 Welcome everyone to the January 2023 hyperledger financial markets mortgage subgroup meeting. That's always a mouthful. We're glad to start up this series of meetings again. But before we get started, I would like to express our appreciation to the financial markets special industry group that we fall under, and the hyperledger foundation further ongoing support and making this meeting possible. So with that, let's just go ahead and dive right in. Okay, as always, please note that this meeting is being recorded. I think you guys heard the announcement a couple seconds ago, and is under the umbrella of the hyperledger foundation. So we ask that everyone abide by the antitrust policy and code of conduct. The antitrust policy states that we avoid discussions of company specific pricing products and projects. We don't make negative remarks about other companies or products, and the code of conduct means that we treat each other with respect, never discriminate and communicate constructively. We fully support hyperledger's policy of openness, equity and inclusion. And for new participants, we welcome you and if there's anything you, you would like to to say or introduce yourself, please do so in the chat. If there's anything of special interest you'd like to discuss again mentioned that in the chat, the chat we like to keep these meetings as open and as interactive as possible. So here's our agenda for today. Some of you that joined early. I think you probably heard that 2022 was a tumultuous and challenging year for mortgage. And I don't think we can overstate that the promise of crypto mortgage ended abruptly with the collapse of the crypto market, and we'll delve into that area today. What happened with crypto? Why did it impact the mortgage market? And what does it mean for the future? We'll try and answer some of those questions today and we'll provide a status update on some of the blockchain projects that are out there. We always covered this slide in each of our meetings and this is to reinforce that we're all on the same blockchain journey and that we may be at different points along that path. This group is meant to help everyone on their blockchain journey to demonstrate the feasibility of blockchain technology through mortgage industry use cases, define potential implementation paths for the mortgage industry, and what does a mortgage company need to implement blockchain and discuss some of the challenges and shortcuts in implementing blockchain. Okay, the next three slides. I always mentioned briefly for those people that are new to the group. I'm not going to spend a whole lot of time on them. This slide provides links to different resources for the Linux Foundation. The second one from the bottom is the Wiki link to this mortgage subgroup. So if you're new, definitely avail yourself of this information. If you do want to access these resources, you'll need to create an LF ID. All of this is free and it's very helpful. So please just use this information as you desire. And then the last item, this is blockchain training that's provided by Hyperledger. I've used this training. It's fantastic. So again, this is information that we share and it's free. So definitely take advantage of it. Okay, if you follow the crypto markets and also if you've been participating in these sessions. I always used to preface our meetings with this statement that blockchain is not crypto. The turn of events within the past six months to a year and maybe want to resurrect this so I just wanted to start off with that blockchain is not crypto crypto is an application of blockchain technology. You've seen the volatility, we've hinted at it. What happened? What happened in crypto? Why did crypto tank so much? And really to gain insight into the decline, we need to first identify and understand some of the key entities involved. Although the collapse really started in May 2022, I want to take you back to September 2017. That's when a young Samuel Bankman Fried started Alameda Research at the age of 25. You're going to hear a lot about Alameda Research. It was a quantitative trading company and it found its initial success arbitraging the difference in the price of Bitcoin between the US and Japan. There are going to be a lot of other names involved in Alameda Research. I'm not going to delve into the personalities, but really just focus on Samuel Bankman Fried or SBF as he's being called. I think that's a convenient acronym and then some of the companies that he's worked with as well. After Alameda Research, SBF then started FTX in April of 2019 as a crypto exchange and Alameda Research became the primary market maker for FTX. So in addition to trading fees, FTX also sold its own crypto token FTT that allowed customers to trade on FTX at a discount. A couple of things to note. This will come back later on as well. FTX would eventually operate through a network of 130 affiliated entities. Also, SBF still own 91% of Alameda Research, although SBF was adamant that Alameda did not have any special privileges at FTX. So keep those two items in mind. We're going to revisit those in the following slide. Okay, in addition to FTT, we'll also discuss a couple other cryptocurrencies. Terra, USD, and Luna. Terra and Luna are two native tokens of the Terra network, a blockchain based project developed by Terra Labs in South Korea. Terra was a stable coin, a coin designed to hold its value at $1 based on a pseudo arbitrage system and community fate in the Terra ecosystem that it inhabited. And if you guys think I'm reading that from something, you're absolutely right. So just full disclosure because some of this information is going to get pretty complex. So instead of relying on a reserve of assets to maintain their peg, as USDC and USDT do, Terra is an algorithmic stabilized coin. This means that it uses a smart contract based algorithm to keep the price of Terra anchored to $1 by burning or minting Luna tokens in order to create new Terra tokens. So that's what one aspect of it. In the Terra ecosystem, users could always swap the Luna token for Terra and vice versa at a guaranteed price of $1. So regardless of the market price of either token at the time, this is important to note because it means if demand for Terra rises and its price rises above $1, Luna holders can bank a risk-free profit by swapping a dollar of Luna to create one Terra token. And there were some people that were doing this and this is due to the rise in demand in this example. However, a weakness in the algorithmic stablecoin is if there's a lot of sellers, so a lot of downward demand of both Terra and Luna, the next price for Luna will logically go lower despite the supply-balancing smart contracts. In other words, and I had to simplify it for me to be able to understand it, in other words, the velocity and force with which Terra is declining overwhelms the ability of the smart contract algorithm to compensate and rebalance. And in May of 2022, this is exactly what happened. So let me pause there. I know we have some people on this call that are pretty familiar with cryptos that may even have been part of some of these exchanges. So if there are any questions, any clarifications, if I misstated anything, please feel free to interject and add to this conversation because I'm by no means the expert in all of this. So let me just pause there and see if there's any comments. Okay, I see that there are quite a few chats, people saying hello, so thank you to everyone that introduced themselves through the chat. I'm going to keep going on this discussion about Terra and Luna. Okay, so we left off about what was happening in May of 2022. What began with two large withdrawals from the decentralized exchange per finance, totaling around $250 million became a torrent in the next couple days. On May, by May 7, over $2 billion worth of Terra was unstaked or taken off the anchor protocol and hundreds of millions of dollars were being quickly liquidate. Okay, there's a debate as to whether this happened as a response to rising interest rates, or if it was a malicious attack on the Terra blockchain. I've read a couple interesting conspiracy theories. I'm not a conspiracy theorist, so I just want to make you guys share that, but I just want to provide insight onto what one of the theories was that the collapse was a George Soros type of attack, which if true, if you guys think back on how George Soros shorted one of the European currencies, I think it was the Euro, and then essentially that short became a self-fulfilling prophecy. So that's what they're saying this George Soros type of attack on the Terra and Luna exchange was. But regardless of its genesis, the huge selloffs brought the price of Terra down significant. And as a result, crypto hedge fund three arrows collapse. And through that contagion, there were several other crypto banks that collapsed. Voyager was one Celsius and block five. So as these events were unfolding. Remember, we had SPF in the wings here, he was trying to help out some of these companies he helped bail out Voyager, and he helped bail out to a certain extent block five, and he was considering a relief for Celsius. As a result of these events, companies began to take a much closer look at crypto companies in general. As a part of the increase scrutiny coin desk. The crypto companies that were out there in to have their website they do trading they obtained a copy of Alameda's balance sheet and noted that there was a large amount of FTT and that FTX is FTT assets were being loaned to Alameda. The coin desk published a report questioning the financial health of both FTX and Alameda. At that point, Changpeng Zhao, I'm sure I mispronouncing is wrong, the billionaire founder of a rival exchange finance said that he was going to dump all of his FTT tokens. So as a result, customers on the different exchanges were panicking, and they started yanking the money, causing it was just a good old fashioned bank run. So strapped for cash FTX agreed to sell itself to Binance, but Binance quickly changed its mind as issues arose and their due diligence. So FTX almost rescued, excuse me Binance almost rescued FTX, but that just didn't come to fruition. Within hours of filing for bankruptcy FTX said it was a victim of unauthorized transactions, and that it would move its digital assets to cold storage for security purposes. Outside analysts said that they suspected that $477 million was stolen from FTX in that alleged hack. And recall from the previous slide where SBF was adamant that Alameda received no special treatment from FTX. So that clearly wasn't the case. And in bankruptcy, regulators have found, and this is just coming out in the news almost on a daily basis, that there were backdoors that allowed the transfer of funds from FTX to Alameda. And I mentioned that at the beginning of this call that I just saw a great headline that's not one of my favorite headlines related to this is FTX funds $5 billion in liquid assets. So something like that clearly hints that there was a lack of controls within the organization to say the very least. So let me pause there and see if there are any questions or if anyone wants to add any commentary before we dive into the next time you're probably thinking. What does this have to do with the collapse of what does the collapse of crypto have to do with mortgages. I remember I mentioned that FTX had 130 affiliate companies with a major exchange and trading firm under its umbrella, loans to and from players and various tokens with market values in the billions of dollars. FTX's tentacles extended widely across the financial services industry, including the mortgage industry. The next section that I want to call out is Silvergate Capital. As an indication of the importance of this relationship, SPF even said, and this is a direct quote, life as a crypto firm can be divided into before Silvergate, and after Silvergate. What is Silvergate Capital Silvergate was one of the first banks to work with crypto clients, branding itself as the leading financial institution in the digital assets based. The company rode the crypto boom to significant heights with its stock gaining over 1,700% from its initial offering of $12 in 2019 to a peak in 2021 of $220. And that's a significant growth and they were their timing was really fantastic. Unfortunately, the collapse of Silvergate Capital's top client FTX led to $8.1 billion of withdrawals near the end of last year. So other examples of FTX's reach include some of the following companies saying I mentioned BlockFi, that crypto lender, they got a line of credit from FTX in 2022. Genesis Global Capital, which had loans outstanding to Alameda in they were trying to raise capital excuse me trying to raise cash at the end of 22 as well. Some of the companies that were involved in this Singapore based 3AC, they were reported to have 10 billion in cryptocurrency early in 2022. They've begun bankruptcy proceedings in British Virgin Islands in June. I'd mentioned Voyager as well. They're a New Jersey based crypto lender they filed for bankruptcy in July. And those are just some of the companies and some of the areas where FTX tentacles reached. Okay, so I use the term crypto lenders to describe BlockFi. Let me delve down into that a little bit. A crypto back loan uses digital assets as collateral comparable to using physical assets like your house for a mortgage. And one thing to keep in mind is crypto is not a legal tender issued by government. Therefore, it doesn't meet the good fund standard for disbursement and other closing related fees and many title insurance and settlements providers do not accept cryptocurrency loans in crypto. So, although a consumer may not use crypto directly to buy or pay for a home, a consumer can use crypto as a collateral for a loan and mortgage. And some of the companies that were offering crypto mortgages and they're on the slide, Milo, USDC dot homes, figure, lead end, there are also a slew of other crypto lenders that have either collapsed gone out of business that aren't on this slide, and that includes I mentioned BlockFi, the Duran bankruptcy, Nexo, WeTrust, Spectrocoin, Unchained Capital. Those are just some of the ones I've identified in my work and doing research on this topic. I'm sure there are a bunch of other companies that have either stopped doing crypto mortgages or are significantly winding down that that product. Okay, so let's go on to what does this mean for mortgages. I mean, crypto's impact can be viewed in three different ways. Consolidation, I think that part's obvious that there's going to be a calling of crypto companies and that's already taking place. I'm sure there are going to be several other ways that we'll have to go through before this phenomenon is complete. I've put in here two, I think, fairly relevant regulations or at the very least statements from different regulatory bodies. The first one from the Federal Reserve, they're stating that for a bank to offer or conduct business within crypto, they need to do three things. They must have legal permissibility. They need to provide notification, and they need to. I think there was one more, but I don't have that in my notes. So we'll just leave it at those two. Legal permissibility and notification of proposed activity. Second bullet joint statement on crypto assets, risk to banking organizations, that's from the Federal Reserve, the FDIC, and that's very similar to the Federal Reserve item in the first bullet. They're stating that agencies that are continuing, excuse me, I misread that, the federal agencies are continuing to assess whether or how current and proposed current asset related activities by banking organizations. So they're essentially saying they're still looking into the situation and they haven't finalized any regulation yet. And a second bullet out of that statement issuing or holding as principle crypto assets that are issued stored or transferred on an open public and or decentralized network or similar system is highly likely to be inconsistent with safe and sound banking practices. So that's what the FDIC is saying about crypto activity. It's not consistent with safe and sound banking practices. Last bullet for this FDIC supervised institutions that intend to engage in or that are currently engaged in any activities involving or related to crypto assets are reminded that they are requested to notify the FDIC. So this reinforces what the Federal Reserve is saying, if you're going to be doing anything around crypto, you better be telling the appropriate regulatory bodies. So I know that there are other regulatory bodies taking a look at this. Some of the people on this call may know about that. So if you do, please share with the rest of the team or if you guys have any commentary on this. Please let us know. So the last item that I wanted to mention on this is, and this is a conversation that I, James and Angel and I've been having with other people on crypto and blockchain is, although crypto is facing a collapse and may not be entirely here for the mortgage industry, that doesn't mean that the underlying technology is bad. Going back to my original statement or my original thesis statement, blockchain is not crypto. So Web 3 metaverse, the underlying technology of blockchain is still a key technology that can be used. So I included a quote in here, proponents of Web 3 expect that although there's going to be a 2020 or there was a crypto winter, that this winter will pave the way for more innovative uses of blockchain rather than speculative uses with crypto. This can still lead to things like blockchain consortiums in figure is still doing fantastic, I believe, within blockchain lead in, they were on the previous slide, they say that they're still doing crypto related mortgages. They are, I believe, much more conservative than some of the other companies out there. So they're still saying positive things about blockchain positive things about innovation. And then there are other technologies that in tandem with blockchain, AI, machine learning. I think those things are definitely going to help with innovation in the mortgage industry. The last item that I wanted to close with is chat GPT and chat GPT is made possible because it has access to a slew of information, public information. And by putting information on the blockchain, it can accelerate and help tools like chat GPT so I want to just throw that out there. And make sure that as you take a look at blockchain as you discuss blockchain that you're not throwing the baby out with the bathwall. I know that that's probably tried to say but blockchain is not crypto block crypto is an application of the underlying technology. Okay, so I'm going to get off my soapbox, and I'm going to open it up to you guys if you have any comments or anything you want to share with what we've just gone over. James, do you want to walk us through the state of blockchain and the global mortgage industry. Yeah, absolutely Marvin. Thanks for covering that that's a lot of detailed information and I know through your research I wound up learning a lot from it as well. So the whole theme of today, you know, blockchain is not crypto I think you and I have had that conversation with you know more people over the last year than we care to admit every time you say oh yeah you're involved in blockchain. The first thing they say is oh you're involved in crypto. Yeah, yeah. Let's take a look at some of the items that are going on in the industry. Moving over to the next slide. So, Sun West mortgage loan originator and servicer. They unveiled the latest version of their proprietary artificial intelligence platform called Morgan. Morgan enables the lender to convert pre approved property specific home loans into tradable non fungible tokens so again an example of blockchain being utilized for things other than crypto. The NFT is property agnostic. It's backed by real dollars and guaranteed by Sun West which is one of the largest non bank mortgage companies in the industry. The Morgan AI platform makes use of Sun West true approval loan platform, and is powered. Excuse me Morgan AI platform is powered by its fintech sister company's allegiance. If the trade value is accepted on the NFT by the seller and property owner then the transaction gets openly recorded on the blockchain to ensure that the NFT is traded as agreed the NFT seller has two choices. They may close the transaction and transfer the NFT over to the buyer. But if they choose not to honor the trade, they can forfeit their earnest money deposit as in as his customary and you know pretty much any real estate transaction. Sun West has been testing Morgan's real world performance since its launch earlier last year, and they've reviewed and resolved within two hours some 99% of the thousands of daily loan conditions with more than 30% of those loan conditions being reviewed in less than 30 minutes. During their launch announcement last year, Sun West stated that the result is 100% success rate and property underwritten and guaranteed true approval loans. So, interesting to see what Sun West is doing, you know there's been ups and downs with the NFT market as well. And as we've seen in the crypto market. So it'd be interesting to see where this product and process goes as we move into 2023. You know the next one we've talked about figure quite a bit over the last year. This article kind of demonstrates a little bit about how quick things can change in the industry. I mentioned earlier mentioned figure as well they are doing quite well but you know there's some ups and downs. So, for figure in the very early part of December their parent company the figure acquisition signed a non-viting letter of intent with a warehouse slender and bank holding company in order to bring figures blockchain to financial institution which has a nation wide residential mortgage, lending and service and appropriation of the proposed purpose acquisition company would provide figure a unique value creation opportunity to be able to start exploring how to leverage digital asset registration technologies in the bank's warehouse business. Unfortunately, by December 16 while reviewing the stockholder vote, the decision was made to dissolve the SPAC. So, Mike Cagney who's the CEO of figure and he's also chairman of the S pack stated, while we're disappointed our decision reflected the state of the capital markets. So a combination of both rising redemption rates and sharp interest rates increases really just made it unfavorable environment in order for them to complete the merger. But one of the things Cagney went on to say is that they continue to plan on bringing blockchain wins to the industry throughout 2023. So here's an article that we've got up, you know, over the last year plus that we've been doing these presentations we've been trying to bring you articles podcast. Also trying to interject some videos in there as well so is the mortgage industry ready for mass blockchain adoption. This is both a combination of an article as well as the full video. I'll give you with four different executives so Pavan Argo wall who's the CEO of Sun West that we mentioned earlier, AJ Poland the chief revenue officer at the mortgage office. Christy Connelly who's the EVP evaluation modernization at class valuation and Josh Lear who's the senior director of partnership and industry technology at Total Expert. And the interesting point out of this article when you read it it really ties to today's topic. None of the executives that they interviewed were positive about crypto, but they absolutely believe that blockchain will create massive efficiencies in the real estate market. They went on to describe blockchain today as where the internet was in the early 90s, and the revolution that blockchain will have to over the counter transactions will be as transformative as the internet was to e-commerce. Ultimately, the, you know, the, the best case scenario is an over counter system in real estate, where individual buyers and sellers are connected to each other without a central authority. It really simplifies the transaction for both parties. And it makes it really an ideal application for blockchain, as it'll create massive efficiencies within the market. They also talked as we've talked in, you know, previous articles about title and how the title process blockchain can be used to ensure that we have an immutable record on the property for whenever it changes hands. Again, a great article talking about a variety of different things at the end of the article. There's also a link to the actual 30 minute video as well. Marvin moving on to the next side. So just a reminder for the hyper ledger wiki site for the mortgage indices subgroup, we do have available both this recording once it's ready as well as all of us are previous meetings down the left hand side. The articles that we talk about are available on the right hand side or are available on the previous articles page. You know, I've included some other articles under industry research for interest. For example, there's the coin desk link that you see there on the right. It's really a link to a video from coin desk TV talking about JP Morgan CEO Jamie, Jamie Diamond attending the Institute for international finance event. And again, you know, calling crypto tokens decentralized Ponzi's which he's been, you know, touting for the last couple years, even as he out he was praising aspects of blockchain technology. He did go on to say, you know, blockchain on the other hand at least has certain real aspects and diamond allowed noting job JP Morgan's Onyx platform that we talked about last year that they're utilizing for their wholesale payment transactions. This video to is only about 17 minutes long and they do cover a variety of other topics over the last, you know, year plus since 2021 when we launched this group we've actually curated about 150 different articles. So take a look at the wiki site sign up as you know Marvin walked you through it earlier. We'll actually drop into the chat a link to the wiki site as well. But if you don't find the information that you're looking for there feel free to reach out directly to us and they're you know potentially is information that we've got curated that you can be using for case studies, strategic planning things of that nature. Marvin next slide. All right, future agenda topics you know we'd like to solicit feedback from the group on any future agenda topics please reach out to Marvin and I, you know, whether it's regulatory related as Marvin mentioned we know Fannie Mae and Freddie Mac have been taken a look at a couple of different things business related technical related. If you're interested in doing a demo. You know, sharing information and knowledge is what this community is really all about. James, before you continue. I think we have a question in the chat from Maria. Perfect we were actually just opening it up to Q amp a what do we got. Maria is asking the Sun West NFT loans are on their books. Yeah, so Maria that is exactly what my understanding is at this time. As of right now, Fannie Freddie and Jenny are not approving crypto or NFT loans. There is discussion going on with it at Fannie and Freddie they are they do have some focus groups, but we have not heard any word yet from them. As to the future of them being able to accept it. You know I think once we you know have a crypto token that's tied to the US dollar I think there's a much better chance of that moving forward. And in fact Marvin let's go ahead and move into the next slide because we were at Q amp a anyhow. I'd like to open it up if you want to come off mute if you want to drop your questions into chat. Feel free. Okay, one item I did want to mention as well there was just a recent article that came out this morning, talking about how Goldman stacks just went live with a tokenization platform called GS D AP T M, and it was deployed on the canton blockchain. So, their goal with this platform was improving the velocity of transaction so I think for Goldman to go live with a blockchain platform really does speak volumes I think they're a believer in this. Yeah, and that's actually I think one of the topics we'll be able to bring you some more information on in next month's meeting. You know as Marvin said that info actually just got updated this morning. Any questions from the group. I know this was a lot of information and content to be covering today. Alright, more. Oh yes. This is Michael Baron. I'm kind of a little drink from the fire hose here because I haven't dug much into into blockchain in the mortgage space yet so I want to go take a look but the the articles that you talked about here. Mike use cases, the details are out on the wiki if I check them out there that I can. Yeah, if there are questions later. Exactly. So, in fact Marvin can you back up a slide or two for us to that wiki slide. So over on the right hand side. I actually got two sets of things I've got the global mortgage industry research so I've got articles and then I've got research papers that we put down at the bottom. I keep about two to three months worth over on that right hand side the most recent stuff that we've been covering, but then if you look at the menu on the very left hand side the third link from the very bottom says previous mortgage to blockchain, all the articles that we've covered in previous presentations, you know, once they're about three four months old I move them over to that page. So you'll be able to access them there as well directly above that there are recordings and meeting notes from all the previous presentations that we've been doing since 2021. I want to see some of the demos some of the groups that we've had come to the table to be able to present. And then if you're looking for additional Mike as I said you know reach out. Over the last year and a half. I've got a library of probably 150 different articles research company information. Some of the projects that are being worked on consortiums that are growing things of that nature. Be happy to, you know, share any information that you're looking for. Awesome, what a resource thank you. Very welcome sir. All right Marvin I'll pass it back over to you for any closing comments. Well, if there aren't any other questions. I do want to mention that we are working on future agenda items. I presented blockchain at several conferences within the past couple months the I triple E conference on the hyper ledger forum, and also the ideas conference. So I'm going to be reaching out to some of the people that presented at those conferences as well to see if they'd be interested in speaking with our group here. Based upon some of my preliminary discussions there's quite a bit of interest so we'll have some industry experts some blockchain experts come and speak to us. So I think it's always, if there's any specific companies or topics that you guys are interested in us covering, please reach out to us. We want to make this as interactive as possible and we want it to be driven by the members of the group. So, with that, I think I'll go ahead. You got a question from Daniela I saw her. Okay. Hi, don't have a question I have many questions as usual but I just want to wish everybody a happy new year I'm very excited about you know 2023 what our community has been working on. And I want to thank particularly the financial markets mortgage industry special interest group it's always a mouthful. And I want to thank all of those of you that have been contributing and participating. I'm really looking forward to, you know, checking in every once in a while. I'm available as is the rest of staff if you ever need assistance or you have questions you want to run us by things. And we look forward to connecting you very much also into our developer community the projects that are driving a lot of these use cases in 2023. Marvin specifically thank you for running the session today. And thank you everyone. And I look forward to participating and learning from you all.