Around The Block With Jefferson – Interview with Aaron Tilton of SmartFi.com

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Bitcoin Blockchain Interviews Podcast
Around The Block With Jefferson – Interview with Aaron Tilton of SmartFi.com

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Around The Block With Jefferson Podcast

Podcast Transcript:

Jefferson:

Live from BTC Manager World Headquarters, this is “Around The Block” with Jefferson then. I’m here today with a special guest, Aaron Tilton of SmartFi.com. Welcome to the show.

Aaron:

Thanks, Jefferson. Glad to be here.

Jefferson:

Awesome, awesome. 

So, tell me a little bit more about SmartFi, it looks like you’ve got already some institutional deals going on and so forth, tell me more.

Aaron:

Yes, so SmartFi was actually born out of our experience over the last five years from cryptocurrency mining. We were actually lending to miners dollars against their Bitcoin and Ethereum and doing large scale, lending transactions to a lot of customers in China and around the world. And we decided to take what we had been learning from those lending transactions and the financial trading that we’ve been doing with our bigger counterparties and customers, and help distribute the information or how to participate in those kinds of transactions to some of the average people. And so the platform was launched last year, after five years of working through our other larger-scale transactions. And we’ve had a lot of success and learned a lot as well go a long way launching the platform. And just recently, we became the official cryptocurrency platform of Monster Energy Supercross. So we’ve been going at this for over five years now.

Jefferson:

Awesome, awesome. 

I think there’s a lot of opportunity for companies such as yours, I mean I’m looking at the growth of Celsius, how do you compare to something like Celsius?

Aaron:

Well, it’s very similar in terms of the way that a loan works, the transactions that we do, somebody can bring us Bitcoin, or Ethereum and borrow against that to receive dollars. So they can do other things like re-invest in other businesses or whatever they’re going to do with the proceeds of their dollars. What is different for us, is that the token that we launched and created last year is the price is indexed to the volume of our loans or the amount of loans that we make. So the token goes up in value, as we make more loans. And that’s much different than a lot of the other competitors or other people in this space. And our structure is a little different, where it makes the token much safer. Because it has something backing its value, it has a real value associated with it.

Jefferson:

That’s fascinating. 

I mean, the Self token for example, has dropped from I think with an all-time high of around 6 down to about 2 something now. And I’m looking at the smart cycle as you call it, where you have 100% buyback guarantee. Tell me what’s that all about?

Aaron:

Yes, because we index this token to our loan portfolio, that allows us to do some unique things like the buyback guarantee, when you buy the token from us, or trade it with Bitcoin, or Ethereum, or whatever token is stable coins, we will give you any time after a year the dollar amount that you use to purchase it or to trade with it back. If you don’t like the price of the token after that time, we’re the only guys that we know of that are doing this. So it adds a lot of stability and safety to our process. And the reason that we can do this is it the proceeds from that trade or transaction we only use that to make more loans so the value doesn’t go anywhere we don’t build software with it or do different things or you know, any trader that tokens somebody else they keep the value but in our case, it goes to make loans and then if you don’t like the value of the token for whatever reason you can come back give us the token back and we’ll give you back the dollar value of what you traded for it at the time.

Jefferson:

That’s absolutely fascinating. And I think you’re right I think yours is the only place that does, not crow, not black mining, none of these guys. 

Aaron:

Yes

Jefferson:

So it looks like I mean you have this smart strategy. What’s going on there?

Aaron:

Well, that’s part of the trade so the strategies around that are you can take Bitcoin or Ethereum and if you don’t like the volatility, as many people probably not liking it Right now or the market has come off, almost 50% Since last year, the middle of last year. One of the strategies is you convert your Bitcoin to a SmartFi token. When we came out with a token, it came out at $0.70. And right now it’s trading around, I think about $3.29 even in the down market, because, again, the buyback guarantee people don’t panic and sell it. And there’s no need to panic and sell it, because the guarantee allows you to have this kind of safety first speculation second approach. So that’s one of the original smart five strategies around safety in the token, but then also incorporates the speculative nature of the capital appreciation.

Jefferson:

Very, very cool. 

Well, turning our attention to just a broader issue, if you will. How did you get into the crypto industry, how did that happen?

Aaron:

Well, the parent company for SmartFi is called Power Block Coin. And then there’s a parent company for Power Block Coin, which is Blue Castle Holdings, and blue Castle Holding originally is an energy infrastructure development company, formed in 2007. So we’ve been around as a company for over 15-years. And about 2017, we started getting all these calls from cryptocurrency miners, asking us if we have power over a nuclear power plant that we were developing. And obviously, we didn’t end along-developing a nuclear power plant takes a long time. But we started using our expertise in developing energy infrastructure to help people locate new facilities for cryptocurrency mining. And as you know, crypto went up at the time, I think it was about where Bitcoin was about $1,500 at the time, and then it went all the way up to $20,000. And then went down about $3,000, 6 months later. And all the guys we were working with building those projects, they were worth a lot less at that point. So, we just started lending them money against our Bitcoin, to help them sustain their enterprises during that downtime. And Viola, we became a non-bank, cryptocurrency-backed lender. And that’s how we have introduced to crypto five years ago, and just expanded from then and started doing deals around the world in China and Europe and South America and here in the US, and started taking what we were learning from those transactions and making it available for the retail customer.

Jefferson:

Interesting, interesting. Well, what do you think Bitcoin is going to go from here? I mean, entire countries like El Salvador picking it out, potentially more. But then again, you have countries like China that are all disallowing it. So where do you see it going from here?

Aaron:

Well, I’m fresh out of crystal balls, I should say, first off, but I think that the usability of cryptocurrencies, there have to be some changes for adaptation for the real-world application. One of the things we’re doing at SmartFi, while we kind of structure our cryptocurrency the way that we did to the buyback guarantees, and some of the other innovations that we’re doing, that allow the average person to be able to participate in it without having to take this significant risk. So they’re always going to be the people trading Bitcoin and Ethereum and other cryptocurrencies that have a lot of volatility. Because there’s the upside is significant, but the downside is also significant. So there’s a lot of caution has to be taken, and people Hottel they’ll continue to do what they’ve always done over the last decade with it. But I think we’ll see some changes just like we’ve seen with Russia, with China. I think they’re far more of a currency manipulator like to control things, obviously their governmental controls and is antithetical to the ideology behind bitcoin, which is decentralization and freedom. 

So, you’ll see that the people who are more interested in freedom and decentralizing things in free markets, I think we’ll continue to adopt it like El Salvador and make it a more integrated part of their economy. People who don’t want that in terms of controlling governments, like China, and Russia, will continue to try to clamp down on it. So, I think it’s just more of the same that we’ve always seen. But because it’s getting bigger and crypto is becoming much more, not quite mainstream, it’s not there yet, but it’s becoming more accessible and understandable to people, you’ll see a little more of that division, which I don’t think should be surprising to people, it just shows that there’s going to be maturity in the free markets for it. And the markets that are not free, there’s going to be kind of a tightening or consternation about its usage. And they’ll try to clamp down on it through regulation. But as far as pricing, and where we are with the market, as a company, we try not to give a prognostication. But, I think you’re going to see more user adoption, it’ll ebb and flow. And we’ve been here before right, with the scenario I just mentioned, in 2017. We can remember when it was pretty low, and went really high and then came back down. So, I think it’s just going to be more of the same, but the adaptation will continue to integrate into the freer markets. I know, we’re going to be coming out with a prepaid debit card that allows you to borrow against your Bitcoin and Ethereum and get that dollar amount onto a debit card. So you can use that value in purchases anywhere, that is taken by MasterCard or Visa. But without having to sell your assets. That’s the key to it is that you want to continually maintain that because over time, we believe that crypto will continue to go up with the network effect in the utilization increase.

Jefferson:

And do you think there’s going to be more mining in the future? I see that Power Block coin has invested a lot in mining, for example, [unintelligible 00:12:14] and other places. So do you think there’s going to be more mining as we go?

Aaron:

Yes, but I think it’s going to change. I think that the structure will be different. We see like the Bitcoin network, it accomplished many first of a kind feats. For example, it is still to my knowledge the only network in cryptocurrency or otherwise, that has been perfect insecurity. So, it’s demonstrated the utility that it can serve by being a secure network function. And we utilize that kind of technology in some of our other upcoming products where we would use merge mining, to build out another network, use the hash rate on the Bitcoin network to secure another network. I will go into the details as I have accomplished but you basically write the header of one blockchain block into another header of another blockchain header block, and you can then reference it and create another secure network without having to increase power consumption, or add new miners, so it becomes much more efficient. So we see one of the real values of the Bitcoin network is securing other networks. 

We do that right now with another coin called Litecoin, and we’re building out some structures. So I think mining will take a little different turn, it has to become more efficient, and serve a greater purpose to not only just secure the Bitcoin network, but other networks, Litecoin, and others that have a mining algorithm. So, I think you’re going to see more of that. Staking still has a few technical hurdles to prove its worth in terms of really securing a network. I think you’ve seen Solana and other networks that utilise staking and other node validations, they have some issues with them. They’re not perfect yet. And so as that evolves and matures, we see a combination of staking networks.

Jefferson:

Yes, that’s the part that’s been really interesting to me. I’ve wondered why Bitcoin has been the developer therapy and really resistant to any kind of transition to like proof of stake or whatever. Even when Satoshi himself said, you know, he was just using proof of work in the beginning. I think he fully intended to go proof of stake later whoever he is. But, Etheruem is proof of stake, turning our attention there. Do you see that Ethereum having a long life with a lot of developers or do you see that as a risky project?

Aaron:

I think the problem with the Ethereum is the fees, they’re only hybrid. So they’re not pure proof of stake, right. They haven’t resolved that. And our belief and this is where we differ again, in the structure of what we’re building with our blockchains and our project is that, systems that are based on fees for you have to pay to play or to complete a transaction, are really probably the worst features that were adopted in the source codes of blockchain innovation using cryptography. No one likes to pay fees, right. And so in this structure, what we built with our project is something that actually had no fees. And that’ll be launching this year, where you can complete a transaction without fees because we will reward the network operators with interest that’s derived from our loans. 

So, when you think about the concept of, of an economy, and what was accomplished, Bitcoin, Ethereum, use one of the worst features and part of a tyrannical structure of charging fees in probably the best technology that has to come about in the last decade. So, that has to change. But the only way to do that is to decouple the transactions from the value on the network. So that’s what we did with our structure. 

So in our structure, there’ll be no transaction fees. So we think that the network’s going forward, you see them going to lower fees, but then networks that will be utilized on mass at scale, will be the networks that have no fees. They have to derive economic gain for the operators in a different way, and that’s why we’re doing it with our loans.

Jefferson:

Fascinating. 

And I really think that the programmatic use of cryptocurrency will make a difference over the long run. And I think that’s the piece that is missed, oftentimes by regulators who have a little bit of experience than dealing with American politics, right. 

So could you tell me what your thoughts are about how we can approach if you will, the powers that be with some of the more useful aspects of cryptocurrency? 

Because, it seems like the only harp on the negative, but they perceive it the negative aspect, for example, the dirty energy that Bitcoin supposedly uses.

Aaron:

Yes. 

And I obviously have a lot of experience that way, because I developed a nuclear power plant project and built oil and gas pipelines. And so we have a practical experience of actually delivering this critical infrastructure and utilizing it. And I was also the Vice-Chair of The Public Utilities & Technology Committee in the House, in the state legislature, here in Utah. So, I’ve actually passed bills related to energy, and worked through that process and it’s difficult. But, I think really what happens is this is it when you design a product, and Bitcoin is a product, it’s a commodity, or any other cryptocurrency blockchain Ethereum, or whatever you’re doing. If it has an aspect to it, that can be exploited or has a less than optimal structure, just primarily by being new and having not having a lot of experience in a practical real-world application, then politicians tend to seize on that so that they can bolster their own standing with voters. 

So, if somebody had a bad experience, where maybe they lost Bitcoin value, they lost a Bitcoin or a regulator couldn’t control something, they then build a narrative that it must be dominated by the government to protect the constituencies. I’ve seen that over and over and over, in my experience as being an elected politician. So the design of our products as an industry for cryptocurrencies has to get better. It has to have more safety features in it. One it’ll broaden user adoption. It’ll make it more acceptable among people, and they will have less complaints for politicians, and politicians will see less opportunity to use it as an excuse to pass more regulation. 

So as an industry, we’ve got to be working toward less fees or lower fees or no fees. And then also having solutions around inequities around losing Bitcoin or having Bitcoin or Ethereum stolen, right now, there is no way to redress that on the blockchain, although it makes it good for a transaction that’s valid. But what if somebody steals your crypto or it gets lost, because you’ll lose your private keys, most people don’t accept that type of product characteristic in the real world. If somebody looked at you and said, “Hey, we started this new bank, and about 20% of all people are going to lose their value in the bank, it’ll be lost because they lose their password, but ignore that part of it, everything will be okay, it’s a great bank.” Nobody would accept that, they would all go, that’s crazy. But if you substitute the word Bitcoin for the bank, and that scenario, that’s exactly what’s happened. 20% of all bitcoin is lost or locked in wallets that can’t be moved, because people lost their address, their private keys, or their seed words to a wallet in the early days, or everybody knows if somebody got hacked from a centralized exchange or something like that. 

So, in our structure with what we do with SmartFi, and our blockchain will have what are called, “Sheriff Nodes” where you can reverse a transaction, it’s not easy, you have to post a bond, and you have to go through an adjudicative process. But you can redress an issue like that where you can get a transaction reversed over a period of time with a process that can be done with a structure that requires somebody else putting up something, almost like staking again but allowing the Sheriff Node to then adjudicate an inequity or a theft. So those are the things that have to be done, the blockchain technology has to get better, and the feature set has to get better. And then regulators will have no excuse to actually try to regulate it, as long as they’re poor experiences and user experiences where politicians can see that they can benefit or further their career, that will never change. So, that has to change with our industry.

Jefferson:

Yes, that’s a very interesting perspective. But I am aware of a few projects on that front, for example, there’s a company that will provide you with-it is multi-sig, right. So they’ll provide you with a way to recover your keys in the event that they’re lost. And if all using of course multi-sig. So I mean, and so you can use that wallet. 

For example, if that person passes away, or whatever, then there’s a way that the family could, for example, access the keys and recover the funds. So at least it addresses the lost key issue. But still yes, with the reversing of transactions in some cases the finality of transactions can be a good thing. Case in point where banks have been known to seize entire bank accounts, because they disagreed with whatever that person was doing, for example, some workers that were working in an industry that perhaps they didn’t like. So, and I’m not talking drugs or anything like that. I’m just talking just pure day to day life.

Aaron:

Yes, we’ve experienced that in the early days of what we were doing.

Jefferson:

Right.

Aaron:

We had a very good little [inaudible 00:23:55] what we were doing with crypto, and they shut down an account.

Jefferson:

And that’s not something that’s right, and they can actually shut down the account and keep the funds. If you go into PayPal, you’ll see a long list of that, paypalsucks.org type of thing. There are just dozens of people that were just doing regular transactions, they did nothing wrong, and all of a sudden, PayPal claims thousands of dollars, and that can really fit people on the streets even. So, there has to be a balance between the two.

Aaron:

Yes. 

I mean, that’s the whole purpose behind decentralization for cryptocurrencies is when you look at some of the issues, in some cases, we’re just trading one inequity for another inequity. And that’s where the creative structure has to come from that if you want to do something where you need to reverse a transaction or you need to do something, somebody stole something. We’ve all seen that cryptocurrencies have been stolen. But having a structure where you can post a bond. And we, there was some legislation that I passed years ago related to bonding, it passed in the house in the Senate. But it was it allowed a person to post a bond so that they could plead their case, in this case you would have a software structure that you can go to and another node that you can kind of go to that process post a bond. And if it showed that you are being abusive to that process, and the person that you transferred the cryptocurrency to in the first place, really should have it. Well, now they could get your bond and be rewarded or compensated for participating on a network that have this kind of structures. And then justices related to transactions can be had. But if somebody really stole something from you, no criminal is going to show up to adjudicate this process through software and a bond, they’re just not going to show up. So that process can run its course and you can eventually get your cryptocurrency back, it will be easy, but it would be obviously worth it. And it’d be equitable.

Jefferson:

I’d like to ask a series of one final set of questions. And by the way, I think all of this is absolutely fascinating. I love your insights. They’re very unique, I got to say. 

But just a final set of questions if I may, around the future of energy even I mean, there’s, fusion, which appears, I know, they always say it’s 10 years away, right. But actually, with some of the more recent stuff, it doesn’t look that far away. I mean, they had several hundrend seconds of net positive energy production recently. 

Do you think even with a higher our lifetime, sort of like the next 30, 40 years, do you think we will see fusion power?

Aaron:

Yes, that’s a great question. 

I often say that my engineering, essentially, it’s non-existent in our company, I would say, I’m the dumb guy, right. I am the guy that deals with politics, in some cases, the technology of the other things we have nuclear fuel experts, PhDs in nuclear engineering and who have regulated essentially all nuclear assets in the US, one of the members of our board was the chairman of the Nuclear Regulatory Commission, and was also the dean of nuclear engineering at Florida State University. It was the chairman of the Star Wars program and all these other things for nuclear propulsion. And those guys have a better handle on how to commercialize a new asset. And that’s the key whereas, you can, as you mentioned, you saw that they had net positive energy created, which essentially almost not necessarily violates the laws of thermodynamics, but it shows that the necessary chemical and atomic changes need to happen to produce the energy and release the energy can happen, but harnessing that, and making that a commercial prospect is a whole another level of engineering for practical purposes that we can accomplish that we saw that in the nuclear program, once they were learned how to fission worked. But, we’ll still even perfecting that and moving out along in the process are much better moderators and commercial aspects to nuclear fission. That can be worked, but it takes to commercialize any nuclear technology in the United States, it will take 20 years to do any of it because of the regulatory aspects of it, not just the laws of physics.

Jefferson:

So yes, I asked that question if I may interrupt, and I’m so sorry. But I asked a question just to try to give a little bit of background around where we’re going with even cryptocurrency because I really see that there are some parallels between the future of fusion for example, and the future of crypto. And crypto no matter what, still it’s going to use energy, even if it’s in the form of cell phone or laptop. And based on that, I think we’re going to see a lot more energy usage with augmented reality, virtual reality, all that stuff. So all of this basically requires energy. So, Based on that how do you see the next 20 years kind of going down between Everything?

Aaron:

You know, it’s a great analogy that we’ve used in the past that compares the beginning of the internet in comparison to what I would consider, the newest era of the digital age, which is a transfer value using networks. So when the internet started, you know, pick whatever day or year you want to look at in terms of like the late 80s, early 90s. And the usage of the electricity from the internet was very small comparatively. But by once the network’s mature, cell phones came about in 2007 and all this the usage, you look at the usage of electricity from the internet, and we’re almost at roughly probably a little bit higher than about 70,000 gigawatts, which is essentially 70 nuclear power plants. So, you go from the beginning of the internet using almost no electricity to now 25 almost going on 30 years later, to using 70 gigawatts or 70 nuclear power plants. 

Nobody that I know of says the internet was not worth it, shut down all the electrical use, right. And I think it’ll be the same thing with cryptocurrencies, and what is the internet of value. And that usage for the efficiency of electricity will continue to evolve, things will continue to get more efficient. You look at the nanometer scale technology for mining, it went from being very inefficient. Now we’re down to 7nm scale technology. Miners are 20x more efficient that they were just using CPUs, so that’ll continue to evolve, but it might evolve in different ways either consumptive use at the chip level on the boards or in staking or in multiple merge mining applications, you can continue to get more and more efficient in this structure. And eventually, the same thing will be said, whatever the power usage is, for cryptocurrencies and their networks, at the end of the day, the benefits will outweigh the consumptive use of energy. And 25 years from now, nobody will ever say, please just shut down all, you know, cryptocurrency networks, the electric consumption is just not worth it. 

But we’re just going to early days of all of this. And if you would tell somebody back in early 1990s, then the internet would use 70 nuclear power plants worth of electricity, just for the data and the networks, nobody would ever believe you. And then two, they would have said, “Should we really do that?” Well, now, nobody ever says.

Jefferson:

Right, well, thank you so much for your time. It’s been extremely informative. And if people want to check out your website and the things you’re working on, where should they go?

Jefferson:

https://smartfi.com/ 

Definitely check it out. Thank you so much, Aaron.

Aaron: 

Thanks, Jefferson. I appreciate it.

Jefferson Nunn

Since 1999, Jefferson Nunn has been a consultant to high net worth individuals. Always an innovator, his ideas have generated millions for his clients including Ronco and GoWireless. He has been involved in the CryptoCurrency industry since mining his first Bitcoin in 2010. Since then, he has met with many of the early pioneers in the CryptoCurrency space including the founders of Ethereum and the founders of Crypto Capital in Panama, and more.