 Live from Toronto, Canada, it's theCUBE. Covering Blockchain Futurist Conference 2018. Brought to you by theCUBE. Hello, welcome back to theCUBE. We're live here in Toronto for the untraceable Blockchain Futurist Conference with two days of wall-to-wall coverage. I'm John Furrier, my co-host Dave Vellante who's had to take a step away. And our next guest is David Johnson, who's the chairman of the board at Factum, an industry legend. He's done a lot of great work from startups. He funds it in early days. Really was involved in the original DApp, decentralized application framework and part of that community. Great to have you on theCUBE. Thanks for spending the time with us. It's good to be here. So first of all, we are believers. theCUBE, our team, we're pretty biased. We think that decentralized applications is going to be the next really renaissance in software and startups because it's not your grandfather's venture capital or app SaaS model. There's a real change going on. Capital formation, entrepreneurial activity. So congratulations for putting that together. What's going on? What's the status of this? I mean, obviously put all the price crashes on the side. There's real building going on. Yeah, it's really actually an exciting time. A lot of good projects have started the last few years. And I think what we're going to see is those projects come to fruition later this year, early next. I think about what's happening with groups like Polymath and what they're doing on tokenizing securities. They really started that wave last year and now we've got Bank to the Future and what's going on in Malta with the legislation. A lot of jurisdictions are looking to basically embrace that model of, okay, if you have a company, now we can turn that equity into a record on the blockchain and really give people global ledger where we can trade it on multiple exchanges. It gets you global access, global liquidity and all of these advantages. So I see a stampede of projects headed towards that model but thinking about decentralized applications, what I want to preserve is still the permissionless nature of this ecosystem. I mean, I wasn't a rich investor when I got into Bitcoin in 2012, right? I was lucky to be an economics nerd and already want to get rid of my fiat and opt into non-government currency. And so the timing was great for me but there weren't any barriers. I could download a node, I could access the ecosystem, I could jump right in and get involved. And so as we see the ecosystem mature, what I hope we see is preserving that permissionless nature and recently I proposed smart drops as a means of distributing tokens and utilities or currencies as a way of bootstrapping the network. So that's what I really see coming next. Love the smart drop concept because with smart contracts and airdrops kind of being wishy-washy, you know, it goes on there. I think one of the things I want to get your thoughts on because we were at the cloud blockchain event yesterday, cloud computing and cloud native change SaaS applications. You started to see operators now be involved in cloud as that matures. What decentralized applications bring it kind of changes the game a bit. How do you see software development changing? Because what cloud did was gradient DevOps culture certainly leverages open source. And there's a big community around that. Now with decentralized application you got communities that active part of it. So is open source. How is it going to change the software development frameworks? Well, I think you can cut out a lot of the middle steps and go directly to developers that you want to work with. I mean, I think Ethereum really still set the gold standard when they set aside a chunk of Ether for developers that contributed code to their GitHub before launch. And people will forget now it was a heavy lift to get Ethereum launched. It took a good year and a half, two years to go from a white paper to production net deployments. In that time, they needed to align people, the smartest people in the world to try to build that platform. And so I think people can still draw from that lesson and say, okay, I'm going to reward developers directly. I'm going to reward the people that download the alpha, download the beta, right? Bootstrap this community to my first thousand, first 10,000 users. I think Polymath did that really well recently with their airdrop where they got 50,000 people into a Telegram channel and fill out a survey and do the KYC because they didn't make it a rounding error. They made it a meaningful airdrop of hundreds of dollars worth of poly at the time. And that really motivated people to get involved. Yeah, and I like the slogan, let the stampede begin. Obviously we covered Polymath at their Polycon event that Tracy and Untraceable did. And this is again, the new dynamics. So I want to get your thoughts on economics, right? So you got crypto, which is choking economics, which is a business concept. When you think about a new way, blockchain certainly plumbing and infrastructure. Choken economics is changing the business landscape. So you saw it as an economics nerd. And now people are realizing, holy shit, I can actually do things a little bit differently. I can change the equation and still get the outcomes I want, faster, cheaper, smarter, of something that's not efficient. This is a new dynamic. How do you see the token economics evolving? Aside all the liquidity, nonsense we're seeing in the market, certainly fluctuations are happening. But from a build out standpoint, from a business model innovation, where's the action on token economics? Well, I loved when Vitalik coined the term token economics and crypto economics. And basically what he was describing is, we're using math to secure the past and we're aligning people's economic incentives to secure the future. So that idea that we can rely on encryption to give us a stable, immutable, transparent ledger is really powerful because it takes away, in the cloud context, the need to create a bunch of infrastructure. Before the cloud, people had their own servers. Provision them. .com days, they spent millions of dollars provisioning their own hardware. Before they could roll out their app. Right, and so we take it for granted today, you can jump on AWS or Rackspace and get going in a few minutes. So I think blockchain is going to do something similar for all the features of smart contracts, financial integrations around transfer of money. All of these things are now a toolkit that as soon as I hook into Ethereum or Bitcoin Cash or one of these protocols, I have this large established infrastructure. Thousands of people running nodes that I don't have to pay for as a user. And that's amazing for innovation because it just lowers the barrier for the average guy to get involved. And accelerates time to value, big time. All right, so what was your talk here at the show? What were you speaking about? You had a discussion, what was the speech about? I'm really focused on this idea of smart drops because I think, you know, this can be a primary, sure, sure. So most people are probably familiar with AirDrops. Been around for years, hey, you want to give 100,000 users of Bitcoin some of your new token, we're going to send it out to all their addresses. It was sort of like a spray and pray strategy, very broad, right? And so what I think we need to move through now that we have 50 million people with crypto wallets is we can much more intelligently target who we're dropping to, hence smart drop, right? Really focus in on the people that the app needs. If you're at the development stage, you want to AirDrop to 1,000 Ethereum developers to test out your app. If you're going into your alpha, you need those early adopters to try it out, give you feedback. So it's a thing that I think we can leverage, but people have created a story that's afterthought, right, oh, I'll take 1% of my tokens and do one of these AirDrops. I think we could actually be distributing 20, 40, 60% of tokens via smart drops if you're properly targeting them and tranching it out based on the maturity of the projects. Yeah, and I think smart contracts and smart drops really add value because it brings intelligence to, and targeting and we're value, and you can distribute, it's like policy-based distribution. Right. All right, final question for you. State of the Union, I see people seeing this fluctuations, Ethereum lost its one year value, it's back down to where it was a year ago. Wilderness Developer Community, people get nervous when you have these short-term fluctuations that really aren't based on anything from a build-out standpoint, it's really more market dynamics, Asia, wherever, whatever, but this real builders in the developer community going on that are building long-term, trying to build long-term ventures. Right. What do you say to that community of Ethereum and others, stay the course, don't waver, don't check the price, head down, grind it? What do you say? What I say is think long-term. We've been through this like four times already. I remember when Bitcoin went from almost nothing to $30 and crashed to $2, right? And it took almost a year to recover, 2012, get back to 10 bucks, and then it made its big run 2013 to 250, and proceeded to crash to $50, right? And then make a big run thereafter to a thousand and crashed to 200. And here we've made an enormous run to 19,000 on the Bitcoin price, and it's crashed to 6,000 or 5,000 whatever it is today. And so you got to keep in mind the long-term perspective. We've come so far. Like when I got into Bitcoin in 2012, it was $10 a Bitcoin. There were 10 million Bitcoins in circulation, meaning $100 million was the entire digital currency universe. And now today there are hundreds of billions of dollars of assets in this space, and it's only been five or six years. Like it's orders of magnitude. So I keep my eye on usage, on real utility. You look at Ethereum, I mean they're doing seven, eight, 900,000 transactions a day. People are using the platform. I think at this point they've got more usage than all other blockchains combined. And so, you know, that's really exciting. And I think keep your head down, keep building. These are the times when sort of like the fluff falls away and the projects that didn't make sense, all that gets flushed out of the ecosystem and the real projects come before. David, you're on a great career so far. Congratulations on getting in in early when it's $10. And we had, our first website developer was so good, but he wanted to be paid in Bitcoin in 2011. It was 22 cents at the time. I remember buying it as like, what was Bitcoin? What is this craziness? We started covering it then, just started doing videos. So we're going to do more interviews, hopefully get you on again. Real quick, final plug for you. What are you working on right now? Share with the community some of the projects and your interest right now, what's going on? Well, Factum is a big focus for me because this solves data on the blockchain and lets you do record keeping, documentation, all that sort of stuff. And so that's really hit a chord with enterprise. So we need to get the mainstream into the ecosystem and that's really what Factum has focused on. So really excited. They've delivered their third version of their software which is now fully decentralized recently. It's a huge milestone for them. So harden it, make it reliable, stable and make it easy to consume and use. That's right. That's the key. You let people put millions, billions or trillions of records on and what Factum does with Merkle trees, basically you only need one transaction every 10 minutes to anchor all of that data. So what we've created is scalability and that's what we need for this to go mainstream. All right, David Johnson, chairman of the board at Factum here on theCUBE, industry, insider, pioneer, also leader, inspiration. theCUBE bringing you all the live action, all the data here, not yet on the blockchain. Soon to be, I'm John Furrier, live coverage here in Untraceable's event, Futurist's event here in Toronto. We'll be back with more. Stay with us. We'll be right back with more content after this short break.