Blockchain for the Masses: Mission Possible? - Nick Mussallem | ATC #507

This comprehensive podcast conversation between the host Stephen Sargeant and Nick Mussallem, the Head of Product at Ava Labs and is focused on building AvaCloud, a fully managed blockchain service. Nick is a fintech leader and operator with over 20+ years of experience building teams and products within traditional capital markets. Before Ava Labs, Nick was the Co-Founder and CEO of Castle Funds, a leading wealth management platform for digital asset investment solutions, and sat on the executive team at Tora Trading Systems as the Managing Director of Global Operations, building the world's leading institutional investment solutions.

Host: Stephen Sargeant

Guest: Nick Mussallem

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Episode Transcript

Stephen: Steven Sargeant, you recognize my face now, the new host of the Around The Coin podcast. Just had Nick Mussallem from Ava Labs. They're building out Ava Cloud, which is revolutionary to help Web 2.0 companies enter Web 3. 0. We talk about ticketing services, we talk about underbanked and underserved.

Communities and how this technology can help them. We get into regulatory things and tax implications. We talk about everything about the community and how Web3 is exploding, especially with how can we reach. Someone building a million NFTs or doing thousands and millions of transactions per second. You have to listen.

If you're in Web 2.0 tech and looking into Web 3. 0 as a place to reach out to your customers, create engagement and loyalty, Ava is probably one of the best places to do it. So check out this episode and let me know in the comments, reach out to me or Nick. Keep us engaged. Let us know how you love in these episodes. Talk soon.

Stephen: This is Stephen Sargeant, host of the Around The Coin podcast. We have Nick MusalLem, and I had to even do it slowly and I probably still pronounce it wrong. He's the SVP and head of product at Ava Labs. Nick, how's it going?

Nick: Great. Thanks for having me on today.

Stephen: You know, there's so much going on, Ava. I want to jump into it.

But I want to talk a little bit about your background. You have quite a diverse background. You know, you worked with LSEG. But your education shows creative writing and communications focus. And now you're in this product department. Is this where a lot of product people are coming from? You know, communications, maybe strategy? Or did you just completely divert? And create a new path for future project managers getting into the Crypto Web3 space.

Nick: Yeah, it's a, it's a good question. I mean, for me it was really kind of focusing on what I was passionate about at that given time and going into college and, and, you know, thinking about going to B School or something that's more formal and traditional and structure didn't really kind of light me up.

So this idea of, I've always loved writing and, and writing stories and this idea of being able to do that and focus it on as an a part of my. Academia helped and it really created kind of a flexible brain when you're living in this fictitious world, but you have to really structure these stories in a way that are going to resonate with people and not just feel kind of random. And there's a lot that goes into tying that up.

And so the process of, of, of learning how to write that way and how to structure stories, ironically, does translate into a lot of the work I've done on the technical side, because you basically learn that these, these logical systems, even for creative writing, that you need to follow in order to properly convey Certain kind of messages or, or build certain kind of ideas into your readers. And so the readers are users in it, and it kind of translates into the product world that way.

Stephen: Does that help internally too? Because I'm assuming, you know, I've been in, seen under the hood of crypto exchanges, blockchain analytics companies. You know, the customer says, hey, or the user says, hey. We need this, and the sales guy's Hey, can you just add this for us, Nick?

You know, just this one tab that does these 14 things. That's something you can do in a day, right? Does it help that you can communicate and kind of walk them along the story and the process of how long some of these features take from a product standpoint? Totally.

Nick: So this kind of measurement of cost to value is something we do literally every day.

And just what you said, it comes up every day. Somebody has an idea and they're usually pretty cool ideas. And so it's, sometimes it's, it's great to kind of explore the idea with them, capture it. And sometimes we implement it. Sometimes if it's a customer and there's a real use case and we've heard it from other customers and and we have the cycles that we'll put it in and kind of bump it up the priority list and get it done as long as there's a clear.

We just use a simple cost of value metric, like how many hours do we think this is going to take, and what is the end value, how many customers are going to use it, is one specific thing for one client, how big is that client, how big is their need, does it lead to other things down the road we need, so these are the kinds of of thought processes that we go through with the team, you know, daily.

Stephen: How do you balance that? Let's say you have a large customer, but it's also a bear market. Things are like what we experienced in the last two years. And hey, your big customer wants something, you know, it might not be beneficial for the rest of your customers. But this might be more of the longest term play that you're going to have.

So pleasing them might be worth it, even though when you're going through analysis, like how much does the, you know, the market situation impact those decisions? I'm assuming when everything's fruitful, it's easier to like kind of execute on a lot more ideas versus in the market where, you know, the cash is a little bit tighter and so is capital.

Nick: Totally, so the bear market is all about efficiencies and focus. And I, and I love it for that reason because it does kind of, the noise starts to remove itself from the picture and you do get down to focusing on what matters most. With the clients, I mean, ideally we go out of our way to try to build relationships with our clients and if the relationship is good and there's a good trust barrier, and a lot of times you can take what they thought they needed and kind of squeeze it down to something that's maybe not so big. And then just delivering that shows that you're listening to them and, and you're making progress towards something that they want.

And then they can put that into market and really see if it has the impact or the value that they thought it would. And then you kind of progress from there. So most of it's kind of just a conversation, but it all kind of starts with The underlying relationship, I think.

Stephen: And what was your first experience with crypto? You know, you're coming out of school, you got, you have the diplomas and the degrees. When is your first instance where you either run into Ethereum, Bitcoin? Talk about that first experience, because I feel like a lot of people that work a lot on the Ethereum network and then Web3, their first experience was actually Ether or Ethereum and not so much Bitcoin. Tell me a little bit about your, your journey down the rabbit hole, as everyone says.

Nick: Yeah, my journey is not so virtuous. It was a friend of mine who was very, very into the thought of arming Bitcoin across centralized exchanges. This was back in 2015 / 16. And so I have dabbled in trading and writing algorithmic trading programs.

And so we were having lunch and kind of working out like, how do we reduce this delay so the carry risk is not so much. And so that was it. And so then they kind of just researched more. And I started to go down the rabbit hole. And then once the kind of digital gold narrative came in through, I think that was through Grayscale.

And, and that was the point at which I was like, okay, this is gonna this is the use for Bitcoin and Ethereum was already its own thing. And then, so that led me to, okay, I get why Bitcoin's going to be important. That's kind of like that single asset, single chain, fixed supply, totally makes sense.

And then you have the whole Nakamoto as not being this real person with centralized control, which is the coolest thing for me of all of it. It's just, it's really makes a huge difference. And then on the Ethereum side you know, I was building these, these when I was running the crypto fund, we were building these technology systems that would allow people to kind of invest in the top 10.

Largest crypto by market cap, inflation adjusted, and put them in a portfolio and then offer them to traditional wealth managers who can then offer them to them clients without having to understand all of the crypto and Web3 stuff. And so, in doing that, they would take cash positions at times. There was a little bit of an algorithm that would take a cash position and the idea that you could take that cash position and put it into, the one at this time was Compound, still exists, but you put it into Compound, and that your US dollars or whatever the fiat was.

could earn interest while sitting in a cash position electronically, when we started to run the historical numbers and what was possible, it really made a difference in kind of the long term strategies. And so that was the point in which my brain kind of opened up to there's a lot that can be done here.

And this is just one use case, but I can start to think of like everything, ride sharing, music, you know, even government, you know, efficiency, you can apply it to anything. So that's the point at which I had my moment of okay, this is truly going to Be one of those paradigm shifts in how we think about computing.

Stephen: And, you know, I'll take two things from that. When you talk about Bitcoin arbitrage, sounds very similar to other people in the industry. Hope your friend's name wasn't Sam, but it sounds like very similar to a story that Sam told quite early in the journey.

Talk to me about the crypto fund, because you're dealing with, you know, traditional investors, I'm assuming for the most part, that probably are a little bit more open minded.

We just saw, obviously, BlackRock and others finally get into the Bitcoin spot ETFs. What was the conversations then you think you're having compared to what are some of the conversations you think people are having now with the approval of those spot ETFs?

Nick: Yeah, it's a good question. I mean, this is one of those things where the idea is right, but the, it was early.

And so you really have to sit on it for a long time in order to get to where, number one, compliance is clear enough for you to move forward to it. And it really comes down to a reputational risk situation, which is. We have these incredibly volatile assets, which people love and so you have certain hedge funds or certain people who are trading vol who want exposure to that kind of stuff, but they didn't want to deal with having to get the funds into the bank accounts, getting the funds from the bank accounts into crypto, and then having them rebalance on a regular basis.

So this is what we did for them, and then we would just have push button custody. So everything was safe and they had ownership of their assets and, and so the wealth managers could really just offer something very simple without them having to think about a lot, but still fully audited and they would know it's compliant.

Stephen: Do you think there's a lot of pressure now for education because I think back then you could just say Bitcoin, no, but now it's a legitimate asset class and you can't just say no without at least educating or providing some sort of solutions like you have that fiduciary duty to explain why no it can't just be no whereas I think maybe back in 2016 a simple no would have been good enough for regulators and everyone else.

Do you think there's a lot of pressure to now for wealth managers to educate themselves and get accustomed to what Bitcoin and Ethereum are doing? Because they have to almost.

Nick: Definitely. And we were seeing it then. So back in 2017, 2018, where people wanted it, they wanted it to be a part of their portfolio.

You know, the problem is this, this industry sets itself back, you know, a couple, pretty regularly with some kind of event that's really unfortunate. And so that events have, you know, created a lot of risk where you, where maybe the. The portfolio manager is very interested, but their compliance team doesn't want to touch it at all.

And so when you get into regulated finance, you have to go through a lot of hoops in order to get there. I think we're there now, clearly and I think that people will start to really see the value of having exposure to these assets, especially as they start to decouple or de correlate from traditional markets.

I think if that happens. You'll really start to see broader adoption in a way where they can get access to it easily through the ETF.

Stephen: I love it. And let's talk about your journey now. You're at Ava Labs. I think a lot of people understand that there's foundations there's blockchains, there's tokens.

Explain to me what the lab's job, or the foundation's job, in the grand scheme of things, and maybe a little bit about what your mandate is there at Ava.

Nick: Yeah, sure. So so Avalanche is the foundation, not for profit, and Avalabs is essentially the aspect of that that licenses to the foundation to market and build for the foundation and build for the ecosystem.

So everything that's associated, whether it's marketing or engineering or whatever, they sit as a as a provider to the foundation to Further the development of the ecosystem, ensure that they're always doing, you know, what's in the best interest for the protocol and the ecosystem itself. And so it's a very unique place to be in in, in the fact that you, you have this focus and the focus is adoption and not profit, right?

That is not the first thing. And so that offers a lot of freedoms where you get to really kind of think about things differently now. Avalabs is a for profit company, and there are aspects of it where, you know, someday they might look towards that direction. But right now, it's really just supporting the underlying foundation, growing the ecosystem, growing awareness, and developers building on it.

Stephen: How difficult is, you know, a lot of tokens have a lot of communities now, a lot of different features, a lot of L1 as well, but a lot of L1 blockchains. Privacy focused blockchains. There's only so many developers and so many use cases. How much has to go into marketing efforts, you know, setting aside grants for builders? How much of that is a part of the conversation that you're having at the highest levels?

Nick: Yeah, I mean, it's a big part of it. I think Avalanche has extraordinary technology. It always has. You know, it has these five key differentiators. And but if people don't know how to use it Right? If it's too obtuse or too complex for the common builder or people just don't know about it, the word's not out, then it's going to be overlooked.

And there is a lot of brand confusion between the various chains. And so part of the things that I've been very focused on in the last year is kind of extrapolating the differentiators. And so Avalanche itself has gone through this really interesting progression where it started with this very Novel consensus algorithm.

And and it's kind of like the third real consensus model that's been put forward after classical and then, you know, Nakamoto and, and now you have the avalanche consensus and, and it's really kind of a sub sampling gossip consensus that allows for decisions to be made across very decentralized networks extremely quickly.

And that's where it started. And so they had this. You know, consensus algorithm. They're like, okay, this is great. And so Goon's whole background for 25 years distributed systems. He's brilliant. He was very clear on how he could take that and you know, build it into a blockchain, grab some of his smartest students.

And started to build it out. And then from there, you know, they had the foresight to say, Hey, we're going to need to scale these things at some point. So let's build the ability to horizontally scale these subnets so that not everybody has to share the same layer one. We call those subnets, which is your own custom blockchain.

And that's kind of what led into Avocloud. The other two components are still being built. And I figure these are the last two major pillars of the technical kind of building that's been the foundations that are being laid. And so first one's interoperability. So all of these chains need to be able to, you know, you're, you're going to build horizontally.

They all need to be able to talk to each other seamlessly. You can't know who you're talking to or you can't, you don't want to be thinking about that layer. Second one is the ability to scale. So everything's built on the EVM right now and the EVM has served us incredibly well and it's been extremely innovative in what it does, but you're starting to see a lot of other VMs come to the forefront that are faster, more scalable, that are using parallelization and things like that.

And so we're working on something. Called the Hyper VM, which is going to scale to the, you know, 50 TPS range, which will really just allow Web 2.0 applications to do everything they need to do today but in a distributed, non centralized way.

Stephen: And that's transactions per second, I'm assuming, just for some of the audience.

I just want to make sure, and for myself, and for myself, I think that's what it is. But I always make sure when I'm, when in Web 3. 0, when in compliance. Always ask for explanations of acronyms, especially when some of them are exactly the same, right?

Nick: Totally. Yeah, absolutely.

Stephen: Tell me about speed because speed is what like, from what I know, I'm not very technical, but I know one thing when people talk about Avalanche, they're talking about speed and efficiency.

So what are some of the use cases, especially if you have all these different subnets, they're trying to talk to each other, they're extremely fast, and now you're going to be adding on the component of yeah, we can scale these right up to, you know, to MasterCard, Visa type transactions per second.

Tell me what are like the most common use cases. Maybe a couple of unique ones that you're like, Oh, I'm not really sure why they're here, but they're doing their thing and we love to see it.

Nick: Yeah. I mean, I think there's, there's a lot, I think this year is the year we really start to see that kind of blend of a lot of traditional Web 2 successful companies make that leap into Web 3 and not necessarily replace, but to integrate.

And so there's a couple of examples of that right now. So loyalty points programs, especially in Asia, they're massive. I mean, it's just, you don't, you, everything you buy comes with a loyalty points program that all the merchants are entered, integrated into these systems. So SK was the first one to launch on a subnet with their loyalty points program.

But the interesting thing there was that they didn't. They didn't just rip everything down and say, oh, it's Web3. It's still the mobile application. You still log in the same way you do. They just clipped in a Web3 component that has the ability to create NFTs and then associate the NFTs with your loyalty points.

And there's some Level up and gamification there. And then their team is really crazy because they're building all these applications themselves. They layered on a ticketing application three months later onto the same subnet. And the beauty for them is that because they launched a subnet, they have complete control over their entire environment.

It's essentially the same blockchain that Avalanche uses to field, you know, the billion transactions. And it's been completely battle tested over the last three years. It's the same technology, just built and bespoke for whatever they want to do. And so that was a really unique one because they really blended the two things together in a way where the user doesn't even know they're actually interfacing with Web3. And it's been really successful.

Stephen: Do you think that's that Web 2. 5 a lot of people talk about? Where a lot of the infrastructure is still Web 2, still, you know, tying in to traditional apps, your email address. But if you want to dabble in Web3, if you want to talk to NFTs or get into the Metaverse, there's that portal that you can access it without leaving the ecosystem.

You can still access those Web3 features and attributes. Because I think Web 3 is great, but not everybody wants to be their own bank, especially with the hacks and everything that you've seen in Web 3. Do you think we're positioned for Web 2. 5, especially with talks of Web 5 coming already from Jack Dorsey?

Nick: Yeah absolutely. So it's, it's, it's ready and it's there, and we're, like, the foundations are in place. And I think that's, you know, you, I, I essentially think of the world And Web3 and 3CAMPS. You have your speculators and that's just there's a there are tokens, they're tremendously volatile, it'll always drive interest in that area as something to do.

So if we push that one aside you know, it has its place, but it's not the focus of what we're doing, then you basically fall into these two brackets. One, you have these kind of crypto native founders, which are typically kind of these younger people who are figuring out ways. To do things that have done before without the central, you know, the, the centralization of the, of the main incumbent.

And and there a lot of those are defi apps and, and NFT marketplaces and things like that. And then you have this kind of internet incumbents who have already built successful applications, typically large commercial enterprises. Who see the value in either user adoption, or price optimization or the ability to just create better data hygiene by using, you know, like data or like objects that communicate with each other seamlessly.

And so that's creating all these cost efficiencies. And so From that point of view, we're seeing both of these things come together. The second one is really where we're seeing the Web 2. 5, where they're taking these existing systems and they're kind of bolting in these components of Web 3 into their applications.

Stephen: And I love that loyalty aspect, you know, everyone can say they're a fan of a band or something, but unless you have the NFT. How is the band to know who to reward? You know, maybe when they're going on tour the next time, you don't really know who's holding that, you know, that final ticket or that, that, that actual engagement.

So I love NF, NFTs, especially for that is where you can reward people that are actually true friends that are approving it, but I've actually, they've spent money on the NFT or they've acquired NFT in a way so you can actually reward and support them. Right there at a certain given point where you can't do that in Web 2, I don't think.

Nick: Yeah, I mean, so this is a really good point where, you know, it's not necessarily popular because a lot of the ethos around blockchain in cryptocurrencies around kind of removing the central entity. But there is an aspect where those entities are saying, hey, we can choose, we can drop in a QR for an NFT onto that, we can issue them a wallet.

And now they have this, we know what kind of shoes they bought and we can kind of follow them around if we want to. Right? And assuming the user wants that, which gets into kind of those privacy questions, which we can, which we can talk further about, but also it's Hey, this person has bought the X number of shoes.

And so this is a very loyal customer and you can start to differentiate your customers and really learn about them a lot through kind of their purchasing habits, not in the traditional way where you're storing everything in a database, but more around kind of doing this in a, in a web three way and looking at what else they might be doing within their wallets.

Stephen: Yeah, and privacy in the sense that you might not even have to know who that person is, but you know they're holding a certain wallet. So I think there's, you know, there's different sides of, as you said, the privacy conversation. Talk to me about AvaCloud, because I think this is one of the, probably, the product that you're working on the most.

It's definitely one the community's talking about the most.

Really break it down for our users what is AvaCloud, what were people using before, and why is everyone so excited about it now?

Nick: Yeah, sure, so the origin story around AvaCloud was that, you know, we launched subnets, they were in the white paper, they've been around for a while, there's this incredibly, you know, powerful technology where you don't have to share gas or transactions with anybody else in the blockchain, it's yours, you can configure it exactly the way you want.

We launched it, there was adoption, but the adoption rate was not as fast as we had hoped, and when we did the research, it was it takes fairly complex people who have a lot of background in engineering to be able to spin these things up, to be able to understand this new architecture that doesn't like, look like the traditional three stack architecture and then be able to finally, then once they get all that set up, get back to building their product and what they originally intended to get to market.

So. That was just kind of the aha moment where we realized, listen, we need to make these things push button. They just need to be able to go into a GUI, set up their parameters, hit a button, and have their blockchain in minutes. And that was the original goal, like blockchain in minutes. And that's where it is now.

So you can log into avocloud. io, you can create an account, you can launch your own free layer one blockchain with all the power of Avalanche. And literally under a minute and you can work from it from there. And then there's a progression. You can create test environments and production environments.

It's kind of like. It's, it's, it's AWS, but for blockchain. And then the, you know, the kind of icing on the cake there is that the service is fully managed. So, when we went out and talked to a lot of customers, they were like, we don't want to hire a bunch of blockchain experts, infrastructure experts. It's very different discipline than traditional Web 2.0 infrastructure, DevOps teams. And so, you know, if you can take care of that, and we can just see if there's product market fit, and we can do this all very quickly. And very cost effectively, then we're going to sign up for that. And we saw the progression of subnets You know, there was, it was like a 500 percent increase in the number of subnets that were launched once we started to offer this service.

The last piece, sorry, just the last piece was the last piece was putting a professional services team in front of it. So, you know, Web3 has this kind of kind of dark room feel to it sometimes. And we wanted to remove that dark room feel so that you could have somebody to talk to. And most teams are mostly made up of Web3 founders who have built their own applications, who have launched their own subnets.

And they are walking these teams through every part of the process so they're understanding what's going on and ensuring that they're getting the proper configurations in place and not creating unnecessary security risks or anything like that. And it de risks the reputational side, it de risks the cost side, it de risks the time to market side.

By having all these things in place, where it was much easier for them to go to whoever approved these budgets and say, Listen, it's two months now to start to finish, and and it's only gonna cost like this sliver. And so a lot of these proof of concepts were spun up, whereas before it was like, Ah, too much risk, too much time, too much money.

Stephen: How do you walk outside without consultants, you know, trying to snipe you from the rooftop? Because that's how the blockchain consultants made their money. They're like, Oh, don't worry. It's 6, 8, 12 months. We got it. And basically they're doing what your professional services team is doing. And now you're cutting down that time in two months. Is that a fair assessment?

Nick: Yeah. I mean, we can launch, literally we can launch the fully configured blockchain in Mainnet. And that's everything. And that's, you know, five to 12 hours. We just, we have a very, it started out. We have a very talented infrastructure team and they codified a lot and we did all these deployments for our own main nets and we just started to get really good at it.

And once we kind of had this idea of like product was like, Hmm, but there should be more adoption here. And then engineering was like, well, we got this like great application, like Infra's code that we built. And so we kind of married those two things together and, and the baby was Avocloud.

Stephen: And is this, you know, the kind of hit on Ethereum?

Is that Ethereum is great at doing everything, but it's not that great of doing one thing. And you're kind of opening up these subnets so you can do specifically one thing while harnessing the power of your, your, your virtual machine. Is that a good assessment?

Nick: Yeah. So, you know. Bitcoin was the OG, was one chain, one coin.

I mean, slightly different now, but that was kind of the, and then Ethereum was one chain, many coins. And then Avalanche is many chains, many coins. And so any of these layer ones can have their own native token, which is very powerful. They don't need to use a Vox as their own native token. And so for Example of like game publishers who are going to launch multiple games on the same subnet on the same blockchain They have this natural cycle where they launch a game it gets Adoption and then the adoption starts to win.

So instead of them having to scrap everything Rebuild the whole infrastructure and then prop up the new game They can just launch the game on the same infrastructure using this exact same native token Who's value carries across and who's, who's players and who's users actually own that value. And so they can take their assets and transfer that value across the ecosystem instead of it just kind of poof vanishing, which happens in kind of traditional gaming today.

And so these are the kind of value propositions that we're starting to see come into play.

Stephen: That makes a lot of sense. Now you're talking to, you Roblox. Yeah, if something happens, Roblox is starting to go down and we're sitting on thousands of dollars of Robux. And they start up a new one. We can't really use those Robux, where is in this situation, they can kind of use those tokens and, you know, maybe they might apply to new games or be converted in some way.

So it's a nice transition if they decide to scrap one game. So users don't feel like everything I work for is valueless. They say, hey, I, you know, the game's not there anymore. The game may not have that value, but I still have that possessed value that I can now use in a new game they're coming up with.

Nick: Totally. And this, this whole concept of Sovereign custody, it translates to everything, right? It really is just, you know, like your assets, your bank accounts. So those are insured, but they're only insured up to a certain amount. And so if you really have self custody of that, then that's great. Your identity, right?

The ability for you to be able to own your own data and using some kind of zero-knowledge proof, be able to provide proof that the data is true without them actually having to see the details of your data. That stuff's incredibly important. It's Twitter, right? I mean, you put all that time and effort into providing content for a third party and at the end of the day, they own your content.

So if they decide that they want to shut it down or keep it or ban you or whatever, you don't have it. And so this idea of, of sovereign ownership of, of one's created, creations in the form of digital assets, it's really powerful. And I think that, you know, that is the thing that started it and that is the thing that will And that's that kind of left side that I talked about.

It's not necessarily the corporate side so much where they're seeing like cost efficiencies and, and, and user adoption, but it's more of the, you know, what I think crypto was originally founded for and ultimately where I think a big part of it will, will lead to once the technology falls into the background a little bit more and the use cases come to the forefront.

Stephen: Is there any use cases maybe that your team had in early decks you were like, Oh, this is going to be perfect for this market that hasn't come to fruition. You're like, Oh, more of these markets need to know about this one. Cause this will be a perfect application. We can build a perfect blockchain for their use case.

I'm thinking maybe like a small village that wants to operate, which is exactly what you said. More of a decentralized nature. Everyone has a digital identity. And it's a small sovereign nation that wants to, you know, kind of use. Blockchain and cryptocurrency, the power of that nation. Is there anything that you have where you're like, Oh, this will work perfect. We just have to go reach out to those communities.

Nick: Yeah, I mean, it's a really interesting question because at the end of the day, there's typically an incumbent, right? And so you get into this displacing incumbents is very, very hard. And the technology is neutral. It is a tool that can do what you want it to do.

And so, you know, the one, I remember very early Very early when thinking about Ethereum, I was like, oh, I'm ticketing, like, Ticketmaster is done they're just going to eat Ticketmaster's lunch. You can basically issue the tickets. You can reward them for the tickets. They get, they can transfer their tickets.

The price can come way down, you can transparency on the whole thing, all of these bands and artists are going to want to use that and give that to their users rather than the traditional model. And it didn't happen. So the reason it didn't happen is because, you know, they're very powerful incumbents and there's very powerful lobbyists and that's, this is a natural cycle, right?

That we see this in everything where if somebody has a strong foothold into anything, whether the technology be better, doesn't necessarily mean that the technology is going to get adopted. until there's so much value that users are willing to go through the hassle. And the, you know, lack of safety or whatever to take the leap into this, this new area.

And so, and so there's a lot of that, that stuff we've seen. And it kind of just, it kind of reinforces for me what we're doing on AvaCloud.

And it's a bit of a leap, but it all starts with the ability to quickly, cost effectively launch a new idea. Like before it was like, oh, I have this great idea.

It's Oh, it's going to take me a year and I can't do this because I can't have my own layer one. And I can't have my own native token and I need different gas settings and whatever the technology gets into. And it was just like, that's going to cost me 1. 5 million was the report that came out that delivered it.

And so, you know, now it's under a thousand dollars and it's instant. And so, you know, I don't think people know, but you can try an idea and you can iterate through ideas super quickly without any risk. And and not have to break your bank or even go raise money to do it. And I think that will lead to more applications being put through that I can't even think of.

And it will attract the users that are interested in those things. And they'll find adoption and product market fit. And then they'll ask for more features and that's going to lead to more users. And that's going to lead to more applications being built. But it all starts with the technology has to be mature enough.

That the user is not thinking about it, and we're not quite there yet.

Stephen: And I know you really understand the problem, because every question that pops up in my mind as you're talking, by the end of you talking, you've already answered the question, because I was going to say, you know, for Ticketmaster, let's just say they want to do unique features just for like Web 3 concerts or, you know, AI performers, they can now launch that Ticketmaster 3, Web 3 kind of focus.

Application on the side of an already built infrastructure. They still have to go all in on Web 3. They can run these kind of parallel, these test markets, you know, for a limited exposure or limited feature where they can say, Hey, you know, 100 artists or underground or indie artists, you know, can come here and that goes for Sotheby's.

I'm assuming art, you know, art in general can have kind of these built up systems. We saw Christie's launch, Christie's I think 3. 0, where they probably spent a lot more time and a lot more money to, you know, to create something that easily could have probably been created as a pop up within, as you said, within 24 hours. Is that kind of an accurate assessment of how you view the space as well for these companies?

Nick: I mean, the use of NFTs, so the non fungible, unique digital assets to represent something in the real world and then associate provenance with it, where it comes from, who it has been sold to, what it has been sold in the past.

That whole process just becomes so much simpler on an immutable ledger that has a very clear history that nobody can tamper with. And so, and then the fact that, you know, the movement of these things is so smooth because you're not having to connect disparate systems to try to get one type of database to talk to another type of database in order to have two parties be able to do a transaction.

It's just one layer of very clean technology that's always in this digital realm. It just, that's where you get the cost efficiencies and really the quickness and how transactions and time to complete transactions between two parties, which again, can be, you can think of hundreds and thousands of use cases that will, in business, that could benefit from that.

It's just a matter of the technology still feels a bit unwieldy and again, I think there's, we have the perception issue based on stuff that has nothing to do with this, but has been conflated with the technology. And so we kind of have to. I don't know. Take, you know, unbury that, right? Clean it up.

Stephen: And I think you're right, right?

You're probably put in the same bucket of very Web 3 focused. Crypto native blockchains, whereas, you know, just in this conversation, I'm sure there's a lot of people that are doing stuff in the traditional tech sector like, Oh, I see the applications here. I thought Avalanche was just Web3 focused.

They're not worried about us. But hey, I can use, I can use a lot of this technology and add on, even treat it as more of a research and development. I can pop out these ideas on a weekly basis. And it's so perfect when you have that quick turnaround time. Because if something like a Coachella comes up, or a once in a lifetime opportunity, or a once a year opportunity, you have a really good chance to test something, and if it doesn't work out, you know, you didn't hire these 15 consultants, or these big, you know, acronym consulting firms, and you're not out of pocket hundreds of thousands of dollars, you can actually be profitable, probably, in these scenarios, while you're still testing it out.

Absolutely. One thing I do want to ask about is, you know, the question of the underbank. And, you know, unbanked altogether. And it's funny because in the US, I didn't even know this, but I think 5. 3 percent are either underbanked or unbanked, which is crazy for a first world and such a rich country.

How can this, and maybe this technology doesn't help that, but overall, how, the number, a lot of these companies in crypto, I've been around since, you know, a lot of those conferences in 2017, and one of the main drivers of everyone's, you know, you know, the top of their deck was, you know, banking beyond bank, and that was what we're going to do in financial inclusion, but the number of unbanked and underbanked doesn't seem to be going down, so what's happening here?

How can we apply some of what you're, what you're seeing maybe from some of the builders in your space?

Nick: Yeah, I mean, it's a really good point. It's where the technology is capable of solving the problem, but the regulatory environment is not quite ready for it yet. So it's not that you can't get these digital assets into the unbanked or underbanked.

It's just that There's no easy way in most cases for them to be able to use those assets. And so you still have to convert them back to fiat and then do the point of sale. So until there is broad adoption of point, for this is for the consumer world, but until there's broad adoption of point of sale for multiple currencies, which is definitely being worked on, but the process right now is pretty clunky.

And this is because it's well, hey. We can't, you know, the government's, we can't really map all these transactions. We don't know that money is being spent. So if you go and buy your house with, you know, Bitcoin, then how are they going to know what that, what happened on that transaction? How they're going to tax it efficiently, which it really comes down to the ability for them to tax.

If the tax things figured out, they're going to be like, this is great. Let's go. And I don't think that, you know, I think the, there's this case where it's oh, the government's bad and they're unclear. They are unclear, and I think they're trying to solve for a couple problems, which is 1. How do we not lose the tax revenue?

2. How do we keep bad actors from doing things like money laundering? And those are legitimate concerns, like you need to address those in a monetary system that's going to be used widespread. So I think it's not that they don't want the innovation, it's not that they don't like the technology, it's that they haven't figured out how to solve some key problems, which Under which are threatening to their overall operations and even possibly their existence if it goes too far.

So I think, I think that's at the heart of the matter as I understand it. And so when the point of sale comes forward, you're not having to go crypto to fiat to credit card to settlement, which makes no sense, right? You're like not solving anything. Then when it's just a pure digital transaction and we have ways to account for, I think we'll be, I think you'll start to see that mass adoption and the, the banking, the unbanked, sovereign ownership of assets, all those things come to fruition.

Stephen: Well, the IRS is not hiring 8000 / 18 000 new people because they're not going to be attacking the crypto industry. The numbers were crazy. I think out of the, you know, millions of people that report taxes in the U.S., like 900 people. Had a crypto claim or claimed crypto I'm sure that number hasn't gone further up.

When people are buying NFTs and flipping them for a $40, 000 profit, I'm sure the IRS is the last entity to know about what they're doing on it. But you talked about regulation and your CEO, might pronounce his name wrong, Eman made a comment that, you know, the blockchain And the cryptocurrency space cannot thrive, cannot, you know, cannot mature until the regulators are able to read and maybe audit code.

What are your thoughts on that? Is that where the issue lies? Is there making rules? There, you know, lawmakers are making regulations, but they don't understand the technology that's, you know, underlying. It's like making rules on fiat currency and not understanding how it's printed. What are your thoughts on that statement and overall about, you know, what regulators have to do to get up to speed?

Nick: Yeah, so, Evan's a genius on this stuff. He spent a lot of time dealing with it. It's, I mean, I think there's two components of it, right? You kind of have the technical sides of governments and they need to do their due diligence and really understand what's happening underneath to be able to properly get the systems that will allow them to create solutions to address the two problems we just talked about.

And if they don't have those systems, which basically comes down to some form of chain analysis and, you know, digital clearing of, of assets, then you're going to get the kind of rhetoric, which is. Not very well founded in logic. And I think that's the part where he's commenting to, which is just the arguments are made, but they're not made soundly.

And him being the professor, he's going to call that out right away. And I think that's his point, which is you do really need to spend some time understanding this technology. Before you start to try to just broadly set rules in place about, you know, what needs to be regulated and what's security and what's not a security and all that stuff.

And so, I think the government has a long way to go. I think the U.S. government has a long way to go. I think there are some forward thinking governments. I think Japan and Singapore have been both kind of on the front of trying to create very clear boundaries. With a deeper knowledge of the technology on what's acceptable and what's not acceptable.

And listen, this is no different than say Silk Road, right? I mean, the web came in and there's always, it's a neutral tool. It can be used for good things. It can be used for bad things. And and of course the government's eventually going to get to the bad things and say Listen, we have to shut this down, but this kind of stuff's okay.

And I think that's what he's looking for is not necessarily to judge the technology, which is very neutral in what it does, but to judge what's behind that technology, which also is gets into like the privacy discussion. It's not that privacy is bad or privacy is illegal. It's the action behind the privacy that really needs to be understood and then judged rather than.

Privacy, no privacy, right? Privacy is, is again, just a, it's a tool to, to provide a function, but it's the, what's happening behind it. And they got to get nuanced into that level before we can do anything intelligently.

Stephen: You're a product person. What are your discussions that you have with developers in your industry when you hear that the developers of TornadoCash have been arrested by the U.S. government, when you see that TornadoCash, a decentralized smart contract, not even so much a mixer, the way the technology is, but, you know, people classify this as a decentralized mixer. And I'm sure the technology wasn't invented, you know, to launder state sponsored, you know, stolen proceeds from crime, let's say North Korean Lazarus Group hackers.

What are your thoughts? What are the developers saying when they are creating on the blockchains? Does this impact the way they develop in any way? Or, you know, especially since it's just one arrest out of hundreds of thousands of decentralized applications that we see out there. It's kind of like, you know, needle in the haystack that the government would come after them.

What are the conversations you're hearing?

Nick: Yeah, I mean, it's clearly meant to send a warning, but in my mind, you know, cryptos like water. You just, it's not going to go away. It's going to find a way to, you know, keep flowing wherever it's going. And and I think for, you know, developers, I don't know exactly what all the background is, how many warnings they got, or if they really tried to work with them to say, Hey, we can maybe try to use some kind of OFAC list or something like that to be able to like, Stop certain things from happening.

It's, I always think it's unfortunate when a technology gets cast in a view. But my assumption is that there was probably, I don't think it's going to stop it. It's kind of like, you know, peer to peer downloading of MP3s and movies. Until you had a viable network, like Spotify or or, or Netflix, right?

And people more or less stopped downloading movies because it was more convenient for them just to pay a fair price to be able to see them now. There's a whole argument was it fair to the creator? And I think that's a different argument. I think blockchain really helps to solve that question. Kind of going back to the ticket master thing, but as far as like managing the behaviors of people, the technology is not the problem.

And so the purveyors of the technology, I don't think are the right people to punish. You know, again, not knowing the whole background. I think you just need to really support there being. Better, more compliant solutions, and people will tend to use those solutions because nobody wants the risk of going to jail.

Stephen: And I think the convenience, though, you know, as someone that used to be a, have a thriving business in high school of burning CDs when Eminem came out with his LP, is that, you know, you don't want to be downloading something from Napster, and two songs are Eminem, and the rest are just some random, you know, some random bootleg songs.

But you don't know that because it took you four hours. To download the CD in the first place, right? You, you put it on before you go to bed. So it's kind of hard to tell.

Talk to me about where you, you know, as, you know, AI. I just be saying AI. I'm sure a thousand things come into your mind, but as a product person, are you guys utilizing it in any of your features?

Is this a conversation that might be hard to utilize? You know, the regulations around AI might be a little bit different because you guys are builders and developers. But what's the conversation like at the highest of meetings on AI and machine learning?

Nick: Yeah, I mean, I think it's, there's some obvious use cases like, you know, feeding customer requests in a more accurate way and helping people get the data they need that is specific to our docs without them having to go through formalized docs and they can have interactions that are more very people focused.

We've implemented those and they've been very successful. Right, I do, you know, I absolutely believe in the promise of AI. There's some other areas that we're, we're, we're trying to, for me, the benefit and where we are for blockchains right now is really Simplifying certain aspects of the technology for the common person.

So if you could query data off the blockchain, because blockchains are notoriously hard to query from depending on what you're trying to do and you could just speak in a normal language model that's asking it, "Hey, show me all the people that have owned this NFT or transacted on this thing in the last 30 days, because I want to airdrop a token to them or let them know about something I'm, I'm doing," well, that's going to be helpful then having them write.

Complex SQL queries and stuff like that. And so, I think the, you know, that's the reason people prefer AI from a consumer point of view. It just simplifies and makes the experience more human rather than having to think more technically. So, we're definitely looking at that from that point of view.

There are some really interesting use cases when it gets down to how you can fuse blockchain and AI. But I don't think any of it is really, I think we have to do the foundational work first. before something will come to market that will allow the computing scale and the amount of complexity it takes to, to do these things in a way that's going to be beneficial to the end user and get some sort of mass adoption.

And when I say that, I don't think it's five years out. I think in the next two years you'll start to see very novel uses of blockchain and AI together.

Stephen: That's, that's awesome.

What are your thoughts about cybersecurity? Because I'm assuming, you know, when you have this professional services team, they're helping people on the subnets, on the subnets create their own chains.

Are they also leveraging your cybersecurity expertise, the same vendors that you're using for, you know, pen testing and all these things to make sure that the smart contracts are airtight? How do you, you know, how do you contribute to that? How much do they have to do on their own? So I think that's always a big concern with the year that we saw in 2023 with Web3

Nick: Yeah, totally. So we, I mean, we have a great security team. They're involved in all aspects of it. And it's, it's different from, you know, when they're looking at kind of core technology, foundational stuff, that's just how these blockchains are running, kind of the deep tech. It's a very different conversation than say, you know, getting product launches on AutoCloud for clients because the clients have a great deal of the ownership.

Now we will look at everything and we have a series of best practices. But we can't control which smart contracts are launched, nor do we want to. We just want to provide them the infrastructure on which they can do whatever they want. In a lot of cases, they will come to us and say, Hey, can you look at this?

And our teams will look at a lot of their stuff. Or, who are the reputable people that you've worked with who have been very effective? And we have a handful of auditors that are not necessarily big name auditors, just community members who are really talented, who will look at certain contracts and are very good at finding Holes, and I think when they've gone through that process versus not the outcome's been a lot better.

And the risk is really taken down because, you know, it's a new technology and there is a lot of vectors that need to be considered when you're looking at it. So, in the core technology side, very much involved. As you get towards the actual customer use cases that are being built on top of that core technology, it's kind of as much as you want.

Stephen: I think people forget that you have a community, right? So it's you know, when you have a special type of car, right? You can go on forums. And say, Hey, this check engine light came on, or, Hey, the car is making this ticking sound in third gear. And you have hundreds of comments of this is how you do it.

People leverage these Reddit communities. You have basically that community that can also support. You have so many builders there that said, Hey, this is what we did. And this is the same thing happened to us. Here's some advice. So I think people sometimes forget about the community aspect when they're dealing with like big blockchains like yourself.

Nick: Totally. And we have a really strong developer relations team, which is not the professional services team. The professional services team does what developer relations does, but they do it for AvaCloud paying clients. The developer relations team is part of the foundation, which we get back to Avalabs.

And so Avalabs created a DevRel team to basically go out to anybody who's building and really support them in clarifying docs, answering questions, doing comparisons, education and so they're there. And then you just, you know, we have what I think is one of the most talented teams In all of blockchain building these really novel new things.

And, and when you get people like that, more people come in and say, well, these guys are doing some really Patrick and Steven and Kevin and Emin and everybody who's done all this work. From the consensus to interoperability. They attract a lot of these really, really smart people and they have these conversations, which I don't understand at all.

But but it does create these very powerful communities and these powerful communities help each other. And they're big, you know, proponents of open source software. And I think that open source software ethos, you know, really resonates throughout the Avalanche community.

Stephen: That's awesome. You're one of the few guests that have made 51 minutes feel like 15 minutes to be quite honest.

We could talk a lot, but tell me about the main features.

What's coming out in 2024? What are you most excited about from a product feature? Why people have to go to Avalabs and Avalanche and check it out for themselves? What are the things that you're getting excited

Nick: about? Yeah. So I think the big, well, Subnets is a managed service.

So that's the whole AvaCloud thing. That's amazing. If you're a builder and you just have an idea, check it out. It's free to do the dev layer. And you can do a lot on it. It's not, it's very open. The the other thing about that is, is, you know, Avalanche, Warp Messaging, and Teleporter. Those are the names for the things that allow for interoperability.

So, blockchains notoriously have a hard time interoperating with each other, and it really is kind of a key foundational piece to be able to drive things to any kind of really interesting fruition. You can't, things don't work well on an island. So, that's coming out. The testnet goes live next Wednesday, and then I think The mainnet goes live at the end of the month.

And so that is a really major milestone in our progression towards this truly seamless world of thousands and thousands of interoperable blockchains. The Hyper VM sits off the back of that which is the, the, the scale taking the VM. So, the other cool thing about Avalanche is that it's very VM agnostic.

So, it's not just, hey, we're only using EVM chains like a lot of the Layer 2s do. It is move, you can run any VM on it, literally. It's, it's completely separated out where the VM layer can be dropped in, and you can use the consensus algorithm and all the underlying networking. And so, the fact that, you know, we're building our own.

Very talented team I talked about is at the forefront of that. That's going to be amazing. I'm really excited to see that because it really lifts any tech, technology limitations on Web 2 versus Web 3. And we're seeing the need for this scale already from some of our bigger clients who want to mint a million NFTs a day.

And right now, you can't do that, right? You just, that's not possible. So but that will be possible by the end of the year. That's exciting.

Stephen: It's like dropping like a V10 into a 92 Civic, right? It would just fly and that's exactly what people are They have the infrastructure, they have the community, they have the customers, they just need the engine to be dropped in and they're good to go. Totally. Nick, where can people find you directly?

Nick: So, on Twitter it's _nMoose and that's the best place to find me. I'm happy to, you know, I'd love to hear from everybody. Any questions they have and Yeah, we're really excited about where we're going this year. And it's been, I appreciate the conversation. It's been really fun.

Stephen: We're gonna shoot everything in the show notes, all the links, tell people where they can reach out to you. Especially if they want to build, because I think there's a lot of Web2 people on this listening to this podcast's. Oh, I never knew this was even possible. And the fact that they can mint a million NFTs for many of these brands that have a million or so customers, I think it's gonna be one of those watershed moments similar to the Bitcoin spot, ETF.

Nick: Awesome. Yeah, totally agree. Very. It's gonna be an exciting year.

Stephen: Always a pleasure, brother.

Nick: Thank you so much.