I didn’t know James Belding very well before our call, but I have always appreciated his professional insights about tokenization and smart contracts. He is the CEO of a company called “Tokenized,” after all, but the thing that really stood out in this interview was his passion. He has so much, undying hope for a future that is made more fair and efficient through the use of smart contracts, that it hurts to even consider the fact that his vision is still viewed as “pie in the sky” by old world financial institutions and most of the Bitcoin world.
We also spent thirty minutes just getting to know each other before the call, and it would be unfair not to mention that James is just plainly a kind and personable man when he isn’t in public with his “Professional CEO” suit on, and I think that matters.
Our conversation occurred amid the giant DeFi pump and dump on the obsolete Ethereum network, and it seemed like James just wanted to reiterate the importance of real value to the world. There is a lot to digest here, so let’s get into it!
James, let’s hear your brief history. How do you get into Bitcoin? And then how did that lead to the creation of Tokenized?
Yes. I was studying engineering at university. Electrical was my focus, and I’ve always had an engineering interest. But I’ve also complemented that with a deep interest in economics and philosophy. And it is actually when I think I was 16, I was given the book, My Dad, The Sovereign Individual, by James Dale Davidson and William Rees-Mogg. It had a profound impact on me. I read it five or six times, and I was at an age where it certainly informed my worldview. One interesting thing in that book was that they predicted the rise of cyber cash and they predicted the logical foundations for why it could work and how it might work; not just about cryptography and the internet and some of the pieces there. And it resonated for me at the time. I remember pausing that page and thinking quite a bit about it. I know Milton Friedman had spoken about it, too, and predicts it across his work as well.
So basically, I was fairly primed on the idea, but I wasn’t a cryptocurrency researcher or advocate online. It was just an economic kind of thing; a thought experiment. And then when Bitcoin came on the scene, I noticed it in 2013, and it just immediately hit me. We figured it out! This is it! But I didn’t feel like it was worthy of changing careers or spending too much time on yet. I wanted to see how the regulators reacted, how the technology skills and just let it mature. And so I watched it from a distance for a good four, five years—just a little bit here and there and played with it, but didn’t really spend much time on it until the end of 2017 when I caught up on the scale. I was watching this game, and I was kind of disgusted with how all that played out. Then, when I started to see some real sensible voices start to gather and then take the momentum, the Bitcoin Cash project was starting to really find support. That’s when I thought, “OK, the time is now. I see a clear path forward to mainstream adoption. I see regulators reacting in a favorable manner. They were starting to understand the risks. And I can see this working.”
So I decided to basically take six months off and study the details and figure out how I can make a contribution.
During that period, I was just analyzing value propositions, customer experiences, business models, white papers, writing, all that kind of stuff. And quickly, it became very clear to me that the main and most compelling value proposition was going to be commercial records. And particularly the smart contracts and honest records like tokens. And so the business models I started to develop around that idea required a very compelling, smart contract protocol on a platform that could scale—on a decentralized ledger that can scale.
So it was a no brainer for me to use BCH and Bitcoin SV (BSV) now, because that protocol, that concept, the documentation, that theory behind it, was all very, very sound. And in my view, every other ledger that I looked at didn’t have those critical components together. And even then, it was not just a matter of the right technical formula, but it’s also a cultural component. To get this thing started, you need miners to understand its value and understand its role in the world and how their business is going to perpetuate, and all those key components. So I saw all that in BSV or BCH. So it was clear to me that we need a really good protocol on that network.
And there wasn’t one. So I evaluated everything at the time, and pretty much out of necessity to get my businesses that I had plans for off the ground, I had to do my own. So I started tinkering away, and came up with a protocol. And then I read some stuff by Joannes Vermorel, and he had a paper that he published with a previous design. It was a multisig design, and when I read his paper, it clicked for me. His request-response model was the missing ingredient that brings it all together—that just makes this super compelling. So I quickly added that into the protocol. The contest had been announced prior to that, but I hadn’t even considered entering at that point, to be honest. I was just sort of playing with protocol and making something that would work for the business. But when I had that light bulb moment and I flushed the rest of the details out, I decided to have a crack at the contest. And so I reached out to some people I knew in the “Metanet ICU” or whatever it was called before. I built a team and did a proof of concept, and ever since then, we’ve been working towards building the businesses that I always wanted to build.
That’s awesome. What a great story. It’s funny you mention Joannes Vermorel. That’s a name I haven’t heard in about two years now. Has he completely disappeared from the Bitcoin conversation or where did he go?
He’s still watching from afar. He’s still a strong supporter of Amaury and Bitcoin Cash. I haven’t spoken to him for a little while now, but I’m very respectful of him. I’m very friendly with him. I don’t agree, obviously, with his assessment, but he’s a very smart guy, and a very valuable contributor.
Yeah, he seemed like a very sharp guy. I heard him interviewed and I’ve read some of his stuff before. So, yeah, that’s interesting to hear that he was one of the inspirations for you.
So let’s get into the drama. What is the status of Tokenized today?
So the Tokenized protocol has been live and released for over a year now. It was the middle of May that we actually published it. So that was six months after being announced to us as the winners of the contest. And in that six months, we basically just did lots of R&D, polish, improving the robustness of the feature set. And what we released in May, over a year ago, was a pretty complete and very compelling protocol.
So full governance features, full compliance, enforcement features, all the transfer features that allow for not only multi asset like atomic swaps, but with all of the privacy features that you’d need from like a typical in the same manner that you’d have in a typical Bitcoin transaction. So spread across multiple inputs and outputs and all the… everything you needed for it to be a viable foundation for a new financial system with full, expressive, smart contracting in place. And that’s been the case for ages now. And we know a few businesses that have been working with it, issuing their own tokens and proof of concepts and building around it as we speak. So it has been life for a long time.
Our company has been focused on building those businesses that I described, which even before the contest, we’ve had a very clear vision on. We’d never wanted to spend any time appeasing the community in trying to do an open source fun project and gain popularity in this world. We wanted to be laser-focused on going straight for the big prize, which is a real compelling value proposition that we can go market to real enterprises, bring real value to customers and not have them care whether it’s on a distributed ledger or not.
But to benefit in such a way that it becomes a no brainer that their behavior fundamentally changes in a way that they’re willing to pay their good, hard earned money to actually use the service. So that’s our focus as a company, but the protocol itself is available to everyone, and we support it. Any question that people have, we answer within 24 hours and we share a lot of information privately to help support [the protocol.]
So that leads to my next question. It looks ready to go. I’ve been paying attention to Tokenized for a long time. Could I, if I wanted to, launch Kurt Token on Tokenized Protocol today?
Haha Great! So what does the process look like?
So you could spin up your own smart contract agent if you liked—and we have a guide that can help you—or the documentation is complete enough that you can work it out yourself. And you can basically just send instructions on chain through the different actions that we have specified as part of the protocol to spin up a contract, define the key terms and conditions of the contract and then create an asset that’s controlled by that contract. And then you can transfer it to any Bitcoin address or locking script, if you like.
So it’s all ready to go now. The only real and difficult part of it is really implementation like wallets that support all the features and platforms, and the licensing and things like that.
Yeah, that seems like a big sticking point. I think even if somebody were to launch a token product, I don’t think any of the wallets have any simple integration for, you know, “Hey, send me tokens!” Is there something out there or do you guys have some product?
DotWallet is currently functioning and does some… it has support for Tokenized protocol. They created a few tokens a while back, like Ethereum and BTC tokens. They had a little video on Twitter showing the performance of it on ShowPay—just like a Point-of-Sale type thing. But, yeah, lightning quick as you expect, as fast as Bitcoin and all the low fees and what have you that are expected on Bitcoin SV. So that’s one public example.
I know BitBoss were playing around tokens for a while and they were using it. So it means it is certainly possible. You can certainly reach out to those companies and get the wallets. We haven’t got a public implementation or wallet release just yet. We’re working on it. But we can certainly help with hosting and anything else.
Very cool. So let’s segue a little bit. All of a sudden, Ethereum tokens have gotten super hot. We’ve seen some 200X moves on tokens that don’t seem to do anything. I’ve seen hot dog, pizza, sushi tokens and stuff. They’ve gotten from a dollar to four grand and then back down to a dollar in a week or two.
And that led to all these BSV people starting to say, “Hey, wait where are our tokens? Why aren’t we trading any tokens anywhere? …which I think is a little silly, but I understand people being jealous of four thousand X gains on vaporware tokens. But, if it can be done, and it sounds like it can be done with Tokenized, what is the issue? Where are these tokens that everybody seems to think they want?
Yeah, I think it comes down to who. Who are the people that are going to be willing to put their reputations on the line to facilitate that type of activity? And I don’t see many people in the BSV community interested in doing those things.
The Ethereum community seems to be very well not grounded in reality. Like the financial instruments and the value of anything is just completely nuts. But they’re all just tinkering and playing. A lot of developers are totally disconnected from the economic realities of things, and they just are playing. And there’s a lot of hype around it and focus and a lot of money has been injected into the industry, from Ethereum Foundation. They put a lot of money into projects like five years ago, and that is sort of paying fruits in a very unproductive way. There are things that are working and things like that. But, yes, for me, like I personally would never put my reputation on the line to do anything that’s not of the highest caliber of quality.
I don’t want to be associated with garbage ever, in anything I do in my life, so I’m just not interested. But people can do that if they see a valuable business proposition there. They can certainly do it, and we’ll support them on it. But yeah, from a business point of view, I’d just never be interested in it. And I think that’s the missing component: the commerciality and the sensibility and the conservatism of the BSV community. If that is an accurate assessment of the community here, which I think it does lean that way. I think it just lends itself to being more practical and doing things of value rather than complete nonsense that gets whipped up into a hype frenzy.
Sure. Do you think we miss out? Maybe a little bit on that sort of “go fast and break stuff” opportunity? Even if 95% of all these things are scams or they go away, there is that five percent, that maybe would be a good idea. I look at a theory and projects and say, “Oh, yeah, we don’t need this or that or this or that.” But occasionally, I’ll hear a business idea I actually like and think, “Man, why didn’t somebody think of that on a ledger that can scale?” So do you think it’s a cultural blocker in the BSV space? Are we possibly too conservative?
I don’t think. It’s really just a symptom of being early like so I think that the BSV community and the products and the businesses are just super underdeveloped because there was no opportunity to think about these things because we were consumed with the scaling debate and the critical foundational pieces like getting the platform correct. And even when I was thinking about tokens in 2018, no one wanted to talk about them. I remember reaching out to lots of people and shocking people that are super big into tokens now. They didn’t want to talk about it. They weren’t interested. All they wanted was Craig scaling things, BCH, all the personalities, right? So I think there’s just an aspect of maturing in our minds, and in the community’s minds about what to focus on next and what needs to be addressed.
What were the real problems for them before and where do we stand now? So I think it was driven by emotion, but now we’ve settled the debate about all those key foundational issues. And now that everyone’s focus is turned towards “what’s next? What can we really build? What are the real things we can do?” Whereas Ethereum had a poor foundation, they didn’t think out the foundation correctly, but they did that sort of thinking in their community six, seven years ago. And people just started building from that period on. So they’re just very far ahead of us in a lot of ways in these building kind of aspects.
You know, it’s funny to hear like the way you talk about building the right foundation. I think it’s really obvious in the way that Tokenized is built. One of the things that really stands out is the incredible amount of documentation. For example, you guys have a PDF about everything: absolutely world class stuff, like the regulatory navigation, all the potential use case examples. It’s just fantastic. And I think that, first of all, calls back to your character based on hearing how you think about Bitcoin and business in general. But to me, when I read that, it sort of implies that there’s some demand from big business and or, you know, heavily regulated industries or even governments. Is that demand real? Is it out there? Is it being worked on quietly or does somebody need to go out and really hit the road and do some serious business development to gin that up and explain it to the big players like, “hey, this is all right here and we can deploy it faster than anybody in a way that is legally compliant and functional and not going to create all kinds of regulatory issues.”
So I see a lot that others don’t obviously, and I’ve had many, many meetings with very talented—I would even consider them—mainstream enterprise type people or regulatory type people or… Even retail clients, users that are very interested, but they’re not necessarily a crypto-focused kind of person. And smart contracts and tokens: when the value proposition is articulated correctly, (which I actually don’t see it articulated correctly publicly very often) is very compelling. It gets their attention, their eyes light up. And I’ve had a lot of inquiries that are coming out of the blue—they just heard about us—hedge funds and things like that. And they want to be a guinea pig. They want to try it out. They’ve got real problems that they’ve identified that they think they can solve with it, which resonates with my belief as well: what we think the value proposition is. And the conversations always led to “great when can we try it? When can we use it?” And that’s why we’ve been, as a company, just laser focused on getting the product implementation and the business ready so that we can go and get these people on board and start demoing it and start issuing these security tokens. So the demand is very, very real.
I hear it constantly to the point where it’s almost turning people away because I don’t want to go through that same song and dance to end up with “great when we try it?!” I know that they want to use it. So we’re just building as fast as we can so that we can bring that conversation to the next level and start to iron out real business deals effectively.
Absolutely. That leads to my next question. So what is that next major step? Is there a specific hurdle that you need to get over to start to do that?
So, I mean, to make a compelling value proposition for financial instruments (we think that’s the most compelling value proposition), particularly in the alternative investment space… So private securities, alternative investments, hedge funds, private equity, VC, investing, tech, startups, that type of thing. Those instruments are all paper contracts effectively. PDFs aside, the software does not make sense of them. It’s disorderly. It’s very complicated and convoluted. And there is real, serious demand from nearly everyone in that ecosystem and all sides to have a better way of doing things.
So as an example of that, HSBC has an assets services division which is basically managing private investments for wealthy family offices and things like that. And one of the main pain points we have identified is that their customers have really been screaming about a better way to manage their investments. So an example would be like if they have a private loan, like a bond of some sort, where they get a coupon to find out when they get that coupon paid or how much it is going to be or what the status of a certain term retention is… That pretty much has to be emailed to their customer, or their lawyer, at this firm, and they dig through the contract, and then they do some special calculations and they return an email about a week later. So there’s no real time possibility, and that’s shockingly common for basically most of the private equity world.
So, that’s where the real hard work is. But it’s where the real forcing function or the real value proposition is. So to actually achieve and really solve those problems there, though, you need to have a payment token like a currency token to be able to interact with the financial instrument tokens so that you have smart contracts. You can really make that a valuable proposition. But then you need the licenses that go not only with the payment side of things and the integration with the bank’s system, but also the security side of things. So in most jurisdictions, if it’s done on a P2P basis, you don’t really need it as a platform or really need licenses at all. You can get away with some reporting and things like that, but put the onus back on the customers to do their own reporting and their own compliance. But with the payment side of things, you can’t get away from it.
You really need that properly accounted for, and that’s a big sticking point because it’s doable, but it requires capital and it requires a significant organizationally OpEx expenditure to manage the risk. So you have people around the clock that not only manage the operations side of things from an I.T. perspective, but you have people that can support the customer service and stuff like that. And if you don’t have that, you just don’t get the licenses! So the regulators just won’t be interested in allowing you to have a license. There’s all this qualification. So if you’ve got a business like that, the regulators want to see that you have a very sophisticated business plan with operational redundancy, like “what happens even if you have capital to closed down shop in an orderly manner?” If you do run out of steam or your business fails, do you have insurance in place? Do you have credible relationships? Do you have something like AWS, for example, a credible relationship, but every supplier can’t have any impact on your business in terms of being out of service. Or do your customers need to be qualified and of a high standard and have existed for a long time as qualification procedures? So all that stuff is very, very important. And it’s something that I wouldn’t want to run a business like that without doing anyways. But the regulators require it and every jurisdiction is a little bit different.
So there’s a lot of complexity there. It’s good. It’s actually a very interesting challenge.
It sounds like a nightmare [chuckles]!
So I’m not trying to be negative at all. It’s a really fun challenge to tackle.
There’s all kinds of arrangements where you can partner with companies already to do this and cover a lot of jurisdictions very quickly. So those are the strategies that we’re employing. But at the same time, it’s important to get your feature set in the platform right before you start churning through OpEx and spending a lot of money to get those partnerships and licenses, because if you do that too early, you’re just going to kill the company. Right? No investor is going to want investment in the whole thing, and it just spirals out of control.
So the timing is very, very important. And that’s what we spent a lot of time on. And the timing is not only dependent on us as a company and our build rate and all that. But it’s also on external factors like regulatory attitudes, which are not the same in every jurisdiction. Certain policies, like some businesses, if you go to partner with them in terms of banking as a service or a payment system service, some companies just have a board level policy where they won’t touch any company that has anything to do with crypto and they won’t even listen to the details.
So you just have to navigate that kind of stuff or convince them. And that might take 10 calls to tackle the BSV side of things, then tackle the smart contracting side of things, then tackle the AML side of things and the technical side of things… And it just takes a long time to kind of get everyone’s head around it. I think the critical point here is that we’ve got to be patient in running our business to make sure that we get the timing right. We’re not too early. But also, from the community’s perspective, we need to be very cautious with starting businesses and getting our hopes up too early because BSV is very, very early. Still, it’s very underdeveloped.
Yeah, I agree. There’s a lot of tool sets that need to be built out still. And to that, I guess my next question is: does Tokenized have scaling issues or is there some kind of 2.0 version or anything that we need to wait for to truly be ready for prime time? Or what’s the status of all of that?
If, let’s say, the Federal Reserve showed up and said, “Hey, we want a digital dollar in three months out to the whole country,” is that something you guys could just do, or what would be the hurdle? Could you accommodate that in a matter of two, three months?
So we’ve done all the work to improve the bottlenecks and the benchmarking to take us up to 100,000 plus transactions per second. We can go even well beyond that. We can go up to, essentially for a single contract instance, the limits of the Bitcoin network itself; even up to the terabyte blocks. So fundamentally, there’s no scaling issues there. Obviously, to get to that level, we need to do some more engineering to parallelize it. But we did spend a good few weeks proving its scaling capabilities and understanding the bottlenecks. And we have no concerns there. We would happily engage any central bank now and be able to show them proof of concept in a matter of weeks.
That’s awesome. That’s great news.
But I will caveat one thing is that we do have a big update coming soon, which is mostly going to be in the data structures of some of the actions. It’s going to basically start to bring out more features, not only from different financial instruments, but more terms and conditions that you typically associate with shares, for example, where those terms and conditions become codified. It’s very easy to upgrade, but essentially it’s just something that people need to be aware of.
That’s exciting. So what’s what’s something that you want people to know that isn’t being discussed? What do you wish everybody was talking about?
I think it would be nice to see more analysis, or at least the deeper thinking about the real value proposition of tokens. So I think people inherently think that a token share certificate is more valuable than a traditional share certificate stored on Google Drive and sent over email. I would argue that it is minorly more valuable, but not by much. So I think the real value proposition is in the smart contracts themselves and the expressiveness and the user experience that can be derived by building great products around that feature set.
I don’t know how much experience you’ve had in contracting and drafting and dealing with financial instruments, but if you have a chance to look at some agreements or play with them, how the drafting experience goes, the way that lawyers and their clients and the other lawyers interact and how they come to an agreement to fully execute an agreement is actually quite a sophisticated process with a lot of like checkpoints and sign offs and passing them back and forth. The complexity and the toolset in the contracting world is really underdeveloped, like it’s been frozen in time for 20 years. Most lawyers agree that’s terrible. It’s garbage. And that can be improved.
I think when you build a foundation that’s smart contract based on the ledger and you combine it with what is possible in the tooling of drafting contracts and then the contracting experience, you have like a real 10x improvement in how we manage or administer commercial activities. I think that’s the sort of bigger picture thing that when you really tease out all the advantages and you tease out what kind of user experience you can have, it really is equivalent to like going from snail mail to email. But in the commercial records worlds.
It seems like a big deal. I used to work in logistics many, many years ago now. But, we had crazy record keeping requirements for certain clients. I’m talking about a whole warehouse full of boxes of scanned paperwork and stuff. It was a nightmare. So, yeah, being able to clean that up and search it easily and to have it be stored forever in a global database like that would be a big change too.
Absolutely. And there’s really lots of interesting things that when you bring in smart contracts and make them interoperate with those types of commercial records, there are some really profound implications when it comes to very specific financing deals. Like I’m sure you’re familiar with factoring or like supply chain financing. It’s pretty simple in its foundation. But there’s some real interesting opportunities where you consider micro transactions, micro fees, micro distributions, fractionalization, those types of instruments, so that no longer becomes heavily relationship focused, but it becomes a much, much bigger global market where risk is manage in totally different ways where you can perhaps buy fractions of an invoice across many different sectors, across businesses and manage it much more with data.
And we can make it so easy to do that. The global market is able to participate with a few clicks of a button and it does not require one single entity to facilitate. We create a public exchanges of sorts. Not like a traditional ATS, but marketplaces where these kinds of options become available. And even retail investors can get some exposure to it, especially if they have a degree of expertise in particular industries or sectors that they’ve worked in themselves. It really removes elements of what make retail investors exposed to risks investing typically a lot less reduced because they are genuine experts in that case. So there’s a lot of really interesting things, and you can really explore and take the potential of smart contracts on the BSV ledger at scale with micro transactions: right to the outer limits and edges in terms of financialization from securitization. Really, really interesting things become apparent and it changes the game in terms of risk. It changes the game in terms of liquidity. It changes the game in terms of cost structures and diversification, even at very, very granular levels.
Yeah, that’s fantastic. That’s the world that Bitcoin is supposed to create. So that’s, that’s very exciting stuff.
So what’s the big goal? When do you, James Belding, say, “all right, we did it! We’re going to have a company wide party. We’re gonna break out all the expensive champagne” and say, “holy cow, guys, we actually accomplished that!” What is that big goal?
So I think the real big goal, which I think would be an awesome milestone, would be to have a financial institution—like a top 100—start to interoperate with the protocol on chain in their own capacity.
So what I mean by that is they start to offer identity oracle and authority oracle services to the banking side of payments, AML and CBF for on-chain currencies or even their own demand deposits on chain or certificate deposits or other even mortgages on chain. I think that would be brilliant. And I think that’s a major, major marker. And it’ll probably come along the same time as the central bank, to start to really take the pilot projects of that kind of nature to the next level.
A lot will sort of all flow from that sort of point or being around that point.
So it’s like the domino that really starts the big boom! That’s awesome. Any last thoughts, any shout-outs to anybody?
Just to the Tokenized team! These guys are absolutely busting their butts right now to make this vision a reality. Not only is it an honor working with the guys, but their passion is just something! It’s a rare moment in time to be able to work with people that are so talented. And I believe in the product so much. And it’s just really a great experience. And I really appreciate the efforts that they’re making to make this a reality.
That’s awesome. All right. I appreciate your time, James. Been really good.
Yeah. Kurt, thanks for your time, mate!
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