren't taking advantage of low knowledge areas. I mean, this is done in like securities markets anyways, right now, watch China hustle.

It's very interesting. But I think we as you know, the foundation needs to make sure that we're inviting regulators to the table and helping to educate around these different types of like tokens and information around them. You bring up a really great point, Lisa. And I think so one of our supporters at the Chicago Blockchain Center is the Chamber of Digital Commerce. And one of the initiatives that they've been trying to do is to just really educate the regulators at the federal level.

They've created the blockchain caucus within Congress. They've worked with chairmans of the CFTC and SEC as well. So it's definitely this one area that, you know, we need to continue working in. But maybe in addition to that, or besides that, what do you guys see as some of the greatest impediments to adoption in the public sector? Maybe Chris, you can start us off since you've been kind of working in this innovation space with the government for a while now.

Yeah, I think the education is the first piece. That ease of adoption. We don't, as the last panel said, really have a standard lexicon to even talk about this. And the first battle you face is educating and then it's but why or it's not a magic bullet and explaining the difference between blockchain and tokenomics. What's the difference there and what does it mean for them to embrace one but not the other?

And then I would just say that the people that I work with oftentimes when they have to make sure that the people that they listen to want this. And so if they're trying to innovate in a direction, but their own constituents don't listen to that or want or force because they're the ones that really make the decisions. They're the ones that call these legislators up. They don't force that, then they won't even take the time to understand what the language is. Right.

So have you found some of those communities and jurisdictions that you're working with, the constituents have had kind of an appetite for this or has it been from the top down? Top down, definitely, but they have to have those major tastemakers, those key employers and large tax-based payers to come to the table and say, us Fortune 500 companies want this because we see that it's going to make us better as a company. It's probably going to save us money and it's going to attract our customers to a new way to do things.

And I think that actually just gets the legislators excited to learn. And then once they do, then they figure out, well, how do we do it later? That whole how piece will still be defining for years, but just to understand enough to go there is the first major piece. Right. And then, Sunil, have you seen any kind of advantages to trying to take a leadership stance from the state perspective as opposed to the federal?

So there are areas where the state can take a leadership role and form regulations. This is certainly one of those technologies that has the potential to disrupt all the business lines in a state from the basic service provider to the highest regulation that we have. That is a challenge for them to start to regulate a technology. The regulations you see are more for the business. They hardly have a technology regulation anywhere.

First and foremost is education. And again, industries, lobbyists, others reaching out to the legislative assembly to ask them for regulation. I think we were successful to some extent to have what we think is a low-tech regulation around cryptocurrency in the state. But I think it takes a lot of effort, a lot of players to reach out, educate and bring forward the benefits of this technology. Yeah.

I just wanted to respond to their comments. So I used to say education. I have a new response, which is bureaucracy. My personal experience, I've talked to a fair amount of national regulators and rarely is there not a champion or a group of champions or people who get it. Right.

There's always people internally who get it, but they always express this feeling of being handcuffed, not being able to necessarily move forward. And so I think that there is a lot of opportunity for the public sector to be self-aware of that and to try to allow for green spaces for their own deployment of this technology. And I also think one of the other great antidotes to this is competition. And whether it's at the state level or the national level, the Gulf is a great example of this, like Bahrain and UAE and Saudi kind of like all pushing each other to be the real innovator in the space.

Those things drive change. Right. And so I think it's great that Illinois is like aggressively looking to be an actor in the space. And I hope we see more of that. I totally agree there.

I think that competitive aspect that you were talking about, and you know, the fact that Illinois launched their blockchain initiative in late 2016. And since then we've seen several other states become very interested. There's been, you know, Wyoming earlier this year put out some legislation as well. There's places like Arizona. There's been a couple of bills that have come and gone through California, but there's still some energy there as well.

And maybe Lisa, perhaps you can speak to this as well. For startups that are looking to find headquarters someplace and really get started in this space, since there is this sort of constellation of different stances toward cryptocurrency and blockchain, not just in the United States, in our kind of bifurcated state and federal system, but worldwide actually. What would you recommend for most startups that don't know how to get started? Yeah. I mean, you know, in real estate, they say it's location, location, location, but I think the same applies for startups that are working in super innovative areas.

So shop around, get people to compete for you, whether it's resources or sandboxing or having close contacts, at central banks or local regulators. There are definitely places in the world that are very aggressively trying to attract companies in this space. And I think that it can be a very big competitive advantage. Chris, you were kind of touching on this. Maybe you could expand here for us first, but what's kind of the importance of interacting with the community and kind of keeping those lines of communication open with the regulators?

Well, yeah, I think that creates that location, location, location vibe is that we want to reduce the barriers of entry. We want to make it okay to fail and fail quickly. And you need that iterative approach, especially with the technology this new. And that also harkens to the strategic partnerships that are really key. And community often says quickly, this is what I need.

And you have to have those environments and those communities that are willing to listen and then get together so that they have whatever access to capital they need, access to other partnerships and really green field of adoption at an early place. We can all create things, but if it doesn't get adopted, we don't really go very fast. So just taking a new narrative to approach that this is a piece of your community that isn't just a cool, new form of tech. It's something that permeates our entire culture.

And I think I would add, this is kind of green field in terms of regulation. There's an opportunity for the states and multiple federal entities to work together rather than enact local regulations and then try to supersede each other by other regulations. We want to think this is an opportunity to work in parallel with all the states. We are starting to reach out to multiple states, looking at the efforts of the states. Also think that we want to reach out to the federal entities so that we could all have a single unified regulation than what has happened in prior in any regulation as being different regulation that has caused challenges for business to operate from state to state.

So I think it's a great opportunity for the states and the community to work on this. Sure. So at Stellar, I would say we're thinking about this at kind of two levels. So the first is we need to empower the companies or institutions, individuals that are working on Stellar to first be able to find each other within kind of local areas and then feel like they have the educational tools and knowledge to be able to speak to their regulators directly and ask for what they want.

Right? So it's enabling discovery of other people in your space and then kind of empowerment and being able to vocalize what you want and why it's valuable for your local economy, et cetera. But at the same time, I think we at the foundation have an obligation to our kind of global community to make sure we're continuing to expand the network. And so what that means to me is going to places that are less open to blockchain around the world, whether that's Egypt or India or, you know, South Africa and making sure that we're kind of bringing those regulators into the conversation and educating them so that companies in those communities have a better chance of, you know, being able to access and launch.

Final thoughts from our panelists here? Any projects that you guys are working on that you want to talk about? You know, the state of Illinois would want to continue to have the leadership role in blockchain within the state, but we're also looking for opportunities to start work with some of the national entities to both educate and possibility of expanding use of blockchain across all the services that we offer. So we'll continue to do that. We'll look for both partners, vendors, and other entities to work with us to move forward on this.

Yes. So from a crypto fam perspective, we've got a great global community that we just continue to put out a lot of free valuable content. So I encourage you to either connect with us at our booth or engage in some of that. And then hopefully that just helps further the conversation. And then check out what Ohio's doing.

We've got a lot of really cool initiatives and a lot of funds and companies starting there and funds flowing there for this space. And I can't wait to see what happens there next because you might not expect that from Ohio. I'm really impressed with what I've seen here and the community. And I would just encourage anyone who's a participant or an organizer to keep it up. I really like that this is like local city community coming together and talking about this, not, you know, one company trying to bring their agenda to the table.

I think that's awesome. Impressed on our end. Let's give our panelists a round of applause. Thank you guys. I also wanted to share with you guys a panel discussion led by Lada Moberg.

It's actually called The Blockchain Opportunities in Special Economic Zones. Lada is an author of a book called The Political Economy of Special Economic Zones, Concentrating Economic Development. And Lada, she invited past guests, Paul Doherty, president and CEO of the Digit Group, a leading smart cities design and solutions company. They had a very interesting discussion that I wanted to share here. So listen in.

Hey, welcome to the session. What we want to cover here is the opportunities that we see for blockchain solutions in special economic zones. I'm here with Paul Doherty, the CEO of the Digit Group. And I want to start by just giving you an overview of what special economic zones are about, special jurisdictions, and what the opportunities are that we can find in these areas. I am a researcher on special economic zones myself.

I have my PhD in economics from George Mason University, but I'm based here in Chicago. I work for William Blair in their macro team. So that's kind of what I do for a living. I have a book on special economic zones, the political economy of special economic zones. And I found that a lot of people who are looking for the kind of innovative solutions that we see people talking about here are really interested in understanding this space.

So that's why we wanted to kind of talk about this. So let's just give a little bit of an overview first. And I'll be turning to Paul and we're going to hear about what the kind of projects that he's doing. Why do we really care about special jurisdictions, special economic zones? What can they actually do for us?

Well, if you have a change that will actually have a possible political impact, what people often recognize is that even if this could be something revolutionary, something awesome that can really change a country for the better, you come against the reality of politics. Policy makers are generally conservative. Why is that? It's not a matter of ideology. It's about them wanting to preserve their space of power.

They have their interest groups. They don't want to rock the boat. Now here we come, this kind of community with blockchain solutions that can actually have big impacts for the whole community. Makes me really excited to see all these things that are possible and that people are pursuing here. But I know that a lot of these projects are going to come up with the reality of politics, where policy makers are going to say, no way, we're not going to try this.

What you're going to change the way that we organize society. You want to change the way that we produce things, the way we deal with common resources and things like that. That is where the special jurisdictions or special economic zones come in. And we've seen this in the past. We've seen how countries have transformed on the back of special economic zones.

And what it is about is carving out an area in a country where you can pursue change that is different from the rest of the country, where the government can say, I'll allow you to play around in this space. It doesn't matter as much to us. We're not as worried when we see you doing things this because it's far away enough for the capital city. Maybe it's not going to rock my boat. I'm still going to have my crony relationships on the other side.

And that's actually where the opportunities come in. So let me just take a couple of minutes to just look at what we've seen in the past in this space. And I think that the best example of this really what we saw happening in China and China opened up really beginning in the 1980s, very much on the back of special economic zones. This is not the government saying we want to open up there for going to have a special economic zones. It was a group of business people wanting to pursue trade with Hong Kong and saying, please let us give this exemption area here.

And it's far enough for Beijing, small enough for a project that the government could say, oh, yeah, we'll let you do this. We don't care too much. And lo and behold, what happened? We saw more and more of these zones. We saw reform countrywide.

And we're still seeing this kind of development going on. And we're going to touch upon that when we're talking about policy projects. So that's kind of the overview. That's why I am excited about thinking about what is the way to get the solutions actually happening and how to get around the politics of it. And I'll be happy to talk about my research and going into depth about that.

Before that, I would say we want to think about the blockchain solutions here. So Paul, why don't you introduce yourself a bit of an overview of what you're doing. And before we get into specific projects, I really hope to have a little bit of a dialogue about why the zones actually make sense and what your view is on the points that I've touched upon here. Sure. Thanks, Laudy.

Good morning, everybody. This will be a split type of conversation. We'll be talking about two very prominent areas of the world that are going underneath significant change and growth. One is in China and one will be in Saudi Arabia with real world projects and why blockchain becomes such an important foundation for a lot of the transactions that will be happening from a contractual aspect. Rightfully what you said, starting created transparency where transparency was never seen before.

For my friends from China, Ni Hao, I would actually give this in Chinese, but my Chinese is ma mo ho ho. So sorry about that. Part of the way that we are starting to take a look at the convergence of how as a real estate developer, I'm actually a licensed architect, a real one, not a software architect. I actually get sued if the building falls down. And also a builder.

But our focus right now is looking at environments that can create a data-driven human-centric environment. This is something that the people here in Chicago should really take a strong look at where we're no longer taking a look at, well, this is just how work gets done, like you said, about cronyism. Yeah, well, take a look at Chicago, except that we put nice words around it. Instead of it calling the payoffs or out and right shakedowns and things like that, we create building departments with inspectors. We make it legitimate.

Right? If we're really professionals, we don't want to see buildings fall down and kill people. Of course, we're not going to do that. But we have these checks and balances in place. And this is where the advent of data becomes a very important driver.

The transparency that is going to make sure that we not only have a built environment that we feel safe in, that we feel secure in, and that it raises the quality of life, we're also now into a world that reaches beyond a single building. What we develop overseas is that we take American innovation products, goods, and services, and bring them into areas to create brand new cities from scratch. Which means my job, from a commercial aspect, is I have to make people fall in love with a piece of dirt.

Meaning, are they going to move their families there without the safety net of having grandma being able to babysit? Or they're not sure what the school system is going to be like, or the healthcare system. So this becomes a society issue. So a lot of our work with creating those digital foundations comes with building exactly what we're sitting in here. The built environment is very good at documenting a lot of this, but it's still not accurate enough.

With the use of blockchain, we can start to ensure that the process of how you build things like roads, bridges, and buildings becomes more transparent, which means we're going to piss off a lot of people in the construction industry that are making a lot of money off the inefficiencies. But we're going to persevere. The problem that we're finding right now with blockchain is that Ethereum being one protocol that we use for contracts, because you can imagine the amount of contracts not just for a single building, but for building a complete city.

We have to have checks and balances all the way through. The thing is, I can't reach into a bank to actually enable those contracts to pay people. So again, I feel like I'm in 1983 in New York City at the Javits Center during the first PC Expo. I saw a lot of guys back then wearing flip flops with their own little PCs trying to sell their things. I saw this little booth with a brand new company called Compact Computer.

Of course, IBM was there. Of course, they were with that little penguin guy going around with their PS2 architecture and promoting the things like token ring networks. Back then was very heady. I'm seeing these two days in the same way. There may be in one of those little booths, the next Compact Computer.

But we think that the world is going to be around cryptocurrency in its current format, especially in the world of Bitcoin. Well, you know what? It's a great way of creating some cow paths, but those things aren't forever. Why? Because for all you people that think you're environmentally sound and, yay, let's go, we're going to have a brand new way of doing cryptocurrency, you really believe in the environment when you literally can bring down an entire city like Seattle just to mine one of those damn transactions.

Are you kidding me? I watched the two Chinese sessions here yesterday. I was very pleased to see that there was such a great thought put into what they were trying to do. But again, everything's connected to everything, Lota. We have this amazing universe that's now starting to connect together that when you do use cryptocurrency, it's not just about a transaction.

It's not just about an asset system. You're killing the environment in its current format. The amount of energy that you need to use is horrifying. We got to rethink things. And the PC world went through that.

The software world went through that. It's just part of the process. Now it's our challenge. Everyone's sitting here in the audience to start to rethink, well, how do we really do this? Because guess what?

Cryptocurrency in its current format is a lazy man's way of doing cryptocurrency. Let's start rethinking things. And that's a challenge. I'm not from the crypto world. I understand it because I have to use it as a tool in order to make sure that the data that I use goes through proper protocols and starts to unleash the power of how it affects the built environment so that when you're sitting in this seat next year, maybe how you get here is more efficient.

We have to take these things in small steps, but the world, including Chicago, is moving in to be in a smart city. When you pursue the projects that you're doing, perhaps you can touch on why it's different to work in a special jurisdiction or special economic zones environment. Now I touch a bit on the political economy of it. And perhaps you can be more specific. What are the kind of incentive problems that people like you and people who are pursuing these projects here, they're going to come up against?

And why does it make sense? What is different in working in a special economic zone environment? Special economic zones that we are working in currently, but I'm going to go to China and then we can talk about Saudi Arabia. So approximately 25 years ago now, they made some big announcements out of Beijing that they would take certain areas, in this case Shenzhen, which is a southern city in Guangdong province, right across a creek from Hong Kong. And with the handover in 1997, there was a huge push to raise the bar on the Shenzhen side so that you just weren't going over there for cheap goods, then going back to Hong Kong to live.

And they created this wonderful bubble around that particular geography. And you wrote a book that actually talked about when you take the hands off the wheel as a centralized government and allow that particular region to thrive, that is thousands of miles away from the capital, special things start to happen. And the big specialty was that this was actually an incentive for that geography that was pushed by communication specialists inside of the government. So there were certain generals in the People's Liberation Army that also caught wind of this.

And one of them was a general that had just started a small company based upon telecommunications called Huawei. Well, it's now the headquarters for the world's largest IT company, Huawei. When you can create those special zones, special things can happen. We also have probably the best known brand outside of Alibaba called Tencent. You may not know Tencent, but you definitely, if you're in the gaming world know League of Legends, they own that.

They also own WeChat. For those of you that are not on WeChat, there's 1.4 billion reasons why, because that's all the Chinese use. They don't use WhatsApp. And the reason why that's important is because WeChat has transcended of being this tool that you can communicate together to being the third largest bank on a monthly basis in the world in transactions. Get your head around that.

WeChat is the third largest bank, bigger than Goldman Sachs, bigger than Morgan Stanley, bigger than all these big groups, and it's a chat mechanism. There's more VW vehicles sold on WeChat in a month than the entire dealership system in the rest of the world. This is the power of what we're talking about. But here's the problem. That special economic zone, because it was given all these incentives and ways of growing things that were outside of the traditional communist way of working more capitalistic, they've gotten too successful.

And this is a word of warning for all special economic zones. When you get too successful, then the clamp comes down. Two months ago, Tencent has now been borrowed from growing any more games for at least two years as a moratorium. They don't want it to grow anymore because it's becoming too powerful. What does this have to do with blockchain?

Well, right now, these special economic zones are now sprouting up in other parts of China. And a lot of them are being pushed into certain types of zones. One can be for manufacturing, another for financial. FinTech is a big thing in China right now. And what's interesting about that is watching entrepreneurship grow outside of a singular system that is more capitalistic than the United States in certain regards because of our regulations.

And what's really cool when you start to see that is how do we as an organization start to take advantage of that? When some of our projects like our virtual reality theme park in Qingdao, we have a contract to manage that for 50 years. So what we do is we go back into not just using a protocol like blockchain. And of course, yeah, this word big data, it's not big data. We have infinite data.

It's never going to end. And we have to corral that into the process of building it for real, but more importantly, human capital. And this is the warning. We created a blockchain protocol for the identification of labor so that we could actually then tie that into materials and goods so that we have a chain of custody. Pretty simple, actually.

But what it did was that we then identified people too well. And because we're in a special economic zone, the government owns the data. The same thing goes for the Kingdom of Saudi Arabia. Again, a totalitarian government is an awesome place to break through into technology because they say do it and it gets done and there's no discourse. So not bad.

But the problem is the double-edged sword. We have a human capital now list of people that are being used right now for a brand new system that was just implemented this past June that every citizen in China now has a scorecard on how good of a citizen they are. Did anyone see that Black Mirror episode where they had that social media thing? They're doing it for real. And guess what they're using?

My trusted, authenticated human capital data that I'm using for the good, but it can get hijacked. And right now, what do you do? So it's a word of warning. Having trusted, authenticated data is great. Having trusted, authenticated data sometimes can be used in the right spirit, because I understand what they're trying to do, which is to help people for safety and security.

We are very close with the Chinese government because of relationship both with the Obama administration now, the Trump administration. We have access that most business people don't have because of the importance of these projects. But wow, it's really taken me aback. When you create something, you've unleashed Pandora's box and we can't think of everything, but we're trying like hell to prove time and time again that this is the way you should use it. Don't use it for evil, use it for good.

Do you think that's an issue that will a lot of people pursuing blockchain projects in special use systems will come across that it's actually the case that the government can take all the data that their work is being founded upon? Not so much the hijacking of that, because that will happen in states that, well, they have total control. But let's take a very peaceful place like Canada. Right now, there's a smart city going up, actually it's a smart district on the waterfront of Toronto. And Google want to bid to put a billion dollars into a portion of this waterfront area called Keyside.

And Dan Doctoroff, a very good guy, former CEO of Bloomberg and former deputy mayor of New York City, formed this group within Google called Sidewalk Labs, where they want to take this approach where they can go into an existing city and place innovations to watch it grow within a city instead of like what I do, which is let's drop shit in an entire city and rock and roll. And at first, everyone was going, this is great. Sidewalk Labs is here and they have some great town meetings like this, a lot of input.

And then just about six weeks ago, someone in social media said, hey, wait a second, we're watching all this stuff going on with Facebook and how they can have third parties come in and manipulate their personal information of you and I and not know about it. Cambridge Analytica, right, with the lady that was here that blew the whistle on that. Well, guess what? The people of Toronto all of a sudden said, wait a second, this is really Google. Why do you have a fake name called Sidewalk Labs?

What are you going to do with our data? Do you know that they have protests in the street in downtown Toronto now against Google being part of this rebirth of Toronto? The backlash is unbelievable when it comes to human capital and the privacy issues. So sometimes it's not so much of the government taking over, but it can be people. Now, what's the important point of that story is that Canadians are such a nice, wonderful people.

The only time they get upset is when the beer runs out during a hockey game. So you can imagine they're really upset if they're out there protesting in the street that their data is being hijacked. I'm thinking that other side of the incentive issue here with the policymakers too is that because they're creating a special economic zones, and we've certainly seen this mechanism in China, even though the dark side is there is that you touch upon here, is that when they create these special areas, new economic areas that they are calling them, they have an incentive to make sure that they succeed.

So to some extent, they're going to let you pursue your project. And it seems to me that there's a difference between the kind of success that you were talking about here in terms of business success. I'm a successful company, and we're making a lot of money here versus success of the community. And I would parallel this to what happened in China when they opened up with this special economics in the beginning, was to say, hey, let's try open economies. Let's try some capitalism here.

People would say that the socialist soul will be destroyed if you introduce capitalism in China. And it was almost a way to show that that's not true. And then the success there that I understand is spreading throughout the country on the back of special economic zones had to do with how the community actually changed, how the economy is a whole change rather than the profit concentrate in one company. So maybe that will be a difference. And if I'm thinking about blockchains projects being launched, if it's a matter of I can now make a lot of money, well, maybe then you're more vulnerable than if you can say we actually created something that is different here, that local policymakers that are completely corrupt, but they're going to see that we can actually benefit from doing similar things in other places.

And I can move up the hierarchical ladder. One day I am going to be in the top in a communist party and sit in Beijing. That's my goal. Right. So if I can see that as being something I can write upon on the back of a blockchain project that is very successful, maybe that is the way to be actually really successful.

We're navigating a tricky political system like China. The problem with great new discoveries and understandings of how to take digital information and transpose that into something that's usable and then hopefully be in not chasing a trend, but having the trend hit you is where you can get monetary success. I come in from a different angle. I've made my money. I'm a gray hair, but I have that entrepreneurial spirit.

I lived in China for seven years in Shanghai. I've been working there in mainland China since 1994. My wife is from China. I have family in China. When I enter and the reason why President Xi and the leadership have embraced me as an American is not because I'm there to go in there to see if I can make some money, because I have a cool new way of looking at the world, including currency.

You have to start taking a look at blockchain as a social way of endearing how to create environments for people to succeed. If we don't start taking a look at like that and we allow greed to take over, this is going to be one of the most short-lived ways of having a nascent technology be killed because people are starting to see through that crap. If you're just here to make money, Leaf, that's not what this is about. We're trailblazing in ways that I missed the boat when the PCs were first there.

I was just too young. Guess what though? In eighth grade, I had a Lisa and then when the Mac came out, I had it. 1984, my Mac Pro, one meg of RAM. I was a king of the hill.

Now you take a look at what's happening now and I'm in a position, I hope, of being more mature, but the idea is that we have this entire world ahead of us that we need to start making sure that the human capital needs are being met and start showing blockchain in ways that make the everyday go, huh, what we're talking about now is not sexy. We're the plumbers right now of the new internet. Everyone's sitting in this audience. Now, do you care that the plumbing is perfect inside of these walls?

No. You just want to make sure that when the toilet flushes, it's not going to go down through the floor below you. So we're plumbers. Remember that. Let's make sure that we do put these things together, like in China with the way that I have to go about this, which is to come at it from a social aspect and really care.

I mean, really care. Start opening up because if blockchain is not socially conscious and just financially conscious, we're in trouble. And one project that I know you're doing a lot of the plumbing is actually in Saudi Arabia and I wanted to make sure that we have a little time of covering that because it's just an awesome example of a special jurisdiction. The city of Neom is being built as a private city. And why don't you talk a little bit about that?

First, maybe start at what makes it special in terms of a special jurisdiction and then get into what on the ground that you're doing there. Sure. There's a lot of talk about Neom. Everyone that I know that's working in the Middle East says that they're working on it. Yeah, right.

They're not. There's a lot of interviews going on. There's little bits and pieces of pilots and projects. And the reason why it's so secretive is because of the underlying nature of what Crown Prince Salman, better known as MBS, Mohammed bin Salman is up to. This is a next generation, a millennial coming into power in one of the most critical geographies in all the world right now.

He is Western educated in England, very smart, very shrewd, has surrounded himself with just the best minds in the world. Why? Because 50% of the population of the Kingdom of Saudi Arabia is underneath the age of 25 and they're bored. Right now, all the groups that I work with, McKinsey Accenture and whatnot, will say that by the year 2030, half of that population will be radicalized. So this just isn't about hearing about Sonia Romko going for an IPO and the price of oil.

Again, socially conscious. We do not need one of the most critical and pivotal countries on the planet Earth becoming upended because they did not follow through on policy. As simple as give them an education, give them hope. That's what Niamh's about. So I met then Deputy Crown Prince Salman through an introduction from then Chicago-based Penny Prichester, who was Secretary of Commerce at the time on a trade mission, and we bonded.

I just got what he was trying to do, which is to start coming out from underneath the archaic ways of being so secular with a religion that you're starting to come to certain conflicts when it comes to growth, especially in a modern world. Things like having no cinemas, not having women drivers. Wow. Well, guess what's happened over the past four years? They have theaters with real movies.

They have women drivers as of two months ago. Now, of course, you're reading a lot of the stuff that goes on with that when you open up the kimono socially and there's some people that become active and radical. And he's trying to keep a handle on keeping the clerics happy and grow something new and he's finding it impossible. So what we did as his advisor and master planner, we've done a number of different exercises. One where the master planner is for his uncle's development called the Jeddah Economic City.

It's in the northern suburbs of Jeddah. We're putting up the world's tallest building as we speak. Unfortunately, I don't have a laptop here, but if you want to come and see me afterwards, I have all the pictures. It's real. CNBC just did a whole report on it.

We're 82 floors up out of the ground. It'll be 259 stories when it's completed. Incredible. It's a vertical city. You want to talk about some blockchain.

And we also have a horizontal city that supports it. Because we were so successful with that, we got the opportunity to redesign Medina, which is the second holy city of Islam after Mecca. It's where right now during the Hajj, people go for a day to pay respects because that's where Muhammad's body is kept in the prophet's tomb. The problem there was they came in one day, said, hi Muhammad, and they get back on and they leave. They want to start capturing the mechanism to keep rials inside of KSA.

With those two successes, we were brought into a team of approximately six people. And we're responsible right now for Neom. It is a city state outside of Islamic law and outside of Islamic banking, which allows us to create in size a city the size of 564 San Francisco's. Yeah, this is a big one. It's also a cross national program that will bleed into Egypt and bleed into Jordan because they feel that the more that they can expand out with innovation, raise the quality of life, be safe and secure, that they can lead as an example in that region and move with newer types of jobs, things like digital fabrication, robotics, I mean, really high end stuff so that they can leapfrog themselves because they are going to run out of oil by the year 2050 as a natural resource to sell to the rest of the world.

This special economic zone is so special that they're now looking at this as having its own currency. You see where this is going, right? So we have every group in cryptocurrency in the world coming to the royal court. And I almost feel like it's like the old days of Caesar. It's like we have all the cryptocurrency guys inside of like the Roman Forum and it's this or it's this.

It's just awesome. But there's real thought put behind it. It's not just like here's my pitch and it's there. What we're questioning right now is we're getting outside of certain restrictions there. How much of a future shock is that going to be when we're trying to then have people move into this space that's unoccupied?

That's the entire Northwest quadrant of a sovereign state. And it's a challenge. The reason why you're not seeing a lot of news about it has a lot to do with what you're reading in the headlines this past week about the Soti Aramco taking 5% of their value and launching it as initial public offering and how come it may be pulled. The reasons are pretty simple. Oil went back over $70 a barrel, so they don't need the money.

But it is a $2 trillion float. Most of that money will be put into NEOM, not all of it, but it's meant again raise education, health care across the board so that we give hope to people. So I think when you talk about special economic zones and you want to start making a difference, you must have the foundation of a protocol like blockchain in order to make sure that the human capital is matched and is working with day-to-day current commerce, future planning, and then probably most importantly, how can I measure myself, my own family's quality of life?

And I think the key aspects of this special economic zones very much as it often is, it's exemptions from particular rules. So you have these kind of rules in Islamic finance, as you mentioned, I mean, the female drivers, I mean, there are a lot of countries with special economic zones and some are just kind of areas where you get some tax benefits and that can be very beneficial for you. I would always recommend somebody setting up a business to look for that. But the really key like makes you grow, makes you do something very different is what are the opportunities, what are the possibilities, not just costing my cost, what can I actually do on the opportunity side that is opening up here because I have these exemptions.

So that's really exciting aspect of Neon. What are you specifically doing? How are you implementing blockchain? What kind of technologies are you pairing that up with in your Neon projects? Right now we're looking at it from a multi-contract, multi-enterprise workflow because we have built something in Neon.

Actually, the Royal Family, you may have read it in the news, actually spent the month of August instead of leaving Saudi Arabia, which most of the time they do because August, you know, it becomes another planet and it gets very hot, like really hot. So a lot of people leave, but they stayed for the first time in decades because we built a palatial city. So they do have a royal court in Neon already built. And the way we use that was because we had to be as secretive as possible when all this is being master planned.

You know, there's not one company that sits on top and then just does all the work. You have to have local talent, you have to bring in materials, you got to bring in workers mostly, and you have to now make sure all that works. We use blockchain to capture that data to create an authenticated trusted system as a data asset management system. That digital asset management system becomes the digital DNA of a digital twin of exactly what's built. So we use a technology that we developed with Remy Arnaud.

Remy Arnaud is the designer and developer of a technology called Intrinsic that was part of the keyhole roll-up that you know is Google Earth. Google Earth is meant to be this tool that you can create from satellite imagery and street views and all this stuff and then splice it together for an experience. The problem with that is that you're dealing just with images. You have to attach data to the dumb images. And Remy was always frustrated.

So I gave him the opportunity to say, I want you to give me a digital twin of every city on the planet Earth and I want it geospatially perfect and I don't want one drawing and I don't want one image. I want the data to drive everything. And that's what we've done. We now have about 38% of the planet Earth in a geospatially perfect environment which is a gaming engine that resides in any browser. The cool part about that is when you put blockchain in behind that, sort of as like your pavement, we can put a lot of different vehicles on that pavement, meaning applications and things like that.

Things like analytics, reporting, real-time crime heat maps, helping firefighters fight fires better. These are the types of things that are real world that are now being implemented in places like Neom. I thought maybe you could wrap up with just, I know that you have a lot of opinions about the data application for blockchain and the kind of projects in a place like this that you would hope people to work a lot thinking really hard about the data, what the opportunities are there. So maybe you can just touch upon that.

I think in Chicago in particular, this is a very unique place on the planet. It was born and bred in New York City. So if New York City didn't exist, this would be my favorite city in the US. Our pizza is better, sorry. But one of the things that we are taking a strong look at here is creating Chicago into sectors of special economic zones.

We had worked in the past without taking into account the trustworthiness of the data and made a huge mistake three years ago in Gary, Indiana, where we were brought in to turn that city around and it blew up in our face because we did not take the proper approach with data. We used data that was inside of the government, like building departments and things like that. And I was really worried about my first time driving through Gary. I thought it was going to be like the Wild West with lots of guns and I had a duck.

I didn't have to worry. There was no one there. It's like this abandoned city, which means that there's abandoned buildings and we wanted to turn that around with the use of autonomous vehicles as being the primary tool to be a public transportation system. And immediately, unfortunately, we did not get in front of the story that the majority of the people down there that owned the properties bought them at a dirt cheap price and they're now slumlords. If we had known that information better and put it into a blockchain to tie in sustainable economic policies, sustainable environmental policies, along with the proper ideas of human capital, I don't think we would have been blown out of the doors by Black Lives Matter that we were a bunch of white guys going in there trying to take over a city.

That's what happens. We don't want to see that happen here in Chicago. So we're taking the approach that we're using blockchain as a way of monitoring people's education and training and retraining for jobs. This means that the north side and the south side would actually have a proper conversation in a taxonomy, in a language that they understand. We're first looking right now at the union shops of the different trades inside of the construction industry as our first point of contact.

Because why? Because they're already digitizing the pipe fitters, the electricians, all these guys that you think are just manual labor. Guess what? They're going to be driving the digital future. Why?

Because we don't have enough workers in the construction industry in the United States. 2008, we were blown out of the water by the recession. People did not come in and just look across into downtown over here inside the loop. There are more construction cranes going on than ever in the history of Chicago. We have to digitize.

We're the last great industry to digitize. Do you remember being in a bank 25 years ago? In order to do a transaction, you had to stand in line with a teller and fill out a lot of paperwork. That's us. We've been doing the same way of building buildings since the time of the pyramids.

Here's the sketch in the sand. Here's the sketch on paper. Go build it. We're now into a world where the data is going to be driving this. If we don't have a foundation of trusted data that can use a blockchain protocol, again, the whole thing is going to come crashing down.

So I implore all of you, take a look at our industry. It's $1.3 trillion annually. We're the largest industry outside of prostitution. So please, please come and help us. Therefore, two lessons from this panel that I hope you're going to take with you.

One, think about the data. That's where a lot of the work is going to have done in the blockchain space. And it's also where you find a lot of opportunities when you want to make a dent here and where it's going to be a lot of demand for these kinds of services. And two, all these brewing ideas in here, when they're going to be implemented, you're going to have to end up having to work with the rules in place in your jurisdiction, the policymakers, and how you navigate that is going to matter.

So that's why we've been talking about the special economic zones. It's understanding that fundamentals of the political economy of the environment where you're in, in particular, when you're coming as this super radical person in flip flops, maybe, but don't do that in the first meeting. Okay. And you're saying something radical that it's going to blow their mind. They don't know.

They've heard about blockchain, but they still don't know what it is. And then you take it 10 steps further. That is your awesome, cool idea. Think about the incentives that you're putting in front of people who are not going to be the smartest people you ever met. Okay.

But they are going to be, nevertheless, the people that you're going to depend on to get the green light for your project. So thank you very much, Paul, for being here. If you liked this episode, find out more in the show notes at constructor.com slash EP 93. If you learned something valuable, share it with your friends and colleagues. You can also let me know you enjoyed our discussion by connecting with me on Twitter at Brittany underscore CT or find me on LinkedIn.

You can just email me to at Brittany at constructor.com that's B R I T T A N I E at construct double R.com. This week, you'll be hearing one more episode as part of the voice of blockchain recap. And this episode is going to include actually interviews that I had at the voice of blockchain conference with a couple of people. The one includes Paul Doherty, who you heard from today, but a few more voices you haven't heard from. So I look forward to sharing the last episode as it relates to the voice of blockchain recap with you later this week.

If you haven't already subscribed to the podcast, you can do so your preferred podcast player. I look forward to connecting with you later this week.