 Hello, welcome to the Daily Decrypt, as good a home as any for currency competition. I'm your host Amanda B. Johnson and today's episode is brought to you by BitShares. You may have heard of the Internet of Things or IoT, which is a burgeoning reality in which our devices are internet enabled and they can be controlled remotely. Slocket is a project working to take the IoT a step further, creating the software which enables physical locks to be open and closed upon receiving cryptocurrency payments executed by smart contracts. Here to tell us more is Slocket co-founder Christoph Gents. In short, we are creating locks which can be opened by paying money. We are of course using the blockchain for doing so by connecting the blockchain to Internet of Things devices. So basically any smart device out there which has an open API and if they don't have an open API then you can connect to the manufacturer to get one. The reason why we are doing this, there are several reasons. One of course is the sharing economy to make it possible for someone to rent out a property by locking it with a smart lock and then people can open it by paying money. So for example a door lock which could be implemented in an Airbnb so people could pay to open it. We also work with spike locks and padlocks, power outlets, so all sorts of things which we connect to the blockchain. A long-term vision is much broader, thinking about machine to machine communication. So for example we work together with a German energy company called RWE. They are building a charging station for electric cars. So we are connecting them to the blockchain so cars can pay their energy themselves. Even to the step when you're waiting in front of a red traffic light, your car could be charged by induction and there is no time for swiping a credit card or anything like this. It's only like 5 or 10 seconds so you only pay 5 to 10 cents for the energy you get there. So this is where the car needs to pay for the energy. So making it possible for things to pay and receive payments is something we aim to do. Neat. And now how long has this been in the works? Is this something that you thought was possible as early as a few years ago? Thinking like with Bitcoin or did you rethinking of this even before cryptocurrency was invented or? So my first notes I found in my notebook about this was about August 2014. So actually when I started working for Ethereum but I know I would need Ethereum to work for this. So I worked full time for Ethereum and sometimes I did on the weekend or on the evening I did some working on prototyping and prototyping some small contracts for this and I think in summer 2015 I built a prototype together with my brother, the door lock. And then I think it was August or September 2015, Stefan tool joined to work full time for Slocket and then I'm working full time for this now since beginning of the year before this I also work for Ethereum. I still do but not as active as I have been before. So it has evolved. And now you is Slocket, is it intended as would it be correct to say it would be an Ethereum based DAP? Is that correct? Yes. Yes you could say this. It's a decentralized application because the locks we are building of course completely decentralized and autonomous meaning they all work without us. It's a completely decentralized application and it's actually open sourcing for anyone free to use and build on top of this. And we will add services around this which is the way we make profit as a company but the core product is open source and free for anyone to use to copy, adopt, change whatever they want to. So the Slocket software has it been deployed as a DAP on Ethereum yet? Can I use it? Only for testing. So there are no slots out there which are used in production. Got it. So I would need an actual lock. And yes I have one example here, I show this to you. Yeah. Do you see this? Yes I can. This is a lock made by Fast Designs. It's called the Nokey. Okay. It's basically a smart lock which you control with a smart phone via Bluetooth. And they have a developer version of it which they made available to us and so we are putting our software on top of this and so you will be able to pay to open the lock. Yes, then we have door locks and power outlets and other things but all of them, so you could say you work as we have each lock has their own contract so we have a lot of smart contracts actually on the blockchain but we only use them for testing. So right now we are not in production mode and you cannot buy them on Amazon or anything like this but we have them working in our lab basically. Neat. So you are testing the software and you have people manufacturing these locks with chips in them that will work with your software and so is it expected that once the locks are finished and shipped then this locket will be usable? Yes. So basically those locks you can buy them today without our software. Okay. And use them with Bluetooth. So the lock you have there can currently be used with Bluetooth and when people unlock it with Bluetooth are they sending an actual payment to it in some form of cryptocurrency or... In the current version like this product it works without blockchain without payments you can just buy it and with your app only you can control it but it just will add the ability to it that you can also allow other people to open it when they pay money. So basically add the ability for the lock to receive payments but this will be live you hope end of the year we will have some products you can buy on Amazon maybe where this is already implemented. Neat. Yeah. That's exciting. And now could locket live on any blockchain or is there something that makes it Ethereum specific? Well of course in Ethereum you can make the smart contract because the smart contract behind the lock it's actually a simple one but I cannot do this on the Bitcoin blockchain currently. Okay. The smart contract just says the following there is a deposit and a price and those two numbers are set by the owner of the lock. So let's for example say I use this as my lawnmower and say I want to have $50 as a deposit and $1 per hour to use it. So then the user would come and check the scan the QR code his app would show him this he would say yes I accept it I pay the deposit so then I can use it for as long as I want to. When I return it it just counts the time on the blockchain and gives me the deposit minus the costs back and the costs go to the owner. This is the smart contract which is implemented on the Ethereum blockchain where this lock is connected to. And now just for my own knowledge you said that the smart contract that that lock requires to work is not currently possible for example on the Bitcoin blockchain. What is it that Ethereum has which Bitcoin does not have which make the lock possible? The two incomplete programming languages which which can observe the state can store some data which belongs to a certain account. So maybe that you could do it in some way on the Bitcoin blockchain I would have need to check maybe it's actually possible but not in this current form in a much much simpler version maybe. But why should we do this? If you can do it much easier on the Ethereum blockchain and then there comes the next thing which is definitely not possible on the Bitcoin blockchain. We are building a DAO a decentralized autonomous organization which we use to fund ourselves and they actually will get a reward each time a lock is used. So we have implemented as a fee currently 1% so when someone is using it 1% of this costs which user has to pay goes to this DAO and this DAO is a completely autonomous organization where anyone can send money to to buy tokens of this DAO and in the DAO they can vote to send us money so we can build a product in this product if implemented this reward rule the DAO gets rewarded when the products are used and such a DAO could not be implemented on the Bitcoin blockchain it's way too complex. So people using the Slocket DAP would have a certain amount of Ether that they are charged to use the DAP and 1% of that Ether would go to the Slocket decentralized autonomous organization account DAO is that right? Yeah just about correct yeah okay I would say it like that. Sponsored shout out from ChangeTip the popular social tipping service which is soon to be a wallet. ChangeTip is also a sponsor of the upcoming blockchain madness student tournament which will be a live global game show style competition among the crypto savvy students at six universities. You can learn more about it and other projects which ChangeTip finds most tip worthy at changetip.com slash tip worthy. I just wanted to ask your opinion because I didn't know that you had been an Ethereum developer just for the sake of Ethereum before Slocket so that's interesting and I wanted to ask you okay so with the with the nodes with the Ethereum blockchain that is going to be hosting the data for lots of DAPs potentially including at least the Slocket DAP. Are we talking a super large blockchain and have you given any thought to what the incentives will be for people to run a blockchain as potentially large as Ethereum's? So the incentive currently is of course the mining they get either when it comes to the size and first of all not everything needs to be stored on the blockchain when you create a decentralized application you need to be very careful about what processes are critical to be run on the blockchain in a smart contract which can be run off-chain with other techniques. For example for this slot there are only two transactions actually on the blockchain when you're renting it then you're returning it to transaction that's it anything in between open and closing it just send signed messages not on the blockchain so we actually do not store that much data on the blockchain only the most crucial and important data so therefore we are not filling up the blockchain this data is a slot all the opening and closing messages are just messages sending peer-to-peer without touching the blockchain actually they're just weeding from the blockchain to see who's currently allowed to open the slot that's all what they need to do so for incentive yes they might not get it we want and currently this works just fine but of course the blockchain will grow and we need a long-term solution for scalability so we will not have a problem with scalability for the next couple of years I guess like one or two or three years depending also on which application is running on it but I think Vitalik's solution of sharding is the one we will use in a couple of I don't know how many how much years he needs to implement it or we need to implement it but let's say one two or three years most and then I hope you'll have a scalable if you're in blockchain and in right yes and in that same vein do you have any thoughts on the planned but indefinitely timed switch of proof of work to proof of stake within Ethereum yes so this will happen and it has to happen because we have something I call it a difficulty bomb or there you could call give it different names but in the current Ethereum blockchain there's a rule implemented the difficulty will grow exponentially at a certain time this will make the blockchain unusable because it's too hard for any miner to find a block so therefore there needs to be a hard fork on the Ethereum blockchain when this time comes the Ethereum foundation will offer a fork or new client where proof of stake is implemented proof of stake is superior to proof of work in the sense that first of all it's good for our environment it saves a lot of energy and second it allows already to handle more transactions so it's actually the first step towards scalability it's not the final step because it just gets better maybe by one order of magnitude it's not completely scalable but we need it at the first step and I am very convinced that all the miners or all the people will update to the new version there it comes in about one year I guess all right well I think that that is just about all of my questions do you have I guess as a closing question do you have any sort of wild sounding predictions for what what smart objects you know the internet of things or whatever in which objects can pay one another do you have any sort of predictions of how this can or will be used in the future that maybe doesn't get discussed a lot elsewhere well I think of completely autonomous objects for example think about a drone a drone could receive payments to pick something up and deliver to a place with this payment the drone could fly to a charging station to charge himself even if it needs with replacement of need to be repaired it could fly to someone to repair themselves and they have money to pay so I you could think about a completely autonomous drone or completely autonomous car that a car manufacturer still owns it and makes money but because people are using it but the car could yeah could pay for its electricity could pay for it needs to be repaired and the user paying it and they use it so I think this machine to machine communication will end up in you kind of a new level of interoperability between objects and of course also between humans because we can interact with those objects that's what I see in the future and that's I think the exciting thing that the blockchain technology enables those objects to enter into agreements to receive payments to send payments this is a complete new level of IoT because currently IoT is just about a lot of data and making sense of data but this is a new level and they are able to do such things so that's what I what we hope to do but of course I think the first use case is decentralizing the sharing economy and I hope everyone is and I invite everyone to participate in our DO and because it's actually the first real DO which will hold hopefully a consip considerable amount of money and if you participate in this DO you can vote on what we do which projects we work on and send us money to do certain things and you will get rewards when all those things are used so I think it's also you need a unique opportunity for everyone how does somebody participate in this Locket DAO do you have your own tokens within Ethereum yeah so we will very soon announce the starting date when we make a sale that basically can people can put ether in the DO and get DO tokens we also work together with exchanges like shapeshift to accept almost any cryptocurrency but it's it's not just like a token sale a classic one where we just get all the money because we actually get none of the money the DO keeps the money and the one sending buying DO token stays in control of the money they then after they have funded the DO they then will vote who to give money to so they actually could say we don't like Locket and give the money to someone else to work for us but we of course hope we make the first offer to the DO but we will build for them and hope they will give us money but the unique system of raising funds by creating a really a decentralized autonomous organization but so it will start very soon and then those tokens have the potential to pay dividends on DAO earnings is that correct yes you could say so basically because if they accept our offer then we would include this reward system which gives them something like dividends and would the dividends be issued via human like would it take someone on your team to pay out dividends or would that all take place on the blockchain and whichever ether had been paid to use the slocket DAP a percentage of that would automatically get kicked out as dividends exactly they mean if our company would not be around anymore that the lock is paying the DO it's completely happening without us so that's I usually don't call it shares and dividends because we don't set any shares of our company our company is not paying our dividends it's just the DO makes an investment into a product and this products will pay them and this product will continue to pay them as long as the product is alive or not destroyed but not depending on our company so we are not paying them at all the product is doing so we just implement the rule in this product if each time it is used the DO gets paid well that is fascinating Kristoff do you have do y'all have like a Twitter account or something like how can people's basically how can people stay updated for when those locks actually come out and our user first go to our website slock.it and there's a mailing list you can contribute we have a slack there you can go on discuss you have over a thousand six hundred people on our slack to discuss those things so a lot of people there and on Twitter we have a slocket project you can follow our tweets very good all right well thanks for your time Kristoff have a lovely day thank you yeah have a good day too today's episode is brought to you by bit shares a currency whose wallet comes with a decentralized exchange where user-issued assets can be swapped and you can even try issuing your own user-issued asset yes I am not kidding whether the tokens represent tickets to an event shares in your company or membership in your club you can learn more about how to do this and get your own bit shares web wallet at openledger.info and we at the Daily Decrypt both the man servant and I would just like to give a hearty thank you to those of our viewers who we notice are tipping us in various cryptos some of which we notice come in on a regular weekly basis which probably means you're using the pro tip browser extension so thanks so much we are happy and honored to serve