As for some examples of other financial content we are incorporating, a little over a few years ago two young quant guys with a lot of trading experience contacted us saying that they had these great algorithms that they wanted to put to work trading among currencies that we support on UPHOLD. We see that as the Burger King in our food court. And we are busy now trying to roll out the Shake Shack and Starbucks and everything else. We have this Russian econo-physicist who has this set of herd behavior algorithms that back test wonderfully and we are rolling that product out in 3-4 weeks. We have also been in discussions with an Israeli economist who similarly has some excellent trading strategies. These experiences really hit home for me that no human being can possibly keep track of the interplay between 40 currencies and other financial instruments. It is by necessity a computer exercise. And so what I forsee in the future is not this high bound world of managers that compete in the traditional way where you need a big LP structure to be able to participate. It’s going to be endless apps with clever people coming up with clever algorithms that will again narrow the access gap.
So to bring this back to your question of why a platform app model, it’s not just us, it is other folks that are using the platform to roll out their products, new strategies, new innovations. Our platform is a kind of seemless, digital place to move between these different units of account. So the more content we add, the more we expand the geography, I think the more useful we are to a even broader breadth of companies that today find the legacy industry very difficult to deal with so far as international money transmission, foreign exchange, and product innovation and access.
Hortz: Tell us about your new products Earn and Borrow?
JP: This is another attempt to taking this industry from being relevant to millions of people who are exposed to it today and try to make it relevant to billions of people beyond them. In our new Earn product, it is the interplay of 3 things that we are able to bring together that no bank can do, what no crypto-competitor can currently do, and that is putting together a consumer facing platform like UPHOLD, with the capabilities of a pure play credit specialist like CRED and the 3rd part of the triangle is basically adding an engine of token creation from the UPP alliance, which we are integrally part of. By bringing those three things together, out of the gates, you do not have any of the structural baggage that banks have and then, if you add the interplay of a token that could appreciate and further mitigate the need for margin between what you are paying out in yield and what you are getting in interest, it’s a cool idea. So what we configured and put out in the world, without knowing how a token is going to perform in the aftermarket, is an earning product that can start off with being able to pay 5% yield and possibly do secured interest up to 9% - pretty eye-catching figures. It’s a significant improvement for the 2.5 billion under-banked globally on how their money is working for them.
On the credit side, when you think of the friendliest line of credit, it would be the U.S. home line of credit (HLOC). Launching the Borrow product, our crypto line of credit, the significance is that today to get the benefits of a HLOC you need to be rich enough to have a home in US. If you are in Argentina and need to borrow dollars today, even if was even possible to find, it would have an interest rate above 40% since their currency has been devaluing in 20-30% range. For an Argentine, without a US credit rating, without owning a house in Miami, Borrow can offer a 50% LTV loan at a 9% interest rate - that’s beyond competitive. The way we phrase it is the Borrow product is nominally interesting for Americans who do have access, eye-opening for Europeans, but potentially life changing to folks in Argentina, Venezuela, Brazil, Turkey, Cyprus, places outside the Eurozone and the US.
Hortz: We keep hearing so much hype about blockchain. How important is blockchain technology in the overall mix?
JP: Blockchain is a core fundamental technology to all this because, at the end of the day, there is no exchange of value without a legacy intermediary that doesn’t involve blockchain, other than cash. The problem is that there is no dominant blockchain so it is going to be interoperability that kind of lays the foundation again for a true internet of money. Uphold has started an alliance with a company called CRED which is a bunch of ex-PayPal guys; Blockchain at Berkeley which is the largest university blockchain group; Brendan Eich Founder of BRAVE, inventor of Javascript and one of top handful of technologists in the word; and a group called FEG which focuses on trading and markets where liquidity is central issue.
The purpose of this alliance is to move the distributed ledger or blockchain industry into the mainstream by addressing what we collectively perceive to be some of the foremost issues holding it back. One of them is this current primordial soup of competing protocols. Even if you are a small business or individual that recognizes that WOW, this is going to dramatically change my life or my business’ activities, you still have an entry point conundrum because you don’t know what you are reprogramming your business logic to or what type of talent you need to hire or exactly what it is going to end up being. Ethereum has some degree of critical mass. It’s where the preponderance of smart contracts logic resides. It’s where all the decentralized exchanges have set up.
So by putting forward this alliance, and its platform that wraps other blockchains in Ethereum basically, you start to create the beginnings of a common language, somewhat akin to if you think of the internet in 1988 or 1989, where you had AOL, Prodigy, Compuserve. Probably a lot fewer people then were aware that this “thing” is important than there are people now who think blockchain is important today. But it wasn’t until the fusion of certain technologies that you had the conditions for mass consumer uptake. So that’s what we are trying to push along. So to go back to your question, without an immutable public ledger that no one group can control, you don’t have the foundational DNA for anything. But, like pointing to low bandwidth in 1996, these current issues will get resolved.
Hortz: It seems to many that blockchain technology is still so far removed from their practical usage and still far down the road as to tangible applications for them. From your perspective, when and how do you see blockchain being a more mainstream technology in financial services?