This is a transcript of the Podcast – Security Tokens Series Part 1: Why Do Security Tokens Matter With Alon Goren – You can listen the audio here
Nye : What is going on, everybody? What is going on? As always, it is your boy, Nye. We are here with another episode of Evolvement, the financial podcast where we talk about Bitcoin, cryptocurrency, and the future of our financial systems. I wanna give a big thank you to Nexo for sponsoring our Security Tokens series. Nexo is a blockchain-based overdraft system that allows users to make instant crypto loans. At this moment, there’s no other way in which crypto owners can use their assets other than selling and buying them. Nexo comes forth with a very lucrative business model where it allows crypto owners to use their holdings as collateral, then withdraw cash. The user maintains 100% access to their cryptocurrency while they have immediate access to cash as well. Check out Nexo at Nexo.io.
Nye : Shout out to our second sponsor TokenPay. Right now, there are huge limitations to the adoption of cryptocurrency. With TokenPay, you can quickly and securely send and receive crypto-payments in TPAY around the world in a matter of seconds. Learn more at TokenPay.com. Thank you to our final sponsor, Veracity. Veracity helps solve the lack of transparency around advertising abusing their data. Right now, video aids are intrusive for viewers and ineffective for advertisers. Veracity aims to solve this problem by allowing creators, viewers, advertisers, and brands to directly interact with one another. Learn more at Veracity.io.
Nye : Today, I’ve got a really special guest on with me, Alon. He heads Invest Token Summit, Security Token Summit. He’s a big events guy. He knows a lot about the industry, knows a lot about security tokens. He knows a lot about a lot of different topics in crypto, and I’m stoked to have him on, I’m stoked to discuss a little bit of security tokens and kind of just see where the conversation leads. So, Alon, how you doing, man?
Alon Goren : Doing great. Thank you for having me. I’m stoked to be here. Yeah, I do Crypto Invest Summit and Security Token Summit, and I’ve been in the space for a long time. So, I’m stoked to be here with you.
Nye : Perfect, bro. I’m glad that we got to do it. We chat back and forth on Twitter every once in a while, and I wasn’t able to make it out to LA for your event last year because I was in Dubai, sadly, but my buddy, Digital Lawrence, was out there. He said it was some really good stuff, and I’m stoked to hopefully be attending this year. It would be a lot of fun. So, do you wanna just, like, start off by giving the audience a who are you, what’s your background, and why are you into crypto?
Alon Goren : Cool. Yeah, sounds good. I’m in this space because I’m an idealist kind of dude. I was a punk rocker growing up. Super into this kind of stuff for the disruption part of it actually. I hate the word disruption. I always tell people to aim for destruction if they’re going to do something. But the whole point is that I love the idea of people being in control of what they do and people being able to support each other without government intervention. I’m not a super hardcore libertarian because I do believe that some things need addressing, but I think it’s absurd and obscene that a company just a few years ago wasn’t even allowed to share on social media that their company is fundraising without breaking the law. That’s sort of how I got into this space.
Alon Goren : So, I was a techy nerd growing up, used to … Anybody who’s old enough that would dial up to AOL and do all those things, I used to … My brother and I used to make add-ons to AOL to edit, basically, what you were allowed to do on those things. We used to use these funny programs. Back then, they were called, like, AOHell and all sorts of things like that to basically put in fake credit card numbers and things … Am I allowed to talk about this? I wonder if I’ll get in trouble … Put in fake credit card numbers to get free accounts on AOL until they figured it out ’cause, back in the day, talk about shit not working right. You used to put in a fake number and it would take AOL, like, a week to figure out that you just made up a credit card number, so you have free service for a week on something that used to charge you by the minute.
Alon Goren : So, that was my beginnings on computers and online. Worked at MySpace back in the day and then I worked at IMDb at Amazon, and while I was there, I launched a company called [Invested IN 00:04:57] for crowdfunding. It was basically … We had no idea that it was illegal, like I said earlier, for companies to raise money online the way we wanted to, so we basically created a platform for it, quickly realized that we created a platform to help people break the law, and so we pivoted towards the generic crowdfunding, which ended up taking off with Indiegogo and Kickstarter and those type of people. But then we enabled … Because we’re techies, it was better for us to power the technology than it was to run our own site, so we powered tech for a bunch of banks and people who we were enterprise providers for crowdfunding technology.
Alon Goren : While I was doing that, as a team-building exercise, we built a Litecoin mining rig … This is, like, 2013 … and we were really into the crypto space for obvious reasons, the complimentary reasons and all that stuff. We built, Joseph and I, my partner on CIS and STS and in all things crypto, we basically met at a bunch of crowdfunding conferences and thought that the conference space sucked. There were no conferences that allowed you, basically … There were no conferences that enabled real companies and investors to get together, but all we talked about at these conferences were startups and investors, and it was really stupid. It was a bunch of service providers … It was really fun hanging out with our friends and grabbing a beer, but we never actually got shit done there.
Alon Goren : So, we decided to create Crowd Invest Summit back in the day, and we did that. It became the world’s largest crowdfunding conference, and over the years, the conversation turned from the generic crowdfund, or the general crowdfunding talk to crypto-talk, and that’s essentially become the security token space. So, we went from Crowd Invest Summit, then rebranded it to Crypto Invest Summit ’cause most of the talk was about crypto anyway and that was what we were passionate about and spending our time on anyway, and then just this year, we decided to launch something called Security Token Summit because all of the rules and laws we’re forced to learn and understand in crowdfunding are what is, basically, the basis for security token. So, we can go into it, but yeah, that’s where I’m at right now, and I’ve probably talked for five minutes straight, so you [crosstalk 00:07:37]-
Nye : That’s good. I love it. I love it. It sounds like you got a really good background in fundraising and things like that, and it’s a huge, huge thing in the space right now. Over the last … I don’t know … year and a half, two years specifically, we’ve seen, for example, ICOs come up and have this huge, huge reign over the market and over the industry, you know? That’s how people were raising money at the end of 2017 and beginning of 2018 in ridiculous quantities in very, very short periods of time. The sad thing is anyone could technically go write a white paper or go have an idea, make a really pretty looking website, and put in an Ethereum address on that website and raise $30 to $50 million within a matter of minutes.
Alon Goren : Insane.
Nye : Yeah, it’s absolutely insane. It’s absolutely ridiculous. I think that … What’s interesting to me in terms of fundraising is that we’re seeing that model slowly die off or at least we’re seeing that the old model doesn’t work anymore. There may or may not be a new model for ICOs that come up. I don’t know. I wanna discuss that with you. But we’re also seeing security tokens come up, and security tokens, whether they’re legit or not is something I wanna discuss. I also wanna discuss whether this is just another hype phase. But before we get into all of that, what do you think about the ICO phase, what do you think about the ICO hype, are ICOs dead for good or are we going to see them revive in the same model or maybe in a brand new, which we’ll get in on that?
Alon Goren : Sorry about that if there was some crazy noise. So, my feeling is that … I argue with David Bleznak from Totle. He’s a CEO of Totle and, full disclosure, we’re investors’ advisors there, but he’s a good friend. We argue about this shit all the time, and what I will say is that in a perfect world, the ICO model, like the way people fundraised, would probably be the way I would want people to be able to fundraise, without intervention, without banks, without regulation, without anything because, at the end of the day, if Nye posts a campaign and I fucking love him, I want to invest in him, and it shouldn’t matter if I’m an accredited investor or not, it shouldn’t matter … All these what jurisdiction I’m in or whatever.
Alon Goren : If I wanna give my friend money to invest in his company at the terms that he sets and it’s all transparent and you can see it all, then I should be able to. I’m allowed to do the same thing with gambling, and that’s just as risky as investing in a startup. If you’re, at least, discerning and smart, maybe it’s more risky, right?
Alon Goren : So, in an ideal world, that would be the way to do it, right? But the problem with what happened last year and a little bit before that was that … Or really the last two years .. is that we all got or majority of our industry got super greedy and they let that blind them because, in the short term, they could make a killing off of these bullshit, fake deals and what we would call fraud, right? So, people would give money to a company that only has a white paper that is practically impossible to build because they really didn’t give a shit if they actually built that company. They only wanted to make a 10x return, a 20x return, a 30x return in 30 days, and 60 days, and 90 days, whatever that was. So, they really only gave a shit about the discounts and that kind of stuff, and that was the biggest problem in my opinion.
Alon Goren : I think in a world like today, that stuff doesn’t happen, not because of regulation, because of people being smarter and those deals being fewer and far between because the hype train has left the station. Now, if somebody raised in the same fashion, but everything was transparent, the crowd is smarter and can talk to each other about what’s real, what’s not, and the space is more mature in general. There’ll be less of those scams. By the way, I think people should fucking go to jail for scamming people. I don’t think that it needs to be … I don’t think it needs to be regulated from the standpoint of, “Oh, you have more money in your bank account, so you’re allowed to invest in this deal,” versus, “You have less money in your bank account, so you’re clearly not smart enough to make an investment decision.” That’s bullshit.
Alon Goren : So, from that perspective, I wish ICOs could run the way they do, but from a realistic perspective of, “I’ve gone through this with crowdfunding and what I wish would be the rules and laws versus what actually are the rules and laws,” I think the best thing we can do in the short term is take the regulations that exist and figure out how to build technology to make them as usable as we can as entrepreneurs.
Alon Goren : So, there are things like Reg CF, there’s a company called Funware that’s launching something called Funcoin that is a Reg CF deal on Republic right now. Reg CF lets companies raise up to a million dollars from people who aren’t accredited investors in increments as low as, I think, like, $5 or $10. I think their minimum investment is, like, $50, so they made that deal available at that stage. Then, the next stage is something called Reg A+, which was, I think, like Title IV of the Jobs Act, and that lets people raise up to, I think, $50 million from non-accredited investors.
Alon Goren : The problem with those kind of things, there’s a lot of legal work involved and you need to use regulated platforms and stuff like that, but as the industry matures, people will start creating standardized documents that lawyers approve and platforms will come out that make it cheaper, and then we’ll all be able to participate. There’s still gonna be problems with accredited versus unaccredited investors. These companies are now forced to do, like, audited financials and stuff like that, but in general, there are rules and laws that are letting the public participate. We are now allowed to post things publicly. You gotta be careful what you say, but it’s getting to a point where it’s usable. We’re just gonna have to see if the tokenized part of it actually make it more complicated or does what we all hope it does, which makes it more transparent and more traceable and faster and better. That’s just the promise of all these things.
Nye : I agree, man. I agree. I think that … In my opinion, I think that the fundraising model is obviously broken. I was just talking with someone else on a podcast earlier today about this, and we were discussing the fact that if you actually … First off, if you actually have a utility token, and mind you, most of the ICOs are arguably securities versus utility tokens, but if you actually were building a platform that needed a utility token and you were selling that utility token, the ICO would be great for people that actually want to buy the token to use it as a utility, not to use it as a speculative investment.
Nye : So, in terms of all that, I think the greed is the major issue here, man. I think greed is one of the reasons that we saw such a big hype phase. I don’t think it’s necessarily a bad thing. I think it’s actually good because without all of that greed, we wouldn’t have all the money flowing into the industry. Without all the money flowing in, we wouldn’t have the direct development and the direct intelligence and quality of people with high levels of intelligence that we see today in the industry building things, creating, all that good stuff. So, there’s ups, there’s downs to it, there’s positives, there’s negatives, but what I’m super interested in, man, and something that you have, I’m sure, way, way, way more expertise than I have is security tokens. So, can we just dive into that for a little bit. First off, what is a security token and why does it matter to the crypto ecosystem?
Alon Goren : So, yeah. So, security tokens … Basically, right now, the only ones that really exist, there’s a lot of talk on stuff, but the ones that exist now are securities … They’re basically a token that’s pointing at a piece of paper for security at the moment. That’s not what it should be in the future, but for now, a security token is, basically, like, investors invested in Blockchain Capital. If you have a token in Blockchain Capital, it’s a token that tells you that you have a certain amount of ownership in the documentation for that deal. So, when a fund raises money, generally, there’s a subscription document, LPA, which is the limited partnership agreement and all of those docs, right? So, when you sign investment docs, you have those investment docs and you’re entitled to a certain portion of that fund.
Alon Goren : A security token, like Blockchain Capital’s or SPiCE VC’s, basically is a token that’s like, “I have one ownership share in that piece of paper, and so technically, it’s a step in the right direction in terms of now you can trade them on certain exchanges. So far, OpenFinance is really the only one that people are trading on. They’ve done some deals on AirSwap, and SharesPost, I think, did a trade, but those are more, like, testing. But on OpenFinance, you could buy SPiCE VC tokens, and SPiCE VC, on their website, shows the documentation. It’s super transparent about it, so you know you’re buying one token that gives you access to that piece of paper, right?
Alon Goren : But from a legal standpoint, what happens if Blockchain Capital or SPiCe decide to change that documentation? What happens if somebody wants to be shady and tokenize the Brooklyn Bridge, right? Nobody really knows who owns that shit and nobody really knows where the token is pointing at, and it does still have this potential for scam. So, the future of what security tokens are probably going to look like are actual programmable securities. So, the actual documentation will be in the security so that … We’re hoping that the future of this means, like, “I just bought a share in Nye’s company and I could actually take that token, show it to a court of law, and prove that I own a portion of his token, of his company.”
Alon Goren : I’m a part of a company called [Onera 00:19:06] who has this concept for doing something like this, and it would be … It has elements of the blockchain, elements of the security token that do something that we’re called KYA, which is know your asset. So, right now, to invest in something, there has to be KYC and AML, which is know your customer and anti-money laundering stuff ’cause they have to know who the investor is. But there isn’t something the other way around for the actual person buying the piece of the company to verify that this token actually owns a piece of this paper, right? But hopefully there isn’t paper in the future, but truly digital securities, and that’s what’s gonna be really cool with the space.
Alon Goren : So, right now, going back to the original question, security tokens are tokens just like any coin or token you have in your MetaMask, in your wallet, but instead of saying it’s … gives you rights to a network, it’s giving you rights to an actual security, and a security is a fundraising document. It could be debt, it could be equity, it could be a rev share for a company. It could be anything like that.
Nye : How is thing gonna play a role in the ecosystem, right? ‘Cause I see how it plays a role in the overall crypto ecosystem, but in terms of, let’s say, for example, retail investors, right? So, the excitement of ICOs for retail investors was the possibility of buying a token, selling it at 2 or 3x next week with limited to no KYC and things like that, at least for a short period of time, and while that’s not the most proud moment for cryptocurrency, that’s what retail investors wanted, and I’m sure that’s going to come back in some degree. A lot of retail investors, they just wanna make money. That’s what they’re here for. In terms of security tokens, I’m sure there’s going to be much higher levels or authorization and security and knowing who’s buying that security token. So, do you think this is going to play … Do you think security tokens are gonna play a role for retail investors or is this gonna be something that’s more for traditional investors who are okay with high levels of KYC and AML or with institutional investors?
Alon Goren : I’m in it for the masses. I’m in it for the retail people. So, I hope … So, what I’m hoping for is that technology makes it easier. I think that, unfortunately, the world we live in, there has to be some level of KYC and stuff like that, but it should be as simple as signing up on a website. So, if you make it really simple, if you make it really easy, I love that, and the idea … The general idea is that like all of these deals that happened and you wanted to make a 2, 3x in a week, that’s awesome.
Alon Goren : That’s probably gonna happen less and less, but it should be that I can invest in a startup like I invest in a public company. It’s fucking insane that it costs a company hundreds of millions of dollars to go public and to get on to NASDAQ to finally make it easy for the general public to participate. I want it to be that easy, like the Robin Hood app. You could sign up in five minutes and buy Amazon stock. Why can’t I sign up in five minutes and buy a startup’s company stock? I know it’s way riskier, but you’re creating this market and liquidity for these tiny companies, and that’s where I hope it goes.
Alon Goren : There is this microcap world of public companies that don’t have much liquidity that people are pointing at, going, “Yeah, man. These companies aren’t gonna have that much liquidity. It’s gonna be hard to buy and sell the tokens,” but we saw with the ICO world that it can be possible. I think that it’s going to be different than that, but somewhere in between is where reality can be. Look, think about all these startups that are small, that were small just a year or two ago that have blown up, whether it’s Uber or … I don’t know … one of the scooter companies or something where … How cool would it have been if you could have helped the company out by investing some money at the beginning, and sometime between then and now, sold the stock to somebody else?
Alon Goren : That’s what we’re hoping could happen with security tokens, right? I could tokenize our conference and everybody could own a piece of it, and then people could go to the next conference and say, “Holy shit. The conference grew. I wanna invest more,” or, “It’s worth more, and I’m gonna sell my tokens,” or they could show up and be like, “This conference fucking sucks. I’m gonna sell it quick,” you know? But with normal startups, that’s not possible. With normal startups, early stage investors, one, win the most disproportionately, right? Early stage investing in startups, in venture capital, actually have the highest returns for fully diversified funds.
Alon Goren : So, that category gets the highest returns, but part of the reason why they have the highest returns is they take on the most risks, and one of the things that sucks the most about that category is that it takes the longest to get the return. Maybe that’s a part of why there’s very few really big funds that participate in that space, but it’s also probably why the first four or five security tokens are all early stage venture funds because these people see the need more than anyone else for that liquidity and for trading and for being able to do that.
Alon Goren : So, I think there’s this future where people can participate early and trade. I think a lot of people could come back at me, like, just to play devil’s advocate with myself and say, “Well, that’s the riskiest time. How many startups do you know that can get to a certain point, but can’t deliver once they get past that point?” Sure. But there’s opportunities along the way, and some companies might hit a brick wall and have tokens or have … trade at a lower price than previous rounds, some might do really well, but it is this roller coaster, and we should allow investors to participate.
Alon Goren : It shouldn’t only be for people who can afford to invest 25, 50, $100,000 and then just wait 10 years to see if something happens. There should be room to trade in between, and that’s where it’s supposed to go. That’s where I’m hoping it goes if the process can be streamlined and security tokens can truly make that process easy and traceable and trackable so that the whole flow works.
Nye : I like that. So, you’re kind of pretty much saying that we’re hoping the intention is security tokens allow access to retail investors to get ahead of the curve instead of being limited to their investments, such as VC’s investing in Uber and things like that. It would give the retail investor the possibility and the capability to make similar investments in companies with massive potential or with some potential along the lines. Am I right about that?
Alon Goren : Yeah. Well, what I was just gonna say is there’s a thing called the Jobs Act that I mentioned earlier. That’s the rules that made it legal to view the public solicitation for crowdfunding and for fundraising, and that just means that you can post publicly about it. If, before 2012, you took an ad in the Wall Street Journal and you said, “My company is fundraising right now. Go to this website to find out more,” you’d be breaking the law. If you just posted on Twitter that same message, you would be breaking the law.
Alon Goren : So, that happened. It was called the Jobs Act, which was genius by whatever politician put it out. I think Henry … What’s his nose? Patrick McHenry or something like that. One of those guys. But anyway, politicians put it out there as the Jobs Act, which started … which was like the Jumpstart Our Business Startup Act or something, which I’m convinced that the only reason why it passed is ’cause no politician could be on record voting against something called the Jobs Act. But anyway, the whole point of that was that startups, actual small companies, are really the only sector in our whole fucking ecosystem that create new jobs right now. No big businesses, as a sector, create jobs. Pharmaceutical companies are losing jobs, big companies all across the board are losing jobs, but startups are actually the only category creating new jobs.
Alon Goren : So, what this is supposed to do, what crowdfunding is supposed to do is bring money to small companies who are going to actually make the world a better place, create jobs for everyone, and do good things. But the rules and laws to make that possible are really, really freaking hard. They make it really hard, certain things, like KYC and that kind of shit that I mentioned before, but also the accounting part of it. You’re basically doing a light version of going public, and going public is expensive as you hell and you have to have audited financials, which means a CPA has to give their stamp of approval on your financial and certain legal things have to be done every year. You have to manage the cap table of the company and send documentation to all of the owners of the shares in the company and do all these things that …
Alon Goren : Imagine if a startup raises a million dollars, but, like, 10 to $20 grand a month has to go out to just keep the company alive for compliance. That’s bullshit. That’s crazy. The companies gonna be out of business in six months. So, you’re basically hobbling a company right off the bat. So, the only reason why they would use these rules and laws is if they’re desperate for money, and then it’s just more and more hurdles.
Alon Goren : So, we’re hoping that this technology … Think about the fact that … If securities, if the actual shares in a company were truly digital, if I transferred them to you, the company should have an updated list of investors instantly. By the second, they should know, “Here’s exactly how many people hold tokens in our company. Here’s exactly how much they own. Here’s exactly the paper trail,” and all the stuff, and they could also have … We’re all digital now. Their financials should also be digital. All these things should be done completely automatically.
Alon Goren : There shouldn’t need to be … The roles of transfer agents are gonna totally change. Transfer agents are the people who, like, move the stock from one person to another. It’s literally still … Even if it’s done digitally, and I’m holding up air quotes, it’s still just moving paper from on person to another and there has to be all this extra stuff that goes on when you know none of this has to be done in that way. It can all be done digitally. On the Blockchain, it’s all traced and tracked and confirmed, and I think that that’s where this stuff is going.
Alon Goren : I know I’m totally just going on a roll here, but that’s the whole point. We want startups to be able to raise money in this way so we can participate, and some people’ll be early and some people’ll be late, and the people who are late can trade with the early people or buy more from the company. But all this stuff shouldn’t be so complicated. It should be very similar to how ICOs were last year, but there should be a deeper ecosystem and better education and all that.
Nye : I agree. I 100% agree. I’m interested, personally, to see … And I wanna know your opinion on this. You think we’re just gonna have a whole other hype phase, you know? The fact of the matter is I sat in Singapore on an ICO/STO pitch panel, had a bunch of ICOs and STOs pitch to me, and a couple of these STOs came up, and I’m just like, “What are you doing, man? What are you doing? Why are you here?” What I mean by that is … It just … The concept and the idea is unnecessary. They don’t need to have an STO. It kind of reminded me of the ICO phase where there’s a lot of these cool ideas and a lot of these cool concepts, but you don’t need a damn token for it.
Nye : I’m kind of, like … I’m curious. Do you think that we’re going to have the same situation happen with STOs in the future where we’re just gonna have, as soon as regulation’s all figured out, as soon as all the documentation and lawyers are all figured out, we’re just gonna have a huge fucking wave of STOs come in and potentially overcrowd the space where people are buying STOs here and there and then selling them, dumping them? Do you think that’s gonna happen again or do you think this is gonna be a little bit more calm and regulated?
Alon Goren : So, I think that there is going to be this hype, but it’ll be similar to what we live through in crowdfunding. There is this hype. It’s already coming. I’m seeing it with the Security Token Summit we’re doing, these companies that just don’t make sense for it are trying to do it, but I think they’ll die before they begin. So, the reason you’re doing an STO, the reason you’re crowdfunding, the reason you’re doing an ICO, the reason you’re getting into this space should not be because you failed at fundraising every other way and this is the new thing. It shouldn’t be because one day you were into crowdfunding, the next day you’re into cannabis, and the next day you’re into crypto because you’re following this hype train and you think in your head, “This is how I’m gonna scam people out of money,” or, “This is the easiest way to make money fast.” All the get rich quick people are gonna be gone very quick in this world because they have to do all of that, the pre-work, that goes along with it.
Alon Goren : So, the good and bad is that before you even begin, if you’re going to do a security token and do it compliantly and do it, you do have to spend some money on lawyers, you do have to find a proper platform, and the proper … There’s gonna be shitty platforms, but nobody’s gonna support them, so if you wanted to go and use SeedInvest to raise money for your security token offering, they do due diligence on the companies, too. They see if the companies doing anything. We were one of the only conferences ever, that I’ve ever heard of, that turned away sponsors because they were shady as hell and we just couldn’t handle putting them up on our stage, right?
Alon Goren : These platforms do the same thing. People contact them all day long. I used to power crowdfunding platforms with my last company. We powered, like, 30 platforms at one point, and our customers used to deny people all the time because they have to take on some of that responsibility. They sometimes have broker dealers and things like that that actually take on the liability of representing that deal, so those deals will never even come out, and so that’s one thing.
Alon Goren : But there’s definitely gonna be this hype train. I wanna warn investors that you’re probably not gonna have these 2, 3, 10x kind of deals very quickly with security tokens for the most part because a lot of the tokens will probably trade on real information now. It’s gonna be less hype and more the fact that all these companies are gonna have to have, like, audited financials and stuff, so people are gonna go like, “Well, they might say they’re gonna launch something, and we’re excited for that. Maybe when they launch, there will be some bump,” and whatever, but at the end of the day, there will be, not real time, but with the funds, for example, if you wanna learn about SPiCE VC or Blockchain Capital, you can actually see what they’re trading and what their assets under management and stuff are and why they have evaluation.
Alon Goren : That’s gonna happen with companies, and with companies at an early stage, it’s mostly emotional, even on the VC investor front. Is one company worth $5 million and another company worth $15 million when they look almost identical, but the $15 million is based in San Francisco and the $5 million company’s based in Utah? It’s not totally based in reality, and so there’s gonna be some of that, but I think that because of the fact that some stuff is so transparent, you’re not gonna get away with the hype-y factor from the investor side, but there’s definitely some hype going on on the entrepreneur side thinking this is the next big thing. There probably will be some hit companies in there that do really well, I’m hoping, because that will help grow the whole ecosystem as a whole, but I don’t know if there’s gonna be that. I don’t think there will be that, but you never know. T0’s supposed to launch any minute now. Maybe some of those companies will have that hype factor. Maybe a certain amount of money from the crypto space is gonna go in there.
Alon Goren : But on the flip side, I think the exciting part is that it does legitimize the space in a way and it does create these legitimate companies that, technically, if you do a [Reggae 00:36:53] plus deal, for example, like one of those regulation A deals through the crowdfunding stuff that some of these companies are doing for security tokens, you’re technically … You could launch a company through that and list on NASDAQ or the New York Stock Exchange the next day. So, you’re playing that real regulated world, which, on one side, is not why we came into this space, but it is exciting because you will get institutional people playing now. You will get … Like that Funware company I mentioned earlier. They’re a company that’s listed on NASDAQ right now and they’re separately launching a coin and they’re launching that coin as a security token offering. That’s pretty rad and that’s pretty cool, and I think that that’s gonna bring a whole different group into the space and, hopefully, that’s good for the whole ecosystem. I think it will be.
Nye : I think so, too. I think so, too. I think it’s gonna be interesting. In my opinion, I think this is gonna probably … I know we … We talk about and joke about institutional investors a lot on Twitter and other mediums, but I think this is actually something that will give some sort of basis for institutional investors to feel at least a little bit more comfortable in entering into crypto and looking at assets like Bitcoin and all these other assets.
Alon Goren : I was just gonna say, on that front, there is this world where the institutional people haven’t been playing on some fronts because, like, for real estate deals or for, even, certain types of company deals, there’s a whole world of investment bankers and advisors and people who get paid a percentage of the funds raises as part of their business. It’s normal for a real estate deal to pay, like, 5 to 8% in commission to people who help them fundraise. That’s not legal in ICOs. That’s now legal in security tokens because it’s that same regulated world. You still have to be a licensed individual to collect those fees. But just think of the whole [inaudible 00:38:58], like Goldman Sachs, that has to either make money on assets under management. I don’t know how to convince somebody to pay them a percentage of their Bitcoin holdings because everyone can hold it themselves, but with certain people they can. But now, with certain really big companies and really big deals, they could collect their fees, and that’ll be interesting to see what they bring to the table.
Nye : I love that. I absolutely love that. What do you think about exchanges with all this, right? So, the fact of the matter is the majority of these exchanges are not … they’re not selling security tokens. They won’t sell security tokens. It’s actually a rule, you know what I mean? We haven’t seen a lot of security exchanges pop up. We’ve seen the one that you mentioned earlier. I can’t remember the name. We’ve also seen … I think it was called DeXchanged that recently started to tokenize Tesla stocks and other stocks and things like that, and I wanna discuss that. It’s probably a separate topic, but what do you think is going to happen to the exchange atmosphere the more that we get into security tokens?
Alon Goren : Well, I think the existing ones are … they’re purposefully not regulated, right? They’re purposefully … They’re going under the assumption is kind of like Bitcoin where you can trade it back and forth, they can collect their fees, and do all that stuff. If they do trade a security, for example, and they’re not licensed to do it and they hold custody of it in between and do the work and all that, kind of like I mentioned earlier, that is … you’re breaking securities violations. What’s crazy is securities violations are not like fines. They’re not like a slap on the wrist. The main principles of those companies that basically sell securities illegal are, a lot of times, made examples of and go to jail. So, that’s insane, and that means that Kraken isn’t going to list a SPiCE VC token or a Blockchain Capital token because they don’t wanna touch that and deal with that, with those regulations. Sorry.
Alon Goren : So, I think that that’s a thing is the ones that are coming on board now are … they’re all talking about becoming an ATS, which means, like, an … I think it’s alternative trading system. But whatever they want to become, they basically have to become some form of a broker dealer to transfer shares between two people and take a cut, otherwise, if you take a cut, you’re breaking the law. So, that’s why they’re not touching it. You’ll see more and more come up. I get hit up by people who are launching regulated exchanges all the time now because of what I’m doing, and you’ll see some interesting stuff and you’ll see how it starts to evolve.
Alon Goren : But technically, it’s like you’re launching something that’s a light version of a NASDAQ or a New York Stock Exchange and the kind of licenses that they need to operate. Every state has certain rules and laws, every country has certain rules and laws, and it just gets really muddy and overcomplicated, and again, not one of the main reasons why we got in this space and why most of us got in this space is not to deal with that kind of stuff and jump through those hoops. But there will be exchanges. There’ll be more and more of them and we’ll see. It’ll be cool to see what happens when T0 launches. It’ll be cool to see what happens as more tokens live. I think Carlos from Securitize said something like, “There’s gonna be 100 tokens by the end of the year,” or, like, “100 kind of deals this year,” and to think, on one hand, that’s pretty cool.
Alon Goren : On the other hand, that’s fucking nothing. We’re like not even in our diapers yet as an industry. This is so, so early on that who knows what’s gonna happen? But what’s cool is that we are early on and I do believe this is gonna be an epically huge industry, like, if you just go digitizing an industry, right? Sending a document on DocuSign is not truly digitizing shit. It’s basically the same as getting a piece of paper, signing it, and scanning it into your computer. That didn’t streamline the process more than just the signature part, which is cool, but that’s not what we’re doing here. Imagine if you talk about the trillions of dollars in alternative assets that happens in the United States alone. I think it’s $7 trillion a year, alternative investments. If you made that digital, which, I think, like, less than 10% even lives digitally on those DocuSign kind of stuff, that’s mind-blowing, that’s huge, and that is setting the stage for truly global, borderless stuff.
Alon Goren : I think that that’s what we aspire to, and I’m hoping that the future means less of these barriers and less of these border and more to go around because today, I want investors in Atlanta and Ohio and Utah to be able to participate in every deal, whether or not they’re millionaires. In the future, I want everyone across the whole entire world to be able to do that, and I think that will completely transform everything. Think about just transforming ownership to be digital and traceable and trackable online. Should be possible. It should … It’s what we’re going towards, and I think that’ll be … That’s what’s exciting to me. I think that’s what should be exciting in the future, the exchange part and all that, and I think we’re gonna have near term, game theory kind of stuff. We’re gonna be able to do, to invest in companies, be revolutionary in the way we invest, and do things like that. But in the long term, it has the possibility to completely transform everything, and you’re seeing why we get so much resistance from the existing ecosystem.
Nye : I love that, man. I love that. This has been super, super, informative. I don’t specifically have any other questions off the top of my head here. This is super basic, but really, really good overview of why security tokens actually matter, why they’re actually gonna be relevant to the ecosystem. So, along that, thank you so much for coming on, dude. I appreciate it.
Alon Goren : Oh, thank you for having me. I probably talked too much, so if there’s anything else wanna know or any of your listeners wanna know, hit me up. I’m happy to help. Come join us at CIS. Come join us at Security Token Summit. I’m here to help. Happy to do these things anytime. So, let me know how I can help.
Nye : Yeah. To be honest, man, I think that we’re probably gonna sit down a lot more. I could honestly sit here and probably talk to you for another hour or so, but I wanna be able to split up our topics into multiple podcasts for people so it’s not all at once. But I appreciate you, man. You’re really, really smart, dude. I’m really excited to get to know you some more, and obviously, hang out at your events this year.
Alon Goren : You’re gonna be … Yeah, and we’ll get you onstage at CIS for sure, too, and we’ll get all your listeners some promo codes and stuff like that. So, be on the lookout.
Nye : Perfect. Let’s make it happen. That sounds fantastic to me. If someone wants to learn more about your events, if someone wants to come to one of your events, where can they learn more about that and maybe buy tickets and things?
Alon Goren : Yeah. SecurityTokenSummit.com, CryptoInvestSummit.io, or on Twitter. I’m always blasting it on LinkedIn. I’m always blasting it, so @AlonGoren on Twitter, and just look me up on LinkedIn. Posting videos, like, very few days and posting stuff, so just reach out.
Nye : Alon, my man, I appreciate it so much. Again, thank you so much for coming on.
Alon Goren : Thank you.
Nye : As always, guys, it’s your boy, Nye. We are finishing another episode of the Evolvement Podcast where we talk about Bitcoin, cryptocurrency, and the future of our financial systems, and we will catch you next time. Peace.