Recent advancements and current development are vastly accelerating the transformative potential of blockchain technology. Imagine a future where crypto meets cash; where blockchain is driven by strong regulation, preventive security, verified identity, and a seamless customer experience. This will scale the uses of digital assets and cryptocurrencies into everyday financial services and global economic activities.
It represents a complete transformation in all the incumbent technology in the banking and payments world and there is no going backwards. For the first time in history, we have universal transparent ledgers that are unalterable, that any customer in the world can access. It is an important moment for banking and payments. The idea that a government can ban or say, Let's just stop this blockchain and cryptocurrency thing. It is like saying, Hey, let's stop the internet. You cannot. So, the big question is how do you shape it in the right direction?
To better understand where we are and where we are going in blockchain development, and get beyond the hype and the noise, we were introduced to Marshall Hayner, CEO of Metallicus – a San Francisco-based FinTech company building the world’s most customer-centric, digital asset banking network supporting retail and corporate clients by providing global access between traditional banking and digital assets. Marshall has been actively involved in the forefront of blockchain technology development for 14 years and can give us a behind-the-scenes view on what is currently happening in this space and how it will lead to building a better global financial system.
Hortz: Can you give us a sense of how fast things are changing in blockchain development?
Hayner: Most people coming into this space at first will be really blown away at the speed at which things are moving. Artificial intelligence is the only other area of technology that is moving at the speed of blockchain, where you have the convergence of such a radical technology that is quite literally going to change the world - the way that we live and do things.
Even with so many public policy, regulatory hurdles, and challenges, it's just like the fastest, craziest momentum. One week in this space is like one year in the real world. When we celebrate someone's one year anniversary at Metallicus, we congratulate them for reaching a crypto decade of experience. You will never get bored working on the blockchain.
Hortz: If all this development is going to change the way we live and do things, what are some of the practical benefits of blockchain you are working towards? How can blockchain make payments and banking more secure?
Hayner: Well, let us just look at our credit cards, our debit cards, and our physical wallet. On the blockchain, as we are developing it, you will never be able to lose your money or credit ever again because the information on those cards and accounts will not give you and hackers access like you have today, as everything will be digital and on secure blockchain digital ledgers.
Currently, if I give you my credit card information, the 16 digits and the bank identification number, the expiration, the security code on the back, you basically now have the ability to charge that card, right? But that is not the case in cryptocurrency. If I give you my zip Bitcoin address, you cannot pull money out of that address. There are all different types of tooling around that. We have built on decades-old systems to create the best technology on what was originally designed in the world of card payments. In a world where your card information could end up in Russia or some other part of the world and could be hacked or stolen; in a world with cyber threats and sophisticated scams - we cannot have that.
Because of our development of centralized identity and permission systems to further evolve blockchain, you will not have to worry about ever losing your digital assets or having it compromised. The identity systems, capabilities, and permissions will be able to stop that. And so, the old technology was like the original paper dollar where you could lose it and it's gone. In the future, the digital dollar is going to be very different. The decentralized identity of the digital asset holder is going to give way to all the compliance, tooling, and tech to build even better payments and banking systems than we have had in the past.
Hortz: What have been some of the stumbling blocks and what are your efforts to address them?
Hayner: Cryptocurrency has allowed open transaction, cross-border payments and has really been a Pandora's box of innovation. And I call it Pandora's box because we have to stay ahead of it. That is because it has allowed a lot of bad players and unscrupulous actors to try and hide under the guise of decentralization to manipulate and cause problems.
The future of blockchain is basically going in a direction where it will eventually replicate a lot of the traditional financial systems around AML controls, identity, OFAC controls, everything that you see in the modern payments world, whether it's Visa, MasterCard, Bank of America, or other international banks. They all follow very similar frameworks. Now blockchain is entering into the next generation of cryptocurrency that is going to begin to focus on the open protocols for identity, for track and trade, anti-money laundering. These were things that were not popular discussions in the blockchain developer community 10 years ago, nor were they popular five years ago. Many have said, how dare you say that we should do these things, we should be breaking free of these things.
My big message here is that blockchain and crypto are evolving. It is growing up. We should not be afraid of building decentralized identity and anti-money laundering technology into blockchains in open and transparent ways. But we should not recreate the walled gardens of the systems of the past. We really should be coming together as an industry thinking about these open standards and how they apply to all blockchains; how we connect those standards to become a stronger industry, to fix the problems that existed in banking and make it better, not worse. Abuses that have happened is where there have been some bad players like Sam Bankman-Fried and you see how FTX played what I call regulatory arbitrage, bouncing between different jurisdictions that have low regulatory controls while singing the praises of the technology and that they were doing all these good things when we now know that they were not.
So, the technology of blockchain really is going to move the world forward, but we do have to embrace regulation. We have to stop the fighting between this blockchain versus that blockchain like we are different sports teams, and recognize the true enemies are the players who are abusing the financial system. These are the things that blockchain ultimately is going to stop. And it's not a question of if, it is a question of when does this become the standard? I have been in the space for well over a decade, and I can say that last year and this year are the most interesting years of all of them because it is the first time that this conversation has really become a serious conversation.
Hortz: You mentioned that blockchain platforms should be built collaboratively, working with other blockchain developers, banks, and other groups, not just your own developers. How does that work?
Hayner: Well, the two major blockchain offerings that Metallicus has built, they are not just ours. They are an open community where you have other developers coming in and building on it. You have what they call DAO-driven governance which is decentralized and stands for Decentralized Autonomous Organizations. So, we have multiple individuals or companies working on our blockchain platform and technology, and they are all contributing to the governance and the shape of the chain. But they are also building their companies into the blockchain through the technology and by also contributing to the open-source elements and community development.
So blockchains are really multi-firm teams working together to address common interests in fixing and enhancing global payment systems. That’s why I mentioned before that the industry, the different blockchains, instead of forming adversarial “sports teams” in competition, needs to pull together.
Hortz: What are your main blockchain products?
Hayner: Proton blockchain was started three years ago and it was built as the answer to blockchain scalability and issues around payment problems in blockchain. We wanted to do micro payments on the chain. We saw the future for banking and payments with cryptocurrency, but then there were major problems. What if the blockchain could not scale? What if you wanted to send $10 and it cost you $20 to transact? And what if you wanted to send payments on the chain, but the payments could not follow the compliance that banks and payments processors need to reach, like bank secrecy acts, or PCI compliance, or things like that. Also, the idea that end users would have to pay something to use it. We were not used to those ideas. Blockchain, five years ago, three years ago, was not really built for that. So, that was where Proton blockchain came in.
We built Proton to make a blockchain that had an efficient fee system, but also could integrate decentralized identity to be ready for a regulated DeFi world. Something that I think a few years ago, crypto was just not thinking about. There was this insinuation that the word debt meant completely anonymous or that crypto does not follow the rules of traditional finance. We kind of turned that upside down. In building the Proton blockchain, we built a fast, efficient payment blockchain to expand beyond where traditional payments went in the old payments world with card-based payment processing or bank wires. And what would that mean for the world of payments?
Well, it's going to mean, the traditional 3% plus 30 cents per retail charge in the processing world starts to go down because fraud goes down. Small business can incentivize their customers in other ways where they could not as before. And they can also build loyalty in all types of cool systems. So that was the idea behind Proton. Proton was built to have a much higher level of security and authentication and I believe that is really going to help banks and FinTechs going forward.
Hortz: What is your other major blockchain and what are the differences between the two?
Hayner: The Proton blockchain we just discussed is a layer one blockchain which is a blockchain built for programmable payments that's fast, easy, and built to work with banks. So that is our layer one blockchain.
Our Metal blockchain is a layer zero blockchain which is basically so in the future of crypto. When it comes to launching a blockchain, there are many FinTechs and banks out there that want to have their own versions of blockchain, whether they are distributed ledger technology and private closed chains where public or private chains can talk to other public chains. One of the things that we ran into as we started to build out Proton, in talking to other banks and FinTechs, was that they do not want to just be on one blockchain. They want to be on many chains. And furthermore, they do not want to embrace Proton or Ethereum or any one chain as their own chain.
There are all different types of flavors of blockchain that the banking industry is looking at. But how do you get to launch and how do you get to consensus? How do you get to that with blockchain? Metal Blockchain is basically a modular architecture for other chains, what we call a layer zero. It's the lowest layer of blockchain because it can host other blockchains. We built Metal blockchain like a mother chain or a chain of chains where it's really built to host these other chains and to help them communicate with other blockchains like Bitcoin and Ethereum without putting anyone at risk.
You probably have seen all this talk of what they call cryptocurrency bridges and the hacks around these bridges and these so-called linked systems between independent chains are very dangerous. We can calculate about close to $5 billion that has been lost on these bridge hacks. So, we are building these two Blockchains, layer one and layer zero, specifically built for payments and banking to address these challenges and opportunities.
Hortz: What other insights can you share with us about the future of blockchain and crypto?
Hayner: I was saying it over 10 years ago that every cryptocurrency company is going to ultimately have to be partnered with a bank. Banks are going to start to get into crypto, crypto custodians are going to start to become banks, and banks are going to start to buy crypto custodians. All of these things are coming out now. It is the most interesting time in crypto.
I just believe in the future where our centralized exchanges will go away to hybrid decentralized systems where, and this came out after FTX and other exchanges started doing this proof of solvency, proof of reserves. You may have seen cryptocurrency exchanges saying, Hey, we're going to prove our reserves. But as you have seen probably in the media, and I have been a big proponent of this, is that you need to not only prove the reserves, but the liability. And with the decentralized system of blockchain, you can do that. So, if someone says, here's all my reserves, the question is how much of that do you owe to your customers? Because yes, it's billions of dollars, but if that is only 10% of what you owe, then there is a serious problem and we cannot trust the spreadsheet.
At the end of the day, banks power our economies but the integration of blockchain technology will create better, faster, more secure, transparent payment systems. And when it comes to compliance, we are going to have better compliance than we have ever had. Because for the first time ever, we are going to have complete records between all institutions of the different types of activities that are happening. And the end result of that is a better experience for small business, for entrepreneurs, for consumers where you do not have to pay higher fees and businesses can give more rewards back to their customers.
So, this is some of the stuff that we are working on, what we have been talking about, and I will be honest, we have received a lot of pushback from other industry players that do not like what we are doing because it's adding rules and safeguards but I think that this is the way that the space needs to move in. And there is going to be a little bit of pain during this period because cryptocurrency has given rise to a lot of these bad players and over the last year we have seen a number of them fall apart. But the answer is compliance, regulation, but then also integrating it with the technology and the industry coming together.
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